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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 18pt"><b>UNITED
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 18pt"><b>SECURITIES
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 12pt"><b>WASHINGTON,
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 18pt"><b>FORM
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<b>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OR</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_900_edei--DocumentAnnualReport_c20230101__20231231_z30rpd7VQZWj"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleantrue" id="Fact000012" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric></span>
<b>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OR</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_901_edei--DocumentTransitionReport_c20230101__20231231_zokLo8hzqNlf"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000016" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric></span>
<b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
the transition period from _________ to _________.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OR</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90C_edei--DocumentShellCompanyReport_c20230101__20231231_z6RduScoV5Be"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000017" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric></span>
<b>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date
of event requiring this shell company report:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Commission
file number: <span id="xdx_90E_edei--EntityFileNumber_c20230101__20231231_zZS031NvCs8g"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000018" name="dei:EntityFileNumber">001-41444</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 18pt"><b><span id="xdx_90E_edei--EntityRegistrantName_c20230101__20231231_zwfEd5H0Nngi"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000019" name="dei:EntityRegistrantName">INTELLIGENT LIVING APPLICATION GROUP INC.</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Exact
name of Registrant as Specified in its Charter)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_90F_edei--EntityIncorporationStateCountryCode_c20230101__20231231_zXQDhbLN3Rv"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt-sec:edgarprovcountryen" id="Fact000020" name="dei:EntityIncorporationStateCountryCode">Cayman
Islands</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Jurisdiction
of Incorporation or Organization)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_90B_edei--EntityAddressAddressLine1_c20230101__20231231_zLHUw1mq1MYh"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000021" name="dei:EntityAddressAddressLine1">Unit
2, 5/F, Block A, Profit Industrial Building</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_905_edei--EntityAddressAddressLine2_c20230101__20231231_z16XT6Ghwpqc"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000022" name="dei:EntityAddressAddressLine2">1-15
Kwai Fung Crescent, Kwai Chung</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_903_edei--EntityAddressCityOrTown_c20230101__20231231_zwCjna4eGVsa"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000023" name="dei:EntityAddressCityOrTown">New
Territories</ix:nonNumeric></span>, <span id="xdx_90D_edei--EntityAddressCountry_c20230101__20231231_zlUFwzlY6Dch"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt-sec:countrynameen" id="Fact000024" name="dei:EntityAddressCountry">Hong Kong</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Address
of Principal Executive Offices)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_90F_edei--ContactPersonnelName_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zYOb8iMTbAf4"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000025" name="dei:ContactPersonnelName">Bong
Lau</ix:nonNumeric></span>, Chief Executive Officer</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_90D_edei--EntityAddressAddressLine1_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zKGBmS7mhBI4"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000026" name="dei:EntityAddressAddressLine1">Unit
2, 5/F, Block A, Profit Industrial Building</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_906_edei--EntityAddressAddressLine2_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_ze9jixZHgFvf"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000027" name="dei:EntityAddressAddressLine2">1-15
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="xdx_906_edei--EntityAddressCityOrTown_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_z50gxy21NfI5"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000028" name="dei:EntityAddressCityOrTown">New
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>+
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Email:
<span id="xdx_908_edei--ContactPersonnelEmailAddress_c20230101__20231231__dei--EntityAddressesAddressTypeAxis__dei--BusinessContactMember_zWXim816xfnh"><ix:nonNumeric contextRef="From2023-01-012023-12-31_dei_BusinessContactMember" id="Fact000032" name="dei:ContactPersonnelEmailAddress">info@i-l-a-g.com</ix:nonNumeric></span></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Name,
Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(b) of the Act:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 38%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title
    of each class</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 20%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading
    Symbol(s)</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 38%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name
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    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90D_edei--TradingSymbol_c20230101__20231231_zMHEVQSOQ1b3"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000034" name="dei:TradingSymbol">ILAG</ix:nonNumeric></span></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    Capital Market</span></td>
    </tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(g) of the Act:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">None</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Title
of Class)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">None</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Title
of Class)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
the number of outstanding shares of each of the issuer&#8217;s classes of capital or common stock as of the close of the period covered
by the annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes &#9744; <span id="xdx_90F_edei--EntityWellKnownSeasonedIssuer_c20230101__20231231_zv5OXN8qBZk8"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000037" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric></span> &#9746;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 &#9744; <span id="xdx_90C_edei--EntityVoluntaryFilers_c20230101__20231231_zWPOkSuCtCJ3"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000038" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric></span> &#9746;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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. <span id="xdx_903_edei--EntityCurrentReportingStatus_c20230101__20231231_zGtBXfMcDEMh"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000039" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric></span> &#9746; No &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 (&#167; 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). <span id="xdx_90E_edei--EntityInteractiveDataCurrent_c20230101__20231231_zmnBIP5meoK7"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000040" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric></span> &#9746; No &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 &#8220;large accelerated filer,&#8221; &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221;
in Rule 12b-2 of the Exchange Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-left: 0.1in; text-indent: -0.1in; width: 25%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large
    accelerated filer &#9744;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 18%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated
    filer &#9744;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 21%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_90E_edei--EntityFilerCategory_c20230101__20231231_z5LvWuqARc87"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt-sec:entityfilercategoryen" id="Fact000041" name="dei:EntityFilerCategory">Non-accelerated
    filer</ix:nonNumeric></span> &#9746;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 32%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging
    growth company <span id="xdx_90D_edei--EntityEmergingGrowthCompany_c20230101__20231231_zbyEBoqp49R3"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleantrue" id="Fact000042" name="dei:EntityEmergingGrowthCompany">&#9746;</ix:nonNumeric></span></span></td>
    </tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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&#8224; provided
pursuant to Section 13(a) of the Exchange Act. <span id="xdx_900_edei--EntityExTransitionPeriod_c20230101__20231231_zO8JmZfO660f"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000043" name="dei:EntityExTransitionPeriod">&#9744;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8224;The
term &#8220;new or revised financial accounting standard&#8221; refers to any update issued by the Financial Accounting Standards Board
to its Accounting Standards Codification after April 5, 2012.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has filed a report on and attestation to its management&#8217;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. <span id="xdx_909_edei--IcfrAuditorAttestationFlag_dbF_c20230101__20231231_z5A4vSBhU6wa"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000044" name="dei:IcfrAuditorAttestationFlag">&#9744;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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. <span id="xdx_900_edei--DocumentFinStmtErrorCorrectionFlag_dbF_c20230101__20231231_zi2BfHa8YQ6g"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000045" name="dei:DocumentFinStmtErrorCorrectionFlag">&#9744;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center; width: 14%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;
    <span id="xdx_903_edei--DocumentAccountingStandard_c20230101__20231231_zmbbQcC9B6Wg"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000046" name="dei:DocumentAccountingStandard">U.S. GAAP</ix:nonNumeric></span></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center; width: 70%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;
    International Financial Reporting Standards as issued by the <br/>
    International Accounting Standards Board</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;
    Other</span></td>
    </tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
&#8220;Other&#8221; 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 &#9744; Item 18 &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yes
&#9744; No <span id="xdx_906_edei--EntityShellCompany_dbF_c20230101__20231231_zFqnuG00L8Ij"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" format="ixt:booleanfalse" id="Fact000047" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric></span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 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 &#9744; No &#9744;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt; border-bottom: Black 4pt solid"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></div></div><!-- Field: /Rule-Page -->

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>


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    <div style="break-before: page; margin-top: 6pt"><p style="margin: 0pt">&#160;</p></div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TABLE
OF CONTENTS</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; vertical-align: bottom; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; vertical-align: top; text-align: center; width: 0.1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td colspan="2" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#MS_001">Introduction</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ii</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td colspan="2" style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#MS_002">Forward-looking Statements</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">iii</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#MS_003">PART I</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    1.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#MS_004">Identity of Directors, Senior Management and Advisers</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    2.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#MS_005">Offer Statistics and Expected Timetable</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    3.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#MS_006">Key Information</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    4.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_032">Information On The Company</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">37</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    4A.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_033">Unresolved Staff Comments</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">59</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    5.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_034">Operating And Financial Review And Prospects</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">59</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    6.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_035">Directors, Senior Management And Employees</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">72</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    7.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_030">Major Shareholders And Related Party Transactions</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">81</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    8.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_029">Financial Information</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">81</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    9.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_028">The Offer And Listing</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">82</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    10.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_027">Additional Information</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">82</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    11.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_026">Quantitative And Qualitative Disclosures About Market Risk</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    12.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_025">Description Of Securities Other Than Equity Securities</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_024">PART II</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    13.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_023">Defaults, Dividend Arrearages And Delinquencies</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-left: -20pt; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    14.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_022">Material Modifications To The Rights Of Security Holders And Use Of Proceeds</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    15.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_021">Controls And Procedures</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">Item 16.</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><a href="#lpa_001">[Reserved]</a></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center">94</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16A.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_020">Audit Committee Financial Expert</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16B.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_019">Code Of Ethics</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16C.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_018">Principal Accountant Fees and Services</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16D.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_017">Exemptions From The Listing Standards For Audit Committees</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16E.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_016">Purchases Of Equity Securities By The Issuer And Affiliated Purchasers</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16F.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_015">Change In Registrant&#8217;s Certifying Accountant</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16G.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_014">Corporate Governance</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16H.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_013">Mine Safety Disclosure</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16I.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_012">Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16J.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><a href="#S1_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insider Trading Policy</span></a></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    16K.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><a href="#S1_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cybersecurity</span></a></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_011">PART III</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">96</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    17.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_010">Financial Statements</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-left: -10pt; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">96</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    18.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_009">Financial Statements</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">96</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    19.</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#p_008">Exhibits</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">96</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="MS_001"></span>INTRODUCTION</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
this annual report on Form 20-F, unless otherwise indicated, &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our,&#8221; the &#8220;Company&#8221;,
&#8220;Intelligent Living&#8221;, &#8220;Registrant&#8221; and &#8220;ILAG&#8221; refer to Intelligent Living Application Group Inc.,
a company organized in the Cayman Islands, its predecessor entities and its subsidiaries.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unless
indicated otherwise, references to:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Bamberg&#8221;
                                            are to Bamberg (HK) Limited, which was incorporated under the laws of Hong Kong and is a
                                            wholly owned subsidiary of ILAG BVI; &#8220;China&#8221; or the &#8220;PRC&#8221; are to
                                            the People&#8217;s Republic of China&#65307;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;EIT&#8221;
                                            are to PRC enterprise income tax; &#8220;Hing Fat&#8221; are to Hing Fat Industrial Limited,
                                            which was incorporated under the laws of Hong Kong and is a wholly owned subsidiary of ILAG
                                            BVI;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></p>
                                                                                <p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><p style="text-align: justify; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Hong
Kong&#8221; are to Hong Kong Special Administrative Region of the People&#8217;s Republic of China&#65307;</span></p>
                                                                                <p style="text-align: justify; margin-top: 0; margin-bottom: 0"></p>
                                                                                <p style="text-align: justify; margin-top: 0; margin-bottom: 0"></p>
                                                                                <p style="text-align: justify; margin-top: 0; margin-bottom: 0"></p></td></tr><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                         <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;HK$&#8221;
or &#8220;Hong Kong dollars&#8221; refers to the legal currency of Hong Kong&#65307;</span></td></tr>
                                                                                                                                                                                                                                                                                                                                                                                                                                                             <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                                                                                                                                                                                                                                                                                                                                             <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Intelligent
Living,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our company,&#8221; &#8220;ILAG,&#8221; and &#8220;our&#8221; are to Intelligent
Living Application Group Inc., a Cayman Islands exempted company with limited liability, and its subsidiary and consolidated entity;</span></td></tr>
                                                                                                                                                                                                                                                                                                                                                                                                                                                             <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                                                                                                                                                                                                                                                                                                                                             <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;ILAG BVI&#8221; are to Intelligent Living Application Group Limited, a holding company incorporated under the laws of the British Virgin Islands and a wholly owned subsidiary of Intelligent Living Application Group Inc.;</span></td></tr>
                                                                                                                                                                                                                                                                                                                                                                                                                                                             </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></p>
                                                                                <p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Kambo
Hardware&#8221; are to Kambo Hardware Limited, which was incorporated under the laws of Hong Kong and is a wholly owned subsidiary of
ILAG BVI;</span></p>
                                                                                <p style="margin-top: 0; margin-bottom: 0"></p></td></tr><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                         <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Kambo Locksets&#8221; are to Kambo Locksets Limited, which was incorporated under the laws of Hong Kong and is a wholly owned subsidiary of ILAG BVI</span></td></tr>
                                                                                                                                                                                                                                                                                                                                                                                     </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;MOFCOM&#8221;
                                            are to the Ministry of Commerce of the PRC;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Ordinary
                                            Share(s)&#8221; are to our ordinary shares with a par value of US$0.0001 per share;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Preferred
                                            Share(s)&#8221; are to our preferred shares with a par value of US$0.0001 per share;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;RMB&#8221;
                                            and &#8220;Renminbi&#8221; refer to the legal currency of China;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;SAFE&#8221;
                                            are to the State Administration of Foreign Exchange;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;US$,&#8221;
                                            &#8220;U.S. dollars,&#8221; &#8220;$&#8221; and &#8220;dollars&#8221; are to the legal currency
                                            of the United States; and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
                                            are to Dongguan Xingfa Hardware Products Co. Ltd., which was incorporated under the laws
                                            of China and is a wholly owned subsidiary of Hing Fat.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business is primarily conducted in Hong Kong and China, an all of our revenues are received and denominated in HK$ and RMB. RMB is not
freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. This
annual report contains translations of HK$ and RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader.
We make no representation that the Renminbi, HK$ or U.S. dollar amounts referred to in this report could have been or could be converted
into U.S. dollars, HK$ or Renminbi, as the case may be, at any particular rate or at all.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
completed an initial public offering of our ordinary shares at an initial offering price of US$4.00 per share on July 15, 2022. Our ordinary
shares, par value US$0.0001 per share, are traded on the Nasdaq Capital Market under the symbol &#8220;ILAG&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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    <div style="break-before: page; margin-top: 6pt"><p style="margin: 0pt">&#160;</p></div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="MS_002"></span>FORWARD-LOOKING
STATEMENTS</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
report contains &#8220;forward-looking statements&#8221; for purposes of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 that represent our beliefs, projections and predictions about future events. Known and unknown risks, uncertainties
and other factors, including those listed under &#8220;Risk Factors,&#8221; may cause our actual results, performance or achievements
to be materially different from those expressed or implied by the forward-looking statements. All statements other than statements of
historical fact are &#8220;forward-looking statements,&#8221; including any projections of earnings, revenue or other financial items,
any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects
or other developments, any statements regarding future economic conditions or performance, any statements of management&#8217;s beliefs,
goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as &#8220;may&#8221;,
&#8220;will&#8221;, &#8220;should&#8221;, &#8220;could&#8221;, &#8220;would&#8221;, &#8220;predicts&#8221;, &#8220;potential&#8221;,
&#8220;continue&#8221;, &#8220;expects&#8221;, &#8220;anticipates&#8221;, &#8220;future&#8221;, &#8220;intends&#8221;, &#8220;plans&#8221;,
&#8220;believes&#8221;, &#8220;estimates&#8221; and similar expressions, as well as statements in the future tense, identify forward-looking
statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have based these forward-looking statements largely on our current expectations and projections about future events that we believe may
affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include
statements relating to:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            goals and strategies;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            future business development, financial conditions and results of operations fluctuations
                                            in interest rates;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            expectations regarding demand for and market acceptance of our products and services;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">projections
                                            of revenue, earnings, capital structure and other financial items;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">competition
                                            in our industry;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">relevant
                                            government policies and regulations relating to our industry; and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
                                            economic and business conditions in the markets in which we operate.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking
statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from
our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are
generally set forth in &#8220;Risk Factors&#8221; and other sections in this report. You should thoroughly read this report and the documents
that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect.
We qualify all of our forward-looking statements by these cautionary statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
report contains certain data and information that we obtained from various government and private publications. Statistical data in these
publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data,
or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market
price of our ordinary shares. In addition, the rapidly changing nature of the lockset and hardware marketplace industry results in significant
uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any
one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections
based on these assumptions. You should not place undue reliance on these forward-looking statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in
this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence
of unanticipated events. You should read this report and the documents that we refer to in this report and any exhibits filed to this
report completely and with the understanding that our actual future results may be materially different from what we expect.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="MS_003"></span>PART
I</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="MS_004"></span>ITEM
1.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>IDENTITY
                                            OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="MS_005"></span>ITEM
2.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OFFER
                                            STATISTICS AND EXPECTED TIMETABLE</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="MS_006"></span>ITEM
3.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>KEY
                                            INFORMATION</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Our
Holding Company Structure and Operations in Hong Kong and China</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a Cayman Islands holding company without any operation and our operations are conducted by our wholly owned subsidiaries in Hong
Kong and China and this structure involves unique risks to investors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are legal and operational risks associated with being based in and having all our operations in Hong Kong and China. The Chinese
government recently took regulatory actions on certain U.S. listed Chinese companies and made statement that it will exert more
oversight and control over offerings and listings by Chinese companies that are conducted overseas, such as those related to the use
of variable interest entities and data security or anti-monopoly concerns. On July 6, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal
activities in the securities market and promote the high-quality development of the capital market, which, among other things,
requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to
enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial
application of the PRC securities laws. On December 28, 2021, Cybersecurity Review Measures were published by Cyberspace
Administration of China or the CAC, National Development and Reform Commission, Ministry of Industry and Information Technology,
Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People&#8217;s Bank of China,
State Administration of Radio and Television, China Securities Regulatory Commission (&#8220;CSRC&#8221;), State Secrecy
Administration and State Cryptography Administration and became effective on February 15, 2022, which provides that, Critical
Information Infrastructure Operators (&#8220;CIIOs&#8221;) that purchase internet products and services and Online Platform
Operators engaging in data processing activities that affect or may affect national security shall be subject to the cybersecurity
review by the Cybersecurity Review Office. On November 14, 2021, CAC published the Administration Measures for Cyber Data Security
(Draft for Public Comments), or the &#8220;Cyber Data Security Measure (Draft)&#8221;, which requires cyberspace operators with
personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of
Cybersecurity Review. On July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer,
effective on September 1, 2022, which requires the data processors to apply for data cross-border security assessment coordinated by
the CAC under the following circumstances: (i) any data processor transfers important data to overseas; (ii) any critical
information infrastructure operator or data processor who processes personal information of over 1 million people provides personal
information to overseas; (iii) any data processor who provides personal information to overseas and has already provided personal
information of more than 100,000 people or sensitive personal information of more than 10,000 people to overseas since January 1st
of the previous year; and (iv) other circumstances under which the data cross-border transfer security assessment is required as
prescribed by the CAC. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and
Listing by Domestic Enterprises (the &#8220;New Overseas Listing Rules&#8221;) with five interpretive guidelines, which took effect
on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant
governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for
initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been
listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or
multiple acquisition(s), share swap, transfer of shares or other means. According to the Notice on Arrangements for Overseas
Securities Offering and Listing by Domestic Enterprises, published by the CSRC on February 17, 2023, a company that (i) has already
completed overseas listing or (ii) has already obtained the approval for the offering or listing from overseas securities regulators
or exchanges but has not completed such offering or listing before effective date of the new rules and also completes the offering
or listing before September 30, 2023 is considered as an existing listed company and is not required to make any filing until it
conducts a new offering in the future. Furthermore, upon the occurrence of any of the material events specified below after an
issuer has completed its offering and listed its securities on an overseas stock exchange, the issuer shall submit a report thereof
to the CSRC within 3 business days after the occurrence and public disclosure of the event: (i) change of control; (ii)
investigations or sanctions imposed by overseas securities regulatory agencies or other competent authorities; (iii) change of
listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting.&#160;The New Overseas Listing
Rules&#160;provide that the determination as to whether a domestic company is indirectly offering and listing securities on an
overseas market shall be made on a substance over form basis, and if the issuer meets the following conditions, the offering and
listing shall be determined as an indirect overseas offering and listing by a Chinese domestic company: (i) any of the revenue,
profit, total assets or net assets of the Chinese domestic entity is more than 50% of the related financials in the issuer&#8217;s
audited consolidated financial statements for the most recent fiscal year; and (ii) the senior managers in charge of business
operation and management of the issuer are mostly Chinese citizens or with regular domicile in China, the main locations of its
business operations are in China or main business activities are conducted in China.&#160;The New Overseas Listing Rules also
stipulate the legal consequences to the companies for breaches, including failure to fulfill filing obligations or filing documents
having false statement or misleading information or material omissions, which may result in a fine ranging from RMB1 million to
RMB10 million, and in cases of severe violations, the relevant responsible persons may also be barred from entering the securities
market. On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secretes Protection and the
National Archives Administration released the Provisions on Strengthening the Confidentiality and Archives Administration Related to
the Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions,
which took effect on March 31, 2023. PRC domestic enterprises seeking to offer securities and list in overseas markets, either
directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and
filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or
publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies,
securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that (i)
providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and
accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory
agencies and other entities and individuals shall be subject to corresponding procedures in accordance with relevant laws and
regulations; and (ii) any working papers formed in the territory of the PRC by securities companies and securities service agencies
that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in
the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with relevant
laws and regulations. As of the date of this prospectus, these new laws and guidelines have not impacted the Company&#8217;s ability
to conduct its business, accept foreign investments, or list and trade on a U.S. We are headquartered in Hong Kong and our major
operational activities are carried out in Hong Kong, our main places of business are located in Hong Kong, and none of the senior
managers in charge of operation and management of the Company is Chinese citizen or domiciled in China. Hong&#160;Kong is a special
administrative region of the PRC and the basic policies of the PRC regarding Hong&#160;Kong are reflected in the Basic Law of the
Hong&#160;Kong Special Administrative Region of the People&#8217;s Republic of China, or the Basic Law, providing Hong&#160;Kong
with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication
under the principle of &#8220;one country, two systems&#8221;. Also,&#160;all the senior managers in charge of business operation
and management of the Company and its manufacturing subsidiary in China are non- Chinese citizens and do not have regular
domicile in China, the main location of the business operations or business activities of the Company are in Hong Kong instead of
mainland China and our manufacturing subsidiary in China only supplies its products to its affiliates in Hong Kong and does not sell
them in mainland China.&#160;According to the advice by our Chinese legal counsel Guangdong Wesley Law Firm, we believe the New
Overseas Listing Rules by CSRC do not apply to the Company. The Company owns 100% equity interest of all its subsidiaries including
the manufacturing subsidiary in China and does not have a VIE structure. Our subsidiary in China manufactures and sells locksets to
its affiliate in Hong Kong and is not a cyberspace operator with personal information of more than 1 million users or activities
that affect or may affect national security and it does not have documents and materials which may adversely affect national
security or public interests. However, there are uncertainties in the interpretation and enforcement of these new laws and
guidelines, which could materially and adversely impact our business and financial outlook, may impact our ability to accept foreign
investments, offer our securities to investors or continue to list on a U.S. or other foreign exchange, and could impact our ability
to conduct our business. If there is significant change to current political arrangements between mainland China and Hong&#160;Kong,
companies operated in Hong&#160;Kong may face similar regulatory risks as mainland Chinese companies. Any change in foreign
investment regulations, and other policies in China or related enforcement actions by China government could result in a material
change in our operations and the value of our securities and could significantly limit or completely hinder our ability to offer our
securities to investors or cause the value of our securities to significantly decline or be worthless. The Company&#8217;s auditor
is headquartered in the U.S. and it is not subject to the determinations announced by the PCAOB on December 16, 2021, which
determinations were vacated on December 15, 2022, and Holding Foreign Companies Accountable Act and related regulations currently do
not affect the Company as the Company&#8217;s auditor is subject to PCAOB&#8217;s inspection on a regular basis.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Permissions
Required from the PRC Authorities for Our Operations</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
wholly owned subsidiary Dongguan Xingfa Hardware Products Co. Ltd. (&#8220;Xingfa&#8221;) is incorporated and operating in mainland China.
Xingfa has received all permission required to obtain from Chinese authorities to operate its current business in China or issue the
ordinary shares of the Company to foreign investors, including Business license, Customs Registration Certificate, Bank Account Open
Permit and Approval regarding Environmental Protection. Currently, the Chinese government may intervene or influence our operations in
China or any securities offering at any time, which could result in a material change in our operations and our ordinary shares could
decline in value or become worthless. Other than these permits, we are not required to obtain permit and approval from Chinese authorities
to operate our business and to offer the securities being registered to foreign investors. We or our subsidiaries are not covered by
permissions requirements from the China Securities Regulatory Commission (CSRC), Cyberspace Administration of China (CAC) or any other
governmental agency that is required to approve our business and operations. We manufacture and sell lockset products and our products
and services do not pose national security risks, based on the advice of our PRC counsel, we are not subject to the report requirement
under Cybersecurity Review Measures published by Cyberspace Administration of China, National Development and Reform Commission, Ministry
of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce,
People&#8217;s Bank of China, State Administration of Radio and Television, China Securities Regulatory Commission, State Secrecy Administration
and State Cryptography Administration on December 28, 2021, which became effective on February 15, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this report, we (1) are not required to obtain permissions from any PRC authorities to issue our ordinary shares to foreign
investors, (2) are not subject to permission requirements from CSRC, CAC or any other entity that is required to approve of our operations
in China, and (3) have not received or were denied such permissions by any PRC authorities. We are headquartered in Hong Kong with our
chief executive officer, chief financial officer, chief operating officer and all members of the board of directors based in Hong Kong
who are not Chinese citizens and most of our revenues and profits are generated by our subsidiaries in Hong Kong. Although we don&#8217;t
believe we are a Chinese domestic entity as defined in the New Overseas Listing Rules published by CSRC on February 17, 2023, it is not
certain whether we might be determined as a Chinese entity under new rules, which will require us to file the offering related documents
with CSRC. Also, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council
jointly issued the &#8220;Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,&#8221; or the Opinions,
which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal
securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC
regulatory environment, it is uncertain when and whether our PRC subsidiary, will be required to obtain permission from the PRC government
in connection with our listing on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied
or rescinded. If we or our subsidiaries do not receive or maintain such permissions or approvals, inadvertently conclude that such permissions
or approvals are not required, or applicable laws, regulations, or interpretations change and we are required to obtain such permissions
or approvals in the future, it could significantly limit or completely hinder our ability to offer or continue to offer our securities
to investors and cause the value of our securities to significantly decline or become worthless.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif"><b>Transfer
of Cash To and From Our Subsidiaries</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
mainly conduct our marketing and sales, research and development and design activities through our wholly owned subsidiaries in Hong
Kong and manufacturing activities through our wholly owned subsidiary in China, Dongguan Xingfa Hardware Products Co., Limited. As a
result, almost all of our sales revenues are received by our Hong Kong subsidiaries which make payment to Xingfa for the cost of products
and reasonable markups. Transfers of funds among our Hong Kong subsidiaries or from our Hong Kong subsidiaries to the holding company
are free of restrictions. Remittances of funds from our Hong Kong subsidiaries to Xingfa are subject to review and conversion of HK$
or US$ to Renminbi Yuan (&#8220;RMB&#8221;) through Xingfa&#8217;s bank in China, which represents the SAFE to monitor foreign exchange
activities. Under the existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and
trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying
with certain procedural requirements with the banks. Currently, we don&#8217;t have any intentions to distribute earnings or settle amounts
owed under our operating structure other than the agreements entered under normal business operation as discussed above.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
Living Application Group Inc. (&#8220;ILAG&#8221;) is incorporated in Cayman Islands as a holding company with no actual operations
and it currently conducts its business through its subsidiaries in Hong Kong and China. There has been no cash flows and transfers
of other assets between the holding company and its subsidiaries, other than that as of December 31, 2022, Kimbo Locksets and
Intelligent Living Application Group Limited (BVI), both wholly owned subsidiaries of ILAG have paid approximately $1,671,000 for
expenses related to the public offering of ILAG as intercompany loans and not as the dividend payment or distribution. During 2023,
ILAG BVI has paid approximately $972,000 for general and administration expenses as intercompany loans and not as the dividend
payment or distribution. None of our subsidiaries has made any dividend payment or distribution to our holding company as of the
date this report and they have no plans to make any distribution or dividend payment to the holding company in the near future.
Neither the Company nor any of its subsidiaries has made any dividends or distributions to U.S. investors as of the date of this
report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">At
operational level, Xingfa has sold products with markups to Hing Fat, in the amount of approximately $6.54 million and $11.56
million for the year ended December 31, 2023 and 2022, respectively. Hing Fat has sold products with markups to Kambo Locksets in the amount of
approximately $6.31 million and $11.01 million for the year ended December 31, 2023 and 2022, respectively. Hing Fat has made payment to Xingfa
approximately $6.45 million and $12.12 million for the year ended December 31, 2023 and 2022, respectively. Kambo Locksets has made payment to
Hing Fat for approximately $5.47 million and $12.14 million for the years ended December 31, 2023 and 2022, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
transfers of cash are related to the operations of the subsidiaries in the ordinary course of business. For our Hong Kong subsidiaries,
our subsidiary in British Virgin Islands and the holding company (&#8220;Non-PRC Entities&#8221;), there is no restrictions on foreign
exchange for such entities and they are able to transfer cash among these entities, across borders and to US investors. Also, there is
no restrictions and limitations on the abilities of Non-PRC Entities to distribute earnings from their businesses, including from subsidiaries
to the parent company or from the holding company to the U.S. investors as well as the abilities to settle amounts owed. However, PRC
may impose greater restrictions on our Hong Kong subsidiaries&#8217; abilities to transfer cash out of Hong Kong and to the holding company,
which could adversely affect our business, financial condition and results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regarding
cash transfer to and from Xingfa, we are able to have such transfer through banks in China under current account items, such as profit
distributions and trade and service-related foreign exchange transactions, which can be made in foreign currencies without prior approval
from SAFE by complying with certain procedural requirements with the banks. However, approval from or registration with appropriate government
authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as
the repayment of loans denominated in foreign currencies. PRC laws and regulations allow an offshore holding company to provide funding
to our wholly owned subsidiary in China only through loans or capital contributions, subject to the filing or approval of government
authorities and limits on the amount of capital contributions and loans. Subject to satisfaction of applicable government registration
and approval requirements, we may extend inter-company loans to our wholly owned subsidiary in China or make additional capital contributions
to fund Xingfa&#8217;s capital expenditures or working capital. For an increase of its registered capital, Xingfa needs to file such
change of registered capital with the MOFCOM or its local counterparts. If the holding company provide funding to Xingfa through loans,
the total amount of such loans may not exceed the difference between the entity&#8217;s total investment as approved by the foreign investment
authorities and its registered capital. Such loans must be registered with SAFE or its local branches. Under PRC law, Xingfa is also
required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve
funds reach 50% of its registered capital.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Selected
Financial Data</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the table below, we provide you with historical selected financial data for our company. The selected consolidated statements of operations
data for the fiscal years ended December 31, 2023, 2022 and 2021 and the selected consolidated balance sheets data as of December 31,
2023 and 2022 have been derived from our audited consolidated financial statements, which are included in this annual report beginning
on page F-1. The selected consolidated balance sheet data for the year ended December 31, 2021 have been derived from our audited consolidated
balance sheet as of December 31, 2021, which is not included in this annual report. Our historical results do not necessarily indicate
results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified
in their entirety by reference to, our audited consolidated financial statements and related notes and &#8220;Item 5. Operating and Financial
Review and Prospects&#8221; below. Our audited consolidated financial statements are prepared and presented in accordance with US GAAP.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December <span style="font-family: Times New Roman, Times, Serif">31,
    2023</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">December
    31, 2022</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 56%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">Current assets</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 18%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">12,102,160</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 18%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">16,015,777</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Total non-current assets</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">6,181,698</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">5,786,297</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Total assets</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">18,283,858</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">21,802,074</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Total current liabilities</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">1,390,963</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">1,813,936</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Total non-current liabilities</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">490,502</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">536,327</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">For
    the years ended December 31,</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">2023</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">2022</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">2021</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%"><span style="font-family: Times New Roman, Times, Serif">Revenue</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">6,443,357</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">12,158,102</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">12,543,556</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Operating expenses</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">4,527,090</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">4,461,258</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">3,109,966</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Net loss</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(3,501,518</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(1,655,903</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(1,386,515</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">For
    the years ended December 31,</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">2023</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">2022</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif">2021</span></td><td style="padding-bottom: 1.5pt; font-weight: bold"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">Net cash used in operating activities</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">(3,163,187</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">(4,170,876</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td style="width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif">(1,038,967</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Net cash used in investing activities</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(1,360,274</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(4,181,724</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(9,758</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Net cash provided by (used in) financing activities</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(154,976</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">17,397,802</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">876,334</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Net increase (decrease) in cash</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(4,681,921</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">9,034,522</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">$</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif">(171,311</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">)</span></td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.A.
</b>[Reserved]</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.B.
Capitalization and Indebtedness</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.C.
Reasons For The Offer And Use Of Proceeds</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.D.
Risk Factors</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>An
investment in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described
below together with all other information contained in this annual report, including the matters discussed under the headings &#8220;Forward-Looking
Statements&#8221; and &#8220;Operating and Financial Review and Prospects&#8221; before you decide to invest in our </i>ordinary shares<i>.
We are a holding company with substantial operations in Hong Kong and China and are subject to a legal and regulatory environment that
in many respects differs from the United States. If any of the following risks, or any other risks and uncertainties that are not presently
foreseeable to us, actually occur, our business, financial condition, results of operations, liquidity and our future growth prospects
could be materially and adversely affected.</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Summary
of Risk Factors</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
investment in our ordinary shares involves significant risks. Below is a summary of material risks we face, organized under relevant
headings. These risks are discussed more fully in <i>Item 3. Key Information&#8212;D. Risk Factors</i>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
                                            Related to Our Business</b></span></p>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face risks related to health epidemics and other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to
cause business disruptions, resulting in a material adverse impact to our financial condition and results of operations.</span></p>
<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                                                                                                                                                                                                                          may not be able to successfully introduce smart lock and security and internet of things (IoT) products that are in research and
                                                                                                                                                                                                                                          development.&#160;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font: normal 10pt Times New Roman, Times, Serif">We
                                            incurred net losses for the year ended December 31, 2023 and the past two years and may not
                                            be able to generate sufficient operating cash flows and working capital from operation. Failure
                                            to manage our liquidity and cash flows may materially and adversely affect our financial
                                            condition and results of operations. As a result, we may need additional capital, and financing
                                            may not be available on terms acceptable to us, or at all.</span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fluctuations
                                            in the price, availability or quality of raw materials used in our products could cause manufacturing
                                            delays, adversely affecting our ability to provide goods to our customers or increase costs,
                                            any of which could decrease our sales or earnings.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
                                            may experience material disruptions to its manufacturing operations in China that could result
                                            in material delays, quality control issues, increased costs and loss of business opportunities,
                                            which may negatively impact our sales and financial results.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes
                                            in U.S. trade policies could significantly reduce the volume of export goods into the United
                                            States, which may materially reduce our profit margin and our sales in the United States.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Environmental
                                            regulations impose substantial costs and limitations on our operations and violation of environmental
                                            regulations might subject us to fines, penalties or suspension of production which could
                                            have material negative impact on our financial results.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis
of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective,
which may adversely affect investor confidence in our company and, as a result, the value of our Ordinary Shares.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            do not have any business insurance coverage.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
                                            Related to Doing Business in China</b></span></p>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes
                                            in China&#8217;s economic, political or social conditions or government policies could have
                                            a material adverse effect on our business and results of operations.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainties
                                            and quick change in the interpretation and enforcement of Chinese laws and regulations with
                                            little advance notice could result in a material and negative impact on our business operation,
                                            decrease the value of our ordinary shares and limit the legal protections available to us.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
                                            failure to comply with PRC regulations regarding the registration requirements for employee
                                            stock incentive plans may subject the PRC plan participants or us to fines and other legal
                                            or administrative sanctions.</span></td></tr></table>

<p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulatory
                                            bodies of the United States may be limited in their ability to conduct investigations or
                                            inspections of our operations in China.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are
                                            evolving quickly. Further implementations and interpretations of or amendments to the HFCA
                                            Act or the related regulations, or a PCOAB&#8217;s determination of its lack of sufficient
                                            access to inspect our auditor, might pose regulatory risks to and impose restrictions on
                                            us because of our operations in mainland China. A potential consequence is that our ordinary
                                            shares may be delisted by the exchange. The delisting of our ordinary shares, or the threat
                                            of our ordinary shares being delisted, may materially and adversely affect the value of your
                                            investment. Additionally, the inability of the PCAOB to conduct full inspections of our auditor
                                            deprives our investors of the benefits of such inspections.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantial
                                            uncertainties exist with respect to the interpretation and implementation of the newly enacted
                                            PRC Foreign Investment Law and how it may impact the viability of our current corporate structure,
                                            corporate governance, business operations and financial results.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
                                            change of regulations and rules by Chinese government, including the limitations on usage
                                            of power, additional environmental protection requirements, moving technology in and out
                                            of the PRC or restriction on cash transfer out of PRC, may intervene or influence our operations
                                            in China at any time and any additional control over offerings conducted overseas and/or
                                            foreign investment in issuers with Chinese operations could result in a material change in
                                            our business operations and/or the value of our ordinary shares and could significantly limit
                                            or completely hinder our ability to offer our ordinary shares to investors and cause the
                                            value of such securities to significantly decline or be worthless.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Related to Doing Business in Hong Kong</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            will be difficult to acquire jurisdiction and enforce liabilities against us, our officers,
                                            directors and assets based in Hong Kong and China.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Hong Kong legal system embodies uncertainties which could negatively affect our listing on
                                            Nasdaq and limit the legal protections available to you and us.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            cannot foresee the recently passed legislation of Basis Law Article 23 (Safeguarding National
                                            Security Ordinance) will create any legal impact on us, our business, our officers, our directors
                                            and assets based in Hong Kong and China. However, we cannot predict if our customers in the
                                            US may have special prospectus in doing business with us.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Related to Our Ordinary Shares</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0in"></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            ordinary shares may be thinly traded and you may be unable to sell at or near ask prices
                                            or at all if you need to sell your shares to raise money or otherwise desire to liquidate
                                            your shares.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
                                            may face difficulties in protecting your interests as a shareholder, as Cayman Islands law
                                            provides substantially less protection when compared to the laws of the United States and
                                            it may be difficult for a shareholder of ours to effect service of process or to enforce
                                            judgements obtained in the United States courts.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, please see &#8220;Risk Factors&#8221; below, and other information included in this report, for a discussion of these and other
risks and uncertainties that we face.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif"><b>Risks
Related to Our Business</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i></i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>We face risks related to health epidemics and
other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to cause business disruptions, resulting in a
material, adverse impact to our financial condition and results of operations.</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="margin: 0; text-align: justify">In recent years, there have been outbreaks of epidemics in various countries. The recent
outbreak of COVID-19 has spread throughout the world, especially in China, the United States and Europe. On March 11, 2020, the
World Health Organization declared the outbreak a global pandemic. The pandemic has resulted in quarantines, travel restrictions,
and the temporary closure of office buildings and facilities in China and in the U.S. Our results of operations were materially
adversely affected by the outbreak of COVID-19. </p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2022, there were outbreaks of the Omicron variant of the COVID-19 in Hong Kong where our headquarters are located and other cities
in China, including Shenzhen, Shanghai, Guangzhou, Taiyuan, Changchun as well as Dongguan city where Xingfa is located, and travel
restrictions, mandatory COVID-19 tests, quarantine requirements and/or temporary closure of office buildings and facilities were imposed by local governments. China eased the strict lockdown procedures in early December 2022, which led to surge in
COVID infections in December 2022 and January 2023 and caused disruption our business operations as our migrant workers from other provinces in the manufacturing factory
had to leave and go home early for the new year holidays and did not come back until March 2023. Although our operations
have resumed to normal, we cautiously prepare for the
government authorities may issue new orders of office closure, travel and transportation restrictions in China if there is any new
variants or resurgence of the COVID-19, which will have material negative impact to our
business and financial conditions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In general, our business could be materially adversely affected by the effects of epidemics or pandemic, including,
but not limited to, the COVID-19, avian influenza, severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, or other
outbreaks. In response to an epidemic or other outbreaks, government and other organizations may adopt regulations and policies that could
lead to severe disruption to our daily operations, including temporary closure of our offices and other facilities. These severe conditions
may cause us and/or our partners to make internal adjustments, including but not limited to, temporarily closing down businesses, limiting
business hours, and setting restrictions on travel and/or visits with clients and partners for a prolonged period of time. Various impacts
arising from a severe condition may cause business disruptions, resulting in a material, adverse impact to our financial condition and
results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
growth of our business depends on our ability to accurately predict consumer trends and demand and successfully introduce new products
and product line extensions and improve existing products.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
growth depends, in part, on our ability to successfully introduce new products and product line extensions and improve and reposition
our existing products to meet the requirements of property owners and builders. This, in turn, depends on our ability to predict and
respond to evolving consumer trends, demands and preferences. The development and introduction of innovative new products and product
line extensions involve considerable costs. In addition, it may be difficult to establish new supplier relationships and determine appropriate
product selections when developing a new product or product line extension. Any new product or product line extension may not generate
sufficient customer interest and sales to become a profitable product or to cover the costs of its development and promotion and may
negatively affect our operating results and damage our reputation. If we are not able to anticipate, identify or develop and market products
to respond to the changes in the requirements and preferences of property owners and builders, or if our new product introductions or
repositioned products fail to gain consumer acceptance, we may not grow our business as anticipated, our sales may decline and our business,
financial condition and results of operations may be materially adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may not be able to successfully introduce smart lock and security and internet of things (IoT) products that are current in research
and development.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have invested our efforts, time and resources in the research and development of smart locks in the past couple years and the outcome
is uncertain whether such development will be successful. We will continue to invest in the development of the software of smart locks
and equipment and machineries to manufacture parts and assembly line to produce smart locks. In early 2023, we have engaged a Hong Kong
based technology company to conduct research and development in a series of smart home products and devices as a part of our smart lock,
security and IoT products development strategy. Having considered the availability of talents and cost-benefit efficiency, we will incur
costs to outsource information technology developer(s) to develop software application and support functions of such new products. In
additional, we will incur marketing costs to generate customer interest and sales of such products in enough volume to make it a profitable
product. If we fail to design and develop appropriate functions for our smart locks to attract enough customers and establish commercial
manufacturing capabilities or if our smart lock products can&#8217;t meet the regulatory requirements, our financial condition and results
of operations may be adversely affected. If we fail to obtain and maintain patent, trade secret and other intellectual property protection
and regulatory exclusivity for our new smart locks or if we are unable to ensure that we do not infringe, misappropriate or otherwise
violate the valid patent, trade secret or other intellectual property rights of third parties regarding smart locks on the market, our
business, financial condition and results of operations may be materially adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>We
may not be able to successfully implement our growth strategy on a timely basis or at all.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
future success depends, in large part, on our ability to implement our growth strategy, including expanding distribution and improving
placement of our products in the stores of our retail customers, attracting new consumers to our brands, introducing new products and
product line extensions and expanding into new markets. Our ability to implement this growth strategy depends, among other things, on
our ability to:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">enter
                                            into distribution and other strategic arrangements with current and new retailers and other
                                            potential distributors of our products;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">continue
                                            to effectively compete in our distribution channels;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">increase
                                            our brand recognition by effectively implementing our marketing strategy and advertising
                                            initiatives;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">create
                                            and maintain brand loyalty;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">develop
                                            new products and product line extensions that appeal to consumers;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">maintain
                                            and, to the extent necessary, improve our high standards for product quality, safety and
                                            integrity;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">maintain
                                            sources for the required supply of quality raw materials and ingredients to meet our growing
                                            demand; and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">identify
                                            and successfully enter and market our products in new geographic areas and market segments.</span></td></tr></table>

<p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may not be able to successfully implement our growth strategy and may need to change our strategy from time to time. If we fail to implement
our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful, our business, financial condition
and results of operations may be materially adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
incurred net losses for the year ended December 31, 2023 and the past two years and may not be able to generate sufficient operating
cash flows and working capital from operation. Failure to manage our liquidity and cash flows may materially and adversely affect our
financial condition and results of operations. As a result, we may need additional capital, and financing may not be available on terms
acceptable to us, or at all.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
incurred net losses of $3,501,518, $1,655,903 and $1,386,515 for the years ended December 31, 2023, 2022 and 2021, respectively. As a
result, we have generated negative cash flows from operating activities of approximately $3.2 million, $4.1million and approximately
$1.0 million for the years ended December 31, 2023, 2022 and 2021. We can offer no assurance that we will operate profitably or that we
will generate positive cash flows in the next twelve months, given our substantial expenses in relation to our revenue at this stage
of our Company. Inability to collect our accounts receivable in a timely and sufficient manner, or the inability to offset our expenses
with adequate revenue, may adversely affect our liquidity, financial condition and results of operations. We completed our public
offering with net proceeds of approximately $16.86 million in July 2022. We believe that our cash on hand and anticipated cash flows
from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary
course of business for the next 12 months, we cannot assure you this will be the case.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
and when we are unable to generate sufficient cash flows from operations to meet our working capital requirements and various operating
needs, we may need to raise additional funds for our operations and such funds may not be available on commercially acceptable terms,
if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future
opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition
and results of operations. If we are unable to achieve or maintain profitability, the market price of our shares may significantly decrease.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Any
damage to our reputation or our brand may materially adversely affect our business, financial condition and results of operations.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have long business relationships with our customers by maintaining high quality and quick service response. Maintaining our strong reputation
with consumers and our suppliers is critical to our success. Our brands may suffer if our marketing plans or product initiatives are
not successful. The importance of our brands may increase if competitors offer products with designs and functions similar to ours. Further,
our brands may be negatively impacted due to real or perceived quality issues or if consumers perceive us as being untruthful in our
marketing and advertising, even if such perceptions are not accurate. The failure to maintain high standards for product quality and
integrity, including raw materials obtained from suppliers, or allegations of product quality issues, even if untrue or caused by our
raw material suppliers, may reduce demand for our products or cause production and delivery disruptions. We maintain guidelines and procedures
to ensure the quality and integrity of our products. However, we may be unable to detect or prevent product quality issues, particularly
in instances of the attempts to cover up or obscure deviations from our guidelines and procedures. If any of our products become unfit
for use or cause injury, we may have to engage in a product recall and/or be subject to liability. In addition, if our products have
quality issues, we could incur significant expenses related to the replacement of our products. Damage to our reputation or our brands
or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and
increased costs and our business, financial condition and results of operations may be materially adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>To
the extent our customers purchase products in excess of consumer demand in any period, our sales in a subsequent period may be adversely
affected as our customers seek to reduce their inventory levels.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time, our customers may purchase more products than they expect to sell during a particular time period. Our customers may grow
their inventory in anticipation of, or during, our promotional events, which typically provide for reduced prices during a specified
time or other customer incentives. Our customers may also grow inventory in anticipation of a price increase for our products, or otherwise
over-order our products as a result of overestimating demand for our products. If a customer increases its inventory during a particular
reporting period as a result of a promotional event, anticipated price increases or otherwise, then sales during the subsequent reporting
period may be adversely impacted as our customers seek to reduce their inventory to customary levels. This effect may be particularly
pronounced when the promotional event, price increase or other event occurs near the end or beginning of a reporting period or when there
are changes in the timing of a promotional event, price increase or similar event, as compared to the prior year. To the extent our customers
seek to reduce their usual or customary inventory levels or change their practices regarding purchases in excess of consumer demand,
our net sales and results of operations may be materially adversely affected in that period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
operate in a highly competitive industry and may lose market share or experience margin erosion if we are unable to compete effectively.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
compete on the basis of product quality, design and performance, brand awareness and loyalty, product variety, reputation, price and
promotional efforts. We compete with a significant number of companies of varying sizes, including divisions or subsidiaries of larger
companies who may have greater financial resources and larger customer bases than we have. As a result, these competitors may be able
to identify and adapt to changes in consumer preferences more quickly than us due to their resources and scale. They may also be more
successful in marketing and selling their products, better able to increase prices to reflect cost pressures and better able to increase
their promotional activity, which may impact us and the entire lockset manufacturing industry. If these competitive pressures cause our
products to lose market share or experience margin erosion, our business, financial conditions and results of operations may be materially
adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Fluctuations
in the price, availability or quality of raw materials used in our products could cause manufacturing delays, adversely affect our ability
to provide goods to our customers or increase costs, any of which could decrease our sales or earnings.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
major raw material purchases include copper, iron, zinc alloy and packaging materials comprised of paper and plastic. We depend on outside
suppliers for these raw materials and must obtain sufficient quantities of quality raw materials from these suppliers at acceptable prices
and in a timely manner. We do not maintain fixed supply contracts with our suppliers. Unfavorable fluctuations in the price, quality
or availability of required raw materials could negatively affect our ability to meet the demands of our customers. Our inability to
meet customers&#8217; demands could result in the loss of future sales.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
profitability of our products depends in part upon the margin between the cost to us of certain raw materials and our fabrication costs
associated with converting such raw materials into assembled products, as compared to the selling price of our products. We intend to
continue to base the selling prices of our products in part upon their associated raw material costs. However, we may not be able to
pass all increases in raw material costs or increases in the costs associated with taking possession of raw materials through to our
customers in the future. The inability to offset price increases of raw materials by sufficient product price increases could have a
material adverse effect on our consolidated financial condition, results of operations and cash flows.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not engage in hedging transactions to protect against raw material fluctuations but attempt to mitigate the short-term risks of price
swings by purchasing raw materials in advance based on production needs or reaching agreements with some of our suppliers to keep the
cost of raw materials stable. We also attempt to lower consumption of raw materials by lowing waste rate and recycled materials without
compromising product quality.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Xingfa
may experience material disruptions to its manufacturing operations in China that could result in material delays, quality control issues,
increased costs and loss of business opportunities, which may negatively impact our sales and financial results.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
rely primarily upon our manufacturing facilities of Xingfa, which is located in Shatian Town, Dongguan City, Guangdong Province, China,
to produce our products. While we seek to operate our facilities in compliance with applicable rules and regulations and take measures
to minimize the risks of disruption at our facilities, a material disruption at our manufacturing facilities could prevent us from meeting
customer demand, reduce our sales and negatively impact our financial results. Our manufacturing facilities, or any of our machines,
could cease operations unexpectedly due to a number of events, including: prolonged power failures; equipment failures; disruptions in
the transportation infrastructure including roads, bridges, railroad tracks; fires, floods, earthquakes, health epidemics, acts of war,
or other catastrophes, which could also pose a risk to injury or damage to personnel, the property of others, which in turn could lead
to considerable financial costs and may also have negative legal consequences. Our future growth strategy may include an expansion of
our manufacturing capacity to meet increasing demand for our existing products. Any projects undertaken by us to increase such capacity
may not be constructed on the anticipated timetable or within budget. We may also experience quality control issues as we implement these
manufacturing upgrades and ramp up production. Any such material disruption may prevent us from shipping our products on a timely basis,
reduce our sales and market share and negatively impact our financial results.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
face risks associated with managing operations in China, any of which could decrease our sales or earnings and could significantly limit
or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline
or be worthless.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
of our manufacturing operations currently are conducted in China. There are a number of risks inherent in doing business in China, including
the following: unfavorable political or economic factors; fluctuations in foreign currency exchange rates; potentially adverse tax consequences;
unexpected legal or regulatory changes; lack of sufficient protection for intellectual property rights; difficulties in recruiting and
retaining personnel, and managing international operations; and less developed infrastructure. Furthermore, changes in the political,
economic and social conditions in China from which these risks are derived could make it more difficult to provide products to our customers.
Our inability to manage these risks successfully could adversely affect our business and manufacturing operations and could significantly
limit or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly
decline or be worthless.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Changes
in U.S. trade policies could significantly reduce the volume of export goods into the United States, which may materially reduce our
profit margin and our sales in the United States.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
U.S. administration and members of Congress have made public statements indicating possible significant changes in U.S. trade policy
and have taken certain actions that have impacted the U.S. and China trade relationship, including imposing tariffs on certain goods
imported into the United States from China. The increase of tariffs for products made in China has triggered retaliatory actions
from China, resulting in &#8220;trade wars&#8221; and increased costs for goods imported into the United States, which have and may
continue to reduce customer demand for our products if the importers who pay for those tariffs add such tariff amounts to their
selling prices. We have reduced our sales price and profit margin to absorb some of the tariffs, however, importers may still reduce
their orders. Such reductions have caused and may continue to materially and adversely affect our sales, profit margin and our
business. Although the U.S. has started to review and remove the increased tariff previously imposed on certain items importing from
China, it has not impacted our products sold to the U.S. and if we can&#8217;t establish new manufacturing facilities outside of
China, continue to reduce our production costs and/or develop new products to attract customers who are willing to pay higher
prices, our business and profits will be materially and adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
derive a significant portion of our revenues from a few major customers. For the years ended December 31, 2023 and 2022, four
customers accounted for 88.2% and 85.7% of our revenues, respectively. In addition, our five largest customers in aggregate accounted
for approximately 92% and 91% of our revenues for the years ended December 31, 2023 and 2022, respectively. There are inherent risks whenever
a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future
level of demand for our products that will be generated by these customers or the future demand for our products by these customers in
the end-user marketplace. If any of these customers experience declining or delayed sales due to market, economic or competitive conditions,
we could be pressured to reduce our prices or they could decrease the purchase quantity of our products, which could have an adverse
effect on our margins and financial position, and could negatively affect our revenues and results of operations. If any of our three
largest customers terminates the purchase of our products, such termination would materially negatively affect our revenues, results
of operations and financial condition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
operating results may fluctuate significantly and may not fully reflect the underlying performance of our business.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
operating results, including the levels of our net revenues, expenses, net (loss)/income and other key metrics, may vary significantly
in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating
results may not be meaningful. Accordingly, the results for any one period are not necessarily an indication of future performance. Fluctuations
in results may adversely affect the market price of our ordinary shares. Factors that may cause fluctuations in our financial results
include:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            ability to attract new customers and retain existing customers;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in our mix of products and introduction of new products;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            amount and timing of operating expenses related to the maintenance and expansion of our business,
                                            operations and infrastructure;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Increase
                                            the cost of raw materials and/or labor;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            decision to manage order volume growth during the period;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            impact of competitors or competitive products;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">increases
                                            in our costs and expenses that we may incur to grow and expand our operations and to remain
                                            competitive;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in the legal or regulatory environment or proceedings, including enforcement by government
                                            regulators, fines, orders or consent decrees;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">increase
                                            of tariffs, general economic, industry and market conditions, including changes in Chinese,
                                            U.S. or global business or macroeconomic conditions;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            timing of expenses related to the development or acquisition of technologies or businesses;
                                            and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            additional costs related to being a public company.</span></td></tr></table>

<p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Despite
our marketing efforts, we may not be able to promote and maintain our brand in an effective and cost-efficient way and our business and
results of operations may be harmed accordingly.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing
customers. Successful promotion of our brand and our ability to attract quality customers depends largely on the effectiveness of
our marketing efforts and the success of the channels we use to promote our products. Our efforts to promote our sales and to build
our brand have caused us to incur selling and marketing expenses in the amount of approximately $60,000, $105,000 and approximately
$150,000 for the years ended December 31, 2023, 2022 and 2021, respectively. Our COO has taken a marketing trip recently to promote
our products in the US for new and potential customers. Despite our marketing efforts, it is likely that our future marketing
efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the
immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to
successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition
would be adversely affected, which may impair our ability to grow our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely
affected.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
inventories are mostly raw materials, such as copper, iron, zinc alloy and packaging materials comprised of paper and plastic, which
require us to manage our inventory effectively. We depend on our demand forecasts for various kinds of raw materials and pre-made products
to make purchase decisions and to manage our inventory. Such demand, however, can change significantly between the time inventory is
ordered and the date by which we hope to sell it. Demand may be affected by seasonality, the economy, new product launches, pricing and
discounts, product defects, changes in customer spending patterns, changes in customer tastes and other factors, and our customers may
not order products in the quantities that we expect. The acquisition of certain types of inventory may require significant lead time
and prepayment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
as we plan to continue expanding our product offerings, we expect to include a wider variety of products and raw materials in our inventory,
which will make it more challenging for us to manage our inventory and logistics effectively. We cannot guarantee that our inventory
levels will be able to meet the demands of customers, which may adversely affect our sales. If we fail to manage our inventory effectively,
we may be subject to a heightened risk of inventory obsolescence resulting in a decline in inventory value, and significant inventory
write-downs or write-offs. Any of the above may materially and adversely affect our results of operations and financial condition. On
the other hand, if we underestimate demand for our products, or if our suppliers fail to supply quality raw materials and pre-made products
in a timely manner, we may experience inventory shortages, which might result in diminished brand loyalty and lost revenues, any of which
could harm our business and reputation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success,
and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements
with our employees and others to protect our proprietary rights. Thus, we cannot assure you that any of our intellectual property rights
would not be challenged, invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us
with competitive advantages. In addition, because of the rapid pace of technological change, parts of our business rely on Internet of
Things (IoT) technology, the network of physical objects that feature an IP address for internet connectivity, and the communication
that occurs between these objects and other Internet-enabled devices and systems which will alert the users under pre-set conditions,
developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third
parties on reasonable terms, or at all.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject
to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation.
Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies
available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce
our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we
take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce
our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources.
We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become
available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting
or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of
operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks,
patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future
be subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party
trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other
aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property
rights against us in China, Hong Kong, the United States or other jurisdictions. If any third-party infringement claims are brought against
us, we may be forced to divert management&#8217;s time and other resources from our business and operations to defend against these claims,
regardless of their merits.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additionally,
the application and interpretation of China&#8217;s intellectual property right laws and the procedures and standards for granting trademarks,
patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure
you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property
rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property,
and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations
may be materially and adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>From
time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management
attention, disrupt our business and adversely affect our financial results.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our marketplace
and better serve our customers. These transactions could be material to our financial condition and results of operations if consummated.
If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even
if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Strategic
investments or acquisitions will involve risks commonly encountered in business relationships, including:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">difficulties
                                            in assimilating and integrating the operations, personnel, systems, data, technologies, products
                                            and services of the acquired business;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">inability
                                            of the acquired technologies, products or businesses to achieve expected levels of revenue,
                                            profitability, productivity or other benefits;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">difficulties
                                            in retaining, training, motivating and integrating key personnel;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">diversion
                                            of management&#8217;s time and resources from our normal daily operations;</span></td></tr></table>

<p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">difficulties
                                            in successfully incorporating licensed or acquired technology and rights into our product
                                            offerings;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">difficulties
                                            in maintaining uniform standards, controls, procedures and policies within the combined organizations;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">difficulties
                                            in retaining relationships with customers, employees and suppliers of the acquired business;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">risks
                                            of entering markets in which we have limited or no prior experience;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">regulatory
                                            risks, including remaining in good standing with existing regulatory bodies or receiving
                                            any necessary pre-closing or post-closing approvals, as well as being subject to new regulators
                                            with oversight over an acquired business;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">assumption
                                            of contractual obligations that contain terms that are not beneficial to us, require us to
                                            license or waive intellectual property rights or increase our risk for liability;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">failure
                                            to successfully further develop the acquired technology;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">liability
                                            for activities of the acquired business before the acquisition, including intellectual property
                                            infringement claims, violations of laws, commercial disputes, tax liabilities and other known
                                            and unknown liabilities;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">potential
                                            disruptions to our ongoing businesses; and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">unexpected
                                            costs and unknown risks and liabilities associated with strategic investments or acquisitions.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business
strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended
benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to
the successful development of new or enhanced products or that any new or enhanced products, if developed, will achieve market acceptance
or prove to be profitable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to
continue in their present positions, our business may be severely disrupted.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business operations depend on the continued services of our senior management, particularly the executive officers named in this report.
While we have the ability to provide different incentives to our management, we cannot assure you that we can continue to retain their
services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to
replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition
and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain
qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there
is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises
between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements
in China or we may be unable to enforce them at all.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
relative lack of public company experience of our management team may put us at a competitive disadvantage.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such
as those imposed by the Sarbanes-Oxley Act of 2002, (&#8220;Sarbanes-Oxley&#8221;). Our senior management does not have much experience
managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures
on a timely basis. Our senior management may be unable to implement programs and policies in an effective and timely manner or that adequately
respond to the increased legal, regulatory and reporting requirements associated with being a publicly traded company. Our failure to
comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to
the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect
on our business and stock price.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
lease our facilities from third parties and there is no assurance that we will be able to renew our leased facilities on favorable terms,
or at all.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
currently lease all of the properties we use to operate our business. Our headquarters are located in Hong Kong comprising office premises
of approximately 300 m<sup>2</sup>. Our production facilities are located in Dongguan, Guangdong Province of China, where Xingfa leases
a total floor area of approximately 17,560 m<sup>2</sup>. The lease terms on these premises expire on February 28, 2026. In October 2022,
Xingfa acquired an electroplating production line which is on a 2,033 m<sup>2</sup> floor area premise in an environmental protection
industrial park in Dongguan, which is specially approved for infrastructures such as electroplating and other high pollution productions.
The lease term on this premise expires on October 31, 2026. If we are unable to renew these leases on favorable terms, or at all, we
would be required to find new leased space, which space may be more expensive to lease than our current facilities. Also, the lease may
be terminated early due to unexpected change of land usage by the local government.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Moreover,
the lessor of Xingfa has not provided us with a real estate ownership certificate for the manufacturing facility. Under the relevant
PRC laws and regulations, if the lessor is unable to obtain certificate of title, such lease contract may be recognized as void and as
a result, Xingfa may be required to vacate the relevant properties. Although the lessor agreed to compensate Xingfa&#8217;s loss or provide
Xingfa with other properties for its current business operation, we might not be able to recover all the losses and our business might
be negatively impacted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Competition
for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe our success depends on the efforts and talent of our employees, including engineering, risk management, information technology,
financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified
and skilled employees. Competition for highly skilled marketing, engineering, information technology, risk management and financial personnel
is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation
and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may
be able to offer more attractive terms of employment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek
to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and
the quality of our products could diminish, resulting in a material adverse effect to our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Increases
in labor costs in the PRC may adversely affect our business and results of operations.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected
to continue to increase. In addition, Xingfa is required by PRC laws and regulations to pay various statutory employee benefits, including
pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated
government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate
payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees,
fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless
we are able to control our labor costs or pass on these increased labor costs to our customers or end users by increasing the prices
of our products, our financial condition and results of operations may be adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and
cultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain
these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including
our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Environmental
regulations impose substantial costs and limitations on our operations and violation of environmental regulations might subject us to
fines, penalties or suspension of production which could have material negative impact on our financial results.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
uses a variety of chemicals and produce significant emissions and powder dust in our lockset manufacturing operations. The stamping and
casting machines in the manufacturing facility create high decibel noise. As such, Xingfa is subject to various national and local environmental
laws, occupational safety and health (&#8220;OSH&#8221;) laws and regulations in China concerning issues such as air emissions, wastewater
discharge, and solid waste management and disposal. These laws and regulations can restrict or limit our operations and expose us to
liability and penalties for non-compliance. For example, in April 2018, Xingfa was ordered by Dongguan Environmental Protection Bureau
to pay a fine of RMB100,000 (approximately $15,000) for failure to meet the air emission requirement, which Xingfa has paid and corrected
the non-compliance emission. While we believe that Xingfa&#8217;s facilities are in material compliance with all applicable environmental
and OSH laws and regulations, the risks of substantial unanticipated costs and liabilities related to compliance with these laws and
regulations are an inherent part of our business. It is possible that future conditions may develop, arise or be discovered that create
new environmental compliance or remediation liabilities and costs. While we believe that we can comply with existing environmental legislation
and regulatory requirements and that the costs of compliance have been included within budgeted cost estimates, compliance may prove
to be more limiting and costly than anticipated. If Xingfa fails to comply with the environmental regulations, it could face fines, penalties
and our production facility-y(-ies) operations might be suspended until we comply, which could have material negative impact on our operation
and financial results.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition to our core production facility, we acquire an electroplating production line. It is a result of polluted water drainage requirements
are more stringent. This pushes cost of electroplating increase. As a result, we acquired a licensed production line. However, we may
expose to sudden change in environmental regulations to require additional remediation costs for the electroplating production line,
which would have material negative impact to our operation and financial results.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis
of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective,
which may adversely affect investor confidence in our company and, as a result, the value of our Ordinary Shares.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness
of our internal control over financial reporting for the year ending December 31, 2023, the first fiscal year beginning after our initial
public offering. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal
control over financial reporting and, after we cease to be an &#8220;emerging growth company,&#8221; a statement that our independent
registered public accounting firm has issued an opinion on our internal control over financial reporting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform
the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation
in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control
over financial reporting, we will be unable to assert that our internal controls are effective.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered
public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence
in the accuracy and completeness of our financial reports, which would cause the price of our Ordinary Shares to decline, and we may
be subject to investigation or sanctions by the SEC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls
and procedures and hiring accounting or internal audit staff.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">At
such time that our independent registered public accounting firm is required to formally attest to the effectiveness of our internal
control over financial reporting, it may issue a report that is adverse in the event it is not satisfied with the level at which our
controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>We
do not have any business insurance coverage.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insurance
companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies.
Currently, we and our subsidiaries do not have any business liability or disruption insurance to cover our operations. We have determined
that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms
make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and
the diversion of resources, which could have an adverse effect on our results of operations and financial condition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Related to Doing Business in China.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Changes
in China&#8217;s economic, political or social conditions or government policies could have a material adverse effect on our business
and results of operations.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
of our manufacturing operations are located in China. Accordingly, our business, prospects, financial condition and results of operations
may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth
in China as a whole.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement,
level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented
measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and
the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still
owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development
by imposing industrial policies and change of enforcement practice of such rules and policies can change quickly with little advance
notice. The Chinese government also exercises significant control over China&#8217;s economic growth through allocating resources, controlling
payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries
or companies.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
the Chinese economy has experienced significant growth over the past four decades, growth has been uneven, both geographically and among
various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation
of resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial
condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.
Since the outbreak of COVID-19, China&#8217;s economic growth has slowed down significantly, and the recovery has
been slow. Any prolonged slowdown in the Chinese economy may reduce the demand for our
products and materially and adversely affect our business and results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Uncertainties
and quick change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material
and negative impact our business operation, decrease the value of our ordinary shares and limit the legal protections available to us.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC legal system is based on written statutes, and prior court decisions have limited value as precedents. Since these laws and regulations
are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are
not always uniform and enforcement of these laws, regulations and rules involves uncertainties. The enforcement of laws and that rules
and regulations in China can change quickly with little advance notice and the risk that the Chinese government may intervene or influence
our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China- based issuers,
could result in a material change in our operations and/or the value of our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot rule out the possibility that the PRC government will institute a licensing regime or pre-approval requirement covering our industry
at some point in the future. If such a licensing regime or approval requirement were introduced, we cannot assure you that we would be
able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and
impede our ability to continue our operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative
and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult
to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal
systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published
in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and
rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property
(including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to
continue our operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have,
and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct
our business.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a holding company, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing
requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we
may incur. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other distributions to us.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
PRC laws and regulations, our PRC subsidiary, as a wholly foreign-owned enterprise in China, may pay dividends only out of its respective
accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned
enterprise in China is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory
reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and
conduct our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion
may delay or prevent us from using the proceeds of offering to make loans to or make additional capital contributions to our PRC subsidiary,
which could materially and adversely affect our liquidity and our ability to fund and expand our business.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
PRC laws and regulations, we are permitted to utilize the proceeds from offerings to fund our PRC subsidiary by making loans to or additional
capital contributions to our PRC subsidiary, subject to applicable government registration and approval requirements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
loans to our PRC subsidiary, which are treated as foreign-invested enterprises under PRC laws, are subject to PRC regulations and foreign
exchange loan registrations. For example, loans by us to our PRC subsidiary to finance its activities cannot exceed statutory limits
and must be registered with the local counterpart of the State Administration of Foreign Exchange, or SAFE. The statutory limit for the
total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by China&#8217;s
Ministry of Commerce (&#8220;MOFCOM&#8221;) or its local counterpart and the amount of registered capital of such foreign-invested company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may also decide to finance our PRC subsidiary by means of capital contributions. These capital contributions must be filed with the MOFCOM
or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested
enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides
that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes
within the business scope approved by the applicable government authority and unless otherwise provided by law, may not be used for equity
investments within the PRC. Although on July 4, 2014, SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform
in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular
36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises
in certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement
of the foreign exchange capitals of the foreign-invested enterprises established within the designate areas and such enterprises mainly
engaging in investment are allowed to use its RMB capital converted from foreign exchange capitals to make equity investment, our PRC
subsidiary is not established within the designated areas. On March 30, 2015, SAFE promulgated Circular 19, to expand the reform nationwide.
Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises
to make equity investments by using RMB funds converted from foreign exchange capital. However, Circular 19 continues to prohibit foreign-invested
enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business
scope, providing entrusted loans or repaying loans between non-financial enterprises. In addition, SAFE strengthened its oversight of
the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such
RMB capital may not be altered without SAFE&#8217;s approval, and such RMB capital may not in any case be used to repay RMB loans if
the proceeds of such loans have not been used. Violations of these Circulars could result in severe monetary or other penalties. These
circulars may significantly limit our ability to use RMB converted from the net proceeds of any offering to fund the establishment of
new entities in China by our PRC subsidiary, to invest in or acquire any other PRC companies through our PRC subsidiary, or to establish
variable interest entities in the PRC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from any offering
to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity
and our ability to fund and expand our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>PRC
regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary&#8217;s ability to increase its
registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties
under PRC law.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SAFE
promulgated the Circular on Relevant Issues Relating to Domestic Resident&#8217;s Investment and Financing and Roundtrip Investment through
Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local
branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or
financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle
undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation
term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 was issued
to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip
Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving
the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice
has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch
in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiary may be prohibited
from distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted
in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described
above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
to our knowledge, all our 5% or more shareholders are not PRC citizens or residents, however, we cannot assure you whether our other
shareholders or beneficial owners will include the PRC residents or entities in the future and whether they will comply with, and
make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial
owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could
subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC
subsidiary&#8217;s ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely
affect our business and prospects.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Fluctuations
in exchange rates could have a material adverse effect on our results of operations and the value of your investment.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantially
all of our manufacturing and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations
in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets
and the proceeds from any offering. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiary is
RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated
statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate
fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation
in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when
reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results
of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends
on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on
the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated
may make it more difficult to perform period-to-period comparisons of our reported results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or
depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any
dividends payable on, our ordinary shares in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive
from our initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an
adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the
U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the market price
of our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Very
limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into
any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging
transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge
our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict
our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your
investment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Governmental
control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency
out of China. Under our current corporate structure, our company in the Cayman Islands may rely on dividend payments from our PRC subsidiary
to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account
items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without
prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in
foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of
the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the
beneficial owners of our Company who are PRC residents. But approval from or registration with appropriate government authorities is
required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of
loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies
for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to
satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Failure
to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
is required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social
insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages
of salaries, including bonuses and allowances, of its employees up to a maximum amount specified by the local government from time to
time at locations where Xingfa operate its businesses. The requirement of employee benefit plans has not been implemented consistently
by the local governments in China given the different levels of economic development in different locations. As of the date of this report,
we believe that Xingfa has made employee benefit payments in material aspects. If Xingfa fails to make adequate payments in the future,
it may be required by the social security premium collection agency to make or supplement contributions within a stipulated period, and
shall be subject to a late payment fine computed from the due date at the rate of 0.05% per day; where payment is not made within the
stipulated period, the relevant administrative authorities shall impose a fine ranging from one to three times the amount of the amount
in arrears. If Xingfa is subject to fines in relation to the underpaid employee benefits, our financial condition and results of operations
may be adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Non-compliance
with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
has been subject to stricter regulatory requirements in terms of entering into labor contracts with its employees and paying various
statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance
and maternity insurance to designated government agencies for the benefit of its employees. Pursuant to the PRC Labor Contract Law, or
the Labor Contract Law, that became effective in January 2008 and was amended in December 2012 and became effective on July 1, 2013,
and its implementing rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employees&#8217; probation and unilaterally terminating
labor contracts. In the event that Xingfa decides to terminate some of its employees or otherwise change its employment or labor practices,
the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner,
which could adversely affect our business and results of operations. We believe Xingfa&#8217;s current practice complies with the Labor
Contract Law and its amendments. However, the relevant governmental authorities may take a different view and impose fines on us.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
the interpretation and implementation of labor-related laws and regulations are still evolving, our employment practices could violate
labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If Xingfa is deemed
to have violated relevant labor laws and regulations, Xingfa could be required to provide additional compensation to its employees and
our business, financial condition and results of operations could be materially and adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Any
failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC
plan participants or us to fines and other legal or administrative sanctions.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007. Pursuant to these rules,
PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock
incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic
qualified agent, which could be the PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition,
an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the
purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who have resided
in the PRC for a continuous period of not less than one year and who have been granted options or other awards are subject to these regulations.
Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute
additional capital into our PRC subsidiary and limit our PRC subsidiary&#8217;s ability to distribute dividends to us. We also face regulatory
uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees
under PRC law. See &#8220;Regulations&#8212; Regulations of People&#8217;s Republic of China &#8212;Employee Stock Incentive Plan.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a &#8220;de facto management
body&#8221; within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income
at the rate of 25%. The implementation rules define the term &#8220;de facto management body&#8221; as the body that exercises full and
substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In
April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for
determining whether the &#8220;de facto management body&#8221; of a PRC-controlled enterprise that is incorporated offshore is located
in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those
controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation&#8217;s
general position on how the &#8220;de facto management body&#8221; test should be applied in determining the tax resident status of all
offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise
group will be regarded as a PRC tax resident by virtue of having its &#8220;de facto management body&#8221; in China and will be subject
to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day
operational management is in the PRC; (ii) decisions relating to the enterprise&#8217;s financial and human resource matters are made
or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise&#8217;s primary assets, accounting books and
records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting
board members or senior executives habitually reside in the PRC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See &#8220;Taxation&#8212;People&#8217;s
Republic of China Taxation.&#8221; However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities
and uncertainties remain with respect to the interpretation of the term &#8220;de facto management body.&#8221; As some of our management
members are based in or frequently travel to China, it remains unclear how the tax residency rule will apply to our case. If the PRC
tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income
tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially
reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC
tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other
disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case
of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC
sources. It is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their
country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns
on your investment in our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Regulatory
bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time, the Company may receive requests from certain US agencies to investigate or inspect the Company&#8217;s operations, or
to otherwise provide information. While the Company will be compliant with these requests from these regulators, there is no guarantee
that such requests will be honored by those entities who provide services to us or with whom we associate, especially as those entities
are located in China. Furthermore, an on-site inspection of our facilities in China by any of these regulators may be limited or entirely
prohibited. Such inspections, though permitted by the Company and its affiliates, are subject to the unpredictability of the Chinese
enforcers, and may therefore be impossible to facilitate. According to Article 177 of the PRC Securities Law which became effective in
March 2020, the securities regulatory authority of the State Council may establish a regulatory cooperation mechanism with the securities
regulatory authorities of another country or region, to implement cross-border supervision and administration and no overseas securities
regulator is allowed to directly conduct an investigation or evidence collection activities within the territory of the PRC. Accordingly,
without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the
documents and materials relating to securities business activities to overseas parties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly. Further implementations
and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB&#8217;s determination of its lack of sufficient
access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in mainland China.
A potential consequence is that our ordinary shares may be delisted by the exchange. The delisting of our ordinary shares, or the threat
of our ordinary shares being delisted, may materially and adversely affect the value of your investment. Additionally, the inability
of the PCAOB to conduct full inspections of our auditor deprives our investors of the benefits of such inspections</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. In accordance with the HFCA Act, trading
in securities of any registrant on a national securities exchange or in the over-the-counter trading market in the United States may
be prohibited if the PCAOB determines that it cannot inspect or fully investigate the registrant&#8217;s auditor for three consecutive
years beginning in 2021, and, as a result, an exchange may determine to delist the securities of such registrant. On June 22, 2021, the
U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, would amend the HFCA Act and require the SEC to
prohibit an issuer&#8217;s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for
two consecutive years instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted
if our auditor is unable to meet the PCAOB inspection requirement. On December 29, 2022, a legislation entitled &#8220;Consolidated Appropriations
Act, 2023&#8221; (the &#8220;Consolidated Appropriations Act&#8221;), was signed into law by President Biden. The Consolidated Appropriations
Act contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act, which reduces the
number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 5, 2021, the SEC adopted the PCAOB rule to implement HFCA Act, which provides a framework for the PCAOB to determine whether
it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position
taken by one or more authorities in that jurisdiction.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 2, 2021, SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The
rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (the &#8220;Commission-Identified
Issuers&#8221;). A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual
report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual
report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements
in its annual report filing covering the fiscal year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 16, 2021, the PCAOB issued its determinations (the &#8220;Determination&#8221;) that they are unable to inspect or investigate
completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong. The Determination includes lists
of public accounting firms headquartered in mainland China and Hong Kong that the PCAOB is unable to inspect or investigate completely.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance
of the People&#8217;s Republic of China governing inspections and investigations of audit firms based in China and Hong Kong. On December
15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting
firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should
PRC authorities obstruct or otherwise fail to facilitate the PCAOB&#8217;s access in the future, the PCAOB Board will consider the need
to issue a new determination.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
enactment of the HFCA Act and related regulations and any additional actions, proceedings, or new rules resulting from these efforts
to increase U.S. regulatory access to audit information could cause investors uncertainty for affected issuers and the market price of
our ordinary shares could be adversely affected, and we could be delisted if our auditor is unable to meet the PCAOB inspection requirement.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based
in China and Hong Kong. As a result, investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China and Hong Kong makes it more difficult to evaluate the effectiveness of these accounting firm&#8217;s
audit procedures and quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
auditor, Wei, Wei &amp; Co., LLP, an independent registered public accounting firm that is headquartered in the United States, as an
auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the
United States pursuant to which the PCAOB conducts inspections to assess its compliance with the applicable professional standards.
Our auditor has been inspected by the PCAOB on a regular basis with the last inspection in 2022 and it is not included in the PCAOB
Determinations. However, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent
criteria to us after considering the effectiveness of our auditor&#8217;s audit procedures and quality control procedures, adequacy
of personnel and training, or sufficiency of resources, geographic reach, or experience as it relates to our audit. If it is later
determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in
a foreign jurisdiction or any other reasons, the lack of inspection could cause the trading in our securities to be prohibited under
the Holding Foreign Companies Accountable Act, and as a result Nasdaq may delist our securities. If our securities are unable to be
listed on another securities exchange, such a delisting would substantially impair your ability to sell or purchase our securities
when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price
of our ordinary shares. Further, new laws and regulations or changes in laws and regulations in both the United States and China
could affect our ability to list our ordinary shares on Nasdaq, which could materially impair the market for and market price for
our securities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Enhanced
scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue
in the future.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular,
equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular
698, which became effective in January 2008, and Circular 698 was abolished and void as of December 1, 2017.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
Circular 698, where a non-resident enterprise conducts an &#8220;indirect transfer&#8221; by transferring the equity interests of a PRC
&#8220;resident enterprise&#8221; indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise,
being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company
structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at
a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident
enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable
adjustment to the taxable income of the transaction.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced
a new tax regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect
transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer
of a foreign intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable
commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public
securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated
to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an &#8220;indirect transfer&#8221; by transferring
the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being
the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a &#8220;substance over form&#8221; principle, the PRC tax authority may disregard the existence of the
overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring
PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer
of equity interests in a PRC resident enterprise.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions
involving the transfer of shares in our Company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue
such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation and request our PRC
subsidiary to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject
to filing obligations or being taxed, under Circular 59 and Circular 7, and may be required to expend valuable resources to comply with
Circular 59 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which
may have a material adverse effect on our financial condition and results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC tax authorities have the discretion under SAT Circular 59, and Circular 7 to make adjustments to the taxable capital gains based
on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no
specific plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve
complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax
authorities make adjustments to the taxable income of the transactions under SAT Circular 59 and Circular 7, our income tax costs associated
with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Substantial
uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it
may impact the viability of our current corporate structure, corporate governance, business operations and financial results.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March 15, 2019, the National People&#8217;s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 and
replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law,
the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation
rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment
regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements
for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation
and implementation and how it may impact the viability of our current corporate governance and business operations in China and financial
results of the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Any
change of regulations and rules by Chinese government including the limitations on usage of power, additional environmental protection
requirements, moving technology in and out of the PRC or restriction on cash transfer out of PRC may intervene or influence our operations
in China at any time and any additional control over offerings conducted overseas and/or foreign investment in issuers with Chinese operations
could result in a material change in our business operations and/or the value of our ordinary shares and could also significantly limit
or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline
or be worthless.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
manufacturing facility and operation in China may be intervened or influenced by the new regulations and policies by Chinese government.
For example, between July 2 and July 6, 2021, Cyberspace Administration of China, or the CAC, announced cybersecurity investigations
of the business operations of certain U.S.-listed Chinese companies. On July 6, 2021, the General Office of the Central Committee of
the Communist Party of China and the General Office of the State Council jointly issued &#8220;The Opinions on Severely Cracking Down
on Illegal Securities Activities According to Law&#8221;, or &#8220;the Opinions&#8221;. The Opinions emphasized the needs to strengthen
the administration over illegal securities activities and the supervision over overseas listings by Chinese companies. According to the
Opinions, Measures, including promoting the construction of relevant regulatory systems, will be taken to control the risks and manage
the incidents from overseas listed Chinese companies.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic
Enterprises (the &#8220;New Overseas Listing Rules&#8221;) with five interpretive guidelines, which took effect on March 31, 2023.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and
report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and
listing in an overseas market; b) an issuer making a subsequent overseas securities offering after having been listed on an overseas
market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple
acquisition(s), share swap, transfer of shares or other means. The new rules provide that the determination as to whether a domestic
company is indirectly offering and listing securities on an overseas market shall be made on a substance over form basis, and if the
issuer meets the following conditions, the offering and listing shall be determined as an indirect overseas offering and listing by
a Chinese domestic company: (i) any of the revenue, profit, total assets or net assets of the Chinese domestic entity is more than
50% of the related financials in the issuer&#8217;s audited consolidated financial statements for the most recent fiscal year; and
(ii) the senior managers in charge of business operation and management of the issuer are mostly Chinese citizens or with regular
domicile in China, the main locations of its business operations are in China or main business activities are conducted in China.
Although we are headquartered in Hong Kong with all our executive officers and directors based in Hong Kong who are not Chinese
citizens and most of our revenues and profits are generated by our subsidiaries in Hong Kong, it is not certain whether we might be
determined by CSRC as a Chinese entity under New Overseas Listing Rules which will require us to file the offering related documents
with CSRC.</span>&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 28, 2021, Cybersecurity Review Measures published by Cyberspace Administration of China or the CAC, National Development and
Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry
of Finance, Ministry of Commerce, People&#8217;s Bank of China, State Administration of Radio and Television, China Securities Regulatory
Commission, State Secrecy Administration and State Cryptography Administration, effective on February 15, 2022, which provides that,
Critical Information Infrastructure Operators (&#8220;CIIOs&#8221;) and Online Platform Operators engaging in data processing activities
that affect or may affect national security shall be subject to the cybersecurity review by the Cybersecurity Review Office. In addition,
CIIOs and Online Platform Operators that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity
Review Office, if they plan to conduct listings in foreign countries. On November 14, 2021, CAC published the Administration Measures
for Cyber Data Security (Draft for Public Comments), or the &#8220;Cyber Data Security Measure (Draft)&#8221;. Cyber Data Security Measure
(Draft) provides that data processors shall apply for Cybersecurity Review for certain events, such as the merger, restructuring, division
of an internet platform operator that holds a large amount of data relating to national security, economic development or public interests
which affects or may affect the national security; overseas listing of a data processor that processes personal data for more than one
million individuals; Hong Kong listing of a data processor that affects or may affect national security; other data processing activities
that affect or may affect the national security. Although we are not an CIIO or an Online Platform Operator as defined in the Review Measures
and do not process personal data for more than one million individuals under Cyber Data Security Measure (Draft), it is not certain whether
any future regulations will impose restrictions on the business that we are currently engaging in China, which is manufacturing lockset.
As of the date of this report, we have not received any notice from any authorities identifying us as a CIIO, Online Platform Operator
or requiring us to undertake a cybersecurity review by the CAC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 23, 2021, General Office of the State Council promulgated &#8220;Opinions on Further Reducing Students&#8217; Homework Burden and
After-school Tutoring Burden at the Stage of Compulsory Education&#8221;, pursuant to which the institutions that offer tutoring of school
curriculum shall be registered as non-profit organizations and are not allowed to make profits and raise capital. The new regulation
also disallows foreign investment in these institutions through acquisitions, franchise or contractual agreements. Although we only manufacture
lockset products in China and do not engage in CIIO, Online Platform Operator or any education or tutoring related business, our offering
and listing on Nasdaq may be negatively affected by these new regulations as they have materially negatively affected stock prices of
the U.S listed Chinese companies which are the CIIOs, Online Platform Operators or in the tutoring business. Any additional restriction,
scrutiny or negative publicity of the U.S.-listed Chinese companies could cause the U.S. investors less interested in our ordinary shares,
or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline
or be worthless.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
the PRC government authorities may adopt new rules and regulations and impose additional limitations or restrictions on us based on
the industry that we operate in, for example, the &#8220;dual control of energy consumption&#8221; policy to control the total power
consumption and efficiency which has caused disruptions to Xingfa&#8217;s production schedule in 2021, or more stringent
environmental protection requirements for air emissions, wastewater treatment and solid waste management and disposal which could
restrict or limit our operations and expose us to liability and penalties for non-compliance. The new rules or regulations may also
impose additional restrictions on us for moving technology in and out of the PRC or restriction on our cash transfer out of PRC from
current accounts. Such new rules or actions taken by the PRC government authorities may intervene or influence our operations at any
time, which may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer
securities to you and reduce the value of our securities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainties
regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along
with the risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings
conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance
and/or the value of our ordinary shares or impair our ability to raise money.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>If
we become subject to additional scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to
expend significant resources to investigate and resolve the matter which could harm our business operations, securities offering and
our reputation and could result in a loss of your investment in our ordinary shares, especially if such matter cannot be addressed and
resolved favorably.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recently,
U.S. public companies that have substantial operations in China have been the subject of intense scrutiny, criticism and negative publicity
by investors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around
financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative
publicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases, has become
virtually worthless. Some of these companies have been subject to shareholder lawsuits and SEC enforcement actions and have conducted
internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative
publicity will have on us, our business and securities offering. If we become the subject of any unfavorable allegations, whether such
allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend
our company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our business
operations will be severely hindered and your investment in our ordinary shares could be rendered worthless.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif"><b>Risks
Related to Doing Business in Hong Kong.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
Hong Kong legal system embodies uncertainties which could negatively affect our listing on Nasdaq and limit the legal protections available
to you and us.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
one of the conditions for the handover of the sovereignty of Hong Kong to China, China had to accept some conditions such as Hong Kong&#8217;s
Basic Law before its return. The Basic Law ensured Hong Kong will retain its own currency (the Hong Kong Dollar), legal system, parliamentary
system and people&#8217;s rights and freedom for fifty years from 1997. This agreement has given Hong Kong the freedom to function in
a high degree of autonomy. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but
not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition. Hong Kong
continues using the English common law system.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
if the PRC reneges on its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong&#8217;s common
law legal system and may in turn bring about uncertainty in, for example, listing our ordinary shares on Nasdaq Stock Exchange.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
also could materially and adversely affect our business and operation. Additionally, intellectual property rights and confidentiality
protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect
of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation
or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections
available to us, including our ability to enforce our agreements with our customers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Any
social unrest in Hong Kong may affect our business and financial results.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hong
Kong is a special administrative region of the PRC with its own government. Hong Kong enjoys a high degree of autonomy from the PRC under
the principle of &#8220;one country, two systems.&#8221; However, there can be no assurance that our financial condition and results
of operations will not be adversely affected as a consequence of the exercise of PRC sovereignty over Hong Kong. In particular, in 2019 and 2020, there has been a series of large demonstrations in Hong Kong that has adversely affected the business volume and operations of
local businesses, airports and public transportation systems. On July 14, 2020, the President of U.S. signed an executive order to end
the special status enjoyed by Hong Kong under the United States-Hong Kong Policy Act of 1992. Hong Kong&#8217;s position and reputation
as an international financial and trade center may be further damaged, and our business may be materially and adversely affected.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>We
                                            may be affected by the recently effect by the Basic Law Article 23: Safeguarding National
                                            Security Ordinance</b></span></p>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March 23, 2024, the Basic Law Article 23: Safeguarding National Security Ordinance was effect. We have accessed the content and believe
our business operation in Hong Kong will not be adversely affected. However, we cannot assure our customers in US may have different
point of view and this would in turn adversely affect the sales orders from our US customers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>We
may be affected by the currency peg system in Hong Kong.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
1983, Hong Kong dollars have been pegged to the US dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that
this policy will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong
dollar cost of our expenditures denominated in foreign currency may increase. This would in turn adversely affect the operations and
profitability of our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>It
will be difficult to acquire jurisdiction and enforce liabilities against us, our officers, directors and assets based in Hong Kong and
China.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Almost
all of our assets are located in Hong Kong and China and our officers and directors currently reside outside of the United States and
most of them are in Hong Kong. There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign
judgments between Hong Kong and the United States. In a common law action for enforcement of a foreign judgment in Hong Kong, the enforcement
is subject to various conditions, including but not limited to, that the foreign judgment is a final judgment conclusive upon the merits
of the claim, the judgment is for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges,
the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary
to public policy of Hong Kong. <i>See Enforceability of Civil Liabilities &#8211; Hong Kong. </i>China does not have any treaties or
other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of
foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against
us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security
or public interest. <i>See Enforceability of Civil Liabilities &#8211; China</i>. As a result, it may be difficult or not possible for
United States investors to enforce their legal rights, to effect service of process upon us, our directors or officers or to enforce
judgments of United States courts predicated upon civil liabilities and criminal penalties of us, our directors and officers under federal
securities laws.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Related to Our Ordinary Shares</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Relating to Our Shares</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may fail to meet continued listing requirements on the NASDAQ Capital Market</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 19, 2023, the Company received a letter from the Nasdaq Stock Market (&#8220;Nasdaq&#8221;) notifying the Company that, because
the closing bid price for the Company&#8217;s ordinary shares listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company
no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires
a minimum bid price of $1.00 per share (the &#8220;Minimum Bid Price Requirement&#8221;). On April 17, 2024, the Company received a written
notification from the NASDAQ Stock Market Listing Qualifications Staff (the &#8220;Staff&#8221;) indicating that the Company has been
granted an additional 180 calendar day period or until October 14, 2024, to regain compliance with the $1.00 minimum closing bid price
requirement for continued listing on the NASDAQ Capital Market pursuant to NASDAQ Listing Rule (the &#8220;Minimum Bid Price Requirement&#8221;).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">NASDAQ&#8217;s
determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other
applicable requirements for initial listing on the NASDAQ Capital Market, with the exception of the bid price requirement, and the Company&#8217;s
written notice to NASDAQ of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split,
if necessary. If at any time during this additional time period the closing bid price of the Company&#8217;s security is at least $1.00
per share for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance and this matter will
be closed. If compliance cannot be demonstrated by October 14, 2024, Staff will provide written notification that the Company&#8217;s
securities will be delisted. At that time, the Company may appeal the Staff&#8217;s determination to a Hearings Panel (the &#8220;Panel&#8221;)
of NASDAQ.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
notification from Nasdaq has no immediate effect on the listing or trading of the Company&#8217;s ordinary shares, which will continue
to trade on the Nasdaq Capital Market under the symbol &#8220;ILAG&#8221;. The Company will monitor the closing bid price of its ordinary
shares and will consider various options to regain compliance before October 14, 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
ordinary shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to
raise money or otherwise desire to liquidate your shares.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ordinary shares may be &#8220;thinly-traded,&#8221; meaning that the number of persons interested in purchasing our ordinary shares at
or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors,
including the fact that we are relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment
community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse
and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time
as we became more seasoned. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal
or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. A broad or active public trading market for our ordinary shares may not develop
or be sustained.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>The
market price for our ordinary shares may be volatile.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market price for our ordinary shares may be volatile and subject to wide fluctuations due to factors such as:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            perception of U.S. investors and regulators of U.S. listed Chinese companies;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">actual
                                            or anticipated fluctuations in our operating results;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in financial estimates by securities research analysts;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">negative
                                            publicity, studies or reports;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">conditions
                                            in the international lockset, hardware and real estate markets;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            capability to catch up with the technology innovations in the industry;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in the economic performance or market valuations of other lockset and hardware companies;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital
                                            commitments;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">addition
                                            or departure of key personnel;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">fluctuations
                                            of exchange rates among RMB, HK dollar and the U.S. dollar; and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
                                            economic, health or political conditions in Hong Kong, China and worldwide.</span></td></tr></table>

<p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: -0.25in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the
operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of
our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Volatility
in our ordinary shares price may subject us to securities litigation.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market for our ordinary shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share
price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated
securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in
the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert
management&#8217;s attention and resources.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>In
order to raise sufficient funds to enhance operations, we may have to issue additional securities at prices which may result in substantial
dilution to our shareholders.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we raise additional funds through the sale of equity or convertible debt, our current shareholders&#8217; percentage ownership will be
reduced. In addition, these transactions may dilute the value of ordinary shares outstanding. We may have to issue securities that may
have rights, preferences and privileges senior to our ordinary shares. We cannot provide assurance that we will be able to raise additional
funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not
be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations
and financial condition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>We
are not likely to pay cash dividends in the foreseeable future.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect
to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate. Should we determine to pay
dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from our subsidiaries. Our
subsidiaries may, from time to time, be subject to restrictions on their ability to make distributions to us, including restrictions
on the conversion of RMB into US dollars or other hard currency and other regulatory restrictions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>You
may face difficulties in protecting your interests as a shareholder, as Cayman Islands law provides substantially less protection when
compared to the laws of the United States and it may be difficult for a shareholder of ours to effect service of process or to enforce
judgements obtained in the United States courts.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
corporate affairs are governed by our amended and restated memorandum and articles of association and by the Cayman Islands Companies
Act (As Revised) (&#8220;Companies Act&#8221;) and common law of the Cayman Islands. The rights of shareholders to take legal action
against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman
Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in
part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law. Decisions of the Privy Council
(which is the final court of appeal for British Overseas Territories such as the Cayman Islands) are binding on a court in the Cayman
Islands. Decisions of the English courts, and particularly the Supreme Court of the United Kingdom and the Court of Appeal are generally
of persuasive authority but are not binding on the courts of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities
of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the
United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provide
significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative
action before the United States federal courts. The Cayman Islands courts are also unlikely to impose liabilities against us in original
actions brought in the Cayman Islands, based on certain civil liability provisions of United States securities laws.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States.
All of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion
of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process
within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments
predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our
officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to United States domestic public companies.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a foreign private issuer within the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable
to United States domestic public companies. For example:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            are not required to provide as many Exchange Act reports, or as frequently, as a domestic
                                            public company;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">for
                                            interim reporting, we are permitted to comply solely with our home country requirements,
                                            which are less rigorous than the rules that apply to domestic public companies;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            are not required to provide the same level of disclosure on certain issues, such as executive
                                            compensation;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            are exempt from provisions of Regulation FD aimed at preventing issuers from making selective
                                            disclosures of material information;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            are not required to comply with the sections of the Exchange Act regulating the solicitation
                                            of proxies, consents or authorizations in respect of a security registered under the Exchange
                                            Act; and</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            are not required to comply with Section 16 of the Exchange Act requiring insiders to file
                                            public reports of their share ownership and trading activities and establishing insider liability
                                            for profits realized from any &#8220;short-swing&#8221; trading transaction.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we will file reports
on Form 6-K as a foreign private issuer. However, the information we are required to file with or furnish to the SEC will be less extensive
and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the
same protections or information that would be made available to you were you investing in a U.S. domestic issuer.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
are an &#8220;emerging growth company&#8221; within the meaning of the Securities Act, and if we take advantage of certain exemptions
from disclosure requirements available to emerging growth companies, this could make it more difficult to compare our performance with
other public companies</i>.</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an &#8220;emerging growth company&#8221; within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period,
which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as
an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This
may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging
growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>As
an &#8220;emerging growth company&#8221; under applicable law, we will be subject to reduced disclosure requirements. Such reduced disclosure
may make our ordinary shares less attractive to investors.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
as long as we remain an &#8220;emerging growth company&#8221;, as defined in the JOBS Act, we will elect to take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not &#8220;emerging growth companies&#8221;,
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights
available to shareholders of more mature companies. If some investors find our ordinary shares less attractive as a result, there may
be a less active trading market for our ordinary shares and our share price may be more volatile.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Because
we are a foreign private issuer and are exempt from certain NASDAQ corporate governance standards applicable to U.S. issuers, you may
have less protection than you would have if we were a domestic issuer.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Nasdaq Listing Rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign
private issuer, however, we are permitted to follow home country practice in lieu of the above requirements. On June 23, 2023, the Company
has notified Nasdaq that it will follow its home country practice in lieu of the provisions under Rule 5620(a), Rule 5635(a), Rule 5635(c)
and Rule 5635(d) of the NASDAQ Stock Market Marketplace Rules (the &#8220;Rules&#8221;) by relying on the exemption provided for foreign
private issuers under Marketplace Rule 5615(a)(3). Rule 5620(a) requires that the Company to hold an annual meeting of shareholders no
later than one year after the end of the Company&#8217;s fiscal year-end; Rule 5635(a) of the Rules requires shareholder approval for
the issuance of securities in connection with the acquisition of the stock or assets of another company; Rule 5635(c) of the Rules requires
shareholder approval <span style="background-color: white">prior to the issuance of securities when a stock option or purchase plan is
to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock
may be acquired by officers, directors, employees</span>; and Rule 5635(d) of the Rules requires shareholder approval prior to an issuance
of securities, other than in a public offering, equal to 20% or more of the voting power outstanding at a price less than the lower of:
(i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii)
the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding
the signing of the binding agreement. <span style="background-color: white">The corporate governance practice in our home country, the
Cayman Islands, does not require the Company to follow or comply with the requirements of Rule 5620(a), Rule 5635(a), Rule 5635(c) and
Rule 5635(d). We will comply with other corporate governance requirements of the Nasdaq Listing Rules. However, we may consider following
home country practice in lieu of additional requirements under the Nasdaq Listing Rules with respect to certain corporate governance
standards in the future which may afford less protection to investors.</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an &#8220;emerging growth
company.&#8221;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley
Act of 2002, as well as rules subsequently implemented by the SEC and NASDAQ Capital Market, impose various requirements on the corporate
governance practices of public companies. We are an &#8220;emerging growth company,&#8221; as defined in the JOBS Act and will remain
an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion
of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed
to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million
as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year
period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable
generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment
of the emerging growth company&#8217;s internal control over financial reporting and permission to delay adopting new or revised accounting
standards until such time as those standards apply to private companies.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compliance
with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more
time-consuming and costly. After we are no longer an &#8220;emerging growth company,&#8221; or until five years following the
completion of our initial public offering, whichever is earlier, we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC.
For example, as a public company, we have increased the number of independent directors and adopt policies regarding internal
controls and disclosure controls and procedures to become a public company. We have incurred additional costs in obtaining director
and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements.
It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are
currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with
any degree of certainty the amount of additional costs we may incur or the timing of such costs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Four
members of our management team will have substantial influence over our Company and their interests may not be aligned with the interests
of our other shareholders.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Bong Lau, our Chief Executive Officer and chairman of the Board and his brother Mr. Bun Lau, our Chief Operating Officer, each owns 12.96%
of our issued and outstanding ordinary shares. Mr. Wynn Hui, our Chief Technical Officer and executive director of the Board and his
son Mr. Errol Hui, our Vice President of Engineering, each owns 12.96% of our issued and outstanding ordinary shares. As a result of
their significant shareholding, Mr. Bong Lau, Mr. Bun Lau, Mr. Wynn Hui and Mr. Errol Hui have, and will continue to have, substantial
influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets,
election of directors and other significant corporate actions. They may take actions that are not in the best interests of us or our
other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could
deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the
market price of our ordinary shares. These actions may be taken even if they are opposed by our other shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>We
may become a &#8220;controlled company&#8221; within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions
from certain corporate governance requirements that provide protection to shareholders of other companies.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not believe we are a &#8220;controlled company&#8221; as defined under the NASDAQ Stock Market Rules. However, in the event that four
of our principal shareholders, Mr. Bong Lau, Mr. Bun Lau, Mr. Wynn Hui and Mr. Errol Hui, who beneficially own more than 50% of our issued
and outstanding ordinary shares, decide to act as a group, we may be deemed to be a &#8220;controlled company&#8221;. For so long as
we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate
governance rules, including:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#9679;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
    exemption from the rule that a majority of our board of directors must be independent directors; an exemption from the rule that
    the compensation of our chief executive officer must be determined or recommended solely by independent directors; and</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#9679;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;an
    exemption from the rule that our director nominees must be selected or recommended solely by independent directors.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance
requirements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Cayman
Islands economic substance requirements may have an effect on our business and operations.</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands, or the ES Act, that came into force on January
1, 2019, a &#8220;relevant entity&#8221; is required to satisfy the economic substance test set out in the ES Act. A &#8220;relevant
entity&#8221; includes an exempted company incorporated in the Cayman Islands as is our Company. Based on the current interpretation
of the ES Act, we believe that our Company, Intelligent Living Applicant Group Inc., is a pure equity holding company since it only holds
equity participation in other entities and only earns dividends and capital gains. Accordingly, for so long as our Company, Intelligent
Living Applicant Group Inc., is a &#8220;pure equity holding company&#8221;, it is only subject to the minimum substance requirements,
which require us to (i) comply with all applicable filing requirements under the Companies Act; and (ii) has adequate human resources
and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no
assurance that we will not be subject to more requirements under the ES Law. Uncertainties over the interpretation and implementation
of the ES Act may have an adverse impact on our business and operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<table cellpadding="0" cellspacing="0" border="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt">
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  <td style="text-align: justify; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
  </b></span><b>4.</b></td>
  <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_032"></span> INFORMATION ON THE COMPANY</b></span></td></tr>
</table>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0.25in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>A.
History and Development of the Company</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
40 years, we have manufactured and sold high quality mechanical locksets to customers mainly in the United States and Canada, and we
continue to diversify and refine our product offerings to meet our customers&#8217; needs. The predecessor of Hing Fat commenced our
business of selling door locksets in 1981. In 1983, we started a small manufacturing workshop in China to produce door locksets with
imported materials to fulfill for our customer orders, which becomes our current manufacturing subsidiary, Xingfa. Our mission was &#8220;dedicated
to manufacture high quality lockset products at affordable prices.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
2000, we have offered our products with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards, which are developed
by Builders Hardware Manufacturing Association (BHMA) for ANSI. Our focus is producing mechanical locksets, including locksets for outdoor
uses, such as main entrances and gates, and indoor uses, to promote sustainable growth in our business and competitiveness in the market.
To continue driving growth, we have designed our products to go beyond a basic lockset for security purposes; we offer a wide range of
ODM door locksets to various customer segments from &#8220;Premium Series&#8221; to &#8220;Economy-oriented Series&#8221; with classic
to contemporary looks, functions and colors. Currently, our products are sold mainly in the USA, and some in Canada, Macau and China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
sell our products mainly to the US and Canada (&#8220;North America&#8221;) through one of our Hong Kong registered subsidiaries Kambo
Locksets. Another Hong Kong registered subsidiary, Kambo Hardware, targets and distributes locksets and related hardware to countries
other than the North America market and serves our customers in the Asian countries including Thailand and Australia.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
1993, as the laws and regulations for processing with imported materials entity had changed in China, we established our wholly foreign
owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited (&#8220;Xingfa&#8221;) located in Shatian County, Dongguan
City, Guangdong Province of PRC. Xingfa is equipped with various types of machines such as die casting machines, furnace, polishing machines
and other machines for metal processing in a 17,560 m<sup>2</sup> manufacturing facility. In light of excess production capacity due
to current economic conditions, Xingfa has subleased one plant building of approximately 4,300 m<sup>2</sup> to reduce our operating
costs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#9679;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under Hong Kong law (&#8220;Hing Fat&#8221;), as the holding company of Xingfa to manage
    the door lockset manufacturing activities of Xingfa and to conduct research and development.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
    March 26, 2014, Kambo Locksets Limited (&#8220;Kambo Locksets&#8221;) was incorporated under Hong Kong law. Kambo Locksets is a trading
    company focusing on marketing and sales of our products in North America market and became our subsidiary as a result of reorganization.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
    February 25, 2015, Kambo Hardware Limited (&#8220;Kambo Hardware&#8221;) was incorporated under Hong Kong law. Its primary business
    is to sell our products to markets outside of the North America.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    of ILAG in July 2019 and execution of the Share Exchange Agreement between ILAG and ILA BVI in April 2020 (the &#8220;Share Exchange
    Agreement&#8221;) whereby ILAG took control of ILA BVI and its wholly owned subsidiaries by acquiring all the outstanding shares
    of ILA BVI with ordinary shares of ILAG. Pursuant to the Share Exchange Agreement, ILAG and ILA BVI exchanged 2,550,000 shares of
    ILA BVI for 12,990,000 ordinary shares of ILAG. This transaction was treated as a recapitalization of the Company and the financial
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
                                            July 16, 2021, the Board of Directors and Shareholders of the Company approved the Amended
                                            and Restated Memorandum and Articles of Association of the Company and our authorized share
                                            capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000
                                            ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value
                                            of $0.0001 each.</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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                                            July 17, 2019, Intelligent Living Application Group Inc. was established as a holding company
                                            and it is a Cayman Islands exempted company limited by shares and were incorporated as an
                                            offshore holding company for listing purposes and for further expansion flexibility. Intelligent
                                            Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application
                                            Group Limited, which was incorporated on March 19, 2014 under the laws of British Virgin
                                            Islands.</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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                                            Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in
                                            Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has subsidiaries in countries and jurisdictions including PRC and Hong Kong. Details of the subsidiaries and VIE of the Company
are set out below:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: center">&#160;</td><td style="text-align: center">100</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">Kambo Hardware Limited</td><td>&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="text-align: center">100</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="text-align: center">100</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">Hing Fat Industrial Limited</td><td>&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="text-align: center">100</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: center">PRC</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">100</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 15, 2022, the Company closed its initial public offering (&#8220;IPO&#8221;) of 5,060,000 ordinary shares, par value $0.0001 per
share, priced at $4.00 per share. The aggregate gross proceeds from the IPO were $20.24 million, before deducting underwriting discounts
and other related expenses. The ordinary shares of the Company began trading on The Nasdaq Capital Market on July 13, 2022 under the
ticker symbol &#8220;ILAG.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 12, 2022 (the &#8220;Effective Date&#8221;), Hing Fat Industrial Limited and Dongguan Xingfa Hardware Products Co., Ltd. (&#8220;Buyer&#8221;)
entered into an Asset Purchase Agreement (the &#8220;Agreement&#8221;) with Hu Xiongjie, a citizen of Singapore (the &#8220;Seller&#8221;),
pursuant to which the Seller agreed to sell to the Buyer an electroplating production line, including but not limited to equipment, machinery,
tanks, fixtures, flowlines, improvements and mixed property located in Dongguan City, Guangdong, China (the &#8220;Asset&#8221;) for
an aggregate purchase price (the &#8220;Purchase Price&#8221;) of $4,500,000 in cash. The Seller&#8217;s clientele details, books, accounting
records and liabilities are excluded from this transaction. Pursuant to the Agreement, Buyer shall pay a refundable deposit of $2,000,000
on Effective Date and Buyer shall check operational conditions and access the value of the Asset at current market rate within ten (10)
days of the Effective Date, and if Buyer accepts the Purchase Price, an intermediate payment of $1,000,000 shall be then paid. Upon closing,
Buyer shall pay Seller an additional amount of $1,000,000. A residual of $500,000 shall be held by the Buyer for one (1) year from closing
date as quality guarantee for possible tax liabilities, defects or required repair(s) of the Asset. The balance of Purchase Price shall
be paid after deduction of costs of repairment related to unidentified defects or problems with the Asset at transfer date. As of the
date of this report, the Buyer has paid all $4,500,000 to the Seller.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
principal executive offices are located at Unit 2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New
Territories, Hong Kong. Our telephone number at this address is +852 2481 7938. Our registered office in the Cayman Islands is located
at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111. Our agent for service of process in the United States is Cogency,
located at 122 East 42<sup>nd </sup>Street, 18<sup>th</sup> Floor, New York, NY 10168, United States. Investors should contact us for
any inquiries through the address and telephone number (852) 2481-7938 of our principal executive offices.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SEC maintains a web site at www.sec.gov that contains reports and other information regarding issuers that file electronically with the
SEC using its EDGAR system.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;Item 5. Operating and Financial Review and Prospects &#8212; B. Liquidity and Capital Resources &#8212; Capital Expenditures&#8221;
for a discussion of our capital expenditures.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>B.
Business Overview</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
mission is to make life safer and smarter by designing and producing affordable, high-quality locksets and smart security systems.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Headquartered
in Hong Kong, we manufacture and sell high quality mechanical locksets to customers mainly in the United States (US) and Canada and have
continued to diversify and refine our product offerings in the past 40 years to meet our customers&#8217; needs. We believe Xingfa is
one of the pioneers of mechanical lockset manufacturing in China. Since inception, to cope with our development and increase customer
satisfaction in quality, we keep investing in self-designed automated product lines, new craftsmanship and developing new products including
smart locks. In order to obtain the confidence of our customers, Xingfa has obtained the ISO9001quality assurance certificate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 20pt; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Starting
in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed
by the Builders Hardware Manufacturing Association (BHMA) for ANSI. Our focus in producing mechanical locksets - including locksets for
outdoors (such as main entrances and gates) and indoors - has resulted in sustainable growth in our business and raised our competitiveness.
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer
(&#8220;ODM&#8221;) door locksets to various customer segments from &#8220;Premium Series&#8221; to &#8220;Economy-oriented Series&#8221;
with classic to contemporary looks, functions and colors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
meet increasing consumer needs for smart locks and smart home products, Hing Fat been researching and developing smart locks in the past
couple years. Hing Fat has been working on smart locks functions, communication protocols, available designs and have internally worked
out a general solution plan including mechanical and electronic parts but still need to further develop the software related parts for
such locks which we need external help. Most of our research and development on smart locks have been done internally by our technician
and engineers, except that Hing Fat hired outside services for approximately $25,000 in 2017. Because of tariff war and outbreak of COVID-19,
we did not further progress on the software for our smart locks until early 2023. Since then, we have reinitiated the process to develop
devices and software applications for our smart locks and expect to have first smart lock product by the end of 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
approximately 99% of our revenues are from products sold to the US market, and the remaining products are sold to Canadian market. We
build our distribution network by working together with our large and small business partners in different geographic areas to sell our
products. More information about geographical penetration of our revenues can be found in &#8220;<i>Segment reporting in Note 2 of Notes
to the Consolidated Financial Statements</i>&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Our Products</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
produce various ODM indoor and outdoor locksets mainly for importers, builders and the construction market in the USA. Since 2016, we
market our self-branded products, Bamberg, in South-east Asia. In addition, we are selling our self-branded products through reputable
online shops.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Locksets
                                            functions</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mechanical
locksets are mechanical devices which secure an opening by keeping a door closed until a release mechanism is activated. It can be a
lever, knob, key, thumb-turn or button. Mechanical locksets are very common on exterior/interior doors in residential and multi-family
applications. There are several types of mechanical locksets, and the most common functions for mechanical locksets are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Deadbolts
                                            </b>&#8211; are used for front doors and doors which may require an additional security from
                                            a deadbolt, combined in a lockset with one of the functions above. It can be locked by a
                                            thumb-turn from the inside or by a key from the outside.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_001.jpg" alt=""/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Entry
                                            locksets</b> &#8211; are used for bedrooms, front doors, and back doors. It can be locked
                                            by a thumb-turn from the inside or by a key from the outside.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_002.jpg" alt=""/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Privacy
                                            locksets </b>&#8211; are used for restrooms or dressing rooms. It can be locked from the
                                            inside with a thumb turn for privacy, and it can be unlocked from the outside using a tool,
                                            a screwdriver for example, rather than a key.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_003.jpg" alt=""/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Passage
                                            locksets</b> &#8211; are used where doors do not need to lock. There is no key and no lock
                                            function.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_004.jpg" alt=""/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Storeroom
                                            locks</b> &#8211; are used for storerooms. It should always be locked from the outside and
                                            a key is used to open the door. When the key is removed, the door is locked from the outside
                                            again. There is no lock/unlock the door from the inside.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_005.jpg" alt=""/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Our Customized Keying Options</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">One
of our value propositions is the ability to customize the keys for our door locksets based on specific customer requests. Below is a
summary of our various professional custom-made keying options applicable to our products:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Types
                                            of Keying Options</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
term &#8220;keying&#8221; refers to the way keys will be used to operate the cylinders that are installed in the door locksets. Keys
can be assigned to different groups that will and will not open the cylinders. Keying determines which keys work at each opening. A cylinder
will contain a certain number of pins generally ranging from 5 pins or more. The pins vary in height. This variation in height and the
cuts on the key can generate different keying combinations. It can provide access to the cylinder to lock or unlock the locksets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Keyed
                                            Different (KD)</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
cylinder is keyed different. It means that each lock is operated by a unique key. A key used at one door cannot be used to open other
doors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Keyed
                                            Alike (KA)</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
cylinder is keyed alike. It means that every lock can be opened by the same key. This is useful in an area where a limited number of
keys is required, such as a residential unit area with storage closets or common rooms that only need one key combination.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Master
                                            Keyed (MK)</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
cylinder has its own individual key which cannot open other locksets in the system and all locksets in the system can be opened by one
master key. A master keyed system is useful where someone requires a higher level of access authority, such as the building owner.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Construction
                                            Keyed (CK)</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
construction key is needed when contractors need entry to a building during construction. When new homes are under construction, a contractor
will provide a general key to carpenters, painters, and other contractors. This allows easy access to several homes without requiring
different keys, and prevents duplication and later entry into the homes once a homeowner moves in. Once construction is complete, the
owner&#8217;s keys will block further access by the contractors. The following diagram shows how it works.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_006.jpg" alt="" style="width: 659px; height: 384px"/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Our Suppliers</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
past years, our primary raw materials are brass, iron and zinc alloy. We started to use stainless steel to partially substitute
brass from second half of 2021. And we managed to replace substantial usage of brass with stainless steel in 2023. Raw materials by
weight of our locksets basing on bill of materials and actual weighting, approximately 50% are iron, approximately 38% are zinc
alloy, approximately 1% are brass and 11% are stainless steel for the year ended December 31, 2023, while approximately 49% are
iron, approximately 40% are zinc alloy, approximately 6% are brass, and 5% are stainless steel for the same period of 2022. We
don&#8217;t have long term purchase contracts with our suppliers but only purchase via orders. For procurement purpose, management
will get master quote from at least two suppliers for every three (3) months. Management will bargain purchase price by taking into
account price trends of brass, iron, zinc alloy, and stainless steel commodity and quantity volume discount. Xingfa has purchased
approximately 11 tonnes brass, 490 tonnes iron, 373 tonnes zinc alloy and 103 tonnes stainless steel for the year ended December 31,
2023, while 88 tonnes brass, 697 tonnes iron, 569 tonnes zinc alloy, and 63 tonnes stainless steel for the year ended December 31,
2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
purchased iron from five Chinese suppliers in Guangdong province in year 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
purchased zinc alloy from two suppliers. One supplier ships zinc alloy from Shanghai and Dongguan while one Hong Kong supplier ships
them from Shenzhen in 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
purchased brass from various subsidiaries of two suppliers in Dongguan and Shanghai in 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xingfa
purchased stainless steel from four suppliers in Guangdong province in 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have business relationships with our iron, zinc alloy and brass suppliers for over 5 years. Some of them are public companies or
subsidiaries of public companies listed on Shanghai, Shenzhen or Hong Kong Stock Exchanges and the supplies and availabilities of
our raw materials have never been an issued for us in the past. Also, all of our primary raw materials are general commercial
commodities. For 2023, total global production of: (i) brass is approximately 22 million tonnes; (ii) iron is approximately 2.5
billion tonnes and (iii) zinc alloy is approximately 12.4 million tonnes; (iii) stainless steel is approximately 60 million tonnes.
(source: ResearchAndMarkets.com) There are numbers of suppliers in China of our raw materials. Therefore, even our existing
suppliers may be temporarily short in inventory, we can place purchase order to other suppliers without difficulty and price
premium.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Intellectual Property</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success,
and we rely on trademark and trade secret law and confidentiality and invention assignment with our employees and others to protect our
proprietary rights.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
mostly rely on our know-how for production processes and our patents have expired. Currently, Bamberg (HK) Limited has one registered
trademark for Bamberg in the U.S. and one registered trademark for Bamberg in Hong Kong, which are utilized for our self-branded products,
and the Company has one trademark of ILAG in Hong Kong as our group holding company logo for our general company image and marketing
purpose. In addition, we and our subsidiaries have three registered domain names in Hong Kong, namely <i><span style="text-decoration: underline">i-l-a-g.com, kambo.com.hk
</span></i>and <i><span style="text-decoration: underline">bamberggroup.com</span></i>.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual
properties. Monitoring unauthorized use of our intellectual properties is difficult and costly, and we cannot be certain that the steps
we have taken will prevent misappropriation of our intellectual properties. From time to time, we may have to resort to litigation to
enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement
of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing
technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, even if we are able
to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
<i>&#8220;Risk Factors&#8212;Risks Related to Our Business&#8212;We may not be able to prevent others from unauthorized use of our intellectual
property, which could harm our business and competitive position.&#8221; and &#8220;&#8212;We may be subject to intellectual property
infringement claims, which may be expensive to defend and may disrupt our business and operations.&#8221;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Competition</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are facing competition from worldwide brands such as Kwiksets, Schlage, and other domestic manufacturers in Hong Kong and China. The
Company positions its products as affordable high-quality mechanical Grade 2 and Grade 3 locksets. In Asia, there are only a few manufacturers
in China and South-east Asia that are capable of competing with us on such products.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mechanical
lockset companies have been consolidating in the last decade (see table: Competitive Landscaping, below). Sizable multinational companies
keep expanding by acquiring or merging with other lockset companies. Currently, the major player in the world is ASSA Abloy AB (ASSA
B: STO), a Swedish conglomerate that sells cover products and services ranging from locks, doors, gates and entrance automation, which
owns brands such as Abloy, Yale Mul-T-Lock and Medeco. Other well-known brands including Kwikset by the Hardware and Home Improvement
(HHI), division of ASSA ABLOY (STO: AAY.ST), Schlage by Allegion PLC (NYSE: ALLE), Defiant by Home Depot (NYSE: HD), and Delaney Hardware
in Cumming, USA. The PRC market is fragmented because various international lockset standards are all applicable in China. Thus, various
brands of locksets all compete in PRC which makes the Chinese lockset market highly competitive.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
mostly compete with manufacturing subsidiaries and factories of those worldwide brands on product quality as well as the manufacturers
in China on price. The key for our sustainability is to maintain high quality, fine craftsmanship and procurement at affordable prices.
In additional, high capital expense for building a new locket manufacturing facility and our longtime created reputation set up barriers
of entry by new players.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Our
Competitive Strengths</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have four decades of experience in mechanical lockset manufacturing. This gave us the ability to design our own automated production
lines to meet our customers&#8217; needs effectively and efficiently. Xingfa is few of manufacturers who is able to finish complicated
stamping and casting with few machineries by optimizing production progresses. We are currently offering 108 basic designs of various
locksets in our product catalogue (see &#8220;Our Products&#8221; for sample images) and we also have many other designs stored in the
library of engineering department of Hing Fat, all of which enable us to provide our customers with products of many varieties with different
functions, outlooks and colors. We have accumulated extensive design and production know-hows of our lock core in the past thirty years.
Our experience and expertise in the design of mechanical locksets helps us expand our product lines and quickly respond to the changes
of market trends and demands of our customers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
comply with stringent requirements of U.S. standards, Xingfa has obtained ISO9000 certificate, and its manufacturing facility has been
reviewed and audited by U.S. customers from time to time for compliance of social responsibility about labor welfare and safety, environmental
protection and other requirements from such customers. To serve our customers better, Xingfa has equipped with professional keying machineries
which is a very niche service being provided by lockset manufacturers in China and Asia Pacific region. In Asia, we only have a few peer
competitors in China and South-east Asia due to high capital expense requirement for the manufacturing facility and professional know-hows
of the products and industry.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have launched research in smart locks functions, communication protocols, available designs and suppliers of electronic parts in the
market as a part of our R &amp; D process of smart lock products. Our in-depth knowledge in lockset mechanics makes it easier for us
to enter into smart locks market by incorporating relevant electronic parts into our locksets after we develop the software system.
We expect to launch our first smart lock product by the end of 2024. In additional, our long relationship with our customers makes
it quicker for us to introduce new products including future smart locks to the market.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">With
our years of operational history, Xingfa has built a loyal and experienced work force and manufacturing management, which can drive manufacturing
facility expansion without additional talent. Along with long-term relationships with reputable customers and recent access to e-commerce
channels, we believe we are able to attract customers with our new products.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Regulations
of People&#8217;s Republic of China</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
section sets forth a summary of the most significant rules and regulations that affect our business activities in China through our wholly
owned subsidiary Xingfa.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations Relating to Foreign Investment</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Negative List of Industries for Foreign
Investment</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investment
activities in the PRC by foreign investors were principally governed by the Guidance Catalogue of Industries for Foreign Investment,
or the Guidance Catalog, which was promulgated and is amended from time to time by the Ministry of Commerce, or MOFCOM, and the National
Development and Reform Commission, or NDRC. The Guidance Catalog lays out the basic framework for foreign investment in China, classifying
businesses into three categories with regard to foreign investment: &#8220;encouraged,&#8221; &#8220;restricted&#8221; and &#8220;prohibited.&#8221;
Industries not listed in the catalog are generally deemed as falling into a fourth category &#8220;permitted&#8221; unless specifically
restricted by other PRC laws. The NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Foreign Investment
Access (2021 Edition) (the &#8220;2021 National Negative List&#8221;) and the Special Administrative Measures (Negative List) for Foreign
Investment Access in Pilot Free Trade Zones (2021 Edition) (the &#8220;2021 FTZ Negative List&#8221;) (collectively the &#8220;2021 Negative
Lists&#8221;) on December 27, 2021, which took effect on January 1, 2022. Industries listed on the 2021 Negative Lists are divided into
two categories: restricted and prohibited. Industries not listed on the 2021 Negative Lists are generally deemed as constituting a third
&#8220;permitted&#8221; category. The establishment of wholly foreign-owned enterprises is generally allowed in permitted industries.
Some restricted industries are limited to equity or contractual joint ventures, while in some cases, Chinese partners are required to
hold the majority interests in such joint ventures. In addition, projects falling under the restricted category are subject to higher-level
government approvals. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in
the Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations. Any domestic enterprise
engaging in businesses prohibited by the 2021 Negative Lists that lists, issues securities and trades shares overseas must obtain pre-approval
consent from relevant competent regulator; overseas investors must not engage in the operation and management of the enterprise, and
the percentage of foreign shareholding is subject to the relevant provisions in the administrative measures for domestic securities investments
by foreign investors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
comply with PRC laws and regulations, we rely on equity investment with our WFOE subsidiary to operate our business in China. See &#8220;Risk
Factors&#8212;Risks Related to Our Corporate Structure&#8212;PRC regulation of loans to and direct investment in PRC entities by offshore
holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of securities offering
to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity
and our ability to fund and expand our business.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Foreign Investment Law</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March 15, 2019, the National People&#8217;s Congress approved the Foreign Investment Law, which became effective on January 1, 2020 and
replace three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture
Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. Furthermore, the
Implementing Regulations of the Foreign Investment Law of the PRC, or the Implementing Regulations of FIL, was promulgated on December
26, 2019 and became effective on January 1, 2020. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize
its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate
legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework
for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair
competition.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Foreign Investment Law and the Implement the Implementing Regulations of FIL, &#8220;foreign investment&#8221; refers to investment
activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign
country (collectively referred to as &#8220;foreign investor&#8221;) within China, and the investment activities include the following
situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within
China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise
within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and
(iv) investments in other means as provided by laws, administrative regulations, or the State Council.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) (the
&#8220;2021 National Negative List&#8221;) and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot
Free Trade Zones (2021 Edition) (the &#8220;2021 FTZ Negative List&#8221;) (collectively the &#8220;2021 Negative Lists&#8221;) on December
27, 2021, which took effect on January 1, 2022. Compared to the last Special Administrative Measures for Market Access of Foreign Investment
(Negative List) promulgated by the NDRC and the MOFCOM in June 2020, the 2021 Negative Lists cuts down the number of items restricted
or prohibited to foreign investors from 33 to 31, widening access to more industries and fields. However, the 2021 Negative Lists prescribe
that any domestic enterprise engaging in businesses prohibited by the Negative Lists that lists, issues securities and trades shares
overseas must obtain pre-approval consent from relevant competent regulator; overseas investors must not engage in the operation and
management of the enterprise, and the percentage of foreign shareholding is subject to the relevant provisions in the administrative
measures for domestic securities investments by foreign investors. The Foreign Investment Law provides that foreign invested entities
operating in foreign restricted or prohibited industries will require market entry clearance and other approvals from relevant PRC governmental
authorities. The current industry entry clearance requirements governing investment activities in the PRC by foreign investors are set
out in 2021 Negative Lists.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment
may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments
in the PRC, including, among other things, that local governments shall abide by their commitments to the foreign investors; foreign-invested
enterprises are allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory procedures shall
be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of
foreign investors is prohibited; mandatory technology transfer is prohibited; and the capital contributions, profits, capital gains,
proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or proceeds
received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMB or a foreign currency. Also,
foreign investors or the foreign investment enterprise should be subject to legal liabilities for failing to report investment information
in accordance with the requirements.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations on Intellectual Property
Rights</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks and domain
names.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Copyright.
</b>Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC promulgated in
February 2010 which took effect in April 2010 (the &#8220;Copyright Law&#8221;) which has been amended by SCNPC on November 11, 2020
and became effective on June 1, 2021, and related rules and regulations. Under the Copyright Law, the term of protection for copyrighted
software of legal persons is 50 years and ends on December 31 of the 50<sup>th </sup>year from the date of first publishing of the software.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Patent.
</b>The Patent Law of the PRC promulgated in December 2008, which became effective in October 2009 and recently has been amended by SCNPC
on October 17, 2020 and became effective on June 1, 2021, provides for patentable inventions, utility models and designs. An invention
or utility model for which patents may be granted shall have novelty, creativity and practical applicability. The State Intellectual
Property Office under the State Council is responsible for examining and approving patent applications. The protection period is 20 years
for inventions and 10 years for utility models and designs, all of which commence from the date of application of patent rights under
current Patent Law of the PRC. The protection period has been slightly amended in recent amendment which became effective on June 1,
2021. The terms of protection for invention and utility patents will still be 20 years and 10 years, respectively, in general. The term
of protection for a design patent will be extended from 10 years to 15 years. In addition, for invention patents, in case it is only
granted after 4 years or more from its filing date or 3 years or more after a request for substantive examination date, the applicant
can request for an extension of protection term for any unreasonable delay.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trademark.
</b>The Trademark Law of the PRC promulgated in August 2013 which took effect in May 2014 (the &#8220;Trademark Law&#8221;) and it was
last amended on April 23, 2019 and the amendments became effective on November 11, 2019. Its implementation rules protect registered
trademarks. The Trademark Office of National Intellectual Property Administration, PRC, formerly the PRC Trademark Office of the State
Administration of Market Regulation is responsible for the registration and administration of trademarks throughout the PRC. The Trademark
Law has adopted a &#8220;first-to-file&#8221; principle with respect to trademark registration. The validity period of registered trademarks
is 10 years from the date of approval of trademark application, and may be renewed for another 10 years provided relevant application
procedures have been completed within 12 months before the end of the validity period.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Domain
Name. </b>Domain names are protected under the Administrative Measures for the Internet Domain Names of the PRC promulgated by the Ministry
of Industry and Information Technology of the PRC effective on December 20, 2004 and the Administrative Measures for Internet Domain
Names promulgated by Ministry of Industry and Information Technology (&#8220;MIIT&#8221;), effective on November 1, 2017 (the &#8220;Domain
Name Measures&#8221;). MIIT is the major regulatory body responsible for the administration of the PRC internet domain names. The Domain
Names Measures has adopted a &#8220;first-to-file&#8221; principle with respect to the registration of domain names.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations on Environmental Protection
and Work Safety</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations on Environmental Protection</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the <i>Environmental Protection Law of the PRC</i> promulgated by the Standing Committee of the National People&#8217;s Congress (&#8220;SCNPC&#8221;)
on December 26, 1989, amended on April 24, 2014 and effective on January 1, 2015, any entity which discharges or will discharge pollutants
during the course of its operations or other activities must implement effective environmental protection safeguards and procedures to
control and properly treat waste gas, waste water, waste residue, dust, malodorous gases, radioactive substances, noise vibrations, electromagnetic
radiation and other hazards produced during such activities. The preparation of relevant development and utilization plans and the construction
of the projects having impact on environment shall be subject to environmental impact assessment in accordance with the law. Furthermore,
the enterprises and business operators on which the management system for the pollutants discharge permit and registration is implemented
shall discharge pollutants according to their respective pollutants discharge permits or registrations and shall not discharge pollutants
without obtaining a pollutants discharge permit or registration.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Environmental
protection authorities impose various administrative penalties on persons or enterprises in violation of the <i>Environmental Protection
Law</i>. Such penalties include warnings, fines, orders to rectify within the prescribed period, orders to cease construction, orders
to restrict or suspend production, orders to make recovery, orders to disclose relevant information or make an announcement, imposition
of administrative action against relevant responsible persons, and orders to shut down enterprises. Any person or entity that pollutes
the environment resulting in damage could also be held liable under the <i>Civil Code of PRC</i>. In addition, environmental organizations
may also bring lawsuits against any entity that discharges pollutants detrimental to the public welfare. In addition, on May 28, 2020,
National People&#8217;s Congress promulgated the Civil Code of PRC, which took effective on January 1, 2021, to replace the PRC Inheritance
Law, Adoption Law, PRC Contract Law, the General Principles of the Civil Law of the PRC, the PRC Marriage Law, the PRC Guarantee Law,
the PRC Property Law and the PRC Tort Liability Law. Seven parts are introduced in the Civil Code of PRC, including General Part, Right
in Rem, Contracts, Personality Rights, Marriage and Family, Inheritance, Tort Liability.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Law of the PRC on the Prevention and Control of Occupational Diseases, or the Occupational Diseases Prevention Law, promulgated by the
SCNPC on October 27, 2001, became effective on May 1, 2002, and latest amended on December 29, 2018 is applicable to activities for the
prevention and control of diseases contracted by the workers due to their exposure in the course of work to dust, radioactive substances
and other toxic and harmful substances. Pursuant to the Occupational Diseases Prevention Law, the employer shall strictly abide by the
national occupational health standards and implement the measures for occupational disease prevention and control in accordance with
laws and regulations. Violation of the Occupational Diseases Prevention Law may result in the imposition of fines and penalties, the
suspension of operation, an order to cease operation, and/or criminal liability in severe cases.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations on Work Safety</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
relevant construction safety laws and regulations, including the <i>Work Safety Law of the PRC</i> which was promulgated by the SCNPC
on June 29, 2002, amended on August 27, 2009, August 31, 2014 and June 10, 2021, and effective as of September 1, 2021, production and
operating business entities must establish objectives and measures for work safety and improve the working environment and conditions
for workers in a planned and systematic way. A work safety protection scheme must also be set up to implement the work safety job responsibility
system. In addition, production and operating business entities must arrange work safety training and provide their employees with protective
equipment that meets the national standards or industrial standards. Automobile and components manufacturers are subject to the aforementioned
environment protection and work safety requirements.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations Relating to Labor Protection</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Labor Contract Law</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC Labor Contract Law, or the Labor Contract Law, which became effective on January 1, 2008 and was amended on December 28, 2012 and
became effected on July 1, 2013, is primarily aimed at regulating rights and obligations of employer and employee relationships, including
the establishment, performance and termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts shall be concluded
in writing if labor relationships are to be or have been established between employers and the employees. Employers are prohibited from
forcing employees to work above certain time limits, and employers shall pay employees for overtime work in accordance to national regulations.
In addition, employee wages shall be no lower than local standards on minimum wages and must be paid to employees in a timely manner.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Interim Provisions on Labor Dispatch</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the <i>Interim </i>Provisions <i>on Labor Dispatch,</i> or the Labor Dispatch Provisions, promulgated by the Ministry of Human Resources
and Social Security on January 24, 2014, which became effective on March 1, 2014, dispatched workers are entitled to equal pay with full-time
employees for equal work. Employers are allowed to use dispatched workers for temporary, auxiliary or substitutive positions, and the
number of dispatched workers may not exceed 10% of the total number of employees.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Social Insurance and Housing Fund</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Social Insurance Law of the PRC implemented on July 1, 2011, amended on December 29, 2018 and became effective on the same day,
employers are required to provide their employees in the PRC with welfare benefits covering pension insurance, unemployment insurance,
maternity insurance, labor injury insurance and medical insurance. These payments are made to local administrative authorities. Any employer
that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within
a prescribed time limit and be subject to a late fee. If the employer still fails to rectify the failure to make the relevant contributions
within the prescribed time, it may be subject to a fine ranging from one to three times the amount overdue. In accordance with the <i>Regulations
on the Management of Housing Fund</i> which was promulgated by the State Council in 1999 and last amended on March 24, 2019 and became
effective on the same day, employers must register at the designated administrative centers and open bank accounts for depositing employees&#8217;
housing funds. Employers and employees are also required to pay and deposit housing funds, which shall be the product of employees&#8217;
average monthly salaries of the previous year multiplied by the contribution rate of the housing provident fund of the employer. Where,
in violation of the provisions of these Regulations, an employer is overdue in the contribution of, or underpays, the housing provident
fund, the housing provident fund management center shall order it to make the contribution within a prescribed time limit; where the
contribution has not been made after the expiration of the time limit, an application may be made to a people&#8217;s court for compulsory
enforcement.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Employee Stock Incentive Plan</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan
of Overseas Listed Company, or Circular 7, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors, and
other senior management who participate in any stock incentive plan of a publicly-listed overseas company and who are PRC citizens or
non-PRC citizens residing in China for a continuous period of no less than one year, subject to a few exceptions, are required to register
with SAFE through a qualified domestic agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other
procedures. In addition, the SAT has issued certain circulars concerning employee stock options and restricted shares. Under these circulars,
employees working in the PRC who exercise stock options or are granted restricted shares will be subject to PRC individual income tax.
The PRC subsidiaries of an overseas listed company are required to file documents related to employee stock options and restricted shares
with relevant tax authorities and to withhold individual income taxes of employees who exercise their stock option or purchase restricted
shares. If the employees fail to pay or the PRC subsidiaries fail to withhold income tax in accordance with relevant laws and regulations,
the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC governmental authorities.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations Relating to Taxes</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Income Tax</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC Enterprise Income Tax Law, or the EIT Law, imposes a uniform enterprise income tax rate of 25% on all PRC resident enterprises, including
foreign-invested enterprises, unless they qualify for certain exceptions. The enterprise income tax is calculated based on the PRC resident
enterprise&#8217;s global income as determined under PRC tax laws and accounting standards. If a non-resident enterprise sets up an organization
or establishment in the PRC, it will be subject to enterprise income tax for the income derived from such organization or establishment
in the PRC and for the income derived from outside the PRC but with an actual connection with such organization or establishment in the
PRC. The EIT Law and its implementation rules permit certain &#8220;high and new technology enterprises strongly supported by the state&#8221;
that independently own core intellectual property and meet statutory criteria, to enjoy a reduced 15% enterprise income tax rate. In
January 2016, the SAT, the Ministry of Science and Technology and the MOF jointly issued the Administrative Rules for the Certification
of High and New Technology Enterprises specifying the criteria and procedures for the certification of High and New Technology Enterprises.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
April 22, 2009, the SAT issued the Circular of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled
Overseas Registered Enterprises as Resident Enterprises in Accordance With the De Facto Standards of Organizational Management, or the
SAT Circular 82, which provides certain specific criteria for determining whether the &#8220;de facto management body&#8221; of a PRC-controlled
enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled
by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular
may reflect the SAT&#8217;s general position on how the &#8220;de facto management body&#8221; text should be applied in determining
the tax resident status of all offshore enterprises. According to the SAT Circular 82, an offshore incorporated enterprise controlled
by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its &#8220;de facto management
body&#8221; in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are
met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise&#8217;s
financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise&#8217;s
primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the
PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. Further to SAT Circular 82, on
July 27, 2011, the SAT issued the Announcement of the State Administration of Taxation on Printing and Distributing the Administrative
Measures for Income Tax on PRC-controlled Resident Enterprises Incorporated Overseas (Trial Implementation), or the SAT Bulletin 45,
which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for
procedures and administration details for determination of resident status and administration on post-determination matters.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Value-added Tax</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Provisional Regulations of the PRC on Value-added Tax, the VAT Regulation, were promulgated by the State Council on December 13, 1993
and came into effect on January 1, 1994 which were subsequently amended from time to time. The Detailed Rules for the Implementation
of the Provisional Regulations of the PRC on Value-added Tax (Revised in 2011) was promulgated by the MOF on December 25, 1993 and subsequently
amended on December 15, 2008 and October 28, 2011, or collectively, the VAT Law. On November 19, 2017, the State Council promulgated
the Decisions on Abolishing the Provisional Regulations of the PRC on Business Tax and Amending the Provisional Regulations of the PRC
on Value-added Tax, or the Order 691. On April 4, 2018, MOF and SAT jointly promulgated the Circular on Adjustment of Value-Added Tax
Rates, or Circular 32. According to the VAT Law, the Order 691 and the Circular 32, all enterprises and individuals engaged in the sale
of goods, the provision of processing, repair and replacement services, sales of services, intangible assets, real property and the importation
of goods within the territory of the PRC are the taxpayers of VAT. The VAT tax rates generally applicable are simplified as 16%, 10%,
6% and 0%, and the VAT tax rate applicable to the small-scale taxpayers is 3%. Furthermore, according to the Announcement on Relevant
Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of Finance, the State Administration of Taxation and
the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previously subject to VAT rates of
16% and 10% respectively become subject to lower VAT rates of 13% and 9% respectively starting from April 1, 2019.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Dividend Withholding Tax</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
EIT Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident
investors which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but
the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived
from sources within the PRC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance Arrangement, and other applicable
PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions
and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the
Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Circular on Certain
Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, issued on February 20, 2009 by
the SAT, if the relevant PRC tax authorities determine, in their discretions, that a company benefits from such reduced income tax rate
due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According
to the Circular on Several Questions regarding the &#8220;Beneficial Owner&#8221; in Tax Treaties, which was issued on February 3, 2018
by the SAT and took effect on April 1, 2018, when determining the applicant&#8217;s status of the &#8220;beneficial owner&#8221; regarding
tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation,
whether the applicant is obligated to pay more than 50% of his or her income in twelve months to residents in third country or region,
whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region
to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken
into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further provides that
applicants who intend to prove his or her status of the &#8220;beneficial owner&#8221; shall submit the relevant documents to the relevant
tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers&#8217; Enjoyment of
the Treatment under Tax Agreements.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 3, 2015, the SAT issued the Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties
by Non-Tax Resident Enterprises, or the SAT Public Notice 7. The SAT Public Notice 7 extends its tax jurisdiction to cover not only where
a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests
of an overseas holding company, or an Indirect Transfer, but also to transactions involving transfer of other taxable assets through
offshore transfer of a foreign intermediate holding company. The SAT Public Notice 7 also brings challenges to both foreign transferor
and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers
a taxable asset indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident
enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer
to the relevant tax authority. Using a &#8220;substance over form&#8221; principle, the PRC tax authority may disregard the existence
of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding
or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee
or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for
the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under
PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 17, 2017, the SAT issued the Public Notice on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises,
or the SAT Public Notice 37, which came into effect on December 1, 2017. According to SAT Public Notice 37, where the non-resident enterprise
fails to declare its tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay its tax due within required
time limits, and the non-resident enterprise shall declare and pay its tax payable within such time limits specified by the tax authority.
If the non-resident enterprise voluntarily declares and pays its tax payable before the tax authority orders it to do so, it shall be
deemed that such enterprise has paid its tax payable in time.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations relating to Foreign Exchange</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>General Administration of Foreign Exchange</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and most recently amended on August 5, 2008 and various
regulations issued by the State Administration of Foreign Exchange of the PRC, or the SAFE and other relevant PRC government authorities,
Renminbi is convertible into other currencies for current account items, such as trade-related receipts and payments and payment of interest
and dividends. The conversion of Renminbi into other currencies and remittance of the converted foreign currency outside the PRC for
of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from the
SAFE or its local office.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payments
for transactions that take place within the PRC must be made in Renminbi. Unless otherwise approved, PRC companies may not repatriate
foreign currency payments received from abroad or retain the same abroad. Foreign-invested enterprises may retain foreign exchange in
accounts with designated foreign exchange banks under the current account items subject to a cap set by the SAFE or its local office.
Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution engaged in settlement
and sale of foreign exchange pursuant to relevant SAFE rules and regulations. For foreign exchange proceeds under the capital accounts,
approval from the SAFE is generally required for the retention or sale of such proceeds to a financial institution engaged in settlement
and sale of foreign exchange.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Circular of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the
SAFE Circular 59, promulgated by SAFE on November 19, 2012, which became effective on December 17, 2012 and subsequently amended from
time to time, approval of SAFE is not required for opening a foreign exchange account and depositing foreign exchange into the accounts
relating to the direct investments. The SAFE Circular 59 also simplified foreign exchange-related registration required for the foreign
investors to acquire the equity interests of Chinese companies and further improve the administration on foreign exchange settlement
for foreign-invested enterprises.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Circular on Further Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, or the SAFE Circular 13, effective
from June 1, 2015, cancels the administrative approvals of foreign exchange registration of direct domestic investment and direct overseas
investment and simplifies the procedure of foreign exchange-related registration. Pursuant to the SAFE Circular 13, the investors shall
register with banks for direct domestic investment and direct overseas investment.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Circular on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise, or the SAFE
Circular 19, which was promulgated by the SAFE on March 30, 2015 and became effective on June 1, 2015, provides that a foreign-invested
enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital
account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights and interests (or for
which the bank has registered the injection of the monetary capital contribution into the account). Pursuant to the SAFE Circular 19,
for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capital on a discretionary basis;
a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business; where an
ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise
must first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment
with the foreign exchange administration or the bank at the place where it is registered.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or the SAFE Circular
16, which was promulgated by the SAFE and became effective on June 9, 2016, provides that enterprises registered in the PRC may also
convert their foreign debts from foreign currency into Renminbi on self-discretionary basis. The SAFE Circular 16 also provides an integrated
standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign
debts) on self-discretionary basis, which applies to all enterprises registered in the PRC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness
and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance
of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing
board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic
entities must retain income to account for previous years&#8217; losses before remitting any profits. Moreover, pursuant to Circular
3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts
and other proof as a part of the registration procedure for outbound investment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 23, 2019, SAFE issued Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border
Trade and Investment, or the Circular 28, which took effect on the same day. Circular 28 allows non-investment foreign-invested enterprises
to use their capital funds to make equity investments in China, provided that such investments do not violate the effective special entry
management measures for foreign investment (negative list) and the target investment projects are genuine and in compliance with laws.
Since Circular 28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the SAFE Circular 13 and other laws and regulations relating to foreign exchange, when setting up a new foreign invested enterprise,
the foreign invested enterprise shall register with the bank located at its registered place after obtaining the business license, and
if there is any change in capital or other changes relating to the basic information of the foreign-invested enterprise, including without
limitation any increase in its registered capital or total investment, the foreign invested enterprise must register such changes with
the bank located at its registered place after obtaining approval from or completing the filing with competent authorities. Pursuant
to the relevant foreign exchange laws and regulations, the above-mentioned foreign exchange registration with the banks will typically
take less than four weeks upon the acceptance of the registration application.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Foreign Investment Law, Measures for Reporting of Information on Foreign Investment, promulgated by MOFCOM, and State Administration
for Market Regulation, or the SAMR on December 30, 2019 and became effective on January 1, 2020, the Administrative Rules on the Company
Registration, which was promulgated by the State Council on June 24, 1994, became effective on July 1, 1994 and latest amended on February
6, 2016, and other laws and regulations governing the foreign invested enterprises and company registrations, the establishment of a
foreign invested enterprise and any capital increase and other major changes in a foreign invested enterprise shall be registered with
the SAMR, or its local counterparts, and investment information shall be submitted to the competent commerce authorities through the
enterprise registration system and the National Enterprise Credit Information Publicity System, if such foreign invested enterprise does
not involve special access administrative measures prescribed by the PRC government.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based
on the forgoing, if we intend to provide funding to our wholly foreign owned subsidiaries through a capital injection at or after their
establishment, we must register the establishment thereof and any follow-on capital increase in our wholly foreign owned subsidiaries
with the SAMR or its local counterparts, submit such information via the enterprise registration system and the National Enterprise Credit
Information Publicity System and register such with the local banks for the foreign exchange related matters.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Offshore Investment</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Circular of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration over the Overseas
Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37, issued
by the SAFE and effective on July 4, 2014, PRC residents are required to register with the local SAFE branch prior to contributing assets
or equity interests in an offshore special purpose vehicle, or SPV, which is defined as offshore enterprises directly established or
indirectly controlled by PRC residents for investment and financing purposes, with the enterprise assets or interests they hold in China
or overseas. The term &#8220;control&#8221; means obtain the operation rights, right to proceeds or decision-making power of a SPV through
acquisition, trust, holding shares on behalf of others, voting rights, repurchase, convertible bonds or other means. An amendment to
registration or subsequent filing with the local SAFE branch by such PRC resident is also required if there is any change in basic information
of the offshore company or any material change with respect to the capital of the offshore company. At the same time, the SAFE has issued
the Operation Guidance for the Issues Concerning Foreign Exchange Administration over Round-trip Investment regarding the procedures
for SAFE registration under the SAFE Circular 37, which became effective on July 4, 2014 as an attachment of Circular 37.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the relevant rules, failure to comply with the registration procedures set forth in the SAFE Circular 37 may result in bans on the foreign
exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent
or affiliates, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations on Dividend Distribution</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
principal laws and regulations regulating the dividend distribution of dividends by foreign-invested enterprises in the PRC include the
PRC Company Law, as amended in 1999, 2004, 2005, 2013 and 2018, and Foreign Investment Law and the Implementing Regulations of FIL which
replaced the Wholly Foreign-owned Enterprise Law promulgated in 1986 and amended in 2000 and 2016 and its implementation regulations
promulgated in 1990 and subsequently amended in 2001 and 2014, the PRC Equity Joint Venture Law promulgated in 1979 and subsequently
amended in 1990, 2001 and 2016 and its implementation regulations promulgated in 1983 and subsequently amended in 1986, 1987, 2001, 2011
and 2014, and the PRC Cooperative Joint Venture Law promulgated in 1988 and amended in 2000, 2016 and 2017 and its implementation regulations
promulgated in 1995 and amended in 2014 and 2017. Under the current regulatory regime in the PRC, foreign-invested enterprises in the
PRC may pay dividends only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations.
A PRC company is required to set aside as statutory reserve funds of at least 10% of its after-tax profit, until the cumulative amount
of such reserve funds reaches 50% of its registered capital unless laws regarding foreign investment provide otherwise. A PRC company
shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years
may be distributed together with distributable profits from the current fiscal year.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Regulations Relating to M&amp;A Rule
and Overseas Listing in the PRC</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 8, 2006, six PRC governmental and regulatory agencies, including MOFCOM and CSRC, promulgated the Rules on Acquisition of Domestic
Enterprises by Foreign Investors, or the M&amp;A Rules, governing the mergers and acquisitions of domestic enterprises by foreign investors
that became effective on September 8, 2006 and was revised on June 22, 2009. The M&amp;A Rules, among other things, require that if an
overseas company established or controlled by PRC companies or individuals, or PRC Citizens, intends to acquire equity interests or assets
of any other PRC domestic company affiliated with the PRC Citizens, such acquisition must be submitted to MOFCOM for approval. The M&amp;A
Rules also requires that an offshore SPV that is controlled directly or indirectly by the PRC companies or individuals and that has been
formed for overseas listing purposes through acquisitions of PRC domestic interest held by such PRC companies or individuals, shall obtain
the approval of CSRC prior to overseas listing and trading of such SPV&#8217;s securities on an overseas stock exchange.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises
(the &#8220;New Overseas Listing Rules&#8221;) with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas
Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information
under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market;
b) an issuer making a subsequent overseas securities offering after having been listed on an overseas market; c) a domestic company seeking
an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other
means. The new rules provide that the determination as to whether a domestic company is indirectly offering and listing securities on
an overseas market shall be made on a substance over form basis, and if the issuer meets the following conditions, the offering and listing
shall be determined as an indirect overseas offering and listing by a Chinese domestic company: (i) any of the revenue, profit, total
assets or net assets of the Chinese domestic entity is more than 50% of the related financials in the issuer&#8217;s audited consolidated
financial statements for the most recent fiscal year; (ii) the senior managers in charge of business operation and management of the
issuer are mostly Chinese citizens or with regular domicile in China, the main locations of its business operations are in China or main
business activities are conducted in China. We are headquartered in Hong Kong with all our executive officers and directors based in
Hong Kong who are not Chinese citizens and most of our revenues and profits are generated by our subsidiaries in Hong Kong.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>PRC Laws and Regulations Related to Data
Cross-border Transfer and personal information protection</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Measures for the Security Assessment of Data Cross-border Transfer</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022,
which requires the data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances:
(i) any data processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor
who processes personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides
personal information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information
of more than 10,000 people to overseas since January 1st of the previous year and ; and (iv) other circumstances under which the data
cross-border transfer security assessment is required as prescribed by the CAC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Personal Information Protection Law of the PRC</i></span></p>



<p style="margin-top: 0; margin-bottom: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the People&#8217;s Republic of China (the &#8220;Personal
Information Protection Law&#8221;), effective from November 1, 2021. The Personal Information Protection Law requires, among others,
that (i) the processing of personal information should have a clear and reasonable purpose which should be directly related to the processing
purpose, in a method that has the least impact on personal rights and interests, and (ii) the collection of personal information should
be limited to the minimum scope necessary to achieve the processing purpose to avoid the excessive collection of personal information.
Different types of personal information and personal information processing will be subject to various rules on consent, transfer, and
security. Entities handling personal information bear responsibilities for their personal information handling activities, and shall
adopt necessary measures to safeguard the security of the personal information they handle. Otherwise, the entities handling personal
information could be ordered to correct, or suspend or terminate the provision of services, and face confiscation of illegal income,
fines or other penalties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><b><span style="text-decoration: underline">Hong Kong Regulations</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
we conduct business in Hong Kong through our wholly subsidiaries Kambo Locksets, Kambo Hardware, Bamberg and Hing Fat, our business operations
are subject to various regulations and rules promulgated by the Hong Kong government. The following is a brief summary of the Hong Kong
laws and regulations that currently and materially affect our business. This section does not purport to be a comprehensive summary of
all present and proposed regulations and legislation relating to the industries in which we operate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Hong Kong Laws and Regulations relating
to Trade Description</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Trade
Descriptions Ordinance</i> (Chapter 362 of the Laws of Hong Kong) (&#8220;TDO&#8221;), which came into full effect in Hong Kong on 1
April 1981 aims to prohibit false or misleading trade description and statements to goods and services provided to the customers during
or after a commercial transaction. Pursuant to the TDO, any person in the course of any trade or business applies a false trade description
to any goods or supply or offers to supply them commits an offence and a person also commits the same offence if he/she is in possession
for sale or for any purpose of trade or manufacture of any goods with a false description. The TDO also provides that traders may commit
an offence if they engage in a commercial practice that has a misleading omission of material information of the goods, an aggressive
commercial practice, involves bait advertising, bait and switch or wrong acceptance of payment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Hong Kong Laws and Regulations relating
to Sales of Goods</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to <i>Sale of Goods Ordinance </i>(Chapter 26 of the Laws of Hong Kong) (&#8220;SOGO&#8221;), which came into full effect in Hong Kong
on August 1, 1896, in every contract of sale, there is an implied warranty that the goods are free, and will remain free until the time
when the property is to pass, from any charge or encumbrance not disclosed or known to the buyer before the contract is made and that
the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the
benefit of any charge or encumbrance so disclosed or known. The SOGO provides that there is an implied condition that the goods shall
correspond with the description where there is a contract for the sale of goods by description, and there is any implied condition or
warranty as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. Where the seller sells goods
in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Hong Kong Laws and Regulations relating
to Intellectual Properties Rights</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Trade
Marks Ordinance </i>(Chapter 559 of the Laws of Hong Kong) (&#8220;TMO&#8221;), which came into full effect in Hong Kong on 4 April 2003
provides the framework for the Hong Kong&#8217;s system of registration of trademarks and sets out the rights attached to a registered
trade mark, including logo and a brand name. The TMO restricts unauthorized use of a sign which is identical or similar to the registered
mark for identical and/or similar goods and/or services for which the mark was registered, where such use is likely to cause confusion
on the part of the public. The TMO provides that a person may also commit a criminal offence if that person fraudulently uses a trade
mark, including selling and importing goods bearing a forged trade mar, or possessing or using equipment for the purpose of forging a
trade mark.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Patents
Ordinance </i>(Chapter 514 of the Laws of Hong Kong), which came into full effect in Hong Kong on June 27, 1997 provides the framework
for &#8220;re-registration&#8221; system of Chinese, UK and European patents in Hong Kong. Pursuant to <i>Patents (Amendment) Ordinance
</i>2016, which came into full effect in Hong Kong on 19 December 2019 provide a new framework for a new patent system - an &#8220;original
grant patent&#8221; system, running in parallel with the &#8220;re-registration&#8221; system.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Copyright
Ordinance</i> (Chapter 528 of the Laws of Hong Kong) (&#8220;CO&#8221;), which came into full effect in Hong Kong on June 27 1997 provides
comprehensive protection for recognized categories of underlying works such as literary, dramatic, musical and artistic works. The CO
restricts unauthorized acts such as copying and/or making available copies to the public of a copy right work.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Hong Kong Laws and Regulations relating
to Competition</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Competition
Ordinance</i> (Chapter 619 of the Laws of Hong Kong) (&#8220;Competition Ordinance&#8221;), which came into full effect in Hong Kong
on December 14, 2015 prohibits and deters undertakings in all sectors from adopting anti-competitive conduct which has the object or
effect of preventing, restricting or distorting competition in Hong Kong. The key prohibitions include (i) prohibition of agreements
between businesses which have the object or effect of preventing, restricting or distorting competition in Hong Kong; and (ii) prohibiting
companies with a substantial degree of market power from abusing their power by engaging in conduct that has the object or effect of
preventing, restricting or distorting competition in Hong Kong. The penalties for breaches of the Competition Ordinance include, but
are not limited to, financial penalties of up to 10% of the total gross revenues obtained in Hong Kong for each year of infringement,
up to a maximum of three years in which the contravention occurs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Hong Kong Laws and Regulations relating
to Employment</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to <i>Employment Ordinance </i>(Chapter 57 of the Laws of Hong Kong) (&#8220;EO&#8221;), which came into full effect in Hong Kong on
September 27, 1968, all employees covered by the EO are entitled to basic protection under the EO including but not limited to payment
of wages, restrictions on wages deductions and the granting of statutory holidays.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to <i>Mandatory Provident Fund Schemes Ordinance</i> (Chapter 485 of the Laws of Hong Kong) (&#8220;MPFSO&#8221;), which came into full
effect in Hong Kong on December 1, 2000, every employer must take all practicable steps to ensure that the employee becomes a member
of a Mandatory Provident Fund (MPF) scheme. An employer who fails to comply with such a requirement may face a fine and imprisonment.
The MPFSO provides that an employer who is employing a relevant employee must, for each contribution period, from the employer&#8217;s
own funds, contribute to the relevant MPF scheme the amount determined in accordance with the MPFSO.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to <i>Employees&#8217; Compensation Ordinance</i> (Chapter 282 of the Laws of Hong Kong) (&#8220;ECO&#8221;), which came into full effect
in Hong Kong on December 1, 1953, all employers are required to take out insurance policies to cover their liabilities under the ECO
and at common law for injuries at work in respect of all of their employees. An employer failing to do so may be liable to a fine and
imprisonment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to <i>Minimum Wage Ordinance </i>(Chapter 608 of the Laws of Hong Kong) (&#8220;MWO&#8221;), which came into full effect in Hong Kong
on May 1, 2011, an employee is entitled to be paid wages no less than the statutory minimum wage rate during the wage period. With effect
from May 1, 2019, the statutory minimum hourly wage rate is HK$37.5. Failure to comply with MWO constitutes an offence under EO.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration: underline">Cayman
Islands Data Protection</span></b></span></p>



<p style="margin-top: 0; margin-bottom: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have certain duties under the Data Protection Act (as revised) of the Cayman Islands, or the DPA, based on internationally accepted principles
of data privacy.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Privacy
Notice</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
privacy notice puts our shareholders on notice that through your investment into us you will provide us with certain personal information
which constitutes personal data within the meaning of the DPA, or personal data.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Investor
Data</i></span></p>



<p style="margin-top: 0; margin-bottom: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could
be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the
extent legitimately required to conduct our activities of on an ongoing basis or to comply with legal and regulatory obligations to which
we are subject. We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical
and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data
and against the accidental loss, destruction or damage to the personal data.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
our use of this personal data, we will be characterized as a &#8220;data controller&#8221; for the purposes of the DPA, while our affiliates
and service providers who may receive this personal data from us in the conduct of our activities may either act as our &#8220;data processors&#8221;
for the purposes of the DPA or may process personal information for their own lawful purposes in connection with services provided to
us.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating
to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact
details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence
records, passport number, bank account details, source of funds details and details relating to the shareholder&#8217;s investment activity.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>Who this Affects</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements
such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in
relation your investment in us, this will be relevant for those individuals and you should transit the content of this Privacy Notice
to such individuals or otherwise advise them of its content.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>How We May Use a Shareholder&#8217;s Personal
Data</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>&#160;</i></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may, as the data controller, collect, store and use personal data for lawful purposes, including, in particular: (i) where this is necessary
for the performance of our rights and obligations under any agreements; (ii) where this is necessary for compliance with a legal and
regulatory obligation to which we are or may be subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or
(iii) where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental
rights or freedoms.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Should
we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will
contact you.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><i>Why We May Transfer Your Personal
Data</i></p>



<p style="margin-top: 0; margin-bottom: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the
relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange
this information with foreign authorities, including tax authorities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
anticipate disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain
entities located outside the US, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>The
Data Protection Measures We Take</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance
with the requirements of the DPA.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures
designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage
to, personal data.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms
or those data subjects to whom the relevant personal data relates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Contacting
the Company</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
further information on the collection, use, disclosure, transfer or processing of your personal data or the exercise of any of the rights
listed above, please contact us through our website at www. i-l-a-g.com or through phone number +852 2481 7938.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>C.
Organizational structure</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Below
is the Company&#8217;s corporate structure chart as of the date of this report.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img src="form20-f_007.jpg" alt=""/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>D.
Property, Plants and Equipment</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
headquarter and sales office in Hong Kong are operating in an approximately 300m<sup>2</sup> office located in an industrial building.
The office is leased from a related company, Kambo Security Products Limited. Kambo Security Products Limited is owned by Mr. Yu Bong
Lau (Bong), Mr. Bun Lau, Mr. Wynn Hui and Mr. Po Ching Hui, brother of Mr. Wynn Hui. The rent paid to Kambo Security Products Limited
is determined according to the market value of similar property quotes from a Hong Kong property agent. We most recently renewed the
lease of the property starting from January 1, 2024 for a term of one year, with annual rent of HK$576,000 (approximately US$74,000).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
manufacturing facility is operated under our WFOE named Dongguan Xingfa Hardware Products Co., Ltd. (&#8220;Xingfa&#8221;), which is
equipped with different types of machines in a 17,560 m<sup>2</sup> production facility which is able to produce about 6,000,000
locksets per annum. Xingfa leases 15,810 m<sup>2 </sup>of land use rights for our factory from March 1, 2024 to February 28, 2026
from Dongguan Shatian Town Hengliu Equity Economic Union, a third party, with annual rent of approximately RMB 3,748,000
(approximately US$529,000).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have acquired an electroplating production line located at 5/F., Tower A, Shun Hang Environment Projection Industrial Park, Shatian Town,
Dongguan, Guangdong. The lease for the factory that the production line is from April 1, 2023 to September 30, 2026 with Dongguan
Shun Hang Metal Productions Company Limited, a third party, with annual rent of approximately RMB 660,000 (approximately US$93,000).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
we mainly lease the following properties to conduct our business:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 34%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Property
    Address</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Lessor</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Annual
    Rent</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Lease<br/>
    Expiration<br/>
    Date</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 13%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Purposes/Use</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unit
    2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New Territories, Hong Kong</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kambo
    Security Products Limited</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Approx.
    $74,000</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December
    31, 2024</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Head
    Quarter Office</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No.
    43, Min Tian Main Street, Shatian Town, Dongguan, Guangdong, PRC</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dongguan
    Shatian Town Hengliu Equity Economic Union</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Approx.
    $529,000</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">February
    28, 2026</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Production
    Plant and Office</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5/F.,
    Tower A, Shun Hang Environment Projection Industrial Park, Shatian Twon, Dongguan, Guangdong, PRC</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dongguan
    Shun Hang Metal Productions Company Limited</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Approx.
    $93,000</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">September
    30, 2026</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Production
    Plant</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" border="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt">
<tr style="vertical-align: top">
  <td style="width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM</b></span> <b>4A.</b></td>
  <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_033"></span> UNRESOLVED STAFF COMMENTS</b></span></td></tr>
</table>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" border="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt">
<tr style="vertical-align: top">
  <td style="width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 5. </b></span></td>
  <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_034"></span>OPERATING AND FINANCIAL REVIEW AND PROSPECTS</b></span></td></tr>
</table>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth under &#8220;Item 3. Key Information&#8212;D.
Risk Factors&#8221; or in other parts of this annual report on Form 20-F.</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>5A. Operating Results</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Overview</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Headquartered
in Hong Kong, we manufacture and sell high quality mechanical locksets to customers mainly in the United States (US) and Canada and have
continued to diversify and refine our product offerings in the past 40 years to meet our customers&#8217; needs. We believe our wholly
owned subsidiary Xingfa is one of the pioneers of mechanical lockset manufacturing in China. Since inception, to cope with our development
and increase customer satisfaction in quality, we keep investing in self-designed automated product lines, new craftsmanship and developing
new products including smart locks. In order to obtain the confidence of our customers, Xingfa has obtained the ISO9001quality assurance
certificate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Starting
in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed
by the Builders Hardware Manufacturing Association (BHMA) for ANSI. Our focus in producing mechanical locksets - including locksets for
outdoors (such as main entrances and gates) and indoors which raised our competitiveness.
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer
(&#8220;ODM&#8221;) door locksets to various customer segments from &#8220;Premium Series&#8221; to &#8220;Economy-oriented Series&#8221;
with classic to contemporary looks, functions and colors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
approximately 99% of our revenues are from products sold to the US market, and the remaining products are sold to Canadian market. We
build our distribution network by working together with our large and small business partners in different geographic areas to sell our
products. More information about geographical penetration of our revenues can be found in &#8220;Segment reporting in Note 2 of Notes
to the Consolidated Financial Statements&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
40 years, we manufacture and sell high quality mechanical locksets and continue to grow and increase our product offerings. The predecessor
of Hing Fat commenced our business of selling door locksets in 1981. In 1983, we started processing door locksets to fulfill orders from
US customers with imported materials at a small manufacturing workshop in China which becomes our current manufacturing subsidiary, Xingfa.
Since then, our mission is to &#8220;produce high quality lockset products at affordable prices.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
sell our products mainly to the US and Canada (&#8220;North America&#8221;) through one of our Hong Kong registered subsidiaries, Kambo
Locksets. Another Hong Kong registered subsidiary, Kambo Hardware, targets and distributes locksets and related hardware to countries
other than the US and Canada. And it mainly serves our customers in Asian countries. We will further illustrate our development and group
structure in the following paragraphs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
1993, as the laws and regulations for processing with imported materials entity had changed in China, we established our wholly foreign
owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited (&#8220;Xingfa&#8221;) located in Shatian County, Dongguan
City, Guangdong Province of PRC. Xingfa is equipped with various types of machines such as die casting machines, furnace, polishing machines
and other machines for metal processing in a 17,560 m<sup>2</sup> manufacturing facility. In light of excess production capacity due
to current economic conditions, Xingfa has subleased one plant building of approximately 4,300 m<sup>2</sup> to reduce our operating
costs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under
                                            Hong Kong law (&#8220;Hing Fat&#8221;), as the holding company of Xingfa to manage the door
                                            lockset manufacturing activities of Xingfa and to conduct research and development.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
                                            March 26, 2014, Kambo Locksets Limited was incorporated
                                            under Hong Kong law. Kambo Locksets is a trading company focusing on marketing and sales
                                            of our products in North America market and became our subsidiary as a result of reorganization.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
                                            February 25, 2015, Kambo Hardware Limited was incorporated under Hong Kong law. Its primary
                                            business is to sell our products to markets outside of the North America.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bamberg
                                            (HK) Limited (&#8220;Bamberg&#8221;) was incorporated on June 24, 2016 under Hong Kong law.
                                            Through Bamberg, we started marketing our products under our own brand &#8220;Bamberg&#8221;
                                            to establish and focus on internet sales channels, such as Amazon.com</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
                                            July 17, 2019, Intelligent Living Application Group Inc. was established as a holding company
                                            and it is a Cayman Islands exempted company limited by shares and were incorporated as an
                                            offshore holding company for listing purposes and for further expansion flexibility. Intelligent
                                            Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application
                                            Group Limited, which was incorporated on March 19, 2014 under the laws of British Virgin
                                            Islands.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
                                            July 17, 2019, the Company issued 500,000,000 ordinary shares to its shareholders. On August
                                            14, 2019, these shareholders surrendered an aggregate of 499,990,000 ordinary shares to the
                                            Company at no consideration. The transaction is considered as a recapitalization prior to
                                            the Company&#8217;s initial public offering.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
                                            reorganization of the Company&#8217;s legal entity structure was completed in April 2020.
                                            The reorganization involved the incorporation of ILAG in July 2019 and execution of the Share
                                            Exchange Agreement between ILAG and ILA BVI in April 2020 (the &#8220;Share Exchange Agreement&#8221;)
                                            whereby ILAG took control of ILA BVI and its wholly owned subsidiaries by acquiring all the
                                            outstanding shares of ILA BVI with ordinary shares of ILAG. Pursuant to the Share Exchange
                                            Agreement, ILAG and ILA BVI exchanged 2,550,000 shares of ILA BVI for 12,990,000 ordinary
                                            shares of ILAG. This transaction was treated as a recapitalization of the Company and the
                                            financial statements give retroactive effect to this transaction.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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                                            July 16, 2021, the Board of Directors and Shareholders of the Company approved the Amended
                                            and Restated Memorandum and Articles of Association of the Company and our authorized share
                                            capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000
                                            ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value
                                            of $0.0001 each. The Company originally issued 500,000,000 ordinary shares on July 17, 2019.
                                            On August 14, 2019, all of existing shareholders of the Company agreed to surrender an aggregate
                                            of 499,990,000 ordinary shares to the Company at no consideration.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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                                            Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in
                                            Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of
                                            the equity interest in Xingfa.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">Until 2018, we have maintained a profitable
business with steady growth in our revenues and earnings. In 2018, we experienced the sudden impact caused by the tariff war between
the US and China that resulted in a decrease in or suspension of orders in late 2018 and first half of 2019. Our sales orders from our
customers in the US have stabilized and recovered since the middle of 2019 as the market digested information about the tariff war. However,
our factory was temporarily closed in early 2020 and the supply chain and logistic for raw materials and delivery of finished products
were disrupted because of COVID-19. In 2022, there were outbreaks of the Omicron variant of the COVID-19 in Hong Kong and many other
cities in China, including Shenzhen, Shanghai, Guangzhou, Taiyuan, Changchun as well as Dongguan city where Xingfa is located, and travel
restrictions, mandatory COVID-19 tests, quarantine requirements and/or temporary closure of office buildings and facilities were imposed
by local governments. China eased the strict lockdown procedures in early December 2022, which led to surge in COVID infections in December
2022 and January 2023 and caused disruption our business operations as our migrant workers from other provinces in the manufacturing
factory had to leave and go home early for the new year holidays and did not come back until March 2023. Our recovery from COVID-19 pandemic
was negatively impacted high interest rate which has caused a slowdown in real estate market in US, from which we generate most of our
revenues. Our revenues were approximately $6.4 million and $12.2 million for the years ended December 31, 2023 and 2022, respectively.</p>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
deployed alternative pricing strategies to alleviate the negative impact from COVID-19 and higher tariffs as we raised our unit
product selling price in July 2021. Due to the price increase, slow recovery from COVID-19 and the high interest rate in the US,
our revenues decreased by approximately $5.7 million or 47% for the year ended December 31, 2023 comparing to the same period of
2022. Our gross margin decreased to 9.8% for the year ended December 31, 2023 from 18.1% of the same period in 2022. If the idle
capacity impact was removed, our profit margin decreased to 15.2% in 2023. The <span>decrease </span> in margin during 2023 was
mainly due to the <span>increase of labor cost</span>s and raw materials such as zinc alloy and iron.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify">During 2021, three major
shareholders and executive directors of the Company forgave and waived their receivable owed by the subsidiaries of the Company for
$717,949 ($153,846 in 2020) which have been recognized as shareholders contribution. We renegotiated bank borrowings with lower
interest rate to sustain our operation cash needs. Our bank borrowing outstanding as of December 31, 2023 was approximately $0.1
million as compared to approximately $0.6 million as of December 31, 2022. Selling and marketing expenses decreased to $59,841 in
2023 from $105,473 for the same period in 2022, Our general and administrative expenses increased to approximately $4.4 million for
the year ended December 31, 2023 from approximately $4.2 million for the same period of 2022 because of increase in compensation to
directors and executive officers and professional fees as a public company. Finance costs were decreased to $26,935 for the year
ended December 31, 2023 from $147,588 for the same period in 2022. The combination of all above factors, along with decrease in
other income and increase of provision for income tax, have resulted in an increase of our net loss of $1,845,615 to $3,501,518 for
the year ended December 31, 2023 from $1,655,903 for the year ended December 31, 2022.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
our customer and geographical market concentration are high. To mitigate the issues of concentration of customers and geographical markets,
we are contacting property developers and hotel/service apartment developers in China and South-east Asia in an attempt to diversify
our customer base and reduce our market concentration. The following table shows revenues from customers that accounted for more than
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 80%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 46%">US</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">6,364,773</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">11,717,347</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">12,233,382</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">Canada</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">78,584</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">440,755</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">310,174</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">6,443,357</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">12,158,102</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">12,543,556</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
gross margin was approximately 6.8% due to the tariff war between US and China started in 2018. To mitigate the impact of tariff
war, we have launched a series of procurement actions to reduce the costs, and we managed to gradually improve our gross margins,
which was 9.8% for 2023, 18.1% for 2022 and 10.5% for 2021. In addition, once market demands resume to normal along with our
continuous efforts in expanding product selections and varieties, better procurement of raw materials, ability to improve production
efficiency, attracting new customers and initiatives to reduce our overhead costs, we hope to return to profitability. As the permit
for electro-plating production is more stringently regulated in China, in 2022, we acquired an electro-plating production line in an
industrial park near our Xingfa factory to reduce outsourced electro-plating costs. However, the interest increment cycle and
delayed economic recovery have made our customers more cautious in placing more orders. As a result, our gross margin was negatively
affected by amortization of idle capacity. To increase the utilization rate, the management is developing electro-plating business
to provide services to third parties with our newly acquired plant and also continued the development of new smart lock products for
mainland China, Cambodia and Hong Kong markets which expect to launch by the end of 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Key Factors Affecting Our Results</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe the key factors affecting our financial condition and results of operations include the followings:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Our
                                            Relationship with Customers.</i> We rely heavily on customers&#8217; demand to sell our products.
                                            Our four largest customers accounted for 88.2% and 85.7% for the years ended December 31,
                                            2023 and 2022, respectively. In addition, our five largest customers in aggregate accounted
                                            for approximately 92% and 91% for the years ended December 31, 2023 and 2022, respectively.
                                            Our strategy is to attempt to strengthen our direct relationships with these customers to
                                            secure and expand the sales orders from these customers in the future.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Cost
                                            of Goods Sold. </i>Our products are produced in our manufacturing plant Xingfa in Dongguan,
                                            Guangdong Province in the PRC. Cost of raw materials, labor costs and manufacturing overhead
                                            incurred will affect our product cost, and we generally do not have long-term contractual
                                            arrangements with our suppliers. We typically maintain good relationships with our suppliers.
                                            Increases to raw material prices, minimum wage requirements of our staff in the PRC and consumables
                                            could negatively affect our gross profit margins and results of operations to the extent
                                            that we are unable to pass these costs on to our customers. If we experience shortages in
                                            the supply of certain raw materials or if we get inferior quality raw materials, we may not
                                            be able to find or develop alternative supply sources, which could result in delays, reductions
                                            in manufacturing and product shipments and could adversely impact the quality of our products,
                                            all of which could adversely affect our results of operations and financial condition. We
                                            have not experienced significant shortages of raw materials in the past, and we will continue
                                            to monitor the fluctuation of our costs and our relationship with our suppliers.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>More
                                            Stringent Environmental and OSH Protection Requirements in the PRC</i>. Environmental and
                                            OSH protection authorities impose various administrative penalties on persons or enterprises
                                            in violation of the Environmental Protection Law and Occupational Safety and Health Law of
                                            the PRC and Xingfa is subject to such laws and regulations. Such penalties include warnings,
                                            fines, orders to rectify within the prescribed period, orders to cease construction, orders
                                            to restrict or suspend production, orders to make recovery, orders to disclose relevant information
                                            or make an announcement, imposition of administrative action against relevant responsible
                                            persons, and orders to shut down facility. Any person or entity that pollutes the environment
                                            resulting in damage could also be held liable under the Tort Law of the PRC. In addition,
                                            environmental organizations may also bring lawsuits against any entity that discharges pollutants
                                            detrimental to the public welfare. We engaged an independent laboratory to conduct review
                                            of the compliance with environmental laws and regulations by Xingfa. We believe Xingfa has
                                            established sufficient measures and systems to implement and comply with the requirements
                                            of such laws and regulations. We and Xingfa may incur additional costs to ensure compliance
                                            with environmental and worker safety and health protection requirements in the PRC. To cope
                                            with the green requirements as well as our mission of ESQ achievement, we decided to enhance
                                            our production line.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in">&#9679;<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Relations
                                            Between the US and China</i>. At various times during recent years, the US and China have
                                            had significant disagreements over political and economic issues. Controversies may arise
                                            in the future between these two countries. These controversies also could make it more difficult
                                            for us to provide our products to our customers in the US. The international trade policies
                                            of China and the US could adversely affect our business, and the imposition of trade sanctions
                                            and tariffs relating to imports, taxes, import duties and other charges on imports from China,
                                            including those applied specifically to our products, or the imposition of taxes, import
                                            duties or other charges on exports to the U.S. could increase our costs and affect our operating
                                            results negatively. The U.S. government currently has suspended the increases of tariffs
                                            from 7.5% to 25%, pending the results of US and China trade negotiations. Although the U.S.
                                            has started to review and remove the increased tariff previously imposed on certain items
                                            importing from China, which is not related to our products sold to the U.S. Starting in January
                                            2021, we stopped absorbing tariffs cost for our U.S. customers and U.S. might further increase the tariffs that will affecting our products.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Competition:
                                            </i>In order to continue to compete effectively, we must maintain our reputation for innovation
                                            and high-quality products and be flexible and innovative in responding to rapidly changing
                                            market demands. The number of our direct competitors and the intensity of competition may
                                            increase as we expand into other product lines such as smart locksets. Our competitors may
                                            enter into business combinations or alliances that strengthen their competitive positions
                                            or prevent us from taking advantage of such combinations or alliances. Our competitors also
                                            may be able to respond more quickly and effectively than we can to new or changing opportunities,
                                            standards or consumer preferences. Our results of operations and market position may be adversely
                                            impacted by our competitors and the competitive pressures in the lockset industries.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Key Operating Metrics</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
management regularly reviews a number of metrics to evaluate our business, measure our performance, identify trends, formulate financial
projections and make strategic decisions. The main metrics we consider are the results for the years ended December 31, 2023, 2022 and
2021, as set forth in the table below.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the years ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 46%">Revenues</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">6,443,357</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">12,158,102</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">12,543,556</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Gross margin</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9.8</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">18.1</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10.5</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Net loss</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(3,501,518</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(1,655,903</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(1,386,515</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Inventory turnover (in days)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">294</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">174</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">153</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accounts receivable turnover (in days)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">58</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">41</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">27</td><td style="text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
project our revenue based on purchase orders from our customers, the current principal driver of our business. Then, we will
estimate the expected gross profit based on our in-house standard material and cost table in order to determine what our gross
profit percentage should be. If there will be a downtrend trend of revenue, we will try to lower our costs such as raw materials and
direct labor. Normally, when there is no disruption on logistics such as the ones caused by COVID-19. Raw materials and packaging
consumables will be kept at a safe level that may sustain potential production needs for about two months. Potential production
needs include quantities from purchase orders received and projected sales. Taking into account production time, inventory turnover
and accounts receivable turnover and our cash position, we then project our working capital needs and also identify potential sales
sources.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
we see declining trends from purchase orders received, we will start reviewing our material costs and expenses in order to mitigate
the impact to our gross margin. Starting in 2018, we saw the number of purchase orders from customers declined because of the
US-China tariff war. Before getting the final determination of the tariffs, we suffered a decrease of gross profit margin to 6.8% in
2018. In order to maintain product quality, we do not pay our labor based on production quantity. As a socially responsible
organization, we did not lay off employees before the expiration of their employment contacts, but we reduced recruiting of
unskilled labor since the beginning of 2019. Also, we reviewed the production processes of Xingfa and were able to decrease our raw
material costs and waste to the extent that product quality could be maintained. In 2021, outbreaks of various variants of COVID-19
further created negative impacts on global logistics. The number of purchase orders from our customers for 2023 were lower than
those in fiscal year 2022 because of interest rate increase in the US. Units of product shipped during 2023 were
approximately 1.3 million units (including approximately 0.1 million units of spare parts) comparing to approximately 2.4 million
units (including approximately 0.2 million units of spare parts) in 2022 and approximately 2.8 million units (including
approximately 0.2 million units of spare parts) in 2021. Because of product mix shifted and change of combination of metal raw
materials, our gross margin was down to 9.8% (if the idle capacity impact was removed, our profit margin decreased to 15.2%) in 2023
from 18.1% in 2022 (10.5% in 2021). In order to enhance gross margin, the management raised product unit sales price and replace
brass with stainless steel. In addition, we have not absorbed certain increased tariff cost for our customers since January
2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
inventory turnover days increased to approximately 294 days for year ended December 31, 2023, from 174 days for the year ended
December 31, 2022. This was caused mainly by impact fewer purchase orders from our customers due to increase of interest rate
and slower than expected recovery from COVID-19. Because our spare parts are universally applicable for all models of our product
and, in order to ensure utilization of our labor, we have stocked up and meet some short notice purchase orders from potential new
customers.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Starting
in 2020, we are studying and hope to improve our sales mix, namely more ODM and more self-branded products, geographic market mix,
namely the US, South-east Asia and China, cost structure and procurement options in order to further optimize our profit
performance. However, as the combined effect of slow recovery post COVID-19 and the amortization of our electroplating production
line, we have incurred a lower gross margin during the fiscal year 2023. We continue to promote higher value products to our
customers in 2023 and developing smart lock product series. Despite our efforts to optimize our product mix and cost
structure, purchase orders from our customers were slowed
down as the reasons discussed above. As we have to keep our factory operating and utilization of labor, we have stocked up to achieve the expected short delivery
time to meet potential new customers demand, therefore, our inventory turnover in days was negatively affected. We believe that we can
further reduce our cost of raw materials with new processing techniques, to maintain volume rebates of raw materials and enhance our
gross margin as we optimize our product-mix to focus our marketing efforts on higher margin products and new products. To better
manage our gross margin in light of rising cost of raw materials, we leverage extensive product quality testing to identify
alternative raw materials mix that is designed to lower our production costs. Since the second half of 2021, we have been using
stainless steel to substitute brass.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Results of Operations</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table summarizes our consolidated statements of operations for the periods indicated. This information should be read together
with our consolidated financial statements and related notes included elsewhere in this report. The operating results in any period are
not necessarily of the results that may be expected for any future period.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b><i>For the years ended December 31, 2023
and 2022</i></b></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Revenues</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
revenues from sales of door locksets decreased by $5,714,745, or 47.0% for the year ended December 31, 2023 to $6,443,357 from $12,158,102
for the year ended December 31, 2022. The decrease was mainly due to decrease in units sold in 2023. Our total number of products sold
was approximately 1.3 million units (including approximately 0.1 million units of spare parts) for the year ended December 31, 2023 comparing
to 2.4 million units (including approximately 0.2 million units of spare parts) for the year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Cost of Goods Sold</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of goods sold was $5,464,591 for the year ended December 31, 2023 as compared to $9,961,988 for the same period of 2022. Cost of goods
sold was 84.8% and 81.9% of revenues for the year ended December 31, 2023 and 2022, respectively. The increase in cost of goods sold
as a percentage of revenue was mainly caused by the addition of new machinery along with revamped production procedures, increase of
labor and decrease of sales due to weak demand in our major market.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of goods sold includes the cost of raw materials (mainly copper, stainless steel, iron and zinc alloy), direct labor (including wages
and social security contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and taxes.
As a small business with limited resources, we currently lack the ability to hedge our raw materials position and we monitor raw material
price trends closely to manage our production needs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Cost of goods sold &#8211; idle capacity</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Idle
capacity consists of direct production costs in excess of charges allocated to the Company&#8217;s finished goods in production. Such
costs relate primarily to depreciation expense related to the Company&#8217;s electroplating equipment that cannot be directly attributable
to the production process. Idle capacity expenses amounted to $345,424 and nil for the years ended December 31, 2023 and 2022, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Gross
Profit</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gross
profit was $633,342 for the year ended December 31, 2023, a decrease of $1,562,772, or 71.2% from $2,196,114 for the same period of 2022.
Gross margin was 9.8% for the year ended December 31, 2023, decrease from 18.1% for the same period of 2022 as a result of depreciation expense of
new machinery, increase in direct labor cost and weak demand of our major market in the US, during the year ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><br/></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that we can enhance our gross margin as we are researching new processing procedures to use durable but lower cost materials.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Selling and marketing expenses</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Major
components of selling and marketing expenses are transportation, custom declarations, sales commissions. Selling and marketing expenses
decreased by $45,632, or 43.3% to $59,841 for the year ended December 31, 2023 from $105,473 for the year ended December 31, 2022. The
decrease was due mainly to reduction in freight and transportation fees.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>General and Administrative Expenses</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives
as well as legal and professional fees, depreciation and amortization of non-production property and equipment. General and administrative
expenses increased by $232,117, or 5.5%, to $4,440,314 for the year ended December 31, 2023 from $4,208,197 for the year ended December
31, 2022. This increase was due mainly to additional amortization on leasehold improvement and stock options granted to officers and employees
of the company under the Company&#8217;s 2022 Omnibus Equity Plan (the &#8220;Equity Plan&#8221;).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Finance Costs</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Finance
costs decreased by $120,653, or 81.7%, to $26,935 for the year ended December 31, 2023 from $147,588 for the year ended December 31,
2022. The decrease was mainly due to reduce in interest payment for a short-term loan to a third party during the year ended
December 31, 2023. During the years ended December 31, 2023 and 2022, interest expense related to bank borrowings was $18,859 and
$26,836, respectively. </span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Provision for Income Taxes</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provision
for income tax was $56,237 in the fiscal year of 2023, an increase of $56,237 from $nil for fiscal year of 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
PRC entity in 2023 and 2022 was subject to the statutory PRC enterprise income tax rate of 25.0%. Our subsidiaries in Hong Kong are
subject to Hong Kong taxation on income derived from their activities conducted in Hong Kong at a rate of 16.5%.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Net loss and Loss per Share</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
loss increased $1,845,615 to $3,501,518 for the year ended December 31, 2023 from $1,655,903 for the year ended December 31, 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>For
the years ended December 31, 2022 and 2021</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(467,481</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(269,388</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(0.11</td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(0.11</td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Revenues</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
revenues from sales of door locksets slightly decreased by $385,454, or 3.1% for the year ended December 31, 2022 to $12,158,102 from
$12,543,556 for the year ended December 31, 2021. The decrease was mainly due to decrease in units sold in 2022 as we raise the prices
for our products. Our total number of products sold was approximately 2.4 million units (including approximately 0.2 million units of
spare parts) for the year ended December 31, 2022 comparing to 2.8 million units (including approximately 0.2 million units of spare
parts) for the year ended December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Cost of Goods Sold and Gross Profit</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cost of goods sold includes cost of raw materials (such as copper, iron and zinc alloy), direct labor (including wages and social security
contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and other taxes. As a small business
with limited resources, we currently don&#8217;t have the ability to hedge our raw materials position, and we must monitor raw material
price trends closely to manage our production needs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of goods sold was 81.9% and 89.5% of revenues for the years ended December 31, 2022 and 2021 respectively. The 11.3% decrease was mainly
caused by new combination of meatal raw materials since the 2nd half of 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result for the reasons discussed above, our gross margin increased to 18.1% in 2022 from 10.5% in 2021. The management&#8217;s actions
taken to further lower our cost of goods sold even to offset external factors that caused increase of costs mainly due to COVID-19.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
gross margin has been significantly impacted by the trade war that started in 2018. We believe that we can further reduce our cost of
raw materials as we negotiate for volume rebates and enhance our gross margin as we optimize our product-mix to focus our marketing efforts
on higher margin products and COVID-19 is gradually under control in the U.S. and globally. In order to enhance gross margin level, the
management raised product unit sales price since second half of 2021. In addition, we have decided that we would not absorb certain increased
tariff cost for our customers starting in January 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Selling and marketing expenses</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Major
components of selling and marketing expenses are transportation, custom declarations, sales commissions. Selling and marketing expenses
decreased by $44,679, or 29.8% to $105,473 for the year ended December 31, 2022 from $150,152 for the year ended December 31, 2021. The
decrease was due mainly to reduction in business travelling and sales commissions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>General and Administrative Expenses</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives
as well as legal and professional fees, depreciation and amortization of non-production property and equipment. General and administrative
expenses increased by $1,306,157, or 45.0%, to $4,208,197 for the year ended December 31, 2022 from $2,902,040 for the year ended December
31, 2021. This increase was due mainly to additional professional fees and depreciation and amortization of equipment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Finance Costs</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Finance
costs increased $89,814, or 155.5%, to $147,588 for the year ended December 31, 2022 from $57,774 for the year ended December 31, 2021.
The increase was mainly due to interest from short-term loan of $112,142 in year 2022. Also, the increased cost was partially offset
by decrease in borrowing interests. During the years ended December 31, 2022 and 2021, interest expense related to bank borrowings was
$26,836 and $48,910, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Loss before Provision for Income Taxes
and Loss per Share</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Loss
before provision for income taxes increased $269,388 to $1,655,903 for the year ended December 31, 2022 from $1,386,515 for the years
ended December 31, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>5B. Liquidity and Capital Resources</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Liquidity and Capital Resources</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a holding company incorporated in the Cayman Islands. We conduct our operations primarily through our subsidiaries in Hong Kong and
China. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our subsidiaries incur debt on their
behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, Xingfa is
permitted to pay dividends in accordance with PRC accounting standards and regulations. Under PRC law, Xingfa is required to set aside
at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of
its registered capital. Additionally, Xingfa may allocate a portion of its after-tax profits based on PRC accounting standards to its
enterprise expansion fund and staff bonus and welfare funds, at its discretion. Xingfa may also allocate a portion of its after-tax profits
based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary
funds are not distributable as cash dividends. Under existing PRC foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies
without prior SAFE approval as long as certain routine procedural requirements are fulfilled. However, capital account transactions,
which include foreign direct investment and loans, must be approved by and/or registered with SAFE and its local branches.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cost structure is relatively fixed and our working capital requirements are generally influenced by our order backlog. We need substantial
operating funds to pay for raw materials; maintain an appropriate level of work-in-process inventory; and keep the production facility
open. To support our working capital needs, we maintain a credit facility with the Bank of China (Hong Kong) Limited for approximately
$897,000 since 2021 compared to approximately $769,000 in 2020, which is guaranteed by our directors and their personal properties. In 2021,
a shareholder and director forgave an advance of $717,948 ($153,846 in 2020) to the Company and treated as a shareholder contribution.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
working capital was $10,711,197, $14,201,841 and $2,213,523 as of December 31, 2023, 2022 and 2021. Our cash and cash equivalents were
$4,483,730, $9,165,651 and $131,129 as of December 31, 2023, 2022 and 2021, respectively. While our business has been negatively impacted
by the tariffs, COVID-19 and high interest rate in all 2023, 2022 and 2021, we believe we are able to obtain sufficient operating funds from our
existing shareholders, potential investors or extend Hong Kong government guaranteed low interest bank borrowing to operate our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 15, 2022, we closed our initial public offering, raising net proceeds of approximately $16.86 million after deducting underwriting
commission and offering expenses. We believe that our current working capital is sufficient to support our operations for the next twelve
months. We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments,
or if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that
our cash requirements exceed the amount of cash, cash equivalents and restricted cash we have on hand at the time, we may seek to issue
equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to
our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants
that would restrict our operations. Our obligation to bear credit risk for certain financing transactions we facilitate may also strain
our operating cash flow. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Cash
Flows</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
summary of the sources and uses of cash and cash equivalents is as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center">USD</td><td style="font-weight: bold">&#160;</td></tr>
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    <td style="font-weight: bold">Selected Consolidated Statements of Cash Flows Data:</td><td>&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Cash and cash equivalents at end of year</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">4,483,730</td><td style="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 2.5pt">&#160;</td>
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  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>Operating Activities</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><i>&#160;</i></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in operating activities was $3,163,187 for the year ended December 31, 2023 and was primarily attributable to (i) the net
loss of $3,501,518; (ii) an increase in inventory of $586,551; (iii) an increase in deposits of $ 71,188; (iv) an decrease in
accounts payable of $67,945; (v) a increase in prepayment of $ 1,412,318; (vi) a decrease in other payables and accruals of $
50,253; (vii) a decrease in advance from customers of $6,364; and being offset by (i) a decrease in account receivables of
$1,119,804; (ii) non-cash item of $693,531 of depreciation and amortization and $667,016 of options issued for equity compensation
plan; (iii) increase in taxes payable of $31,972; (iv) an increase in cash flow by other elements of $20,627.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in operating activities was $4,170,876 for the year ended December 31, 2022 and was primarily attributable to (i) the net loss
of $1,655,903; (ii) a decrease in accounts payable of $1,631,595; (iii) an increase in accounts receivable of $697,873; (iv) a decrease
of the advance from customers of $216,269; (v) an increase in prepayment of $180,974; (vi) a decrease in other payables and accruals
of $960,292; (vii) a decrease in cash flow by other elements of $42,771; and being offset by (i) a decrease in other receivables of $268,621;
(ii) non-cash item of $408,473 including $303,269 of depreciation and amortization, $105,204 of bad-debt being offset; (iii) decrease
in inventory of $535,182; (iv) an increase in cash flow by other elements of $2,525.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in operating activities was $1,038,967 for the year ended December 31, 2021 and was primarily attributable to (i) the net loss
of $1,386,515; (ii) non-cash item of $259,122 of depreciation and amortization; (iii) an increase in accounts receivable of $199,392;
(iv) an increase in inventory of $712,854; (v) an increase in prepayment of $140,151; (vi) an increase in other receivables of $134,161;
(vii) an increase in accounts payable of $530,221; (viii) an increase in other payables and accruals of $545,903; (ix) an increase of
the advance from customers of $222,633, and (x) a decrease in cash flow by other elements of $23,773.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Investing
Activities</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in investing activities was $1,360,274 for the year ended December 31, 2023 was primarily attributable to leasehold
improvement and purchase of property and equipment for electroplating production.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in investing activities was $4,181,724 for the year ended December 31, 2022 was primarily attributable to purchase of property
and equipment for electroplating production.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in investing activities was $9,758 for the year ended December 31, 2021 was primarily attributable to purchase of property
and equipment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Financing
Activities</i></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>&#160;</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash used in financing activities was $154,976 for the year ended December 31, 2023 and was primarily attributable to repayments of bank
borrowings.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash provided by financing activities was $17,397,802 for the year ended December 31, 2022 and was primarily attributable to proceeds
from public offering of $18,048,369; offset by (i) payments of finance lease liability of $8,391, and (ii) repayment of bank borrowings
of $642,176.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
cash provided by financing activities was $876,334 for the year ended December 31, 2021 and was primarily attributable to (i) payments
of finance lease liability of $32,954, offset by an increase of bank borrowings of $191,339 and (ii) cash proceeds from shareholder capital
contribution of $717,949.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Capital Expenditures</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
had capital expenditures of $1,360,274 and $4,181,724 for the years ended December 31, 2023 and 2022, respectively. Our capital expenditures
were mainly used for purchases of production equipment and office equipment. We intend to fund our future capital expenditures with lease
financing, if available, proceeds from our offering and other financing alternatives. We will continue to make capital expenditures to
support the growth of our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Bank Facility</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 3, 2017, Kambo Locksets Limited obtained banking facilities from the Bank of China (Hong Kong) Limited pursuant to which it
may borrow up to HK$ 6.0 million (approximately $0.8 million) for working capital purposes. On June 24, 2021, this banking facilities
was increased to HK$ 7.0 million (approximately $0.9 million). The credit facility bears interest at 5.5% and it is personally guaranteed
by Mr. Wynn Hui and Mr. Bong Lau (both major shareholders and directors of the Company). The credit facility does not have an expiration
date and is collateralized by a property owned by Kambo Security Products Limited, a related party.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>Off-Balance Sheet Arrangements</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have
not entered into any derivative contracts that are indexed to our shares and classified as shareholders&#8217; equity or that are not
reflected in our consolidated financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>5C. Research and Development, Patents
and Licenses, etc.</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;Item 4. Information on the Company&#8212;B. Business Overview &#8212;&#8221;Intellectual Property.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>D.
Trend Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 to December 31, 2023 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.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>E.
Critical Accounting Estimates</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
accounting estimate is considered critical if it requires assumptions to be made based on assumptions about matters that are highly uncertain
at the time such estimate is made and if different accounting estimates that reasonably could have been used, or changes in the accounting
estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following
accounting estimates involve a higher degree of judgment and complexity in their application of assumptions.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions.
We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences
and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component
of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Revenue
recognition</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows FASB ASC 606, Revenue from Contracts with Customers in accounting for its revenues. The core principle of the revenue
standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps
are applied to achieve that core principle:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
1: Identify the contract with the customer</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
2: Identify the performance obligations in the contract</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
3: Determine the transaction price</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
4: Allocate the transaction price to the performance obligations in the contract</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
5: Recognize the allocated revenue when the company satisfies a performance obligation</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company derives substantially all of its revenue from product sales, specifically sale of door locksets, locksets and related hardware
to customers. Revenue from product sales is recognized when control passes to the customer, which generally occurs at a point in time
when products are delivered FOB (freight on board). Revenue is recorded net of tariffs, VAT and discounts.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Leases</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows FASB ASU 2016-02, &#8220;Leases&#8221; (Topic 842) and measures the lease liability based on the present value of the
lease payments discounted by the relevant borrowing rate and reduces the carrying value of the lease liability for lease payments made.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company accounts for all significant leases as either operating or finance leases. At lease inception, if the lease meets any of the
following five criteria, the Company will classify it as a finance lease: (i) the lease transfers ownership of the underlying asset to
the Company by the end of the lease term, (ii) the lease grants the Company an option to purchase the underlying asset that the lessee
is reasonably certain to exercise, (iii) the lease term is for the major part of the remaining economic life of the underlying asset,
(iv) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected
in the lease payments equals or exceeds substantially all (90% or more) of the fair value of the underlying asset, or (v) 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. Otherwise,
the lease will be treated as an operating lease.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
leases with a term of 12 months or less, the Company is permitted to and did make an accounting policy election by class of underlying
assets not to recognize lease assets and lease liabilities. During the years ended December 31, 2023 and 2022, the Company recognized
lease expense for such leases on a straight-line basis over the lease term.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Income
taxes</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company accounts for income taxes in accordance with FASB ASC Section 740. The Company is subject to the tax laws of the PRC and Hong
Kong (a special administrative region of PRC). The charge for taxation is based on actual results for the year as adjusted for items
that are non-assessable or disallowed; and it is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date. The Company is not currently subject to tax in the Cayman Islands or the British Virgin Islands.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred
taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the Company&#8217;s consolidated financial statements and the corresponding tax basis used
in the computation of assessable tax profit of loss. 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 future taxable income can be utilized with deferred
tax liabilities and/or net operating loss carry forwards. 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 statement of operations, except
when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Net
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 net deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the
relevant taxing authorities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
uncertain tax position is recognized as a benefit only if it is &#8220;more likely than not&#8221; that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that
has a greater than 50% likelihood of being realized on examination. For tax positions not meeting the &#8220;more likely than not&#8221;
test, no tax benefit is recorded. Penalties and interest incurred related to uncertain tax positions are classified in income tax expense
in the period incurred. Tax returns filed for the years ended December 31, 2020 to 2023 in the PRC and Hong Kong are subject to examination
by the applicable tax authorities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" border="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt">
<tr style="vertical-align: top">
  <td style="width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 6.</b></span></td>
  <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_035"></span>DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</b></span></td></tr>
</table>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>6.A. Directors and Executive Officers</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth information regarding our executive officers and directors as of the date of this report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 43%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Directors
    and Executive Officers</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; text-align: center; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Age</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; white-space: nowrap; text-align: center; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center; width: 41%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Position/Title</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bong Lau (Yu Bong Lau)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">46</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Executive Officer,
    Chairman of the Board and Director</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Frederick Wong (Ching Wan Wong)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">56</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Financial Officer</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bun Lau (Yu Bun Lau)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">44</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Operations Officer
    and Director</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Wynn Hui (Po Wang Hui)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">73</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Technical Officer
    and Director</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Errol Hui (Shun Hong Hui)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">35</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice President of Engineering</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tony Zhong (Wei Zhong)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">41</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vice President of Finance</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Monique Ho(1)(2)(3) (Ting Mei Ho)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">49</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chun Fai (Kenneth) Liu (1)(2)(3)(4)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">35</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Carina Chui(1)(2)(3) (Wan Yee Carina Chui)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">45</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Henry Yeung (Wing Hang Yeung)(5)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">40</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  </table>













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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)
Member of audit committee.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)
Member of compensation committee.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)
Member of nominating and corporate governance committee.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)
Mr. Kenneth Liu was appointed as a director on July 4<sup></sup><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">,</span>
2023 to fill the vacancy created by the resignation of Mr. Jochen Koehler.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5).
Mr. Yeung was appointed on January 15, 2024.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Bong
Lau, </b>Chief Executive Office and Chairman of the Board of the Directors of the Company (the &#8220;Board&#8221;)</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Bong Lau was appointed as a director of the Board on July 17, 2019 and Chairman of the Board on June 1, 2020. Mr. Lau joined the Company
in 1999 and has over 20 years of extensive experience in managing door security hardware businesses. Mr. Lau also works well together
with our large and small partners geographically to build solid distribution networks, implements marketing and business expansion strategies.
He is primarily responsible for the overall sales strategy, distribution management and corporate strategies of the Company. In 1996,
Mr. Lau studied in Civil Engineering at the University of Alberta for 2 years.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Frederick
Wong, </b>Chief Financial Officer</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Wong was appointed as our Chief Financial Officer on June 1, 2020. He has almost 30 years of experience in accounting, internal control,
financial control and capital markets. Mr. Wong has served as an independent director of Network CN Inc. (OTC PINK: NWCN) since January
1, 2022. He has served as compliance offer for China Finance Investment Holdings Limited (Stock Code: 0875.HK) from November 1, 2018
to May 31, 2020. Mr. Wong has also served as a member of the board of directors for On Real International Holdings Limited (Stock Code:
8245.HK) from March 31, 2016 to April 22, 2022, Top Standard Corp. (Stock Code: 8510.HK) since January 24, 2020, and Prime Intelligence
Solutions Group Limited (Stock Code: 8379.HK) since June 17, 2022. From September 2017 to August 2018, Mr. Wong was the chief financial
officer of O Media Limited, a Macau media company in gaming. He was a director of Network CN, Inc. (stock code: NWCN) in U.S.A. between
September 2015 and July 2017, and the authorized representative and company secretary of China Oil Gangran Energy Group Holdings Limited
(Stock Code: 8132.HK) from December 2015 to November 2016 and continued acting as the authorized representative until January 2017. Mr.
Wong is a CPA of Hong Kong, CPA of Canada, CPA of Australia and fellow member of Hong Kong Institute of Taxation. Mr. Wong received a
Bachelor of Business Administration from the Chinese University of Hong Kong in 1989, a Bachelor or Business from the University of Southern
Queensland, Australia, in 1992 and studied EMBA courses offered by the Troy University (formerly known as Troy State University), Alabama,
U.S. from 1999 to 2000.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Bun
Lau, </b>Chief Operating Officer and Director</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Bun Lau was appointed as the Chief Operating Officer of the Company on June 1, 2020. Mr. Bun Lau was a director of the Board from July
17, 2019 to May 24, 2022, and he was appointed as a director of the Board on January 15, 2024. Mr. Lau joined the Company in 2005 and
has over 15 years of working experience in the door security hardware industry. Mr. Bun Lau is the brother of Mr. Bong Lau. Mr. Lau is
primarily responsible for the business development and product sales strategy. He is also responsible for the corporate strategies of
the Company and the overall administrative management process. Prior to joining the Company, he worked at Citic Ka Wah Bank and was responsible
for reviewing credit limits, acceptable levels of risk, terms of payment and enforcement actions with customers from 2003 to 2004. Mr.
Lau graduated from The University of Alberta in Canada majoring in Decision Information System and Management in 2003.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Wynn
Hui,</b> Chief Technology Officer and Director</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Hui is one of the founders of the Company and he has been with the Company since 2009. He is also the Managing Director of Xingfa, our
manufacturing factory in China. Wynn has over 50 years&#8217; experience in factory production specialized in manufacturing plastic,
metal and electronic products in the security hardware industry.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Errol
Hui,</b> Vice President of Engineering</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Hui joined the Company in 2013. Mr. Hui is primarily responsible for the product development, product management and continuous enhancement
of production management. He is also responsible for the corporate strategies of the Company. Mr. Hui graduated from The University of
Manchester in U.K. majoring in Actuarial Science in 2011.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Tony
Zhong,</b> Vice President of Finance</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Zhong joined the Company on February 1, 2020. Mr. Zhong has over 10 years of experience in accounting, internal control, financial control,
SEC reporting and capital markets. Since 2011, Mr. Zhong has been the Vice President of Finance of Troops, Inc. (formerly known as SGOCO
Group, Ltd. And NASDAQ: TROO). He was a Financial Manager of China Hydroelectric Corporation, from 2007 to 2011. Mr. Zhong started his
career with KPMG in Beijing from 2005 to 2006. He received a Bachelor of Arts in Finance, Accounting and Management from Nottingham University,
UK in 2005, and a Bachelor of Science in Applied Accounting from Oxford Brooks University, UK in 2015. Mr. Zhong is a Chartered Global
Management Accountant, and was also admitted as a Fellow of the chartered institute of Management Accountants on December 21, 2018. Mr.
Zhong was also admitted as a Fellow of the institute Public Accountant (Australia) and a Fellow of the Institute of Financial Accountants
(UK) on October 22, 2020.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Monique
Ho, </b>Independent Director</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ms.
Ho was appointed as a director of the Company on June 1, 2020. Ms. Ho is a marketing savvy director who has over 20 years of experience
in media. She is the founder and Chief Executive Officer of Toppa Media Savvy Limited (TMS) that is listed on the Stock Exchange of Hong
Kong under OOH Holdings Limited (Stock Code: 8091.HK) since 2018. Ms. Ho is also the co-founder of an online fashion media ztylez.com,
established in 2017. In her early years after graduating with a Bachelor of Science Degree from California State University, Los Angeles
in 1997, Ms. Ho was a junior Marketing Officer at Cable News Network (CNN) in CNN Asia Pacific Headquarter in Hong Kong from 1999 to
2000.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Carina
Chui, </b>Independent Director</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ms.
Chui was appointed as a director of the Company on June 1, 2020. Ms. Chui has over 16 years of finance and accounting experience from
accounting, auditing and corporate financial management. She has served as the chief financial officer of Numiracle Group Limited since
January 1, 2014. She is a fellow member of the Hong Kong Institute of Certified Public Accountants (HKICPA) since 2013 and The American
Institute of Certified Public Accountants (AICPA) since 2011. She received a Bachelor degree in Economics from University of California,
Los Angeles in 2001 and an MBA from Hong Kong University of Science and Technology in 2014.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Kenneth
Liu, </b>Independent Director</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Liu Chun Fai (&#8220;Mr. Liu&#8221;), was appointed as a director of the Company on June 30, 2023. Mr. Liu has served as Chairman
and Executive Director of China Eco-Farming Limited (HK Stock Exchange Code: 8166) since February 2022. Mr. Liu was the Executive
Director of Inves Tech Holdings Limited (HK Stock Exchange Code: 1087) from August 2020 to April 2022 and a director of Blue Sky
Solar Energy Management Limited from November 2018 to April 2022. Mr. Liu was the Executive Director of CEFC Hong Kong Financial
Investment Company Limited (HK Stock Exchange Code:1520, formally known as Runway Global Holdings Company Limited) from November
2016 to June 2019 and the Manager of FT Corporate Strategy Limited from October 2013 to June 2016. Mr. Liu
studied&#160;Administrative Studies&#160;at York University, Toronto, Ontario from 2007 to 2011 and he is a member of Chaozhou
Chamber&#160;of&#160;Commerce.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Henry
Yeung, </b>Independent Director</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mr.
Yeung was appointed as a director of the Company on January 15, 2024. Mr. Yeung has more than 19 years of management experience. Mr.
Yeung has served as vice chairman and general manager of Jewellery City Group, a retail company of luxury jewelleries and watches, since
2004. Mr. Yeung has also served as the director of Green World Technology Ltd., a company developing environmental protection technologies,
since 2017.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.B.
Compensation</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the fiscal years ended December 31, 2023 and 2022, we paid an aggregate of approximately $950,000 and $972,000 in cash to our directors
and executive officers, respectively. For share incentive grants to our officers and directors, see &#8220;&#8212;Share Incentive Plans.&#8221; We
have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and
directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
PRC subsidiary is required by law to make contributions equal to certain percentages of each employee&#8217;s salary for his or her pension
insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Employment
Agreements, Director Agreements and Indemnification Agreements</i></b></span></p>



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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have entered into employment agreements with each of our executive officers. Pursuant to these agreements, each of our executive officers
is employed for an initial term of one year, renewable upon mutual agreement of the Company and the executive officer.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
executive officers are entitled to a fixed salary and to participate in our equity incentive plans, if any and other company benefits,
each as determined by the Board or a committee designated by the Board from time to time.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may terminate the executive officer&#8217;s employment for cause, at any time, without notice or remuneration, for certain acts, such
as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or material breach of any term of
any employment or other services, confidentiality, intellectual property or non-competition agreements with the Company. In such case,
the executive officer will solely be entitled to accrued and unpaid salary through the effective date of such termination, and his/her
right to all other benefits will terminate, except as required by any applicable law. The executive officer is not entitled to severance
payments upon any termination.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
executive officer may voluntarily terminate his/her employment for any reason and such termination shall take effect 30 days after the
receipt by Company of the notice of termination. Upon the effective date of such termination, the executive officer shall be entitled
to (a) accrued and unpaid salary and vacation through such termination date; and (b) all other compensation and benefits that were vested
through such termination date. In the event the executive officer is terminated without notice, it shall be deemed a termination by the
Company for cause.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
of our executive officers has agreed not to use for his/her personal purposes nor divulge, furnish, or make accessible to anyone or use
in any way (other than in the ordinary course of the business of the Company) any confidential or secret information or knowledge of
the Company, whether developed by him/herself or by others.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, each executive officer has agreed to be bound by non-competition restrictions during the term of his or her employment and
for six months following the last date of employment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
executive officer also has agreed not to (i) solicit or induce, on his/her own behalf or on behalf of any other person or entity, any
employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates; or (ii) solicit or induce,
on his/her own behalf or on behalf of any other person or entity, any customer or prospective customer of the Company or any of their
respective affiliates to reduce its business with the Company or any of its affiliates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have entered into director agreements with each of our independent directors which agreements set forth the terms and provisions of their
engagement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, we have entered into indemnification agreements with each of our directors and executive officers that provide such persons
with additional indemnification beyond that provided in our current memorandum and articles of association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Share
Incentive Plans</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the &#8220;Equity
Plan&#8221;) on October 20, 2022, which was approved at the stockholders&#8217; meeting on December 16, 2022. The total aggregate ordinary
shares of the Company authorized for issuance during the term of the Equity Plan is limited to 2,500,000 shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of April 29, 2024, stock options to purchase 820,000 ordinary shares have been granted and outstanding under the Equity Plan. The following
paragraphs summarize the terms of the Equity Plan:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Administration</i></b>.
The Equity Plan requires that a committee of non-employee directors to administer the Equity Plan. Currently, our Compensation Committee,
which we refer here as the Committee, administers the Equity Plan. Among other powers and duties, the Committee determines the employees
who will be eligible to receive awards and establishes the terms and conditions of all awards. Unless prohibited by applicable law or
the applicable rules of a stock exchange, the Committee may delegate its authority and administrative duties under the Equity Plan.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Shares
Subject to the Equity Plan</i></b>. The shares issuable under the Equity Plan are our ordinary shares that are authorized but unissued
or reacquired ordinary shares, including shares repurchased by the Company as treasury shares. The total aggregate ordinary shares of
the Company authorized for issuance during the term of the Equity Plan is limited to 2,500,000 shares. The Committee must equitably adjust
awards and the number of shares available under the Equity Plan in the event of a recapitalization, stock split, stock dividend, extraordinary
cash dividend, split-up, spin-off, reclassification, combination or other exchange of shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Types
of Awards and Eligibility</i></b>. The Equity Plan provides for five types of awards and they are: Stock Options, Stock Appreciation
Rights (&#8220;SAR&#8221;), Unrestricted Stock, Restricted Stock and Restricted Stock Units (&#8220;RSU&#8221;). The Eligible Persons
under the Equity Plan include Employees, Outside Directors, Consultants and New Hires of the Company or its subsidiaries, as selected
by our Board or the designated committee thereof.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Vesting
and Forfeiture</i></b><i>.</i> The Committee determines the time and conditions under which the award will vest or the period of time
after which the restriction shall lapse as part of making an award. Vesting or the lapse of the period of restriction may, in the Committee&#8217;s
discretion, be based solely upon continued employment or service for a specified period of time, or may be based upon the achievement
of specific performance goals (individual, corporation or other basis), or both. Vesting means the time at which an option, SAR or RSU
holder may exercise his or her award at the end of the period of restriction that applies to Restricted Stock. Vesting or lapse provisions
need not be uniform among awards granted at the same time or to persons similarly situated. Vesting and lapse requirements will be set
forth in the applicable award agreement. The Committee, in its discretion, may accelerate vesting of any award at any time. Unless otherwise
determined by the Committee and included in the Participant&#8217;s Award Agreement, in the event that a Participant&#8217;s Service
with the Corporation and all Related Corporations is terminated for any reason, all Awards held by the Participant which are unexercised
or have not yet vested as of such date shall expire, terminate, and become unexercisable as of such termination date, provided, however,
that if the Participant&#8217;s Service terminates for reasons other than Cause, all outstanding vested Options and SARs held by the
Participant as of his or her termination date shall continue to be exercisable until the earlier of the expiration of their term or the
date that is three months after such termination date..</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Prohibition
on Repricing</i></b>. Except as required or permitted pursuant to a corporate transaction (including, without limitation, any recapitalization
or reorganization), in no event will an Option or SAR be amended to reduce the exercise or base price or be canceled in exchange for
cash, other awards or Options or SARs with an exercise price or base price less than the exercise price of the original Option or base
price of the original SAR without shareholder approval.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Limits
on Transfers of Awards/Beneficiary Designation</i></b>. All awards are exercisable only by the participant during the participant&#8217;s
lifetime, and are transferable only by will or by the laws of descent and distribution; provided, however, that the Committee may permit
a transfer of an award, other than an Incentive Stock Option, to a family member of an individual, subject to such restrictions as the
Committee may provide. Participants may designate a beneficiary or beneficiaries to receive their benefits under the Equity Plan if they
die before receiving any or all of such benefit.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Amendment
and Termination.</i></b> Our Board of Directors may amend, suspend or terminate the Equity Plan, without consent of stockholders or participants,
provided, however, that amendments must be submitted to the stockholders for approval if shareholder approval is required by applicable
law, and any amendment or termination that may adversely affect the rights of participants with outstanding awards requires the consent
of such participants. The Committee may amend any award agreement, provided the amendment is not to re-price or constructively re-price
any award.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Term.
</i></b>The Equity Plan is effective immediately and will terminate on the earliest to occur of (i) the 10th anniversary of the Equity
Plan&#8217;s effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issued
as fully-vested shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 22, 2023, (the &#8220;Grant Date&#8221;), the Compensation Committee of the Board of Directors (the &#8220;Board&#8221;) of
the Company granted stock options to purchase 820,000 ordinary shares of the Company (the &#8220;Shares&#8221;) at an exercise price
of $1.23 per share, pursuant to the Company&#8217;s 2022 Omnibus Equity Plan, to sixteen officers, directors and employees of the Company
and its subsidiaries (the &#8220;Grantees&#8221;) The Grants vested immediately on the Grant Date and each of the Grantees also entered
into a Stock Option Agreement with the Company on February 22, 2023. The options will expire five (5) years from the Grant Date and may
be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement. As of April 29, 2024, none has
been exercised.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.C.
Board Practices</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Terms
of Directors and Officers</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
officers are elected by and serve at the discretion of the Board and may be removed by the Board. Our directors are not subject to a
set term of office and hold office until the next general meeting called for the election of directors and until their successor is duly
elected or such time as they die, resign or are removed from office by a shareholders&#8217; ordinary resolution or the unanimous written
resolution of all shareholders. A director will be removed from office automatically if, among other things, the director becomes bankrupt
or makes any arrangement or composition with his creditors generally or is found to be or becomes of unsound mind.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors currently consists of 7 directors. We have established an audit committee, a compensation committee and a corporate
governance and nominating committee. Each of the committees of the board of directors has the composition and responsibilities described
below.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Board
Diversity Matrix</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth Board level diversity statistics based on self-identification of members of our Board as of April 29, 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td colspan="17" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Board
    Diversity Matrix (As of April 29, 2024)</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="5" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Country
    of Principal Executive Offices:</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="10" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hong
    Kong, China</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td colspan="5" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
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    <td colspan="10" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yes</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="5" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Disclosure
    Prohibited Under Home Country Law:</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="10" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td colspan="5" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
    Number of Directors</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="10" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Female</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Male</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-Binary</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Did
    Not Disclose Gender</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="17" style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Part
    I: Gender Identity</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Part
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Audit
Committee</i></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ms.
Carina Chui, Ms. Monique Ho and Mr. Kenneth Liu are members of our Audit Committee, where Ms. Carina Chui serves as the chairlady. All
members of our Audit Committee satisfy the independence standards promulgated by the SEC and by Nasdaq as such standards apply specifically
to members of audit committees.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have adopted and approved a charter for the Audit Committee. In accordance with our Audit Committee Charter, our Audit Committee shall
perform several functions, including:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">evaluate
                                            the independence and performance of, and assess the qualifications of, our independent auditor,
                                            and engage such independent auditor;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">approve
                                            the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services,
                                            and approve in advance any non-audit service to be provided by the independent auditor;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">monitor
                                            the independence of the independent auditor and the rotation of partners of the independent
                                            auditor on our engagement team as required by law;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">review
                                            the financial statements to be included in our Annual Report on Form 20-F and Current Reports
                                            on Form 6-K and review with management and the independent auditors the results of the annual
                                            audit and reviews of our quarterly financial statements;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">oversee
                                            all aspects our systems of internal accounting control and corporate governance functions
                                            on behalf of the board;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">review
                                            and approve in advance any proposed related-party transactions and report to the full Board
                                            on any approved transactions; and</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">provide
                                            oversight assistance in connection with legal, ethical and risk management compliance programs
                                            established by management and the Board, including Sarbanes-Oxley Act implementation, and
                                            make recommendations to the Board regarding corporate governance issues and policy decisions.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have determined that Ms. Carina Chui possesses accounting or related financial management experience that qualifies her as an &#8220;audit
committee financial expert&#8221; as defined by the rules and regulations of the SEC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Compensation
Committee</i></span></p>



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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ms.
Monique Ho, Ms. Carina Chui and Mr. Kenneth Liu are members of our Compensation Committee and Ms. Monique Ho is the chairlady. All members
of our Compensation Committee are qualified as independent under the current definition promulgated by Nasdaq. We have adopted and approved
a charter for the Compensation Committee. In accordance with the Compensation Committee&#8217;s Charter, the Compensation Committee is
responsible for overseeing and making recommendations to the Board regarding the salaries and other compensation of our executive officers
and general employees and providing assistance and recommendations with respect to our compensation policies and practices. The Compensation
Committee is responsible for, among other things:</span></p>

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            approve compensation principles that apply generally to Company employees;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            make recommendations to the board of directors with respect to incentive compensation plans
                                            and equity-based plans and to oversee the application of the Company&#8217;s compensation recoupment/clawback policy;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            administer and otherwise exercise the various authorities prescribed for the Compensation
                                            Committee by the Company&#8217;s incentive compensation plans and equity-based plans;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            select a peer group of companies against which to benchmark/compare the Company&#8217;s compensation
                                            systems for principal officers elected by the board of directors;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            annually review the Company&#8217;s compensation policies and practices and assess whether
                                            such policies and practices are reasonably likely to have a material adverse effect on the
                                            Company;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            determine and oversee stock ownership guidelines and stock option holding requirements, including
                                            periodic review of compliance by principal officers and members of the board of directors;</span></td></tr></table>

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<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Nominating
and Corporate Governance Committee</i></span></p>



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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ms.
Carina Chui, Ms. Monique Ho and Mr. Kenneth Liu are members of our Nominating and Corporate Governance Committee and Mr. Kenneth Liu
is the chairman. All members of our Nominating and Corporate Governance Committee are qualified as &#8220;independent&#8221; under the
current definition promulgated by Nasdaq. We have adopted a charter for the Nominating and Corporate Governance Committee. In accordance
with its charter, the Nominating and Corporate Governance Committee is responsible for identifying and proposing new potential director
nominees to the board of directors for consideration and reviewing our corporate governance policies.</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Nominating and Corporate Governance Committee is responsible for, among other things:</span></p>

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identify
                                            and screen individuals qualified to become Board members consistent with the criteria approved
                                            by the board of directors, and recommend to the board of directors nominees for election
                                            at the next annual or special meeting of shareholders at which directors are to be elected
                                            or to fill any vacancies or newly created directorships that may occur between such meetings;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recommend
                                            directors for appointment to Board committees;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Make
                                            recommendations to the board of directors as to determinations of director independence;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Oversee
                                            the evaluation of the board of directors;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Make
                                            recommendations to the board of directors as to compensation for the Company&#8217;s directors;
                                            and</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Review
                                            and recommend to the board of directors the Corporate Governance Guidelines and Code of Business
                                            Conduct and Ethics for the Company.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Director
Independence</i></span></p>



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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Board reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly, and the
Company has determined that Ms. Monique Ho, Ms. Carina Chui, Mr. Kenneth Liu and Mr. Henry Yeung are &#8220;independent
directors&#8221; as defined by NASDAQ.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.D.
Employees</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, we had a total of 255 employees. We had a total of 374 employees as of December 31, 2022. The following table sets
forth the breakdown of our employees as of December 31, 2023 by function:</span></p>

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hong
    Kong</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Department</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Headcount</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Headquarter</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC
    Production</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 46%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Finance
    and accounting</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
    and Marketing</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Purchasing</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Production</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">199</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">199</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Quality
    Control</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Administration</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">15</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Technical</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">255</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">18*</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">237</span></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  </table>






<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*One
vice president of finance based in Beijing.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, 17 employees are based in Hong Kong, where our principal executive offices are located, one vice president of
finance was based in Beijing, and the remaining employees were located in Dongguan, China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
required by PRC regulations, Xingfa participates in various government statutory employee benefit plans, including social insurance funds,
namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and
a maternity insurance plan, and a housing provident fund. Xingfa is required under PRC law to make contributions to employee benefit
plans at specified percentages of the salaries, bonuses and certain allowances of its employees, up to a maximum amount specified by
the local government from time to time. As of the date of this report, we believe Xingfa has made employee benefit payments in material
aspects. However, if Xingfa were found by the relevant authorities that it failed to make adequate payments, it may be required to make
up the contributions for these plans as well as to pay late fees and fines. See &#8220;<i>Risk Factors&#8212;Risks Related to Doing Business
in China&#8212;Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us
to penalties</i>.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
enter into standard labor and confidentiality agreements with our employees. We believe that we maintain a good working relationship
with our employees, and we have not experienced any major labor disputes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
understand that our success depends on our ability to attract, train and retain our employees. Therefore, as part of our human
resources strategy, we offer employees competitive salaries, stock awards, performance-based cash bonuses and promotions, engagement
activities, various welfare as well as other incentives. We design and provide training to our employees regularly in order to
enhance their professional skills and foster their career development. We also recognize the importance of keeping our employees
safe. During the outbreak of COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees
and have followed local government orders to prevent the spread of COVID-19.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.E.
Share Ownership</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth information with respect to the beneficial ownership of our ordinary shares as of April 29, 2024 for:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each
                                            beneficial owner of 5% or more of our issued and outstanding ordinary shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each
                                            of our directors and executive officers; and</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">all
                                            of our directors and executive officers as a group.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beneficial
ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares issuable
upon the exercise of options that are immediately exercisable or exercisable within 60 days of the date hereof.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and
investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information
is not necessarily indicative of beneficial ownership for any other purpose.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
calculations in the table below are based on 18,060,000 ordinary shares issued and outstanding as of the date of April 29, 2024.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as otherwise indicated in the table below, addresses of our directors, executive officers and named beneficial owners are in care of
Intelligent Living Application Group Inc., Unit 2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New
Territories, Hong Kong, Tel: + (852) 2481 7938.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ordinary
    Shares</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beneficially
    Owned</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Number
    of Shares</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Percentage
    of</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(including
    Share Options)</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shares</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Directors
    and Executive Officers:</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 60%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bong
    Lau</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 16%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,540,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 16%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.9</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bun
    Lau</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,480,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.6</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Wynn
    Hui</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,540,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.9</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Frederick
    Wong</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">60,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Errol
    Hui</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,480,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.6</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tony
    Zhong</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">40,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Monique
    Ho</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kenneth
Liu</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">-</p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Carina
    Chui</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Henry Yeung</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">-</p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">-</p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5%
    or Greater Shareholders:</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bong
    Lau</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,340,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.9</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bun
    Lau</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,340,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.6</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Wynn
    Hui</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,340,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.9</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Errol
    Hui</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,340,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.6</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
    directors and executive officers as a group (10 individuals)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10,150,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">56.2</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</span></td></tr>
  </table>




<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)
including 200,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)
including 140,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)
including 200,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)
including 60,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)
including 140,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)
including 40,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)
including 50,000 stock options exercisable since February 22, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*
less than 1%</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
7.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_030"></span>MAJOR
                  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.A.
Major Shareholders</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
Item 6.E., &#8220;Share Ownership&#8221; for a description of our major shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.B.
Related Party Transactions</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Employment
Agreements, Director Agreements and Indemnification Agreements</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;Item 6. Directors, Senior Management and Employees&#8212;B. Compensation of Directors and Executive Officers&#8212;Employment
Agreements, Director Agreements and Indemnification Agreements.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Share
Incentives</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;Item 6. Directors, Senior Management and Employees&#8212;B. Compensation of Directors and Executive Officers &#8212;Share Incentive
Plans.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Other
Transactions with Related Parties</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
relationship and the nature of related party transactions are summarized as follow:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2018, the Company entered into a rental agreement with Kambo Security Products Limited for office space in Hong Kong. The rental
agreement has been renewed annually. Kambo Security Products Limited is owned by Mr. Bong Lau, Mr. Wynn Hui, and Mr. Bun Lau, major
shareholders and directors of the Company. Rent expense for the years ended December 31, 2023, 2022 and 2021 was approximately $74,000,
$54,100 and $54,100, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.C.
Interests of Experts and Counsel</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
8.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_029"></span>FINANCIAL
                  INFORMATION</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Consolidated
Statements and Other Financial Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
financial statements required by this item may be found at the end of this Annual Report on 20-F, beginning on page F-1.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Legal
Proceedings</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are currently not involved in any material legal or administrative proceedings. From time to time, we may be subject to various legal
or administrative claims and proceedings arising in the ordinary course of business. Such legal or administrative claims and proceedings,
even if without merit, could result in the expenditure of financial and management resources and potentially result in civil liability
for damages.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Dividends</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not declared or paid cash dividends since the Company was incorporated in July 2019 in Cayman Island and we have no plan to declare
or pay any dividends in the near future on our ordinary shares. We currently intend to retain most, if not all, of our available funds
and any future earnings to operate and expand our business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our Hong Kong and PRC subsidiary for
our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiary
to pay dividends to us. See &#8220;<i>Item 4.B. Business Overview&#8212;Regulations &#8212;Regulations on Dividend Distribution.</i>&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides
to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. Cash dividends
on our ordinary shares, if any, will be paid in U.S. dollars.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>No
Significant Changes</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as disclosed elsewhere in this annual report, no other significant changes to our financial condition have occurred since the date of
the annual financial statements contained herein.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
9.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_028"></span>THE
                  OFFER AND LISTING</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.A.
Offer and Listing Details</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ordinary shares are listed for trading on the NASDAQ Capital Market under the symbol &#8220;ILAG&#8221; The shares began trading on July
13, 2022 on the NASDAQ Capital Market.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.B.
Plan of Distribution</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.C.
Markets</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ordinary shares have been listed on the Nasdaq Capital Market since July 13, 2022 under the symbol &#8220;ILAG&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.D.
Selling Shareholders</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.E.
Dilution</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.F.
Expenses of the Issuer</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
                                            10.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_027"></span>ADDITIONAL
                                            INFORMATION</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.A.
Share Capital</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.B.
Memorandum and Articles of Association</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a Cayman Islands exempted company limited by shares and our affairs are governed by our current memorandum and articles of association
and the Companies Act (As Revised) of the Cayman Islands, which we refer to as the &#8220;Companies Act&#8221; below, and the common
law of the Cayman Islands.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
authorized share capital is $50,000 divided into 500,000,000 shares, consists of: (i) 450,000,000 Ordinary Shares, par value $0.0001
per share and (ii) 50,000,000 Preferred Shares, par value $0.0001 per share. As of April 29, 2024, 18,060,000 Ordinary Shares are issued
and outstanding and no preferred share is issued or outstanding.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
incorporate by reference into this annual report our amended and restated memorandum and articles of association, which was filed as
Exhibits 3.2 and 3.3 to our registration statement on Form F-1 (File Number 333-248684) initially filed with the Securities and Exchange
Commission on September 9, 2020, as amended and declared effective on July 12, 2022. Our shareholders adopted our amended and restated
memorandum and articles of association by way of a special resolution on July 16, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to clause 3 of our amended and restated memorandum of association (the &#8220;Memorandum&#8221;), subject to the provisions of the Memorandum,
the objects for which the Company is established are unrestricted.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Board
of Directors</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;<i>Item 6. Directors, Senior Management and Employees</i>.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Ordinary
Shares</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Dividends.
</i>Subject to any rights and restrictions of any other class or series of shares, our board of directors may, from time to time, declare
dividends on the shares issued and authorize payment of the dividends out of our lawfully available funds. Dividends may be declared
and paid out of the profits of the Company, realized or unrealized, or from any reserve set aside from profits which the Directors determine
is no longer needed. The Board may also declare and pay dividends out of share premium account or any other fund or account which can
be authorized for this purpose in accordance with the Act. &#8220;Share premium account,&#8221; represents the excess of the price paid
to our company on issue of its shares over the par or &#8220;nominal&#8221; value of those shares, which is similar to the U.S. concept
of additional paid in capital.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
dividend shall bear interest against the Company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Voting
Rights. </i>The holders of our ordinary shares are entitled to one vote per share, including the election of directors. Voting at any
meeting of shareholders is by show of hands unless a poll is demanded. On a show of hands every shareholder present in person or by proxy
shall have one vote. On a poll every shareholder entitled to vote (in person or by proxy) and shall have one vote for each share for
which he/she is the holder. A poll may be demanded by the chairman of such meeting or by any one or more shareholders who together hold
not less than ten percent (10%) of the votes attached to the then issued share capital of the Company, present in person or in the case
of a shareholder being a corporation by its duly authorized representative or by proxy for the time being entitled to vote at the meeting.
A any general meeting of the Company, two (2) shareholders entitled to vote and present in person or by proxy or (in the case of a shareholder
being a corporation) by its duly authorized representative representing not less than one-third of the votes attached to the then issued
share capital of the Company throughout the meeting shall form a quorum for all purposes. While not required by our articles of association,
a proxy form will accompany any notice of general meeting convened by the directors to facilitate the ability of shareholders to vote
by proxy.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
ordinary resolution to be made by the shareholders requires the affirmative vote of a simple majority of the votes of the ordinary shares
cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes of the ordinary
shares cast. Under Cayman Islands law, some matters, such as amending the memorandum and articles, changing the name or resolving to
be registered by way of continuation in a jurisdiction outside the Cayman Islands, require approval of shareholders by a special resolution.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no limitations on non-residents or foreign shareholders to hold or exercise voting rights on the ordinary shares imposed by foreign
law or by the memorandum and articles of association of our Company. However, no person will be entitled to vote at any general meeting
or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting
and unless all calls or other sums presently payable by the person in respect of ordinary shares in the Company have been paid.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Winding
Up; Liquidation. </i>Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on
liquidation for the time being attached to any class or classes of shares (i) if the Company shall be wound up and the assets available
for distribution amongst the shareholders of the Company shall be more than sufficient to repay the whole of the capital paid up at the
commencement of the winding up, the excess shall be distributed pari passu amongst such shareholders in proportion to the amount paid
up on the shares held by them respectively and (ii) if the Company shall be wound up and the assets available for distribution amongst
the Shareholders as such shall be insufficient to repay the whole of the paid-up capital such assets shall be distributed so that, a
nearly as may be, the losses shall be borne by the Shareholders in proportion to the capital paid up, or which ought to have been paid
up, at the commencement of the winding up on the shares held by them respectively. The liquidator may, with the authority of a special
resolution and any other sanction required by the Act, divide among the Shareholders in specie or kind the whole or any part of the assets
of the Company and whether or not the assets are of the same of different kinds.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Calls
on Ordinary Shares and Forfeiture of Ordinary Shares. </i>Our board of directors may from time to time make calls upon shareholders for
any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time and
place of payment. Any ordinary shares that have been called upon and remain unpaid are subject to forfeiture.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Redemption
of Ordinary Shares. </i>We may issue shares that are, or at the Company&#8217;s option, or at the option of the holders of such shares
are, subject to redemption on such terms and in such manner as it may, before the issuance of the shares, determine. Under the Companies
Act, shares of a Cayman Islands exempted company may be redeemed or repurchased out of profits of the company, out of the proceeds of
a fresh issue of shares made for that purpose, out of share premium account or out of capital, provided the memorandum and articles authorize
this and the company has the ability to pay its debts as they come due in the ordinary course of business.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>No
Preemptive Rights. </i>Holders of ordinary shares will have no pre-emptive or preferential right to purchase any securities of our company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Variation
of Rights Attaching to Shares. </i>If at any time the share capital is divided into different classes of shares, the rights attaching
to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the memorandum and articles,
be modified or abrogated with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Anti-Takeover
Provisions.</i> Some provisions of our current memorandum and articles of association may discourage, delay or prevent a change of control
of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to
issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred
shares without any further vote or action by our shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Transfer
of Ordinary Shares. </i>Subject to the restrictions contained in our current articles of association, any of our shareholders may transfer
all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board
of directors.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up
or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            instrument of transfer is lodged with us, accompanied by the certificate for the ordinary
                                            shares to which it relates and such other evidence as our board of directors may reasonably
                                            require to show the right of the transferor to make the transfer;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            instrument of transfer is in respect of only one class of shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            instrument of transfer is properly stamped, if required;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in
                                            the case of a transfer to joint holders, the number of joint holders to whom the share is
                                            to be transferred does not exceed four; and</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            fee of such maximum sum as the Nasdaq Capital Market may determine to be payable or such
                                            lesser sum as our directors may from time to time require is paid to us in respect thereof.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our directors refuse to register a transfer, they shall, within three months after the date on which the instrument of transfer was lodged,
send to each of the transferor and the transferee notice of such refusal.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
registration of transfers may, on ten calendar days&#8217; notice being given by advertisement in such one or more newspapers, by electronic
means or by any other means in accordance with the Nasdaq Rules, be suspended and the register closed at such times and for such periods
as our board of directors may, in their absolute discretion, from time to time determine, provided, however, that the registration of
transfers shall not be suspended nor the register closed for more than 30 calendar days in any calendar year.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Inspection
of Books and Records. </i>Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of
our list of shareholders or our corporate records (other than the memorandum and articles of association, the register of mortgages and
charges, and copies of any special resolutions passed by our shareholders). However, we will provide our shareholders with annual audited
financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>General
Meeting of Shareholders.</i> Shareholders&#8217; meetings may be convened by a majority of our board of directors or our chairman. Advance
notice of not less than ten clear days is required for the convening of our annual general shareholders&#8217; meeting and any other
general meeting of our shareholders. A quorum required for and throughout a meeting of shareholders consists of at least two shareholders
entitled to vote and present in person or by proxy or (in the case of a shareholder being a corporation) by its duly authorized representative
representing not less than one-third of all voting power of our share capital in issue.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Exempted
Company.</i> We are an exempted company incorporated with limited liability under the Companies Act. The Companies Act distinguishes
between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business
mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are
essentially the same as for an ordinary company except that an exempted company:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">does
                                            not have to file an annual return of its shareholders with the Registrar of Companies;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">is
                                            not required to open its register of members for inspection to the public;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">does
                                            not have to hold an annual general meeting;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            issue shares with no par value;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            obtain an undertaking against the imposition of any future taxation (such undertakings are
                                            usually given for 20 years in the first instance);</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            register by way of continuation in another jurisdiction and be deregistered in the Cayman
                                            Islands;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            register as a limited duration company; and</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            register as a segregated portfolio company.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Limited
liability&#8221; means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the
company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Preferred
Shares</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
of the class or classes (however designated) as the board of directors may determine in accordance with these articles of association.
Subject to the Companies Act (As Revised), any preferred shares may be issued or converted into shares that, at a determinable date or
at the option of the Company or the holder thereof, are to be redeemed or are liable to be redeemed on such terms and in such manner
as the board of directors may in their absolute discretion determine.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
particular and without prejudice to the generality of the foregoing, the Board is empowered to authorize by resolution or resolutions
from time to time the issuance of one or more classes or series of preferred shares and to fix the designations, powers, preferences
and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any,
including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption
privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase or decrease the size of
any such class or series (but not below the number of shares of any class or series of preferred shares then outstanding) to the extent
permitted by law. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of
any class or series of preferred shares may, to the extent permitted by law, provide that such class or series shall be superior to,
rank equally with or be junior to the preferred shares of any other class or series.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as otherwise expressly provided in the resolution or resolutions providing for the establishment of any class or series of preferred
shares, no vote of the holders of preferred shares or ordinary shares shall be a prerequisite to the issuance of any shares of any class
or series of the preferred shares authorized by and complying with the conditions of the Memorandum and Articles of Association.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.C.
Material Contracts</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not entered into any material contracts other than in the ordinary course of business and other than those described in this annual
report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.D.
Exchange Controls</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Cayman
Islands</b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently
there is no exchange control regulations in the Cayman Islands and Hong Kong applicable to us and shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulation&#8212;Regulations Relating to Foreign Exchange&#8221;
for exchange controls in China.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.E.
Taxation</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following summary of the material Cayman Islands, Hong Kong, PRC and U.S. tax consequences of an investment in our ordinary shares is
based upon laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect. This summary is not intended to be, nor should it be construed as, legal or tax advice and is not exhaustive of all
possible tax considerations. This summary also does not deal with all possible tax consequences relating to an investment in our ordinary
shares, such as the tax consequences under state, local, or under the tax laws of jurisdictions other than the Cayman Islands, Hong Kong,
PRC and the United States. Investors should consult their own tax advisors with respect to the tax consequences of the acquisition, ownership
and disposition of our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Cayman
Islands Taxation</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the law of the Cayman Islands as currently in effect, a holder of the securities who is not a resident of the Cayman Islands is not liable
for Cayman Islands tax on dividends paid with respect to the securities and all holders of the securities are not liable to the Cayman
Islands for tax on gains realized during that year on the sale or disposal of such ordinary shares. The Cayman Islands does not impose
a withholding tax on dividends paid by a company incorporated or re-registered under the Companies Act.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no capital gains, gift or inheritance taxes levied by the Cayman Islands on companies incorporated under the Companies Act. In addition,
shares of companies incorporated under the Companies Act are not subject to transfer taxes, stamp duties or similar charges.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
is no income tax treaty or convention currently in effect between the United States and the Cayman Islands or between China and the Cayman
Islands.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>People&#8217;s
Republic of China Taxation</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and
Tax Evasion on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise
directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise
to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority.
Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax
Agreements, or Circular 81, a resident enterprise of the counter-party to such Tax Arrangement should meet the following conditions,
among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must directly own the required percentage
of equity interests and voting rights in such PRC resident enterprise; and (ii) it should directly own such percentage in the PRC resident
enterprise anytime in the 12 months prior to receiving the dividends. Furthermore, the Administrative Measures for Non-Resident Enterprises
to Enjoy Treatments under Tax Treaties (For Trial Implementation), or the Administrative Measures, which became effective in October
2009, requires that the non-resident enterprises must obtain the approval from the relevant tax authority in order to enjoy the reduced
withholding tax rate under the tax treaties. There are also other conditions for enjoying such reduced withholding tax rate according
to other relevant tax rules and regulations. Accordingly, Hing Fat Industrial Limited may be able to enjoy the 5% withholding tax rate
for the dividends it receives from the WFOE, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules
and regulations and obtains the approvals as required under the Administrative Measures. However, according to Circular 81, if the relevant
tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment,
the relevant tax authorities may adjust the favorable withholding tax in the future.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Hong
Kong Taxation</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
taxation of income and capital gains of holders of ordinary shares is subject to the laws and practices of Hong Kong and of jurisdictions
in which holders of ordinary shares are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions
under Hong Kong law is based on current law and practice, is subject to changes therein and does not constitute legal or tax advice.
The discussion does not deal with all possible tax consequences relating to an investment in the ordinary shares. Accordingly, each prospective
investor (particularly those subject to special tax rules, such as banks, dealers, insurance companies, tax-exempt entities and holders
of 10% or more of our voting capital stock) should consult its own tax advisor regarding the tax consequences of an investment in the
ordinary shares. The discussion is based upon laws and relevant interpretations thereof in effect as of the date of this report, all
of which are subject to change. There is no reciprocal tax treaty in effect between Hong Kong and the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Tax
on Dividends</b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the current practices of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of dividends paid by us as
a company incorporated in Cayman Islands.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Profits
Tax</b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
tax is imposed in Hong Kong in respect of capital gains from the sale of property (such as the ordinary shares). Trading gains from the
sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong
Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5%
and 15% on corporations and unincorporated businesses, respectively, and at a maximum rate of 15% on individuals. Liability for Hong
Kong profits tax may thus arise in respect of trading gains from sales of ordinary shares realized by persons carrying on a business
or trading or dealing in securities in Hong Kong.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Stamp
Duty</b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hong
Kong stamp duty, currently charged at the rate of HK$1.3 per HK$1,000 or part thereof on the higher of the consideration for or the value
of the ordinary shares, will be payable by the purchaser on every purchase and by the seller on every sale of ordinary shares (i.e.,
a total of HK$2.6 per HK$1,000 or part thereof is currently payable on a typical sale and purchase transaction involving ordinary shares).
In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of ordinary shares. If one of the parties to the
sale is a non-Hong Kong resident and does not pay the required stamp duty, the duty not paid will be assessed on the instrument of transfer
(if any) and the transferee will be liable for payment of such duty. No Hong Kong stamp duty is payable upon the transfer of ordinary
shares outside Hong Kong.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Estate
Duty</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable
and no estate duty clearance papers are needed for an application for a grant of representation in respect of holders of ordinary shares
whose death occurs on or after February 11, 2006.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>United
States Federal Income Tax Considerations</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is a discussion of United States federal income tax considerations relating to the acquisition, ownership, and disposition
of our ordinary shares by a U.S. Holder, as defined below, that acquires our ordinary shares and holds our ordinary shares as &#8220;capital
assets&#8221; (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the &#8220;Code&#8221;).
This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations or change,
possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the &#8220;IRS&#8221;) with respect to
any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take
a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important to particular
investors in light of their individual circumstances, including investors subject to special tax rules (such as, for example, certain
financial institutions, insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in
securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations)),
investors who are not U.S. Holders, investors that own (directly, indirectly, or constructively) 10% or more of our voting stock, investors
that hold their ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction), or investors
that have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those
summarized below. In addition, this discussion does not address any tax laws other than the United States federal income tax laws, including
any state, local, alternative minimum tax or non-United States tax considerations, or the Medicare tax. Each potential investor is urged
to consult its tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations
of an investment in our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>General</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
purposes of this discussion, a &#8220;U.S. Holder&#8221; is a beneficial owner of our ordinary shares that is, for United States federal
income tax purposes, (i) an individual who is a citizen or treated as a tax resident of the United States, (ii) a corporation (or other
entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United
States or any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for United
States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary
supervision of a United States court and which has one or more United States persons who have the authority to control all substantial
decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ordinary
shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership.
Partnerships and partners of a partnership holding our ordinary shares are urged to consult their tax advisors regarding an investment
in our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
discussion set forth below is addressed only to U.S. Holders that purchase ordinary shares. Prospective purchasers are urged to consult
their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state,
local, foreign and other tax consequences to them of the purchase, ownership and disposition of our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Taxation
of Dividends and Other Distributions on our Ordinary Shares</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Subject
to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to
the ordinary shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend
income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not
be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">With
respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable
to qualified dividend income, provided that (1) the ordinary shares are readily tradable on an established securities market in the United
States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange
of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which
the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax
treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the ordinary shares are readily tradable
on an established securities market in the United States. Under U.S. Internal Revenue Service authority, ordinary shares are considered
for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on
certain exchanges, which presently include the Nasdaq. You are urged to consult your tax advisors regarding the availability of the lower
rate for dividends paid with respect to our ordinary shares, including the effects of any change in law after the date of this report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal
income tax principles), it will be treated first as a tax-free return of your tax basis in your ordinary shares, and to the extent the
amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings
and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a
dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described
above.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Taxation
of Dispositions of Ordinary Shares</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Subject
to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other
taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis
(in U.S. dollars) in the ordinary shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including
an individual U.S. Holder, who has held the ordinary shares for more than one year, you may be eligible for reduced tax rates on any
such capital gains. The deductibility of capital losses is subject to limitations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Passive
Foreign Investment Company (&#8220;PFIC&#8221;)</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
non-U.S. corporation is considered a PFIC for any taxable year if either:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least 75% of its gross income for such taxable year is passive income; or</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least 50% of the value of its assets (based on an average of the quarterly values of the
                                            assets during a taxable year) is attributable to assets that produce or are held for the
                                            production of passive income (the &#8220;asset test&#8221;).</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Passive
income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of
a trade or business) and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets
and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by
value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we hold
will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based
on the market value of our ordinary shares from time to time, which could cause the value of our non-passive assets to be less than 50%
of the value of all of our assets (including the cash raised in any offering) on any particular quarterly testing date for purposes of
the asset test.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
must make a separate determination each year as to whether we are a PFIC. Depending on the amount of cash we hold, together with any
other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent taxable
year, at least 50% of our assets may be assets held for the production of passive income. We will make this determination following the
end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated variable interest entity, as being
owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such
entity but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating
results in our consolidated financial statements. In particular, because the value of our assets for purposes of the asset test will
generally be determined based on the market price of our ordinary shares and because cash is generally considered to be an asset held
for the production of passive income, our PFIC status will depend in large part on the market price of our ordinary shares and the amount
of cash we hold. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the
application of the PFIC rules is subject to uncertainty in several respects. We are under no obligation to take steps to reduce the risk
of our being classified as a PFIC, and as stated above, the determination of the value of our assets will depend upon material facts
(including the market price of our ordinary shares from time to time that may not be within our control). If we are a PFIC for any year
during which you hold ordinary shares, the shares will continue to be treated as stock in a PFIC for all succeeding years during which
you hold ordinary shares. However, if we cease to be a PFIC and you did not previously make a timely &#8220;mark-to-market&#8221; election
as described below, you may avoid some of the adverse effects of the PFIC regime by making a &#8220;purging election&#8221; (as described
below) with respect to the ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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    <!-- Field: /Page -->

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we are a PFIC for your taxable year(s) during which you hold ordinary shares, you will be subject to special tax rules with respect to
any &#8220;excess distribution&#8221; that you receive and any gain you realize from a sale or other disposition (including a pledge)
of the ordinary shares, unless you make a &#8220;mark-to-market&#8221; election as discussed below. Distributions you receive in a taxable
year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years
or your holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            excess distribution or gain will be allocated ratably over your holding period for the ordinary
                                            shares;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            amount allocated to your current taxable year, and any amount allocated to any of your taxable
                                            year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary
                                            income, and</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            amount allocated to each of your other taxable year(s) will be subject to the highest tax
                                            rate in effect for that year and the interest charge generally applicable to underpayments
                                            of tax will be imposed on the resulting tax attributable to each such year.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
tax liability for amounts allocated to years prior to the year of disposition or &#8220;excess distribution&#8221; cannot be offset by
any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as
capital, even if you hold the ordinary shares as capital assets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
U.S. Holder of &#8220;marketable stock&#8221; (as defined below) in a PFIC may make a mark-to-market election for such stock to elect
out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed
to hold) ordinary shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the
excess, if any, of the fair market value of the ordinary shares as of the close of such taxable year over your adjusted basis in such
ordinary shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess,
if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, such
ordinary loss is allowable only to the extent of any net mark-to-market gains on the ordinary shares included in your income for prior
taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition
of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale
or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously
included for such ordinary shares. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If
you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to
distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under &#8220;&#8212;
Taxation of Dividends and Other Distributions on our ordinary shares&#8221; generally would not apply.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
mark-to-market election is available only for &#8220;marketable stock&#8221;, which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar quarter (&#8220;regularly traded&#8221;) on a qualified exchange or other market
(as defined in applicable U.S. Treasury regulations), including Nasdaq. If the ordinary shares are regularly traded on Nasdaq and if
you are a holder of ordinary shares, the mark-to-market election would be available to you were we to be or become a PFIC.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Alternatively,
a U.S. Holder of stock in a PFIC may make a &#8220;qualified electing fund&#8221; election with respect to such PFIC to elect out of
the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally
include in gross income for a taxable year such holder&#8217;s pro rata share of the corporation&#8217;s earnings and profits for the
taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information
regarding its earnings and profits as required under applicable U.S. Treasury regulations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you
hold ordinary shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621
in each such year and provide certain annual information regarding such ordinary shares, including regarding distributions received on
the ordinary shares and any gain realized on the disposition of the ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
you do not make a timely &#8220;mark-to-market&#8221; election (as described above), and if we were a PFIC at any time during the period
you hold our ordinary shares, then such ordinary shares will continue to be treated as stock of a PFIC with respect to you even if we
cease to be a PFIC in a future year, unless you make a &#8220;purging election&#8221; for the year we cease to be a PFIC. A &#8220;purging
election&#8221; creates a deemed sale of such ordinary shares at their fair market value on the last day of the last year in which we
are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating
the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the
fair market value of the ordinary shares on the last day of the last year in which we are treated as a PFIC) and holding period (which
new holding period will begin the day after such last day) in your ordinary shares for tax purposes.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our ordinary shares and the
elections discussed above.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Information
Reporting and Backup Withholding</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payments
of dividends and sales proceeds that are made within the United States or through certain U.S.-related intermediaries may be subject
to information reporting and backup withholding, unless (i) the U.S. Holder is a corporation or other &#8220;exempt recipient&#8221;
or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is
not subject to backup withholding. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to
a U.S. Holder will be allowed as a credit against the U.S. Holder&#8217;s U.S. federal income tax liability and may entitle it to a refund,
provided that the required information is timely furnished to the IRS.</span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Information
with respect to foreign financial assets</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
U.S. Holders who are individuals (and, under proposed regulations, certain entities) may be required to report information relating to
an interest in our ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained
by certain U.S. financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of this legislation
on their ownership and disposition of our ordinary shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.F.
Dividends and Paying Agents</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.G.
Statement by Experts</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.H.
Documents on Display</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers.
Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information
filed with the SEC can be obtained over the internet at the SEC&#8217;s website at www.sec.gov or inspected and copied at the public
reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information regarding
the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that
contains reports and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign
private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy
statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act. You may also visit us on the world wide web at http://www.i-l-a-g.com. However, information
contained on our website does not constitute a part of this annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.I.
Subsidiary Information</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.J.
Annual Report to Security Holders</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
11.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_026"></span>QUANTITATIVE
                                            AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Liquidity
risk</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are exposed to liquidity risk, which is the risk that we will be unable to provide sufficient capital resources and liquidity to meet
our commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures.
When necessary, we will turn to other financial institutions to obtain short-term funding to meet the liquidity shortage.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Inflation
risk</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inflationary
factors, such as increases in personnel and overhead costs, could impair our operating results. Although we do not believe that inflation
has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have
an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if
the revenues from our products do not increase with such increased costs.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Interest
rate risk</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are exposed to interest rate risk on our interest-bearing assets and liabilities. As part of our asset and liability risk management,
we review and take appropriate steps to manage our interest rate exposures on our interest-bearing assets and liabilities. We have not
been exposed to material risks due to changes in market interest rates, and not used any derivative financial instruments to manage the
interest risk exposure during the year ended December 31, 2023 and 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Foreign
currency translation and transaction</i></b></span></p>



<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s reporting currency is the USD. The functional currency of its Hong Kong subsidiaries is the Hong Kong dollar (the &#8220;HKD&#8221;),
and the functional currency of its PRC subsidiary is the Renminbi (the &#8220;RMB&#8221;). RMB is not freely convertible into foreign
currencies for capital account transactions. The value of RMB against the U.S. dollar and other currencies is affected by, among other
things, changes in China&#8217;s political and economic conditions and China&#8217;s foreign exchange policies. To date, we have not
entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
12.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_025"></span>DESCRIPTION
                                            OF SECURITIES OTHER THAN EQUITY SECURITIES</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>A.
Debt Securities</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>B.
Warrants and Rights</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>C.
Other Securities</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_024"></span>PART
II</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
13.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_023"></span>DEFAULTS,
                                            DIVIDEND ARREARAGES AND DELINQUENCIES</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
14.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_022"></span>MATERIAL
                                            MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&#8220;Item 10&#8212;Additional Information&#8212;B. Memorandum and Articles of Association&#8212;Common Shares&#8221; for a description
of the rights of securities holders, which remain unchanged.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Use
of Proceeds</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following &#8220;Use of Proceeds&#8221; information relates to the registration statement on Form F-1, as amended (File number: 333-248684)
in relation to the initial public offering of 5,060,000 ordinary shares of the Company. Our initial public offering closed on July 15,
2022. Network1 Financial Securities, Inc. was the representative of the underwriters for our initial public offering. We offered and
sold 5,060,000 ordinary shares and received net proceeds of approximately $16.86 million, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us. The registration statement was declared effective by the SEC on July 12, 2022.
The total expenses incurred for our company&#8217;s account in connection with our initial public offering was approximately $3.38 million,
which included approximately $1.52 million in underwriting discounts and commissions for the initial public offering and approximately
$1.86 million in other costs and expenses for our initial public offering. None of the transaction expenses included payments to directors
or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None
of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers
or their associates, persons owning 10% or more of our equity securities or our affiliates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, we have used some of net proceeds received from our initial public offering, including approximately
$4.5 million to acquire an electroplating production line, approximately $6.5 million for in working capital, <span style="background-color: white">approximately $4.4 million for
smart lock device and products research and development</span>. There is no material change in the use of proceeds as described in our registration
statement on Form F-1. We still intend to use the remainder of the proceeds from our initial public offering as disclosed in our registration
statement on Form F-1.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
15.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_021"></span>CONTROLS
                                            AND PROCEDURES</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Evaluation
of Disclosure Controls and Procedures</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by
this report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, due
to the material weaknesses identified below, as of December 31, 2023, our disclosure controls and procedures were not effective in ensuring
that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed,
summarized and reported, within the time periods specified in the SEC&#8217;s rules and forms, and that the information required to be
disclosed by us in the reports that we file or submit under the Exchange Act was accumulated and communicated to our management, including
our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Management&#8217;s
Annual Report on Internal Control Over Financial Reporting</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules
13a-15 (f) under the Exchange Act. As required by Section 404 of the Sarbanes-Oxley Act and related rules as promulgated by the SEC,
our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of
our internal control over financial reporting as of December 31, 2023, based on criteria established in the framework in Internal
Control&#8212;Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of
December&#160;31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may deteriorate.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the course of management&#8217;s preparation and our independent registered public accounting firm&#8217;s auditing of our consolidated
financial statements as of and for the year ended December&#160;31, 2023, we and our independent registered public accounting firm identified
one material weakness in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company
Accounting Oversight Board, a &#8220;material weakness&#8221; is a deficiency, or combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements
will not be prevented or detected on a timely basis, in accordance with the standards established by the Public Company Accounting Oversight
Board of the United States.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
material weakness identified relates to our not having sufficient in-house personnel in our accounting department with sufficient knowledge
of the U.S. GAAP and SEC reporting rules to prepare and review financial statements and related disclosures in accordance with U.S. GAAP
and applicable requirements by SEC. Due to the foregoing material weakness, management concluded that as of December 31, 2023, our internal
control over financial reporting was ineffective.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
remedy our identified material weakness identified to date, we plan to take the steps necessary to remediate the ineffectiveness, such
as (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen
the financial reporting function and to set up a financial and system control framework, and (ii) implementing regular and continuous
U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
we cannot assure you that we will remediate our material weakness in a timely manner, or at all. See &#8220;<i>Item 3. Key Information&#8212;Risk
Factors&#8212;Risks Related to Our Business&#8212; We are obligated to develop and maintain proper and effective internal control over
financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal
controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value
of our Ordinary Shares.</i>&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a company with less than US$1.235 billion in revenue for our last fiscal year, we qualify as an &#8220;emerging growth company&#8221;
pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are
otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under
Section&#160;404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company&#8217;s internal control over financial
reporting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Attestation
Report of the Registered Public Accounting Firm</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an &#8220;emerging growth company&#8221; pursuant
to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise
applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404
of the Sarbanes-Oxley Act of 2002, in the assessment of the emerging growth company&#8217;s internal control over financial reporting.
This annual report on Form 20-F does not include an attestation report of our registered public accounting firm because we are an emerging
growth company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Changes
in Internal Control</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered
by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span id="lpa_001"></span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>[Reserved]</b></span></p></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16.A.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_020"></span>AUDIT
                                            COMMITTEE FINANCIAL EXPERT</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors has determined that Ms. Carina Chui, Chairlady of our audit committee and an independent director (under the standards
set forth in Nasdaq Stock Market Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act), is an audit committee financial expert.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16.B.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_019"></span>CODE
                                            OF ETHICS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors has adopted a code of ethics that applies to all of the directors, officers and employees of our company. We have
filed our code of business conduct and ethics as Exhibit 99.1 of our registration statement on Form F-1 (File Number: 333-248684), as
amended, initially filed with the SEC on September 9, 2020.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16.C.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_018"></span>PRINCIPAL
                                            ACCOUNTANT FEES AND SERVICES</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered
by Wei, Wei &amp; Co., LLP, our independent registered public accounting firm, for the periods indicated.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Year</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Year</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ended</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ended</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December
    31,</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December
    31,</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2023</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2022</span></td><td style="font: bold 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 64%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Audit
    fees(1)</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">295,326</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 14%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">273,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Audit
    related fees(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tax
    fees(3)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
    other fees(4)</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">TOTAL</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td><td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">295,326</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td><td style="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">273,000</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  </table>


<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>



<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Audit
                                            fees&#8221; means the aggregate fees billed for each of the fiscal years for professional
                                            services rendered by our principal accountant for the audit of our annual financial statements
                                            or services that are normally provided by the accountant in connection with statutory and
                                            regulatory filings or engagements for those fiscal years.</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Audit
                                            related fees&#8221; means the aggregate fees billed for each of the fiscal years for assurance
                                            and related services by our principal accountant that are reasonably related to the performance
                                            of the audit or review of our financial statements and are not reported under paragraph (1).</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Tax
                                            Fees&#8221; represents the aggregate fees billed in each of the fiscal years listed for the
                                            professional tax services rendered by our principal auditors.</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;All
                                            Other Fees&#8221; represents the aggregate fees billed in each of the fiscal years listed
                                            for services rendered by our principal auditors other than services reported under &#8220;Audit
                                            fees,&#8221; &#8220;Audit-related fees&#8221; and &#8220;Tax fees.&#8221;</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
policy of our audit committee and our board of directors is to pre-approve all audit and non-audit services provided by our principal
auditors, including audit services, audit-related services, and other services as described above, other than those for de minimis services
which are approved by the audit committee or our board of directors prior to the completion of the services.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16D.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_017"></span>EXEMPTIONS
                                            FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16E.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_016"></span>PURCHASES
                                            OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Neither
we nor any &#8220;affiliated purchaser,&#8221; as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities
during the period covered by this annual report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16F.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_015"></span>CHANGE
                                            IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
Applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16G.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_014"></span>CORPORATE
                                            GOVERNANCE</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a Cayman Islands exempted company listed on the
Nasdaq Capital Market, or Nasdaq, we are subject to the Nasdaq corporate governance requirements. However, Nasdaq rules permit a foreign
private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the
Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance requirements. Currently, we
follow our home country practice in lieu of the provisions under Rule 5620(a), Rule 5635(a), Rule 5635(c) and Rule 5635(d) of the NASDAQ
Stock Market Marketplace Rules (the &#8220;Rules&#8221;). Rule 5620(a) requires that the Company to hold an annual meeting of shareholders
no later than one year after the end of the Company&#8217;s fiscal year-end; Rule 5635(a) of the Rules requires shareholder approval
for the issuance of securities in connection with the acquisition of the stock or assets of another company; Rule 5635(c) of the Rules
requires shareholder approval <span style="background-color: white">prior to the issuance of securities when a stock option or purchase
plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which
stock may be acquired by officers, directors, employees</span>; and Rule 5635(d) of the Rules requires shareholder approval prior to
an issuance of securities, other than in a public offering, equal to 20% or more of the voting power outstanding at a price less than
the lower of: (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement;
or (ii) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately
preceding the signing of the binding agreement. The corporate governance practice in our home country, the Cayman Islands, does not require
the Company to follow or comply with the requirements of Rule 5620(a), Rule 5635(a), Rule 5635(c) and Rule 5635(d). If we choose to follow
additional home country practice in the future, our shareholders may be afforded less protection than they would otherwise enjoy under
the Nasdaq corporate governance requirements applicable to U.S. domestic issuers. See &#8220;<i>Item 3. Key Information &#8212; D. Risk
Factors&#8212; Risks Related to Our Ordinary Shares&#8212;Because we are a foreign private issuer and are exempt from certain NASDAQ
corporate governance standards applicable to U.S. issuers, you may have less protection than you would have if we were a domestic issuer.</i>&#8221;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16H.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_013"></span>MINE
                                            SAFETY DISCLOSURE</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
16I.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_012"></span>DISCLOSURE
                                            REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 20pt; margin: 0pt; text-align: justify"></p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
                                            16J.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="S1_001"></span>Insider
                                            Trading Policies</b></span></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by directors, senior
management and employees that are reasonably designed to promote compliance with applicable insider trading laws, rules and regulations,
and any listing standards applicable to the Company.&#160;A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual
Report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0">
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
  <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
  16K.</b></span></td>
  <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="S1_002"></span>Cybersecurity</b></span></td></tr>
</table>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
management of the Company is responsible for the cyber security risk management program as well as to identify, assess, mitigate,
and remediate risks and material issues. The Company&#8217;s cyber security risk management program is supervised by our IT manager,
who reports directly to the Company&#8217;s Chief Operation Officer. The IT manager and Information Security Personnel are
responsible for developing and implementing cybersecurity strategy, policies, standards, architecture and processes. We also engaged
a third-party expert Mr. Kowk Leung MA to provide additional support to our Information Security
Personnel and IT manager whenever needed. Mr. Ma received his Master&#8217;s Degree of Industry Based Information Technology from University
of Wollongong Australia and is a Microsoft Certified Solution Developer (MCSD) and he has extensive experiences in development of IT application
systems and support, including retail system, inventory control system, ERP development and accounting system integration with various
system, stock broker ordering system, stock mobile phone ordering, and garment&#8217;s color size assortment system,&#160;network&#160;planning
and&#160;firewall setup. Mr. Ma is familiar with operation system/server such as Novell, DOS, Windows 98, Windows ME, Window NT, Window
2000 Server, Window 2003 Server , Windows XP, FTP, IIS and Linux and he is also familiar with Database system such as MS SQL server ,
MySQL Visual Foxpro Database, Foxbase, Dbase III and Dbase IV and Tools or computer language familiar such as Clipper, Dbase, Foxbase.
Pascal, C, Visual Foxpro, Visual Basic,&#160;VB.Net,&#160;Visual C++, Com+, Crystal Report, UML.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our Information Security Personnel reports to IT manager and is responsible
for coordinating and managing the response to reported weaknesses or events, including documentation, evidence collection, and event closure.
He also ensures the incident response plan is regularly updated based on experience, lessons learned, and industry developments, while
providing necessary training to employees involved in the procedure.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
IT Manager plays a key role in defining strategies and procedures for cyber incident response, leading the incident response team, and
overseeing detection, response, and recovery efforts. He also ensures the regular review and update of the incident response plan based
on lessons learned and emerging threats.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Information Security Personnel reports any substantial threats, risks, and incidents to the IT manager. Subsequently, the IT manager
will escalate the report to the Chief Operating Officer, if necessary, who will then report it to the Board for any material threats
or breaches.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has set up the password requirement, control of authorization on a need-to-know basis, categorize sensitive information so that
they can be managed and transmitted at different security levels.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has adopted &#8220;Cyber Incident Response Plan Policy&#8221; so that suspicious activities or incidents can be quickly identified
and reported through the system to the management team.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
oversee and identify risks from cybersecurity threats associated with our use of third-party service providers, we maintain third-party
risk management efforts designed to help protect against the misuse of information technology and security breaches.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
than those, the Company currently does not have processes to oversee and identify the risks from cyber security threats associated with
its use of any third-party service provider.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of date of this report, there has been no cybersecurity incidents, have materially affected the Company yet.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_011"></span>PART
III</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
17.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_010"></span>FINANCIAL
                                            STATEMENTS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have elected to provide financial statements pursuant to Item 18.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
18.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_009"></span>FINANCIAL
                                            STATEMENTS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements and related notes required by this item are contained on pages F-1 through F-20.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM
19.</b></span></td><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="p_008"></span>EXHIBITS</b></span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Exhibit
    No.</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; vertical-align: top; width: 0.1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Description</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.1</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465920103446/tm2026605d3_ex3-2.htm" style="-sec-extract: exhibit">Amended and Restated Memorandum of Association (incorporated herein by reference to Exhibit 3.2 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.2</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465920103446/tm2026605d3_ex3-3.htm" style="-sec-extract: exhibit">Amended and Restated Articles of Association (incorporated herein by reference to Exhibit 3.3 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.1</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465923007994/tm234640d1_ex4-3.htm" style="-sec-extract: exhibit">Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-269458), filed with the SEC on January 30, 2023)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.2*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex2-2.htm">Description of Securities</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.1</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465922077643/tm2220498d1_ex4-1.htm" style="-sec-extract: exhibit">Form of Underwriters&#8217; Warrant (incorporated herein by reference to Exhibit 4.1 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.2</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465920103446/tm2026605d3_ex10-1.htm" style="-sec-extract: exhibit">Share Exchange Agreement between the Registrant and shareholders of Intelligent Living Application Group Limited dated on April 8, 2020 (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.3</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465921094038/tm2026605d9_ex10-10.htm" style="-sec-extract: exhibit">Form of Indemnification Agreement by and between the Registrant and executive officers and directors of the Registrant incorporated herein by reference to Exhibit 10.10 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.4</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465920103446/tm2026605d3_ex10-7.htm" style="-sec-extract: exhibit">Director Agreement by and between the Registrant and Carina Chui incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.5</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465920103446/tm2026605d3_ex10-8.htm" style="-sec-extract: exhibit">Director Agreement by and between the Registrant and Monique Ho incorporated herein by reference to Exhibit 10.12 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.6</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465922077643/tm2220498d1_ex10-14.htm" style="-sec-extract: exhibit">Renewal of Employment Agreement by and between the Registrant and Yu Bong Lau in June 2022 incorporated herein by reference to Exhibit 10.14 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.7</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465922077643/tm2220498d1_ex10-15.htm" style="-sec-extract: exhibit">Renewal of Employment Agreement by and between the Registrant and Yu Bun Lau in June 2022 incorporated herein by reference to Exhibit 10.15 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.8</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465922077643/tm2220498d1_ex10-16.htm" style="-sec-extract: exhibit">Renewal of Employment Agreement by and between the Registrant and Frederik Wong in June 2022 incorporated herein by reference to Exhibit 10.16 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.9</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465922077643/tm2220498d1_ex10-17.htm" style="-sec-extract: exhibit">Renewal of Employment Agreement by and between the Registrant and Wynn Hui in June 2022 incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.10</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465922109342/tm2228340d1_ex10-1.htm" style="-sec-extract: exhibit">Asset Purchase Agreement by and among Hing Fat Industrial Limited, Dongguan Xingfa Hardware Products Co., Ltd. and Hu Xiongjie dated October 12, 2022, incorporated herein by reference to Exhibit 10.1 to the Form 6-K, filed with the SEC on October 17, 2022</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">4.11</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000141057823000841/ilag-20221231xex4d21.htm" style="-sec-extract: exhibit">Form of Stock Option Agreement, incorporated herein by reference to Exhibit 4.21 to the Form 20-F, filed with the SEC on April 28, 2023</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.12</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465923079130/tm2320768d1_ex10-1.htm" style="-sec-extract: exhibit">Director Agreement by and between the Registrant and Chun Fai (Kenneth) Liu&#160;dated July 4, 2023, incorporated herein by reference to Exhibit 10.1 to the Form 6-K, filed with the SEC on July 7, 2023</a></p></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">4.13</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000149315224003070/ex10-1.htm" style="-sec-extract: exhibit">Director Agreement by and between the Registrant and Wing Hang (Henry) Yeung dated January 15, 2024, incorporated herein by reference to Exhibit 10.1 to the Form 6-K, filed with the SEC on January 19, 2024</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">4.14*</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><a href="ex4-14.htm">Renewal of Employment Agreement by and between the Registrant and Bong Lau in June 202<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">4.15*</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><a href="ex4-15.htm">Renewal of Employment Agreement by and between the Registrant and Bun Lau in June 2023</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><p style="margin: 0">4.16*</p></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><a href="ex4-16.htm">Renewal of Employment Agreement by and between the Registrant and Fred Wong in June 2023</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><p style="margin: 0">4.17*</p></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><a href="ex4-17.htm">Renewal of Employment Agreement by and between the Registrant and Wynn Hui in June 2023</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.1*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex8-1.htm">List of Subsidiaries of the Registrant</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11.1</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1814963/000110465920103446/tm2026605d3_ex99-1.htm" style="-sec-extract: exhibit">Code of Business Conduct and Ethics (incorporated herein by reference to Exhibit 99.1 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.1*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex12-1.htm">CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.2*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex12-2.htm">CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.1*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex13-1.htm">CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.2*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex13-2.htm">CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">15.1*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ex15-1.htm">Consent of Wei, Wei &amp; Co., LLP</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
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  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
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  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: White">
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  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*
Filed as an exhibit hereto.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SIGNATURES</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 50%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 45%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
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    Bong Lau</i></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
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    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bong
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTELLIGENT
LIVING APPLICATION GROUP INC.</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONSOLIDATED
FINANCIAL STATEMENTS</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>


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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTELLIGENT
LIVING APPLICATION GROUP INC.</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">TABLE
OF CONTENTS</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-align: right; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page(s)</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_002">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</a> (PCAOB ID: <span id="xdx_900_edei--AuditorFirmId_c20230101__20231231_zXm4WUkggeo8"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000061" name="dei:AuditorFirmId">2388</ix:nonNumeric></span>)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_003">CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2023 AND 2022</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-3</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_004">CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-4</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_005">CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#8217; EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-5</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_006">CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_007">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</a></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-7</span></td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>&#160;</p>

<p style="margin-top: 0; margin-bottom: 0"><img src="fin_001.jpg" alt=""/></p>

<p style="margin-top: 0; margin-bottom: 0">&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 20%"><img src="fin_002.jpg" alt=""/><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 80%"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b></b></span></p>
                                                                     <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="fin_002"></span>REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
    the Board of Directors and Shareholders of</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
    Living Application Group Inc.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Opinion
    on the Financial Statements</b></span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    have audited the accompanying consolidated balance sheets of Intelligent Living Application Group Inc. and Subsidiaries (collectively,
    the &#8220;Company&#8221;) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive
    loss, changes in shareholders&#8217; equity, and cash flows for each of the years in the three-year period ended December 31, 2023,
    and the related notes (collectively referred to as the &#8220;financial statements&#8221;). In our opinion, the financial statements
    present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results
    of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting
    principles generally accepted in the United States of America.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Basis
    for Opinion</b></span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
    financial statements are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on the
    Company&#8217;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.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
    obtain reasonable assurance about whether the 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&#8217;s internal control over financial reporting. Accordingly, we express
    no such opinion.</span></p>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April
    30, 2024</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    have served as the Company&#8217;s auditor since 2019.</span></p></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="fin_003"></span>CONSOLIDATED
BALANCE SHEETS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" id="xdx_30F_111_zThAQyJmWsw4" summary="xdx: Statement - Consolidated Balance Sheets" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
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<tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--Assets_i01TI_mtAzAq5_zesIEEIJVLQl" style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--LiabilitiesAndStockholdersEquityAbstract_iB_zmc1sivURde3" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--LiabilitiesCurrentAbstract_i01B_z42v1b7L9om5" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr id="xdx_40F_eus-gaap--AccountsPayableCurrent_i02I_maLCzkl6_zFmaPrO2oQMj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_40D_eus-gaap--ContractWithCustomerLiabilityCurrent_i02I_maLCzkl6_zmG5erwv6Koi" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0119">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ContractWithCustomerLiabilityCurrent" contextRef="AsOf2022-12-31" id="Fact000120" format="ixt:numdotdecimal" decimals="0" unitRef="USD">6,364</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40E_eus-gaap--AccruedLiabilitiesCurrent_i02I_maLCzkl6_zZ9RfU5YxoOd" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedLiabilitiesCurrent" contextRef="AsOf2023-12-31" id="Fact000122" format="ixt:numdotdecimal" decimals="0" unitRef="USD">625,350</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedLiabilitiesCurrent" contextRef="AsOf2022-12-31" id="Fact000123" format="ixt:numdotdecimal" decimals="0" unitRef="USD">677,972</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--TaxesPayableCurrent_i02I_maLCzkl6_zZt3dSTZlkab" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt; text-align: left">Taxes payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:TaxesPayableCurrent" contextRef="AsOf2023-12-31" id="Fact000125" format="ixt:numdotdecimal" decimals="0" unitRef="USD">31,972</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0126">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--OperatingLeaseLiabilityCurrent_iI_maLCzkl6_zLoYc8MaWnn4" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">Operating lease liabilities - current</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityCurrent" contextRef="AsOf2023-12-31" id="Fact000128" format="ixt:numdotdecimal" decimals="0" unitRef="USD">279,293</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityCurrent" contextRef="AsOf2022-12-31" id="Fact000129" format="ixt:numdotdecimal" decimals="0" unitRef="USD">531,750</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_408_eus-gaap--LiabilitiesCurrent_i02TI_mtLCzkl6_maLzICf_zEfAcgp0pVgg" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 20pt; text-align: left; padding-bottom: 1.5pt">Total current liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><ix:nonFraction name="us-gaap:LiabilitiesCurrent" contextRef="AsOf2023-12-31" id="Fact000131" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,390,963</ix:nonFraction></p></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:LiabilitiesCurrent" contextRef="AsOf2022-12-31" id="Fact000132" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,813,936</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_404_eus-gaap--LiabilitiesNoncurrentAbstract_iB_zikWlqsIloqd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">NON-CURRENT LIABILITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--LongTermDebtAndCapitalLeaseObligations_i02I_pp0p0_maLNz6mg_zQCZpnd3SeFj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-align: left">Bank borrowings</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtAndCapitalLeaseObligations" contextRef="AsOf2023-12-31" id="Fact000137" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">334,319</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtAndCapitalLeaseObligations" contextRef="AsOf2022-12-31" id="Fact000138" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">417,795</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--OperatingLeaseLiabilityNoncurrent_i02I_pp0p0_maLNz6mg_zMAREcFuZQD5" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">Operating lease liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityNoncurrent" contextRef="AsOf2023-12-31" id="Fact000140" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">156,183</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityNoncurrent" contextRef="AsOf2022-12-31" id="Fact000141" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">118,532</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--LiabilitiesNoncurrent_i02TI_pp0p0_mtLNz6mg_maLzICf_zUgFqRqN0bwe" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:LiabilitiesNoncurrent" contextRef="AsOf2023-12-31" id="Fact000143" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">490,502</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:LiabilitiesNoncurrent" contextRef="AsOf2022-12-31" id="Fact000144" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">536,327</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--Liabilities_i01TI_pp0p0_mtLzICf_maLASEz7Rc_zVaRcNWlsQR2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Total liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><ix:nonFraction name="us-gaap:Liabilities" contextRef="AsOf2023-12-31" id="Fact000146" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,881,465</ix:nonFraction></p></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:Liabilities" contextRef="AsOf2022-12-31" id="Fact000147" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,350,263</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--CommitmentsAndContingencies_i01I_pp0p0_maLASEz7Rc_zWnZsIvdniJ1" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">COMMITMENTS AND CONTINGENCIES</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0149">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0150">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_401_eus-gaap--StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAbstract_i01B" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">SHAREHOLDERS&#8217; EQUITY</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--PreferredStockValue_i02I_pp0p0_maSEIPAzdVL_zE83PjArZHF" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0156">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="fin_004"></span>CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr id="xdx_406_eus-gaap--OperatingIncomeLoss_iT_pp0p0_mtOILzaLP_maILFCOz0m2_zaWY2K47L6kh" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr id="xdx_40F_eus-gaap--NonoperatingIncomeExpenseAbstract_iB" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr id="xdx_40C_eus-gaap--InvestmentIncomeInterest_i01_pp0p0_maNIEzOBL_zULNQPlg3d13" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_iT_pp0p0_maNILzaeU_mtILFCOz0m2_zTQLLiEwRTtc" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-01to2023-12-31" id="Fact000260" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">3,445,281</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--IncomeTaxExpenseBenefit_iN_di_msNILzaeU_zP3oXInAXrxl" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">PROVISION FOR INCOME TAXES</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncomeTaxExpenseBenefit" contextRef="From2023-01-01to2023-12-31" id="Fact000264" format="ixt:numdotdecimal" decimals="0" unitRef="USD">56,237</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0266">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--NetIncomeLoss_iT_pp0p0_mtNILzaeU_zernTzun5Mne" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">NET LOSS</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-01to2023-12-31" id="Fact000268" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">3,501,518</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31" id="Fact000269" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,655,903</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--ComprehensiveIncomeNetOfTaxAbstract_iB" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">COMPREHENSIVE LOSS</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--NetIncomeLoss_i01_pp0p0_maCINOTzWvI_zJKfqyjraN04" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements.</span></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="fin_005"></span>CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS&#8217; EQUITY</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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  <tr id="xdx_409_eus-gaap--NetIncomeLoss_zCRtxja6t96h" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_403_eus-gaap--AdjustmentsToAdditionalPaidInCapitalOther_zpuPNpFTegt7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0337">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt">Foreign currency translation adjustment</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0343">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_405_eus-gaap--NetIncomeLoss_zDv5dtulBkya" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_40B_eus-gaap--NetIncomeLoss_zZy508CkqLo2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-012023-12-31_us-gaap_RetainedEarningsMember" id="Fact000414" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">3,501,518</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">Stock options granted under Equity <br/>Plan</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0418">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0421">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0422">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueNewIssues" contextRef="From2023-01-01to2023-12-31" id="Fact000423" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">667,016</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0427">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0428">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0429">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES</b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="fin_006"></span>CONSOLIDATED
STATEMENTS OF CASH FLOWS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInOtherAccruedLiabilities" contextRef="From2022-01-012022-12-31" id="Fact000513" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">960,292</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr id="xdx_40C_eus-gaap--IncreaseDecreaseInAccruedIncomeTaxesPayable_i03_pp0p0_maNCPBUz3xw_zlFQFHXBW9Gj" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 20pt; text-align: left">Taxes payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable" contextRef="From2023-01-01to2023-12-31" id="Fact000516" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">31,972</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0517">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0518">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--IncreaseDecreaseInOperatingLeaseLiability_i03_pp0p0_maNCPBUz3xw_z70WVRZdZ5k3" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 20pt; text-align: left; padding-bottom: 1.5pt">Operating lease liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0520">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" contextRef="From2022-01-012022-12-31" id="Fact000521" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">42,771</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" contextRef="From2021-01-012021-12-31" id="Fact000522" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">23,786</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_40D_eus-gaap--NetCashProvidedByUsedInOperatingActivities_i01T_pp0p0_mtNCPBUz3xw_maCCERCzXyI_z6XWD7fUe1Bi" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Net cash (used in) operating activities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInOperatingActivities" contextRef="From2023-01-01to2023-12-31" id="Fact000524" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">3,163,187</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInOperatingActivities" contextRef="From2022-01-012022-12-31" id="Fact000525" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">4,170,876</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInOperatingActivities" contextRef="From2021-01-012021-12-31" id="Fact000526" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,038,967</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40E_eus-gaap--NetCashProvidedByUsedInInvestingActivitiesAbstract_iB" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_401_eus-gaap--PaymentsToAcquirePropertyPlantAndEquipment_i01N_pp0p0_di_msNCPBUz2u8_zXZEYLGLgc59" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 20pt; text-align: left; padding-bottom: 1.5pt">Purchases of property and equipment</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" contextRef="From2023-01-01to2023-12-31" id="Fact000532" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,360,274</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" contextRef="From2022-01-012022-12-31" id="Fact000533" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">4,181,724</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" contextRef="From2021-01-012021-12-31" id="Fact000534" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">9,758</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_405_eus-gaap--NetCashProvidedByUsedInInvestingActivities_i01T_pp0p0_mtNCPBUz2u8_maCCERCzXyI_zBe5D09Yfw22" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Net cash (used in) investing activities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInInvestingActivities" contextRef="From2023-01-01to2023-12-31" id="Fact000536" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,360,274</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInInvestingActivities" contextRef="From2022-01-012022-12-31" id="Fact000537" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">4,181,724</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInInvestingActivities" contextRef="From2021-01-012021-12-31" id="Fact000538" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">9,758</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40F_eus-gaap--NetCashProvidedByUsedInFinancingActivitiesAbstract_iB" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--ProceedsFromIssuanceInitialPublicOffering_i01_pp0p0_maNCPBUzg6u_zbwtJu7sfBxl" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceInitialPublicOffering" contextRef="From2022-01-012022-12-31" id="Fact000545" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">18,048,369</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0546">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--FinanceLeasePrincipalPayments_i01N_pp0p0_di_msNCPBUzg6u_zwMXsYATPVlj" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:FinanceLeasePrincipalPayments" contextRef="From2022-01-012022-12-31" id="Fact000549" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">8,391</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr id="xdx_401_eus-gaap--ProceedsFromContributedCapital_i01_pp0p0_maNCPBUzg6u_zsr7U0mocdel" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 20pt; text-align: left">Proceeds from shareholder contribution</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0552">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0553">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:ProceedsFromContributedCapital" contextRef="From2021-01-012021-12-31" id="Fact000554" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">717,949</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--ProceedsFromShortTermDebt_i01_pp0p0_maNCPBUzg6u_z7REr4hEp1Zg" style="vertical-align: bottom; background-color: White">
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    <td>&#160;</td><td>&#160;</td>
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  <tr id="xdx_40F_eus-gaap--CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsIncludingDisposalGroupAndDiscontinuedOperations_iE_pp0p0_zJ2lDOBjXxR6" style="vertical-align: bottom; background-color: White">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_403_eus-gaap--SupplementalCashFlowInformationAbstract_iB" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0602">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying notes are an integral part of these consolidated financial statements.</span></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<!-- Field: Page; Sequence: 108 -->
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    <div style="break-before: page; margin-top: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="width: 100%">&#160;</td></tr></table></div>
    <!-- Field: /Page -->

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000604" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock"><p id="xdx_800_eus-gaap--OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock_zZtZSjIHZoyf" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span id="fin_007"></span>NOTE
1 - <span id="xdx_821_z84iaZ27yPYi">ORGANIZATION AND BUSINESS</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
Living Application Group Inc. (&#8220;ILA&#8221;) and its consolidated subsidiaries (collectively referred to as the &#8220;Company&#8221;)
are in the business of the manufacture and sale of door locksets. The Company sells its door locksets primarily to customers in the United
States of America (&#8220;US&#8221;) and Canada.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ILA
is a holding company incorporated in the Cayman Islands on July 17, 2019, under the Cayman Islands Companies Act as an exempted company
with limited liability. ILA has no substantive operations other than holding all of the outstanding share capital of Intelligent Living
Application Group Limited (&#8220;ILA BVI&#8221;). ILA BVI was established under the laws of the British Virgin Islands on March 19,
2014; and it is a company holding all of the outstanding equity of Kambo Hardware Limited, Kambo Locksets Limited, Bamberg (HK) Limited,
Hing Fat Industrial Limited and Dongguan Xingfa Hardware Products Co., Ltd.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 15, 2022, the Company closed its initial public offering (&#8220;IPO&#8221;) of <span id="xdx_902_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20220714__20220715__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_zRrePQWHRzO9" title="Shares issued on initial public offering"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2022-07-142022-07-15_us-gaap_IPOMember" id="Fact000606" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,060,000</ix:nonFraction></span> ordinary shares, par value $<span id="xdx_905_eus-gaap--CommonStockParOrStatedValuePerShare_iI_c20220715__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_zwaidg7TDqqe" title="Ordinary shares, par value"><ix:nonFraction name="us-gaap:CommonStockParOrStatedValuePerShare" contextRef="AsOf2022-07-15_us-gaap_IPOMember" id="Fact000608" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">0.0001</ix:nonFraction></span> per
share, priced at $<span id="xdx_900_eus-gaap--SaleOfStockPricePerShare_iI_c20220715__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_z2N62cPVgISl" title="Share price"><ix:nonFraction name="us-gaap:SaleOfStockPricePerShare" contextRef="AsOf2022-07-15_us-gaap_IPOMember" id="Fact000610" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">4.00</ix:nonFraction></span> per share. The aggregate gross proceeds from the IPO were $<span id="xdx_903_eus-gaap--ProceedsFromIssuanceInitialPublicOffering_pn4n6_c20220714__20220715__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_zYwUYe66OPYb" title="Proceeds from aggregate gross"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceInitialPublicOffering" contextRef="From2022-07-142022-07-15_us-gaap_IPOMember" id="Fact000612" format="ixt:numdotdecimal" decimals="-4" scale="6" unitRef="USD">20.24</ix:nonFraction></span> million, before deducting underwriting discounts
and other related expenses. The ordinary shares of the Company began trading on the Nasdaq Capital Market on July 13, 2022 under the
ticker symbol &#8220;ILAG.&#8221;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img src="fin_003.jpg" alt=""/></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<ix:exclude><!-- Field: Page; Sequence: 109 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="width: 100%">&#160;</td></tr></table></div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000614" name="us-gaap:ConsolidationLessThanWhollyOwnedSubsidiaryParentOwnershipInterestEffectsOfChangesNetTextBlock"><p id="xdx_894_eus-gaap--ConsolidationLessThanWhollyOwnedSubsidiaryParentOwnershipInterestEffectsOfChangesNetTextBlock_zbhx9jsKCK83" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Below
is a summary of legal entities controlled by ILA after the reorganization.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8BD_zhyIksx6XQ5j" style="display: none">SUMMARY
OF LEGAL ENTITIES CONTROLLED BY ILA AFTER THE REORGANIZATION</span></span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 34%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 17%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Date
    of</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 17%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Place
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 2%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 26%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Legal
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    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>incorporation</b></span></td>
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    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>incorporation</b></span></td>
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    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Principal
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    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_903_edei--EntityIncorporationDateOfIncorporation_c20230101__20231231__dei--LegalEntityAxis__custom--IntelligentLivingApplicationGroupLimitedMember_zZV52Ka8agf2" title="Date of incorporation"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_IntelligentLivingApplicationGroupLimitedMember" format="ixt:datemonthdayyearen" id="Fact000622" name="dei:EntityIncorporationDateOfIncorporation">March
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_907_ecustom--PlaceOfIncorporation_c20230101__20231231__dei--LegalEntityAxis__custom--IntelligentLivingApplicationGroupLimitedMember_zr0GwMi9tJV8" title="Place of incorporation"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_IntelligentLivingApplicationGroupLimitedMember" id="Fact000624" name="ILAG:PlaceOfIncorporation">British
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span id="xdx_901_ecustom--EntityPrincipalActivities_c20230101__20231231__dei--LegalEntityAxis__custom--IntelligentLivingApplicationGroupLimitedMember_zYXNYdXouzP6" title="Principal activities"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_IntelligentLivingApplicationGroupLimitedMember" id="Fact000626" name="ILAG:EntityPrincipalActivities">Intermediate
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    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kambo
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kambo
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    </tr>
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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</ix:nonNumeric><p id="xdx_8AF_zPnHEGftvo0j" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000658" name="us-gaap:SignificantAccountingPoliciesTextBlock"><p id="xdx_806_eus-gaap--SignificantAccountingPoliciesTextBlock_zl75hw7czlY9" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
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<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000660" name="us-gaap:BasisOfAccountingPolicyPolicyTextBlock"><p id="xdx_847_eus-gaap--BasisOfAccountingPolicyPolicyTextBlock_zTdWS40bILYg" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_863_zHtn8Kja4UV5">Basis
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<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (&#8220;US GAAP&#8221;).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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of consolidation</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All subsidiaries are wholly-owned.
All significant intercompany transactions and balances have been eliminated upon consolidation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements have been prepared on a historical cost basis, except for financial assets and financial liabilities
which have been measured at fair value. The consolidated financial statements are presented in United States dollars (&#8220;USD&#8221;).</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000664" name="us-gaap:UseOfEstimates"><p id="xdx_84E_eus-gaap--UseOfEstimates_zO9XZaKgp0Oi" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86E_z3APoynas3i8">Use
of estimates</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the reporting periods presented. Significant accounting
estimates reflected in the Company&#8217;s consolidated financial statements include the useful lives and residual value of property
and equipment. Actual results could differ from those estimates.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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currency translation</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s reporting currency is the USD. The functional currency of its Hong Kong subsidiaries is the Hong Kong dollar (the &#8220;HKD&#8221;),
and the functional currency of its PRC subsidiary is the Renminbi (the &#8220;RMB&#8221;). Results of operations and cash flows are translated
at the average exchange rates during the period, and assets and liabilities are translated at the exchange rate at the end of the period.
Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Translation adjustments resulting
from this process are included in accumulated other comprehensive gain (loss). Transaction gains and losses that arise from exchange
rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations
as incurred. </span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 110 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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of amounts from HKD into USD has been made at the following exchange rates:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;<span id="xdx_8BA_zdXDarol4ZOk" style="display: none">SCHEDULE
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Balance sheet items, except for equity accounts:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; width: 78%">December 31, 2023</td><td style="width: 2%">&#160;</td>
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</td><td style="width: 1%; text-align: left">&#160;</td></tr>
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    <td style="padding-left: 10pt">December 31, 2022</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">HKD <span id="xdx_902_eus-gaap--ForeignCurrencyExchangeRateTranslation1_iI_uPure_c20221231__srt--CurrencyAxis__currency--HKD_zZOBPrK4Jqb9" title="Translation rate for balance sheet items, except for equity accounts"><ix:nonFraction name="us-gaap:ForeignCurrencyExchangeRateTranslation1" contextRef="AsOf2022-12-31_currency_HKD" id="Fact000674" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">7.80</ix:nonFraction></span> to $<span id="xdx_902_eus-gaap--ForeignCurrencyExchangeRateTranslation1_iI_uPure_c20221231_z3DXGZgvMqU" title="Translation rate for balance sheet items, except for equity accounts"><ix:nonFraction name="us-gaap:ForeignCurrencyExchangeRateTranslation1" contextRef="AsOf2022-12-31" id="Fact000676" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">1</ix:nonFraction></span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt">December 31, 2021</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Statement of operations and cash flow items:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt">For the year ended December 31, 2021</td><td>&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Translation
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-left: auto; border-collapse: collapse; width: 80%; margin-right: auto">
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Balance sheet items, except for equity accounts:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; width: 78%">December 31, 2023</td><td style="width: 2%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt">December 31, 2022</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt">December 31, 2021</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Statement of operations and cash flow items:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt">For the year ended December 31, 2023</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">RMB <span id="xdx_90F_ecustom--Foreigncurrencyexchangeratetranslation2_iI_uPure_c20231231__srt--CurrencyAxis__currency--CNY_z7dCiaH8tCK8" title="Translation rate for statement of operations and cash flow items"><ix:nonFraction name="ILAG:Foreigncurrencyexchangeratetranslation2" contextRef="AsOf2023-12-31_currency_CNY" id="Fact000706" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">7.05</ix:nonFraction></span> to $<span id="xdx_904_ecustom--Foreigncurrencyexchangeratetranslation2_iI_uPure_c20231231_zGKWIzNLo0Cd" title="Translation rate for statement of operations and cash flow items"><ix:nonFraction name="ILAG:Foreigncurrencyexchangeratetranslation2" contextRef="AsOf2023-12-31" id="Fact000708" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">1</ix:nonFraction></span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt">For the year ended December 31, 2022</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">RMB <span id="xdx_905_ecustom--Foreigncurrencyexchangeratetranslation2_iI_uPure_c20221231__srt--CurrencyAxis__currency--CNY_z4oPJ0p5Dx6e" title="Translation rate for statement of operations and cash flow items"><ix:nonFraction name="ILAG:Foreigncurrencyexchangeratetranslation2" contextRef="AsOf2022-12-31_currency_CNY" id="Fact000710" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">6.7</ix:nonFraction><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</span></span> to $<span id="xdx_90E_ecustom--Foreigncurrencyexchangeratetranslation2_iI_uPure_c20221231_zjbSbiK7nzb" title="Translation rate for statement of operations and cash flow items"><ix:nonFraction name="ILAG:Foreigncurrencyexchangeratetranslation2" contextRef="AsOf2022-12-31" id="Fact000712" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">1</ix:nonFraction></span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt">For the year ended December 31, 2021</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">RMB <span id="xdx_90C_ecustom--Foreigncurrencyexchangeratetranslation2_iI_uPure_c20211231__srt--CurrencyAxis__currency--CNY_zxlCGPy29bT1" title="Translation rate for statement of operations and cash flow items"><ix:nonFraction name="ILAG:Foreigncurrencyexchangeratetranslation2" contextRef="AsOf2021-12-31_currency_CNY" id="Fact000714" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">6.45</ix:nonFraction></span> to $<span id="xdx_904_ecustom--Foreigncurrencyexchangeratetranslation2_iI_uPure_c20211231_zIXV0ux7kVIh" title="Translation rate for statement of operations and cash flow items"><ix:nonFraction name="ILAG:Foreigncurrencyexchangeratetranslation2" contextRef="AsOf2021-12-31" id="Fact000716" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">1</ix:nonFraction></span></td><td style="text-align: left">&#160;</td></tr>
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</ix:nonNumeric><p id="xdx_8A1_zmWflRuO1tef" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000718" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><p id="xdx_846_eus-gaap--CashAndCashEquivalentsPolicyTextBlock_zOfOcQFoI2z3" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_862_zM5zDtVoK5p3">Cash
and cash equivalents</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash
and cash equivalents comprise cash on hand and at banks, which are not restricted as to use; and highly liquid investments that are readily
convertible into known amounts of cash, which have a short maturity of generally within three months when acquired. As of December 31,
2023 and 2022, the Company did not have any cash equivalents. The Company maintains bank accounts in the PRC and Hong Kong.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000720" name="us-gaap:CreditLossFinancialInstrumentPolicyTextBlock"><p id="xdx_849_eus-gaap--CreditLossFinancialInstrumentPolicyTextBlock_zSwGrYcMe9o3" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_866_z37hK59B95H8">Expected
credit losses</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
January 1, 2023, the Company adopted ASC 326, Credit Losses (&#8220;ASC 326&#8221;), which replaced previously issued guidance regarding
the impairment of financial instruments with an expected loss methodology that will result in more timely recognition of credit losses.
The Company used a modified retrospective approach and did not restate the comparable prior periods. The adoption did not have a material
impact on the Company&#8217;s consolidated financial statement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In accordance with ASC 326, the Company maintains an allowance for credit losses in accordance with ASC 326 and records the allowance for credit
losses, if warranted, as an offset to assets such as accounts receivable, and the estimated credit losses charged to the allowance are classified
as general and administrative expenses in the consolidated statements of operations and comprehensive loss. The Company assesses
collectability by reviewing receivables on a collective basis where similar characteristics exist, primarily based on the size and nature
of specific customers&#8217; receivables. In determining the amount of the allowance for credit losses, the Company considers historical
collectability based on past due status, the age of the receivable balances, credit quality of the Company&#8217;s customers based on
ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other
factors that may affect the Company&#8217;s ability to collect from customers. Bad debts are written off as incurred.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 111 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000722" name="us-gaap:InventoryPolicyTextBlock"><p id="xdx_84A_eus-gaap--InventoryPolicyTextBlock_zXhcW4NH3W8b" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_869_zTk4c1OowX7i">Inventories</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inventories
consist of raw materials, work-in-progress and finished goods. They are stated at the lower of cost or net realizable value, as determined
using the weighted average cost method. Management compares the cost of inventories with the related net realizable value and will set
up an allowance to write down the cost of inventories to its net realizable value, if it is lower than cost. As of December 31, 2023
and 2022, the Company determined that <span id="xdx_908_eus-gaap--InventoryValuationReserves_iI_do_c20231231_zyvQfKroDTG8" title="Allowance for inventory impairment"><span id="xdx_90D_eus-gaap--InventoryValuationReserves_iI_do_c20221231_zsw9lEh464yl" title="Allowance for inventory impairment"><ix:nonFraction name="us-gaap:InventoryValuationReserves" contextRef="AsOf2023-12-31" id="Fact000724" format="ixt-sec:numwordsen" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:InventoryValuationReserves" contextRef="AsOf2022-12-31" id="Fact000726" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></ix:nonFraction></span></span> allowance for slow-moving or obsolete inventories was necessary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000728" name="ILAG:OtherReceivablesPolicyTextBlock"><p id="xdx_843_ecustom--OtherReceivablesPolicyTextBlock_zLgv6QVbpebg" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_867_zz1ZPKZoPmTc">Other
receivables</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
receivables primarily include receivables from employees related to social security benefits and VAT receivable. Management reviews the
composition of other receivables and determines if an allowance for doubtful accounts is needed. A provision for doubtful accounts is
made when collection of the full amount is no longer probable. As of December 31, 2023 and 2022, the Company determined that <span id="xdx_90B_eus-gaap--AllowanceForDoubtfulAccountsPremiumsAndOtherReceivables_iI_do_c20231231_z6OyYQfsI9j7" title="Allowance for doubtful other receivables"><span id="xdx_901_eus-gaap--AllowanceForDoubtfulAccountsPremiumsAndOtherReceivables_iI_do_c20221231_zcWb0tvxUZV8" title="Allowance for doubtful other receivables"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsPremiumsAndOtherReceivables" contextRef="AsOf2023-12-31" id="Fact000730" format="ixt-sec:numwordsen" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsPremiumsAndOtherReceivables" contextRef="AsOf2022-12-31" id="Fact000732" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></ix:nonFraction></span></span> allowance
was necessary.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000734" name="ILAG:PrepaymentsAndDepositsPolicyTextBlock"><p id="xdx_84A_ecustom--PrepaymentsAndDepositsPolicyTextBlock_z1PBxKRJPKC2" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86B_zdUWmfgU8AI3">Prepayments
and deposits</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prepayments
consisted mainly of prepaid marketing research expenses, prepaid manufacture expenses, prepaid research and development expenses, prepaid
taxes, prepaid insurance, and prepaid software license. As of December 31, 2023 and 2022, prepaid marketing research expenses amounted
to $<span id="xdx_906_ecustom--PrepaidMarketingResearchExpenses_iI_c20231231_zr20LuL6fLi2" title="Prepaid marketing research expenses"><ix:nonFraction name="ILAG:PrepaidMarketingResearchExpenses" contextRef="AsOf2023-12-31" id="Fact000736" format="ixt:numdotdecimal" decimals="0" unitRef="USD">755,355</ix:nonFraction></span> and $<span id="xdx_903_ecustom--PrepaidMarketingResearchExpenses_iI_dxL_c20221231_zEjNCqIoFxuc" title="Prepaid marketing research expenses::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl0738">nil</span></span>, prepaid manufacture expenses amounted to $<span id="xdx_90C_ecustom--PrepaidManufactureExpenses_iI_c20231231_ztliRRTjqhp4" title="Prepaid manufacture expenses"><ix:nonFraction name="ILAG:PrepaidManufactureExpenses" contextRef="AsOf2023-12-31" id="Fact000740" format="ixt:numdotdecimal" decimals="0" unitRef="USD">399,442</ix:nonFraction></span> and <span id="xdx_900_ecustom--PrepaidManufactureExpenses_iI_dxL_c20221231_zUrAmtGOACGg" title="Prepaid manufacture expenses::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl0742">nil</span></span>, and prepaid research and development expenses amounted
to $<span id="xdx_90C_ecustom--PrepaidResearchAndDevelopmentExpenses_iI_c20231231_zJEqvGOiDQq6" title="Prepaid research and development expenses"><ix:nonFraction name="ILAG:PrepaidResearchAndDevelopmentExpenses" contextRef="AsOf2023-12-31" id="Fact000744" format="ixt:numdotdecimal" decimals="0" unitRef="USD">299,581</ix:nonFraction></span> and <span id="xdx_90A_ecustom--PrepaidResearchAndDevelopmentExpenses_iI_dxL_c20221231_zJp5awh1Ts14" title="Prepaid research and development expenses::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl0746">nil</span></span>, respectively. Deposits, a non-current asset, are related to long-term office rental. These amounts are refundable
and bear no interest. Prepayments and deposits are classified as either current or non-current based on the terms of the respective agreements.
These prepayments are unsecured and are reviewed periodically to determine whether their carrying value has become impaired. As of December
31, 2023 and 2022, management believes that the Company&#8217;s prepayments and deposits are <span id="xdx_905_ecustom--AllowanceForPrepaymentsAndDepositsImpairment_iI_do_c20221231_zUBHJRYGlcNe" title="Allowance for prepayments and deposits impairment"><ix:nonFraction name="ILAG:AllowanceForPrepaymentsAndDepositsImpairment" contextRef="AsOf2022-12-31" id="Fact000748" format="ixt-sec:numwordsen" decimals="0" unitRef="USD">no</ix:nonFraction></span></span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">t
impaired.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000750" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><p id="xdx_84F_eus-gaap--PropertyPlantAndEquipmentPolicyTextBlock_z8RkCHnsPhoj" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_861_zpmmkdERcZ86">Property
and equipment</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Property
and equipment are stated at cost net of accumulated depreciation, amortization and impairment, if necessary. Depreciation and amortization
are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service.
Estimated useful lives are as follows:</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000752" name="ILAG:ScheduleOfUsefulLivesOfPropertyAndEquipmentTableTextBlock"><p id="xdx_897_ecustom--ScheduleOfUsefulLivesOfPropertyAndEquipmentTableTextBlock_zk26i7QBKcf" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B6_zF2JsGEEdvzg" style="display: none">SCHEDULE OF USEFUL LIVES OF PROPERTY AND EQUIPMENT</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: White">
    <td style="border-bottom: Black 1.5pt solid; width: 28%; font-weight: bold">Category</td><td style="width: 2%; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 70%; font-weight: bold; text-align: center">Estimated useful life</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Office equipment</td><td>&#160;</td>
    <td><span id="xdx_90A_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--OfficeEquipmentMember__srt--RangeAxis__srt--MinimumMember_zbUmvBnTm4Q8" title="Estimated useful life"><ix:nonNumeric contextRef="AsOf2023-12-31_us-gaap_OfficeEquipmentMember_srt_MinimumMember" format="ixt-sec:duryear" id="Fact000754" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric></span>-<span id="xdx_90F_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--OfficeEquipmentMember__srt--RangeAxis__srt--MaximumMember_zf8wSl0uNUya" title="Estimated useful life"><ix:nonNumeric contextRef="AsOf2023-12-31_us-gaap_OfficeEquipmentMember_srt_MaximumMember" format="ixt-sec:duryear" id="Fact000756" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">10</ix:nonNumeric></span> years</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Production equipment</td><td>&#160;</td>
    <td><span id="xdx_903_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--EquipmentMember__srt--RangeAxis__srt--MinimumMember_zdZPpLbnrEqb" title="Estimated useful life"><ix:nonNumeric contextRef="AsOf2023-12-31_us-gaap_EquipmentMember_srt_MinimumMember" format="ixt-sec:duryear" id="Fact000758" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric></span>-<span id="xdx_903_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--EquipmentMember__srt--RangeAxis__srt--MaximumMember_zp4m0ga0Ro49" title="Estimated useful life"><ix:nonNumeric contextRef="AsOf2023-12-31_us-gaap_EquipmentMember_srt_MaximumMember" format="ixt-sec:duryear" id="Fact000760" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">10</ix:nonNumeric></span> years</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Motor vehicles</td><td>&#160;</td>
    <td><span id="xdx_90E_eus-gaap--PropertyPlantAndEquipmentUsefulLife_iI_dtY_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--VehiclesMember__srt--RangeAxis__srt--MinimumMember_zUBkU0oKhRd5" title="Estimated useful life"><ix:nonNumeric contextRef="AsOf2023-12-31_us-gaap_VehiclesMember_srt_MinimumMember" format="ixt-sec:duryear" id="Fact000762" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric></span> years</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Leasehold improvements</td><td>&#160;</td>
    <td style="text-align: left"><span id="xdx_90C_eus-gaap--PropertyPlantAndEquipmentUsefulLifeDescriptionOfTermExtensibleEnumeration_iI_dxL_c20231231__us-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--LeaseholdImprovementsMember_zAtcfraFVAc2" title="::XDX::http%3A%2F%2Ffasb.org%2Fus-gaap%2F2023%23UsefulLifeShorterOfTermOfLeaseOrAssetUtilityMember"><span style="-sec-ix-hidden: xdx2ixbrl0763">Over the shorter of remaining lease term or the estimated useful lives of the assets</span></span></td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8AB_zNt1rLb7WFG2" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Repairs
and maintenance are charged to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment
are capitalized as additions to the related assets. The cost and related accumulated depreciation and amortization 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.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000765" name="us-gaap:RevenueFromContractWithCustomerPolicyTextBlock"><p id="xdx_841_eus-gaap--RevenueFromContractWithCustomerPolicyTextBlock_znBfV3dIcWFl" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_865_zPkN4wE7DJK7">Revenue
recognition</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows FASB ASC 606, Revenue from Contracts with Customers in accounting for its revenues. The core principle of the revenue
standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps
are applied to achieve that core principle:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
1: Identify the contract with the customer</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
2: Identify the performance obligations in the contract</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
3: Determine the transaction price</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
4: Allocate the transaction price to the performance obligations in the contract</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
5: Recognize the allocated revenue when the company satisfies a performance obligation</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 112 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="width: 100%">&#160;</td></tr></table></div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company derives substantially all of its revenue from product sales, specifically sale of door locksets, locksets and related hardware
to customers. Revenue from product sales is recognized when control passes to the customer, which generally occurs at a point in time
when products are delivered FOB (freight on board). Revenue is recorded net of tariffs, VAT and discounts.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000767" name="us-gaap:CostOfSalesPolicyTextBlock"><p id="xdx_84E_eus-gaap--CostOfSalesPolicyTextBlock_ziIavzPkNZrf" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_865_z4dazaQeYmy4">Cost
of goods sold</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of goods sold consists primarily of the cost of raw materials (mainly brass, stainless steel, iron and zinc alloy), direct and indirect
labor and related benefits, and manufacturing overhead that is directly attributable to the production process, and related production
costs from molding of raw materials to production of door locksets such as handles, panels and spindles, product assembly, quality control
and packaging and shipping. Write-down of inventory, export tax rebates, if any, are also recorded in cost of goods sold. For the years
ended December 31, 2023 and 2022, the Company received export tax rebates of approximately RMB<span id="xdx_909_ecustom--ExportTaxRebatesReceived_uRMB_c20230101__20231231_zI6oqONt9xb7" title="Export tax rebates received"><ix:nonFraction name="ILAG:ExportTaxRebatesReceived" contextRef="From2023-01-01to2023-12-31" id="Fact000769" format="ixt:numdotdecimal" decimals="0" unitRef="RMB">2,906,000</ix:nonFraction></span> (approximately $<span id="xdx_901_ecustom--ExportTaxRebatesReceived_c20230101__20231231_zVMfZi5rcKPj" title="Export tax rebates received"><ix:nonFraction name="ILAG:ExportTaxRebatesReceived" contextRef="From2023-01-01to2023-12-31" id="Fact000771" format="ixt:numdotdecimal" decimals="0" unitRef="USD">412,000</ix:nonFraction></span>) and
RMB<span id="xdx_90F_ecustom--ExportTaxRebatesReceived_uRMB_c20220101__20221231_zvX3OhvCQWig" title="Export tax rebates received"><ix:nonFraction name="ILAG:ExportTaxRebatesReceived" contextRef="From2022-01-012022-12-31" id="Fact000773" format="ixt:numdotdecimal" decimals="0" unitRef="RMB">6,628,000</ix:nonFraction></span> (approximately $<span id="xdx_909_ecustom--ExportTaxRebatesReceived_c20220101__20221231_zOo00Nv8adi8" title="Export tax rebates received"><ix:nonFraction name="ILAG:ExportTaxRebatesReceived" contextRef="From2022-01-012022-12-31" id="Fact000775" format="ixt:numdotdecimal" decimals="0" unitRef="USD">985,000</ix:nonFraction></span>), respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000777" name="ILAG:CostOfSalesIdleCapacityPolicyTextBlock"><p id="xdx_843_ecustom--CostOfSalesIdleCapacityPolicyTextBlock_znejsGDVt60h" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_868_zC8jhjtRTob1">Cost
of goods sold &#8211; idle capacity</span></i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Idle
capacity consists of direct production costs in excess of charges allocated to the Company&#8217;s finished goods in production. Such
costs relate primarily to depreciation expense related to the Company&#8217;s electroplating equipment that cannot be directly attributable
to the production process. Idle capacity expenses amounted to $<span id="xdx_908_ecustom--CostOfGoodsSoldIdleCapacity_c20230101__20231231_zLtfmMzd6Zsh" title="Idle capacity expenses"><ix:nonFraction name="ILAG:CostOfGoodsSoldIdleCapacity" contextRef="From2023-01-01to2023-12-31" id="Fact000779" format="ixt:numdotdecimal" decimals="0" unitRef="USD">345,424</ix:nonFraction></span> and <span id="xdx_903_ecustom--CostOfGoodsSoldIdleCapacity_dxL_c20220101__20221231_zJH3HVaaOHKc" title="Idle capacity expenses::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl0781">nil</span></span> for the years ended December 31, 2023 and 2022, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000783" name="ILAG:OtherIncomePolicyTextBlock"><p id="xdx_84E_ecustom--OtherIncomePolicyTextBlock_zgCRxdbYilw5" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_864_zUNNFn0b7K7f">Other
Income</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
income consists primarily of proceeds from sale of raw materials waste (mainly iron), and rental income from sublease of extra factory
space.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000785" name="us-gaap:LesseeLeasesPolicyTextBlock"><p id="xdx_848_eus-gaap--LesseeLeasesPolicyTextBlock_zMKBpvgDTDJ7" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_867_zxkD1g27aVQ4">Leases</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows FASB ASU 2016-02, &#8220;Leases&#8221; (Topic 842) and measures the lease liability based on the present value of
the lease payments discounted by the relevant borrowing rate and reduces the carrying value of the lease liability for lease payments
made.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company accounts for all significant leases as either operating or finance leases. At lease inception, if the lease meets any of the
following five criteria, the Company will classify it as a finance lease: (i) the lease transfers ownership of the underlying asset to
the Company by the end of the lease term, (ii) the lease grants the Company an option to purchase the underlying asset that the lessee
is reasonably certain to exercise, (iii) the lease term is for the major part of the remaining economic life of the underlying asset,
(iv) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected
in the lease payments equals or exceeds substantially all (90% or more) of the fair value of the underlying asset, or (v) 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. Otherwise,
the lease will be treated as an operating lease.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
leases with a term of 12 months or less, the Company is permitted to and did make an accounting policy election by class of underlying
assets not to recognize lease assets and lease liabilities. During the years ended December 31, 2023 and 2022, the Company recognized
lease expense for such leases on a straight-line basis over the lease term.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i></i></b></span></p>

<ix:exclude><!-- Field: Page; Sequence: 113 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000787" name="us-gaap:IncomeTaxPolicyTextBlock"><p id="xdx_849_eus-gaap--IncomeTaxPolicyTextBlock_zTaauoehv1Ai" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86A_zFhLak8Ypl5i">Income
taxes</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company accounts for income taxes in accordance with FASB ASC Section 740. The Company is subject to the tax laws of the PRC and Hong
Kong (a special administrative region of PRC). The charge for taxation is based on actual results for the year as adjusted for items
that are non-assessable or disallowed; and it is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date. The Company is not currently subject to tax in the Cayman Islands or the British Virgin Islands.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred
taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the Company&#8217;s consolidated financial statements and the corresponding tax basis used
in the computation of assessable tax profit of loss. 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 future taxable income can be utilized with deferred
tax liabilities and/or net operating loss carry forwards. 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 statement of operations, except
when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Net
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 net deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the
relevant taxing authorities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
uncertain tax position is recognized as a benefit only if it is &#8220;more likely than not&#8221; that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that
has a <span id="xdx_90B_eus-gaap--IncomeTaxExaminationLikelihoodOfUnfavorableSettlement_c20230101__20231231_zuDv5CZSllsa" title="Income tax examination, likelihood"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact000789" name="us-gaap:IncomeTaxExaminationLikelihoodOfUnfavorableSettlement">greater than 50% likelihood of being realized on examination</ix:nonNumeric></span>. For tax positions not meeting the &#8220;more likely than not&#8221;
test, no tax benefit is recorded. Penalties and interest incurred related to uncertain tax positions are classified in income tax expense
in the period incurred. Tax returns filed for the years ended December 31, 2020 to 2023 in the PRC and Hong Kong are subject to examination
by the applicable tax authorities.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000791" name="ILAG:TaxesOtherThanIncomeTaxPolicyTextBlock"><p id="xdx_84D_ecustom--TaxesOtherThanIncomeTaxPolicyTextBlock_zpK4sUZl7fkg" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86E_zs78Wzsilr4h">Value
added tax</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company is subject to value added tax (&#8220;VAT&#8221;) in the PRC. Revenue generated and purchases within the PRC from domestic suppliers
are generally subject to VAT at the rate of <span id="xdx_902_ecustom--ValueAddedTaxRate_pid_uPure_c20190401__20231231_z8kJRaQGH58e" title="Value added tax rate"><ix:nonFraction name="ILAG:ValueAddedTaxRate" contextRef="From2019-04-012023-12-31" id="Fact000793" format="ixt:numdotdecimal" decimals="INF" unitRef="Pure">13</ix:nonFraction></span>% starting in April 2019. Certain VAT is refundable after filing rebate applications. As
of December 31, 2023 and 2022, the Company is entitled to receive a refund of approximately $<span id="xdx_908_ecustom--ValueAddedTaxRefundReceivable_iI_c20231231_z0plx8YZQtM9" title="Value added tax refund receivable"><ix:nonFraction name="ILAG:ValueAddedTaxRefundReceivable" contextRef="AsOf2023-12-31" id="Fact000795" format="ixt:numdotdecimal" decimals="0" unitRef="USD">216,000</ix:nonFraction></span> and $<span id="xdx_906_eus-gaap--ValueAddedTaxReceivable_iI_c20221231_zDrPT27pk3M1" title="Value added tax refund receivable"><ix:nonFraction name="us-gaap:ValueAddedTaxReceivable" contextRef="AsOf2022-12-31" id="Fact000797" format="ixt:numdotdecimal" decimals="0" unitRef="USD">200,000</ix:nonFraction></span>, respectively, which
amounts are recorded in other receivables on the Company&#8217;s consolidated balance sheets.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000799" name="ILAG:RelatedPartiesPolicyTextBlock"><p id="xdx_841_ecustom--RelatedPartiesPolicyTextBlock_zmKzQf7FJgY9" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86C_zSAFzqlTARe">Related
parties</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Parties
are considered to be related to the Company if they, directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members
of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with
if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting
parties might be prevented from fully pursuing its separate interests.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000801" name="us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy"><p id="xdx_847_eus-gaap--ShareBasedCompensationOptionAndIncentivePlansPolicy_zdfRiM5rkkZf" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_860_zu8l6BoZ6Mnb">Share-based
compensation</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the &#8220;Equity
Plan&#8221;) on October 20, 2022, which was approved at the stockholders&#8217; meeting on December 16, 2022. The total aggregate ordinary
shares of the Company authorized for issuance during the term of the Equity Plan is limited to <span id="xdx_907_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAuthorized_iI_c20221216__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_z1kspayw7Qdg" title="Ordinary shares authorized for issuance"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAuthorized" contextRef="AsOf2022-12-16_custom_TwentyTwentyTwoOmnibusEquityPlanMember" id="Fact000803" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">2,500,000</ix:nonFraction></span> shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 22, 2023, (the &#8220;Grant Date&#8221;), the Compensation Committee of the Board of Directors (the &#8220;Board&#8221;) of
the Company granted stock options to purchase <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_c20230222__20230222__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_zkoLy0RO0Dbe" title="Number of options granted"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2023-02-222023-02-22_custom_TwentyTwentyTwoOmnibusEquityPlanMember" id="Fact000805" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">820,000</ix:nonFraction></span> ordinary shares of the Company (the &#8220;Shares&#8221;) at an exercise price
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and its subsidiaries (the &#8220;Grantees&#8221;). The Grants vested immediately on the Grant Date and each of the Grantees also entered
into a Stock Option Agreement with the Company on February 22, 2023. The options will expire five (<span id="xdx_90D_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1_dtY_c20230222__20230222__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_z5oaBrw837Zb" title="Option term"><ix:nonNumeric contextRef="From2023-02-222023-02-22_custom_TwentyTwentyTwoOmnibusEquityPlanMember" format="ixt-sec:duryear" id="Fact000809" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1">5</ix:nonNumeric></span>) years from the Grant Date and may
be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The related cost of share-based payments for the ordinary shares is measured by fair
value (&#8220;FV&#8221;) at the Grant Date. The FV is determined by using a binomial model. The cost is recognized in employee benefit
expenses recorded in the Company&#8217;s consolidated statements of operations and comprehensive loss, together with a corresponding amount
in additional paid-in capital.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i></i></b></span></p>

<ix:exclude><!-- Field: Page; Sequence: 114 -->
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    <div style="break-before: page; margin-top: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="width: 100%">&#160;</td></tr></table></div>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000811" name="us-gaap:ComprehensiveIncomePolicyPolicyTextBlock"><p id="xdx_841_eus-gaap--ComprehensiveIncomePolicyPolicyTextBlock_z3AwVa5f7l5j" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86F_zHxVcWnXxTAe">Comprehensive
income (loss)</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Comprehensive
income (loss) is defined as the increase or decrease in equity of the Company during a period from transactions and other events and
circumstances excluding transactions resulting from investments by owners and distributions to owners. Amongst other disclosures, ASC
220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components
of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements.
For each of the periods presented, the Company&#8217;s comprehensive loss included the net loss and foreign currency translation adjustments
that are presented in the consolidated statements of operations and comprehensive loss.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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reporting</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows ASC 280, Segment Reporting. The Company&#8217;s Chief Executive Officer as the chief operating decision-maker reviews
the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a
whole and has determined that the Company has only one reportable segment. The Company operates and manages its business as a single
segment.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000815" name="us-gaap:ScheduleOfRevenueFromExternalCustomersAttributedToForeignCountriesByGeographicAreaTextBlock"><p id="xdx_89D_eus-gaap--ScheduleOfRevenueFromExternalCustomersAttributedToForeignCountriesByGeographicAreaTextBlock_zYGyRwneZPk4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the Company&#8217;s revenue from customers by geographical areas based on the location of the customers:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B3_zghP36WtEj8" style="display: none">SCHEDULE
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td id="xdx_98E_eus-gaap--RevenueFromContractWithCustomerExcludingAssessedTax_c20210101__20211231__srt--StatementGeographicalAxis__country--US_zt5yV84mL6R1" title="Revenue from customers" style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax" contextRef="From2021-01-012021-12-31_country_US" id="Fact000821" format="ixt:numdotdecimal" decimals="0" unitRef="USD">12,233,382</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">Canada</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</ix:nonNumeric><p id="xdx_8A3_zCVsxCuHlH29" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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following table sets forth the Company&#8217;s property and equipment, for the purpose of geographical information:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8BF_zyRi0sdMh993" style="display: none">SCHEDULE
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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="width: 64%">PRC</td><td style="width: 2%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</ix:nonNumeric><p id="xdx_8AF_zMVXgWIKIFNl" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000849" name="us-gaap:EarningsPerSharePolicyTextBlock"><p id="xdx_843_eus-gaap--EarningsPerSharePolicyTextBlock_zA7dYIlK7Hx" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_86F_zoONsxzJLTkd">Earnings
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<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with ASC 260, Earnings per Share, basic earnings (loss) per share is computed by dividing net income (loss) attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted income per share is calculated
by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any,
by the weighted average number of ordinary shares and dilutive ordinary equivalent shares outstanding during the period. Ordinary share
equivalents are excluded from the computation of diluted income per share as their effects would be anti-dilutive.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000851" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock"><p id="xdx_84A_eus-gaap--NewAccountingPronouncementsPolicyPolicyTextBlock_zsXgdxzEjKK5" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Recent
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<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about an
entity&#8217;s effective tax rate reconciliation and additional discloses on income taxes paid. The new requirements are effective for
annual periods beginning after December 15, 2024. The guidance is to be applied prospectively, with an option for retrospective application.
The Company is currently evaluating the impact of this new guidance.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on its consolidated financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<ix:exclude><!-- Field: Page; Sequence: 115 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

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<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 80%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 34%; text-align: left">Customer A</td><td style="width: 2%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Details
of the customers which accounted for 10% or more of the Company&#8217;s accounts receivable are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

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</ix:nonNumeric><p id="xdx_8A4_ziLlyXDL72Pc" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000949" name="ILAG:LiquidityRiskPolicyTextBlock"><p id="xdx_84C_ecustom--LiquidityRiskPolicyTextBlock_z5QoDD1EjV7e" style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Liquidity risk</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company reported consecutive years of net loss of approximately $<span id="xdx_901_eus-gaap--NetIncomeLoss_iN_pn5n6_di_c20230101__20231231_zWrQCqxZSfsa" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-01to2023-12-31" id="Fact000951" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">3.5</ix:nonFraction></span> million and $<span id="xdx_909_eus-gaap--NetIncomeLoss_iN_pn5n6_di_c20220101__20221231_zY9eCQdrJ67e" title="Net loss"><ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31" id="Fact000953" format="ixt:numdotdecimal" decimals="-5" scale="6" sign="-" unitRef="USD">1.7</ix:nonFraction></span> million for the years ended December 31, 2023 and
2022, respectively. In light of the dependency on its key customers and significant decline in its revenues (from approximately $<span id="xdx_906_eus-gaap--Revenues_pn5n6_c20220101__20221231_znKu80yBRjUc" title="Revenues"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2022-01-012022-12-31" id="Fact000955" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">12.2</ix:nonFraction></span>
million for the year ended December 31, 2022 to $<span id="xdx_902_eus-gaap--Revenues_pn5n6_c20230101__20231231_z6bBWUOEZxt2" title="Revenues"><ix:nonFraction name="us-gaap:Revenues" contextRef="From2023-01-01to2023-12-31" id="Fact000957" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">6.4</ix:nonFraction></span> million for the year ended December 31, 2023), the Company&#8217;s operating cash
flows and liquidity could be negatively impacted by the risk of potential loss of business (or reduction in purchase orders) from any
such customers. The Company has historically funded its working capital needs from operations, equity financing and bank loans. In managing
the Company&#8217;s liquidity risk, management monitors the Company&#8217;s operating cash flows, evaluates its collection risk and priorities
its capital spending. As of December 31, 2023, the Company had cash of approximately $<span id="xdx_907_eus-gaap--Cash_iI_pn5n6_c20231231_z9iCyT0B5wh1" title="Cash"><ix:nonFraction name="us-gaap:Cash" contextRef="AsOf2023-12-31" id="Fact000959" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">4.5</ix:nonFraction></span> million. Based on the Company&#8217;s current
business plan and cash flows projection, management believes the operating activities and existing funds can provide sufficient liquidity
to meet the Company&#8217;s working capital requirements for at least twelve months from the date of this report.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000961" name="ILAG:SupplierRiskPolicyTextBlock"><p id="xdx_84F_ecustom--SupplierRiskPolicyTextBlock_zY3kgHmoT7Yc" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_868_z7VNBljeCIZh">Supplier
risk</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s operations are dependent on a limited number of suppliers for its major raw materials. There can be no assurance that
the Company will be able to secure the raw materials supply from these suppliers. Any termination or suspension of the supply arrangements,
any change in cooperation terms, or the deterioration of cooperation relationships with these suppliers may materially and adversely
affect the Company&#8217;s results of operations.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact000963" name="ILAG:SchedulesOfSupplierRiskByRiskFactorTextBlock"><p id="xdx_89F_ecustom--SchedulesOfSupplierRiskByRiskFactorTextBlock_zWcTW2JTJjEj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Details
of the suppliers accounting for 10% or more of total purchases are as follows:</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8BA_zVoN2HGmvT04" style="display: none">SCHEDULES OF SUPPLIER RISK</span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Details
of the suppliers which accounted for 10% or more of accounts payable are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</ix:nonNumeric><p id="xdx_8A6_zkk3kRDrmHh8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001033" name="ILAG:ForeignCurrencyRiskPolicyTextBlock"><p id="xdx_84C_ecustom--ForeignCurrencyRiskPolicyTextBlock_zRBYHTwiznu5" style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i><span id="xdx_864_zkHJzzNoWTnj">Foreign
currency risk</span></i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People&#8217;s Bank
of China, controls the conversion of RMBs into foreign currencies. The value of the RMB is subject to changes in central government policies
and international economic and political developments that affect supply and demand in the China Foreign Exchange Trading System market
of cash and cash equivalents and restricted cash. The Company had $<span id="xdx_906_eus-gaap--CashAndCashEquivalentsAtCarryingValue_iI_uRMB_c20231231_zT19J746rTlh" title="Cash and cash equivalents"><ix:nonFraction name="us-gaap:CashAndCashEquivalentsAtCarryingValue" contextRef="AsOf2023-12-31" id="Fact001035" format="ixt:numdotdecimal" decimals="0" unitRef="RMB">81,226</ix:nonFraction></span> and $<span id="xdx_90C_eus-gaap--CashAndCashEquivalentsAtCarryingValue_iI_uRMB_c20221231_zTNezMYoivCc" title="Cash and cash equivalents"><ix:nonFraction name="us-gaap:CashAndCashEquivalentsAtCarryingValue" contextRef="AsOf2022-12-31" id="Fact001037" format="ixt:numdotdecimal" decimals="0" unitRef="RMB">263,350</ix:nonFraction></span> of cash and cash equivalents denominated in RMB
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
transactions of the Company are denominated in HKD which is different from the functional currency of the Company, and therefore the
Company is exposed to foreign currency risk. As the HKD is currently pegged to the USD, management considers that there is no significant
foreign currency risk arising from the Company&#8217;s monetary assets denominated in USD.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 116 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company currently does not have a foreign currency hedging policy. However, management monitors the Company&#8217;s foreign exchange
exposure periodically and will consider hedging significant foreign exchange exposure should the need arise.</span></p>

</ix:nonNumeric><p id="xdx_85A_zNd6eltpX656" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001039" name="us-gaap:AccountsAndNontradeReceivableTextBlock"><p id="xdx_808_eus-gaap--AccountsAndNontradeReceivableTextBlock_z6CSE1E3a8p3" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
3 - <span id="xdx_824_z8nt3s5b3MP">ACCOUNTS RECEIVABLE</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001041" name="us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock"><p id="xdx_898_eus-gaap--ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock_zDNgWJ5moDTg" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts
receivable as of December 31, 2023 and 2022 consisted of the following:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B0_zdHE9lE1WDie" style="display: none">SCHEDULE OF ACCOUNTS RECEIVABLE</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_497_20231231_zrCfBxoy2V7j" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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    <td style="width: 64%; text-align: left">Accounts receivable</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableGrossCurrent" contextRef="AsOf2023-12-31" id="Fact001043" format="ixt:numdotdecimal" decimals="0" unitRef="USD">445,500</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableGrossCurrent" contextRef="AsOf2022-12-31" id="Fact001044" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,624,809</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr id="xdx_408_eus-gaap--AllowanceForDoubtfulAccountsReceivableCurrent_iNI_di_msARNCzsfN_zitn1aNmAuuk" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Less: allowance for estimated credit losses</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1046">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1047">&#8212;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--AccountsReceivableNetCurrent_iTI_mtARNCzsfN_z1tDaVCKRrtk" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 2.5pt"><span style="display: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts receivable,
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    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccountsReceivableNetCurrent" contextRef="AsOf2022-12-31" id="Fact001050" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,624,809</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
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</ix:nonNumeric><p id="xdx_8A8_zYUiljMY5ZRc" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, 2022 and 2021, <span id="xdx_904_eus-gaap--AllowanceForDoubtfulAccountsReceivableCurrent_iI_dxL_c20231231_ztLLDvYuo531" title="Allowance for doubtful accounts::XDX::-"><span id="xdx_905_eus-gaap--AllowanceForDoubtfulAccountsReceivableCurrent_iI_dxL_c20221231_zWruZQbM26N2" title="Allowance for doubtful accounts::XDX::-"><span id="xdx_90F_eus-gaap--AllowanceForDoubtfulAccountsReceivableCurrent_iI_dxL_c20211231_zW8hc0aIK9i8" title="Allowance for doubtful accounts::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1052"><span style="-sec-ix-hidden: xdx2ixbrl1054"><span style="-sec-ix-hidden: xdx2ixbrl1056">no</span></span></span></span></span></span>
allowance for estimated credit losses has been established as management believes that amounts outstanding are fully collectible.
For the year ended December 31, 2023 and 2022, the Company had written-off uncollectible accounts receivable of <span id="xdx_908_eus-gaap--AllowanceForDoubtfulAccountsReceivableWriteOffs_dxL_c20230101__20231231_zpEAX6pjRbV3" title="Written-off uncollectible accounts receivable::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1058">nil</span></span>
and $<span id="xdx_90A_eus-gaap--AllowanceForDoubtfulAccountsReceivableWriteOffs_c20220101__20221231_zIEcFEQe9xA" title="Written-off uncollectible accounts receivable"><ix:nonFraction name="us-gaap:AllowanceForDoubtfulAccountsReceivableWriteOffs" contextRef="From2022-01-012022-12-31" id="Fact001060" format="ixt:numdotdecimal" decimals="0" unitRef="USD">105,204</ix:nonFraction></span>
respectively. As the date of this report, the Company&#8217;s accounts receivable as of December 31, 2023 have been collected in
full.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001062" name="us-gaap:InventoryDisclosureTextBlock"><p id="xdx_80E_eus-gaap--InventoryDisclosureTextBlock_zfo8VpEVyXv5" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
4 - <span id="xdx_822_zbYEdMzG5kWd">INVENTORIES</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001064" name="us-gaap:ScheduleOfInventoryCurrentTableTextBlock"><p id="xdx_89D_eus-gaap--ScheduleOfInventoryCurrentTableTextBlock_zm5w7rHkm9Nj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
composition of inventories are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8BD_zVYyzNZTAEsg" style="display: none">SCHEDULE OF THE COMPOSITION OF INVENTORY</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_406_eus-gaap--InventoryWorkInProcess_iI_maINzdHC_zhq3wqCvTvcj" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_409_eus-gaap--InventoryNet_iTI_mtINzdHC_zTZauKOgYvt5" style="vertical-align: bottom; background-color: White">
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</ix:nonNumeric><p id="xdx_8A8_zTqzgLsORIwk" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
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<!-- Field: Split-Segment; Name: 001 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001082" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><p id="xdx_804_eus-gaap--PropertyPlantAndEquipmentDisclosureTextBlock_zeZyoMyjrVdb" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
5 - <span id="xdx_820_zmHkpt9xcjo9">PROPERTY AND EQUIPMENT, NET</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001084" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><p id="xdx_897_eus-gaap--PropertyPlantAndEquipmentTextBlock_zGans3OKybTf" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Property
and equipment, net consisted of the following:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B3_zRLPoSIlgGvf" style="display: none">SCHEDULE OF PROPERTY AND EQUIPMENT NET</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_40A_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--OfficeEquipmentMember_z0JQOhHePa62" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentGross" contextRef="AsOf2022-12-31_us-gaap_OfficeEquipmentMember" id="Fact001087" format="ixt:numdotdecimal" decimals="0" unitRef="USD">187,234</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr id="xdx_402_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--EquipmentMember_zZvkrhdiWkCg" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentGross" contextRef="AsOf2022-12-31_us-gaap_EquipmentMember" id="Fact001090" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,357,634</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--VehiclesMember_zaihoaFRO4Wj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentGross" contextRef="AsOf2022-12-31_us-gaap_VehiclesMember" id="Fact001093" format="ixt:numdotdecimal" decimals="0" unitRef="USD">389,333</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--LeaseholdImprovementsMember_zGAoYX9WgZT3" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Leasehold improvements</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentGross" contextRef="AsOf2022-12-31_us-gaap_LeaseholdImprovementsMember" id="Fact001096" format="ixt:numdotdecimal" decimals="0" unitRef="USD">95,539</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_400_eus-gaap--PropertyPlantAndEquipmentGross_iI_hus-gaap--PropertyPlantAndEquipmentByTypeAxis__us-gaap--LeaseholdImprovementsMember_zRFWLg7doOh2" style="display: none; vertical-align: bottom; background-color: White">
    <td style="text-align: left">Property and equipment, gross</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentGross" contextRef="AsOf2023-12-31_us-gaap_LeaseholdImprovementsMember" id="Fact001098" format="ixt:numdotdecimal" decimals="0" unitRef="USD">876,709</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentGross" contextRef="AsOf2022-12-31_us-gaap_LeaseholdImprovementsMember" id="Fact001099" format="ixt:numdotdecimal" decimals="0" unitRef="USD">95,539</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_405_eus-gaap--AccumulatedDepreciationDepletionAndAmortizationPropertyPlantAndEquipment_iNI_di_zFOug9xjZtse" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">Less: accumulated depreciation and amortization</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AccumulatedDepreciationDepletionAndAmortizationPropertyPlantAndEquipment" contextRef="AsOf2023-12-31" id="Fact001101" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,523,051</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AccumulatedDepreciationDepletionAndAmortizationPropertyPlantAndEquipment" contextRef="AsOf2022-12-31" id="Fact001102" format="ixt:numdotdecimal" decimals="0" unitRef="USD">2,895,174</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_406_eus-gaap--PropertyPlantAndEquipmentNet_iI_zy0bWHTiK1kf" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Property and equipment, net</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentNet" contextRef="AsOf2023-12-31" id="Fact001104" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,673,584</ix:nonFraction></p></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:PropertyPlantAndEquipmentNet" contextRef="AsOf2022-12-31" id="Fact001105" format="ixt:numdotdecimal" decimals="0" unitRef="USD">5,134,566</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8A2_z8zVXkOJGda4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
depreciation and amortization expenses were $<span id="xdx_905_eus-gaap--DepreciationDepletionAndAmortization_c20230101__20231231_zGto6DZ4gN06" title="Depreciation and amortization expenses"><ix:nonFraction name="us-gaap:DepreciationDepletionAndAmortization" contextRef="From2023-01-01to2023-12-31" id="Fact001107" format="ixt:numdotdecimal" decimals="0" unitRef="USD">693,531</ix:nonFraction></span>, $<span id="xdx_903_eus-gaap--DepreciationDepletionAndAmortization_c20220101__20221231_zSqjJINV4Lp8" title="Depreciation and amortization expenses"><ix:nonFraction name="us-gaap:DepreciationDepletionAndAmortization" contextRef="From2022-01-012022-12-31" id="Fact001109" format="ixt:numdotdecimal" decimals="0" unitRef="USD">303,269</ix:nonFraction></span> and $<span id="xdx_901_eus-gaap--DepreciationDepletionAndAmortization_c20210101__20211231_z29msZ3o9Dkb" title="Depreciation and amortization expenses"><ix:nonFraction name="us-gaap:DepreciationDepletionAndAmortization" contextRef="From2021-01-012021-12-31" id="Fact001111" format="ixt:numdotdecimal" decimals="0" unitRef="USD">259,122</ix:nonFraction></span> for the years ended December 31, 2023, 2022 and 2021, respectively.</span></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<ix:exclude><!-- Field: Page; Sequence: 117 -->
    <div style="border-bottom: Black 1.5pt solid; margin-bottom: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></td></tr></table></div>
    <div style="break-before: page; margin-top: 6pt"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font-size: 10pt"><tr style="vertical-align: top; text-align: left"><td style="width: 100%">&#160;</td></tr></table></div>
    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001113" name="us-gaap:AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock"><p id="xdx_800_eus-gaap--AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock_zOkVRwz48qD7" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
6 - <span id="xdx_82C_zwHUgxL6tq7h">OTHER PAYABLES AND ACCRUALS</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001115" name="us-gaap:OtherCurrentLiabilitiesTableTextBlock"><p id="xdx_89D_eus-gaap--OtherCurrentLiabilitiesTableTextBlock_z5xdES7f1v34" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
payables and accruals consist of the followings:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8BE_zisRp16hiGbl" style="display: none">SCHEDULE OF OTHER PAYABLES AND ACCRUALS</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_499_20231231_z8fWnhoBtK53" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_495_20221231_zfwnPeYdB55g" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_401_ecustom--AccruedProductionCostCurrent_iI_maALCzhmu_zjZyiEXKhYJc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Accrued production cost</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_403_eus-gaap--AccruedSalariesCurrent_iI_maALCzhmu_z6TRuMjQBs9a" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued salary</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedSalariesCurrent" contextRef="AsOf2023-12-31" id="Fact001120" format="ixt:numdotdecimal" decimals="0" unitRef="USD">177,995</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedSalariesCurrent" contextRef="AsOf2022-12-31" id="Fact001121" format="ixt:numdotdecimal" decimals="0" unitRef="USD">161,761</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40B_eus-gaap--AccruedEmployeeBenefitsCurrent_iI_maALCzhmu_z0lr8ckhahA1" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accrued social security benefits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedEmployeeBenefitsCurrent" contextRef="AsOf2023-12-31" id="Fact001123" format="ixt:numdotdecimal" decimals="0" unitRef="USD">110,906</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedEmployeeBenefitsCurrent" contextRef="AsOf2022-12-31" id="Fact001124" format="ixt:numdotdecimal" decimals="0" unitRef="USD">105,155</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Accrued utilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedUtilitiesCurrent" contextRef="AsOf2023-12-31" id="Fact001126" format="ixt:numdotdecimal" decimals="0" unitRef="USD">34,683</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccruedUtilitiesCurrent" contextRef="AsOf2022-12-31" id="Fact001127" format="ixt:numdotdecimal" decimals="0" unitRef="USD">25,817</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--AccrualForTaxesOtherThanIncomeTaxesCurrent_iI_maALCzhmu_zeTY2NgrUvwb" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Accrued business tax and others</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:AccrualForTaxesOtherThanIncomeTaxesCurrent" contextRef="AsOf2023-12-31" id="Fact001129" format="ixt:numdotdecimal" decimals="0" unitRef="USD">49,198</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:AccrualForTaxesOtherThanIncomeTaxesCurrent" contextRef="AsOf2022-12-31" id="Fact001130" format="ixt:numdotdecimal" decimals="0" unitRef="USD">75,283</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--AccruedLiabilitiesCurrent_iTI_mtALCzhmu_zkXbnsEwDi12" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt; padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccruedLiabilitiesCurrent" contextRef="AsOf2023-12-31" id="Fact001132" format="ixt:numdotdecimal" decimals="0" unitRef="USD">625,350</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:AccruedLiabilitiesCurrent" contextRef="AsOf2022-12-31" id="Fact001133" format="ixt:numdotdecimal" decimals="0" unitRef="USD">677,972</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8AF_z67FZ0g2VJB4" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001135" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><p id="xdx_809_eus-gaap--RelatedPartyTransactionsDisclosureTextBlock_zB63f41JPrkb" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
7 - <span id="xdx_822_zEBfuskRtDdk">RELATED PARTY BALANCES AND TRANSACTIONS</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2018, the Company entered into a rental agreement with Kambo Security Products Limited for office space in Hong Kong. The rental
agreement is renewed annually. Kambo Security Products Limited is owned by Mr. Bong Lau, Mr. Wynn Hui, and Mr. Bun Lau, major
shareholders of ILA. <span id="xdx_905_eus-gaap--RelatedPartyTransactionDescriptionOfTransaction_c20230101__20231231_zcI5xo8sW5k7" title="Description of transaction"><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" id="Fact001137" name="us-gaap:RelatedPartyTransactionDescriptionOfTransaction">The major shareholders of ILA are committed to renewing the rental agreement with the Company for no less than
5 additional years</ix:nonNumeric></span>. Rent expense for the years ended December 31, 2023 2022 and 2021 was approximately $<span id="xdx_90C_eus-gaap--PaymentsForRent_c20230101__20231231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--KamboSecurityProductsLimitedMember_zjeVp5Pe2zBk" title="Rent expense"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2023-01-012023-12-31_custom_KamboSecurityProductsLimitedMember" id="Fact001139" format="ixt:numdotdecimal" decimals="0" unitRef="USD">74,000</ix:nonFraction></span>,
$<span id="xdx_90E_eus-gaap--PaymentsForRent_c20220101__20221231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--KamboSecurityProductsLimitedMember_zqs1Ki0GgDAc" title="Rent expense"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2022-01-012022-12-31_custom_KamboSecurityProductsLimitedMember" id="Fact001141" format="ixt:numdotdecimal" decimals="0" unitRef="USD">54,100</ix:nonFraction></span>
and $<span id="xdx_904_eus-gaap--PaymentsForRent_c20210101__20211231__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--KamboSecurityProductsLimitedMember_zFv4K5UrjbTl" title="Rent expense"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2021-01-012021-12-31_custom_KamboSecurityProductsLimitedMember" id="Fact001143" format="ixt:numdotdecimal" decimals="0" unitRef="USD">54,100</ix:nonFraction></span>,
respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001145" name="us-gaap:DebtDisclosureTextBlock"><p id="xdx_80E_eus-gaap--DebtDisclosureTextBlock_z4Acw0rL1f9k" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
8 - <span id="xdx_827_zKjwVqb5gCy4">BANK BORROWINGS</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 14, 2021, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited for the maximum amount of HKD <span id="xdx_901_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_uHKD_c20210514__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay132029Member_ziFJDhsxfOg8" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2021-05-14_custom_WorkingCapitalFacilityDueMay132029Member" id="Fact001147" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="HKD">1.0</ix:nonFraction></span> million
(approximately $<span id="xdx_904_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20210514__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay132029Member_z7pcwi8rKZok" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2021-05-14_custom_WorkingCapitalFacilityDueMay132029Member" id="Fact001149" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million) for working capital purposes, with the term from June 14, 2021 to May 13, 2029, bearing interest at <span id="xdx_903_eus-gaap--DebtInstrumentInterestRateStatedPercentage_iI_dp_uPure_c20210514__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay132029Member_zEvTvcysvY18" title="Interest rate percentage"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateStatedPercentage" contextRef="AsOf2021-05-14_custom_WorkingCapitalFacilityDueMay132029Member" id="Fact001151" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">2.75</ix:nonFraction></span>%
per annum. Under the facilities, the Company borrowed HKD <span id="xdx_901_eus-gaap--ProceedsFromIssuanceOfLongTermDebt_pn5n6_uHKD_c20210513__20210514__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay132029Member_zxOFw0KZq6I3" title="Proceeds from bank borrowings"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfLongTermDebt" contextRef="From2021-05-132021-05-14_custom_WorkingCapitalFacilityDueMay132029Member" id="Fact001153" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="HKD">1.0</ix:nonFraction></span> million (approximately $<span id="xdx_907_eus-gaap--ProceedsFromIssuanceOfLongTermDebt_pn5n6_c20210513__20210514__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay132029Member_zWpCnoO1vco9" title="Proceeds from bank borrowings"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfLongTermDebt" contextRef="From2021-05-132021-05-14_custom_WorkingCapitalFacilityDueMay132029Member" id="Fact001155" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million), which is repayable in <span id="xdx_900_ecustom--DebtInstrumentNumberOfPeriodicPayments_uinstallment_c20210513__20210514_z8pYGrTprUV8" title="Number of installments"><ix:nonFraction name="ILAG:DebtInstrumentNumberOfPeriodicPayments" contextRef="From2021-05-132021-05-14" id="Fact001157" format="ixt:numdotdecimal" decimals="INF" unitRef="installment">96</ix:nonFraction></span> equal monthly
installments of principal and interest thereon, commencing June 14, 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 8, 2020, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited for the maximum amount of HKD <span id="xdx_90F_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_uHKD_c20201008__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueNovember242028Member_zbgVbOWaFCe1" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2020-10-08_custom_WorkingCapitalFacilityDueNovember242028Member" id="Fact001159" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="HKD">1.0</ix:nonFraction></span>
million (approximately $<span id="xdx_906_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20201008__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueNovember242028Member_zkx2UY8UMeZh" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2020-10-08_custom_WorkingCapitalFacilityDueNovember242028Member" id="Fact001161" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million) for working capital purposes, with the term from November 25, 2020 to November 24, 2028, bearing
interest at <span id="xdx_90C_eus-gaap--DebtInstrumentInterestRateStatedPercentage_iI_dp_uPure_c20201008__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueNovember242028Member_zR0Uo4dIhvL1" title="Interest rate percentage"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateStatedPercentage" contextRef="AsOf2020-10-08_custom_WorkingCapitalFacilityDueNovember242028Member" id="Fact001163" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">2.75</ix:nonFraction></span>% per annum. Under the facilities, the Company borrowed HKD <span id="xdx_900_eus-gaap--ProceedsFromIssuanceOfLongTermDebt_pn5n6_uHKD_c20201007__20201008__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueNovember242028Member_zlf8MZmwRlfk" title="Proceeds from bank borrowings"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfLongTermDebt" contextRef="From2020-10-072020-10-08_custom_WorkingCapitalFacilityDueNovember242028Member" id="Fact001165" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="HKD">1.0</ix:nonFraction></span> million ($<span id="xdx_90B_eus-gaap--ProceedsFromIssuanceOfLongTermDebt_pn5n6_c20201007__20201008__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueNovember242028Member_z8fORnbTMvDg" title="Proceeds from bank borrowings"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfLongTermDebt" contextRef="From2020-10-072020-10-08_custom_WorkingCapitalFacilityDueNovember242028Member" id="Fact001167" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.1</ix:nonFraction></span> million), which is repayable in <span id="xdx_906_ecustom--DebtInstrumentNumberOfPeriodicPayments_uinstallment_c20201007__20201008_zZpIGnQ4O3qj" title="Number of installments"><ix:nonFraction name="ILAG:DebtInstrumentNumberOfPeriodicPayments" contextRef="From2020-10-072020-10-08" id="Fact001169" format="ixt:numdotdecimal" decimals="INF" unitRef="installment">96</ix:nonFraction></span> equal
monthly installments of principal and interest thereon, commencing December 25, 2020.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
April 28, 2020, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited for the maximum amount of HKD <span id="xdx_900_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn6n6_uHKD_c20200428__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay172028Member_zI0T9DVNq5fb" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2020-04-28_custom_WorkingCapitalFacilityDueMay172028Member" id="Fact001171" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="HKD">4.0</ix:nonFraction></span>
million (approximately $<span id="xdx_901_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20200428__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay172028Member_z3Gm1clCaKja" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2020-04-28_custom_WorkingCapitalFacilityDueMay172028Member" id="Fact001173" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.5</ix:nonFraction></span> million) for working capital purposes, with the term from May 18, 2020 to May 17, 2028, bearing interest
at <span id="xdx_90A_eus-gaap--DebtInstrumentInterestRateStatedPercentage_iI_dp_uPure_c20200428__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay172028Member_zOMoBe2kjZv8" title="Interest rate percentage"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateStatedPercentage" contextRef="AsOf2020-04-28_custom_WorkingCapitalFacilityDueMay172028Member" id="Fact001175" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">2.75</ix:nonFraction></span>% per annum. Under the facilities, the Company borrowed HKD <span id="xdx_90C_eus-gaap--ProceedsFromIssuanceOfLongTermDebt_pn6n6_uHKD_c20200427__20200428__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay172028Member_zZWb0zindLYj" title="Proceeds from bank borrowings"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfLongTermDebt" contextRef="From2020-04-272020-04-28_custom_WorkingCapitalFacilityDueMay172028Member" id="Fact001177" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="HKD">4.0</ix:nonFraction></span> million ($<span id="xdx_904_eus-gaap--ProceedsFromIssuanceOfLongTermDebt_pn5n6_c20200427__20200428__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityDueMay172028Member_zyr2OJSVExl1" title="Proceeds from bank borrowings"><ix:nonFraction name="us-gaap:ProceedsFromIssuanceOfLongTermDebt" contextRef="From2020-04-272020-04-28_custom_WorkingCapitalFacilityDueMay172028Member" id="Fact001179" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.5</ix:nonFraction></span> million), which is repayable in <span id="xdx_906_ecustom--DebtInstrumentNumberOfPeriodicPayments_uinstallment_c20200427__20200428_zJe9iCYIxz4" title="Number of installments"><ix:nonFraction name="ILAG:DebtInstrumentNumberOfPeriodicPayments" contextRef="From2020-04-272020-04-28" id="Fact001181" format="ixt:numdotdecimal" decimals="INF" unitRef="installment">96</ix:nonFraction></span> equal monthly
installments of principal and interest thereon, commencing June 18, 2020.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 3, 2017, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited pursuant to which the Company may
borrow up to HKD <span id="xdx_907_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn6n6_uHKD_c20171103__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityNoExpirationDateMember_zWScSLGwH3N2" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2017-11-03_custom_WorkingCapitalFacilityNoExpirationDateMember" id="Fact001183" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="HKD">6.0</ix:nonFraction></span> million (approximately $<span id="xdx_906_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20171103__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityNoExpirationDateMember_zhyI5XHVleah" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2017-11-03_custom_WorkingCapitalFacilityNoExpirationDateMember" id="Fact001185" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.8</ix:nonFraction></span> million) for working capital purposes. On June 24, 2021, this banking facilities was
increased to HKD <span id="xdx_907_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn6n6_uHKD_c20210624__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityNoExpirationDateMember_zOUXLcoVA9kc" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2021-06-24_custom_WorkingCapitalFacilityNoExpirationDateMember" id="Fact001187" format="ixt:numdotdecimal" decimals="-6" scale="6" unitRef="HKD">7.0</ix:nonFraction></span> million (approximately $<span id="xdx_90F_eus-gaap--LineOfCreditFacilityMaximumBorrowingCapacity_iI_pn5n6_c20210624__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityNoExpirationDateMember_zzHMOVeZy2ce" title="Borrowing capacity"><ix:nonFraction name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" contextRef="AsOf2021-06-24_custom_WorkingCapitalFacilityNoExpirationDateMember" id="Fact001189" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">0.9</ix:nonFraction></span> million). The credit facility bears interest at <span id="xdx_90C_eus-gaap--DebtInstrumentInterestRateStatedPercentage_iI_dp_uPure_c20210624__us-gaap--DebtInstrumentAxis__custom--WorkingCapitalFacilityNoExpirationDateMember_z6A0blg14tk9" title="Interest rate percentage"><ix:nonFraction name="us-gaap:DebtInstrumentInterestRateStatedPercentage" contextRef="AsOf2021-06-24_custom_WorkingCapitalFacilityNoExpirationDateMember" id="Fact001191" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">5.5</ix:nonFraction></span>% and it is personally guaranteed
by Mr. Wynn Hui and Mr. Bong Lau (both major shareholders and directors of the Company). The credit facility does not have an expiration
date and is collateralized by a property owned by Kambo Security Products Limited, a related party.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
the years ended December 31, 2023, 2022 and 2021, interest expense related to these credit facilities was $<span id="xdx_90B_eus-gaap--InterestExpenseDebt_c20230101__20231231_zIEcAgYwa47l" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2023-01-01to2023-12-31" id="Fact001193" format="ixt:numdotdecimal" decimals="0" unitRef="USD">18,859</ix:nonFraction></span>, $<span id="xdx_902_eus-gaap--InterestExpenseDebt_c20220101__20221231_z9k3OlSou9Qk" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2022-01-012022-12-31" id="Fact001195" format="ixt:numdotdecimal" decimals="0" unitRef="USD">26,836</ix:nonFraction></span> and $<span id="xdx_901_eus-gaap--InterestExpenseDebt_c20210101__20211231_z3AbwkjvXXke" title="Interest expense"><ix:nonFraction name="us-gaap:InterestExpenseDebt" contextRef="From2021-01-012021-12-31" id="Fact001197" format="ixt:numdotdecimal" decimals="0" unitRef="USD">48,910</ix:nonFraction></span>,
respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001199" name="us-gaap:ScheduleOfMaturitiesOfLongTermDebtTableTextBlock"><p id="xdx_89D_eus-gaap--ScheduleOfMaturitiesOfLongTermDebtTableTextBlock_zr0S7c2shfph" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table represents the maturity of the Company&#8217;s bank borrowings as of December 31, 2023:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B4_zCJG7kDbwAXb" style="display: none">SUMMARY OF MATURITY OF BANK BORROWINGS</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold">For the years ending December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_499_20231231_zujm1X6DG8A7" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_402_eus-gaap--LongTermDebtMaturitiesRepaymentsOfPrincipalInNextTwelveMonths_iI_maLTDzX6z_zPcXknNqIfe5" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 80%; text-align: justify">2024</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInNextTwelveMonths" contextRef="AsOf2023-12-31" id="Fact001201" format="ixt:numdotdecimal" decimals="0" unitRef="USD">129,722</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr id="xdx_406_eus-gaap--LongTermDebtMaturitiesRepaymentsOfPrincipalInYearTwo_iI_maLTDzX6z_zX4WdfDS1xAi" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">2025</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearTwo" contextRef="AsOf2023-12-31" id="Fact001203" format="ixt:numdotdecimal" decimals="0" unitRef="USD">86,154</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--LongTermDebtMaturitiesRepaymentsOfPrincipalInYearThree_iI_maLTDzX6z_zHF0yYAfzcO4" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">2026</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearThree" contextRef="AsOf2023-12-31" id="Fact001205" format="ixt:numdotdecimal" decimals="0" unitRef="USD">89,330</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--LongTermDebtMaturitiesRepaymentsOfPrincipalInYearFour_iI_maLTDzX6z_zKynUQhkTjq9" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">2027</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearFour" contextRef="AsOf2023-12-31" id="Fact001207" format="ixt:numdotdecimal" decimals="0" unitRef="USD">92,623</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_405_eus-gaap--LongTermDebtMaturitiesRepaymentsOfPrincipalInYearFive_iI_maLTDzX6z_zpTCOC1sypoj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">2028</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearFive" contextRef="AsOf2023-12-31" id="Fact001209" format="ixt:numdotdecimal" decimals="0" unitRef="USD">58,740</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--LongTermDebtMaturitiesRepaymentsOfPrincipalAfterYearFive_iI_maLTDzX6z_zKlzxg9cRtJd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 1.5pt">2029</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span><ix:nonFraction name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalAfterYearFive" contextRef="AsOf2023-12-31" id="Fact001211" format="ixt:numdotdecimal" decimals="0" unitRef="USD">7,472</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr id="xdx_402_eus-gaap--LongTermDebt_iTI_mtLTDzX6z_z52WQRsG4jh6" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 2.5pt">Total Bank Borrowings</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:LongTermDebt" contextRef="AsOf2023-12-31" id="Fact001213" format="ixt:numdotdecimal" decimals="0" unitRef="USD">464,041</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>

<ix:exclude><!-- Field: Page; Sequence: 118 -->
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    <!-- Field: /Page --></ix:exclude>
<!-- Field: Split-Segment; Name: 002 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

</ix:nonNumeric></ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001215" name="us-gaap:LesseeOperatingLeasesTextBlock"><p id="xdx_801_eus-gaap--LesseeOperatingLeasesTextBlock_zrfJHz9mKWi" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
9 - <span id="xdx_82B_zhTn4Pr4mFB5">RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company determines if a contract contains a lease at inception. US GAAP requires that the Company&#8217;s leases be evaluated and classified
as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the
lease term used in the evaluation includes the non-cancellable period for which the Company has the right-to-use the underlying asset,
together with renewal option periods when the exercise of the renewal option is reasonably certain or failure to exercise such option
would result in an economic penalty.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has the following operating leases:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0; margin-bottom: 0"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"/><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Real
                                            estate leases for its manufacturing factory and electroplating production line in the PRC
                                            (annual payment of approximately $<span id="xdx_900_eus-gaap--OperatingLeasePayments_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--ManufacturingFacilityInChinaMember_zy59scWgI5Ad" title="Annual payment under lease"><span id="xdx_903_eus-gaap--OperatingLeasePayments_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--ElectroplatingProductionLineInChinaMember_z1Tb2lLufCic" title="Annual payment under lease"><ix:nonFraction name="us-gaap:OperatingLeasePayments" contextRef="From2023-01-012023-12-31_custom_ManufacturingFacilityInChinaMember" id="Fact001217" format="ixt:numdotdecimal" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:OperatingLeasePayments" contextRef="From2023-01-012023-12-31_custom_ElectroplatingProductionLineInChinaMember" id="Fact001219" format="ixt:numdotdecimal" decimals="0" unitRef="USD">622,000</ix:nonFraction></ix:nonFraction></span></span>) that will expire on <span id="xdx_90A_eus-gaap--LeaseExpirationDate1_dd_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--ManufacturingFacilityInChinaMember_zCLMDhGLcRta" title="Lease expiration date"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_ManufacturingFacilityInChinaMember" format="ixt:datemonthdayyearen" id="Fact001221" name="us-gaap:LeaseExpirationDate1">February 28, 2026</ix:nonNumeric></span> and <span id="xdx_90B_eus-gaap--LeaseExpirationDate1_dd_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--ElectroplatingProductionLineInChinaMember_zE0PWVhU1st9" title="Lease expiration date"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_ElectroplatingProductionLineInChinaMember" format="ixt:datemonthdayyearen" id="Fact001223" name="us-gaap:LeaseExpirationDate1">September
                                            30, 2026</ix:nonNumeric></span>, respectively. Various office parking facilities (annual payment of approximately
                                            $<span id="xdx_90D_eus-gaap--OperatingLeasePayments_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--VariousOfficeParkingFacilitiesInChinaMember_zmalrlEyIGp2" title="Annual payment under lease"><ix:nonFraction name="us-gaap:OperatingLeasePayments" contextRef="From2023-01-012023-12-31_custom_VariousOfficeParkingFacilitiesInChinaMember" id="Fact001225" format="ixt:numdotdecimal" decimals="0" unitRef="USD">16,000</ix:nonFraction></span>) that will <span id="xdx_904_eus-gaap--LesseeOperatingLeaseDescription_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--VariousOfficeParkingFacilitiesInChinaMember_zViuO7DNc2Qj" title="Lease description"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_VariousOfficeParkingFacilitiesInChinaMember" id="Fact001227" name="us-gaap:LesseeOperatingLeaseDescription">expire on April 30, 2024 and November 30, 2024, March 31, 2024, respectively</ix:nonNumeric></span>.</span></td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif"/><td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Office
                                            equipment lease (annual payment of approximately $<span id="xdx_900_eus-gaap--OperatingLeasePayments_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--OfficeEquipmentInHongKongMember_zKcgC2GGbdak" title="Annual payment under lease"><ix:nonFraction name="us-gaap:OperatingLeasePayments" contextRef="From2023-01-012023-12-31_custom_OfficeEquipmentInHongKongMember" id="Fact001229" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,000</ix:nonFraction></span>) that will expire on <span id="xdx_90D_eus-gaap--LeaseExpirationDate1_dd_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--OfficeEquipmentInHongKongMember_zVigmNxNXpv4" title="Lease expiration date"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_OfficeEquipmentInHongKongMember" format="ixt:datemonthdayyearen" id="Fact001231" name="us-gaap:LeaseExpirationDate1">December 20,
                                            2025</ix:nonNumeric></span>, and various real estate leases for its office space in Hong Kong (annual payment of
                                            approximately $<span id="xdx_90B_eus-gaap--OperatingLeasePayments_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--VariousRealEstateLeasesForOfficeSpaceInHongKongMember_zIvMaRYiKR5f" title="Annual payment under lease"><ix:nonFraction name="us-gaap:OperatingLeasePayments" contextRef="From2023-01-012023-12-31_custom_VariousRealEstateLeasesForOfficeSpaceInHongKongMember" id="Fact001233" format="ixt:numdotdecimal" decimals="0" unitRef="USD">173,000</ix:nonFraction></span>) that will <span id="xdx_900_eus-gaap--LesseeOperatingLeaseDescription_c20230101__20231231__srt--RealEstateAndAccumulatedDepreciationDescriptionOfPropertyAxis__custom--VariousRealEstateLeasesForOfficeSpaceInHongKongMember_zKtx1ZRNS51e" title="Lease description"><ix:nonNumeric contextRef="From2023-01-012023-12-31_custom_VariousRealEstateLeasesForOfficeSpaceInHongKongMember" id="Fact001235" name="us-gaap:LesseeOperatingLeaseDescription">expire on December 31, 2024, June 15, 2024 and July 31,
                                            2024, respectively</ix:nonNumeric></span>.</span></td></tr></table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The leases
generally do not contain options to extend at the time of expiration.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
adoption of ASU 2016-02, on January 1, 2019, the Company recognized lease liabilities of approximately $<span id="xdx_903_eus-gaap--OperatingLeaseLiability_iI_pn5n6_c20190101_zmfYVnLJbTjb" title="Operating lease liability recognized upon adoption"><ix:nonFraction name="us-gaap:OperatingLeaseLiability" contextRef="AsOf2019-01-01" id="Fact001237" format="ixt:numdotdecimal" decimals="-5" scale="6" unitRef="USD">1.7</ix:nonFraction></span> million, with corresponding
right-of-use (&#8220;ROU&#8221;) assets of the same amount based on the present value of the future minimum rental payments of the lease,
using an incremental borrowing rate of <span id="xdx_900_ecustom--LeaseIncrementalBorrowingRate_pid_dp_uPure_c20190101__20190101__srt--RangeAxis__srt--MinimumMember_zV4AeAnkM74c" title="Lease incremental borrowing rate"><ix:nonFraction name="ILAG:LeaseIncrementalBorrowingRate" contextRef="From2019-01-012019-01-01_srt_MinimumMember" id="Fact001239" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">4.75</ix:nonFraction></span>% to <span id="xdx_908_ecustom--LeaseIncrementalBorrowingRate_pid_dp_uPure_c20190101__20190101__srt--RangeAxis__srt--MaximumMember_zvONYyoh9gbb" title="Lease incremental borrowing rate"><ix:nonFraction name="ILAG:LeaseIncrementalBorrowingRate" contextRef="From2019-01-012019-01-01_srt_MaximumMember" id="Fact001241" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">5.63</ix:nonFraction></span>% based on the duration of the lease terms.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001243" name="us-gaap:LesseeOperatingLeaseLiabilityMaturityTableTextBlock"><p id="xdx_899_eus-gaap--LesseeOperatingLeaseLiabilityMaturityTableTextBlock_zytZJyUXasTd" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the five-year maturity schedule of the Company&#8217;s lease liabilities:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B5_ze3JQOmKCwAg" style="display: none">SCHEDULE OF MATURITY OF LEASE LIABILITIES</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold">For the years ending December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_491_20231231_zUSCG48mqRca" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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    <td style="width: 80%; text-align: left">2024</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_404_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueYearTwo_iI_maLOLLPz227_zBzcGIps8Pm5" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">2025</td><td>&#160;</td>
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  <tr id="xdx_40E_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueYearThree_iI_maLOLLPz227_zuPseCGT6SJ1" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">2026</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">Total operating lease payments</td><td>&#160;</td>
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<tr id="xdx_409_eus-gaap--LesseeOperatingLeaseLiabilityUndiscountedExcessAmount_iNI_di_maLOLLPz0Cd_zIri6IpzTIA4" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">Less: imputed interest</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:LesseeOperatingLeaseLiabilityUndiscountedExcessAmount" contextRef="AsOf2023-12-31" id="Fact001253" format="ixt:numdotdecimal" decimals="0" unitRef="USD">19,786</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
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    <td style="text-align: left; padding-bottom: 2.5pt">Present value of operating lease liabilities</td><td style="padding-bottom: 2.5pt">&#160;</td>
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</table>

</ix:nonNumeric><p id="xdx_8A8_zh3KQu7oYsAi" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Operating
lease expenses are allocated between the cost of revenues and selling, general, and administrative expenses. Total operating lease expenses
were approximately $<span id="xdx_904_eus-gaap--OperatingLeaseCost_c20230101__20231231_zKvNe0t6C9Ag" title="Operating lease expenses"><ix:nonFraction name="us-gaap:OperatingLeaseCost" contextRef="From2023-01-01to2023-12-31" id="Fact001257" format="ixt:numdotdecimal" decimals="0" unitRef="USD">778,000</ix:nonFraction></span>, $<span id="xdx_90B_eus-gaap--OperatingLeaseCost_c20220101__20221231_zbYlzxLYZEEk" title="Operating lease expenses"><ix:nonFraction name="us-gaap:OperatingLeaseCost" contextRef="From2022-01-012022-12-31" id="Fact001259" format="ixt:numdotdecimal" decimals="0" unitRef="USD">497,000</ix:nonFraction></span> and $<span id="xdx_904_eus-gaap--OperatingLeaseCost_c20210101__20211231_z7A9dac6Yu5d" title="Operating lease expenses"><ix:nonFraction name="us-gaap:OperatingLeaseCost" contextRef="From2021-01-012021-12-31" id="Fact001261" format="ixt:numdotdecimal" decimals="0" unitRef="USD">408,000</ix:nonFraction></span> for the years ended December 31, 2023, 2022 and 2021, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001263" name="us-gaap:CompensationRelatedCostsGeneralTextBlock"><p id="xdx_80A_eus-gaap--CompensationRelatedCostsGeneralTextBlock_zFDmQCNcpNR8" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
10 &#8211; <span id="xdx_825_zUOrrHHgfZ49">STOCK-BASED COMPENSATION</span></b></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company operates a share-based payment scheme (the &#8220;Scheme&#8221;) for the purpose of providing incentives and rewards to eligible
participants who contribute to the success of the Company&#8217;s operations. Eligible participants of the Scheme include the Company&#8217;s
directors, employees and consultants.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
</i></b>2022 Omnibus Equity Plan</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the &#8220;Equity
Plan&#8221;) on October 20, 2022, which was approved at the stockholders&#8217; meeting on December 16, 2022. The total aggregate ordinary
shares of the Company authorized for issuance during the term of the Equity Plan is limited to <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAuthorized_iI_c20221216__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_z8BbuGdQk4Nh" title="Ordinary shares authorized for issuance"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAuthorized" contextRef="AsOf2022-12-16_custom_TwentyTwentyTwoOmnibusEquityPlanMember" id="Fact001265" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">2,500,000</ix:nonFraction></span> shares.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 119 -->
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    <!-- Field: /Page --></ix:exclude>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 22, 2023, (the &#8220;Grant Date&#8221;), the Compensation Committee of the Board of Directors (the &#8220;Board&#8221;) of
the Company granted stock options to purchase <span id="xdx_908_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_c20230222__20230222__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_zYEWl7va0v1g" title="Number of options granted"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" contextRef="From2023-02-222023-02-22_custom_TwentyTwentyTwoOmnibusEquityPlanMember" id="Fact001267" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">820,000</ix:nonFraction></span> ordinary shares of the Company (the &#8220;Shares&#8221;) at an exercise price
of $<span id="xdx_906_eus-gaap--SharesIssuedPricePerShare_iI_c20230222__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_zfYTu7onFJR3" title="Option exercise price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2023-02-22_custom_TwentyTwentyTwoOmnibusEquityPlanMember" id="Fact001269" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">1.23</ix:nonFraction></span> per share, pursuant to Equity Plan, to sixteen officers, directors and employees of the Company
and its subsidiaries (the &#8220;Grantees&#8221;) The Grants vested immediately on the Grant Date and each of the Grantees also entered
into a Stock Option Agreement with the Company on February 22, 2023. The options will expire five (<span id="xdx_90D_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1_dtY_c20230222__20230222__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_zAWewmH3J5E9" title="Option term"><ix:nonNumeric contextRef="From2023-02-222023-02-22_custom_TwentyTwentyTwoOmnibusEquityPlanMember" format="ixt-sec:duryear" id="Fact001271" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1">5</ix:nonNumeric></span>) years from the Grant Date and may
be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span>The
stock options granted to officers, directors and employees are accounted for as equity awards and measured at their Grant Date fair values
of $<span id="xdx_903_ecustom--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantDateFairvalue_c20230222__20230222__us-gaap--PlanNameAxis__custom--TwentyTwentyTwoOmnibusEquityPlanMember_zHYCHXDw1KH6" title="Grant date fair value of options"><ix:nonFraction name="ILAG:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantDateFairvalue" contextRef="From2023-02-222023-02-22_custom_TwentyTwentyTwoOmnibusEquityPlanMember" id="Fact001273" format="ixt:numdotdecimal" decimals="0" unitRef="USD">667,016</ix:nonFraction></span> by using a binomial model. As of December 31, 2023, none of the Grants has been exercised. The Company does not believe that
the stock options granted will have any dilution impact on the Company&#8217;s earnings per share since these stock options has not been
exercised as of December 31, 2023 and the Company operated at a loss for the year ended December 31, 2023.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001275" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><p id="xdx_805_eus-gaap--StockholdersEquityNoteDisclosureTextBlock_z3wE4XSje4o2" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
1</b>1 &#8211; <span id="xdx_82F_z14nKOkcLII8">EQUITY TRANSACTIONS</span></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Preferred
shares</i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 16, 2021, the Company amended its articles of association and authorized <span id="xdx_901_eus-gaap--PreferredStockSharesAuthorized_iI_c20210716_zZ3ZosWlXPZ8" title="Preferred shares, authorized"><ix:nonFraction name="us-gaap:PreferredStockSharesAuthorized" contextRef="AsOf2021-07-16" id="Fact001277" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000,000</ix:nonFraction></span> preferred shares with a par value of $<span id="xdx_903_eus-gaap--PreferredStockParOrStatedValuePerShare_iI_c20210716_zdkIqbCmcKV1" title="Preferred shares, par value"><ix:nonFraction name="us-gaap:PreferredStockParOrStatedValuePerShare" contextRef="AsOf2021-07-16" id="Fact001279" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">0.0001</ix:nonFraction></span>.
<span id="xdx_90F_eus-gaap--PreferredStockSharesIssued_iI_do_c20210716__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_zXdqystyFjR" title="Preferred stock, shares issued"><ix:nonFraction name="us-gaap:PreferredStockSharesIssued" contextRef="AsOf2021-07-16_us-gaap_IPOMember" id="Fact001281" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares">No</ix:nonFraction></span> preferred shares were issued or registered in the IPO. There were <span id="xdx_908_eus-gaap--PreferredStockSharesIssued_iI_do_c20231231_zOMDBDhLdIQ9" title="Preferred stock, shares issued"><span id="xdx_90B_eus-gaap--PreferredStockSharesIssued_iI_do_c20221231_zDCwzkfqPn21" title="Preferred stock, shares issued"><span id="xdx_907_eus-gaap--PreferredStockSharesOutstanding_iI_do_c20231231_zXDyoLZUJHh7" title="Preferred stock, shares outstanding"><span id="xdx_90D_eus-gaap--PreferredStockSharesOutstanding_iI_do_c20221231_zfiprcDrNen3" title="Preferred stock, shares outstanding"><ix:nonFraction name="us-gaap:PreferredStockSharesIssued" contextRef="AsOf2023-12-31" id="Fact001283" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesIssued" contextRef="AsOf2022-12-31" id="Fact001285" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesOutstanding" contextRef="AsOf2023-12-31" id="Fact001287" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesOutstanding" contextRef="AsOf2022-12-31" id="Fact001289" format="ixt-sec:numwordsen" decimals="INF" unitRef="Shares">no</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span></span> preferred shares issued and outstanding as of December 31, 2023
and 2022.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>O</i></b>rdinary
shares</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
July 15, 2022, the Company closed its IPO of <span id="xdx_904_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20220715__20220715__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_zGiQnFG636gc" title="Shares issued on initial public offering"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" contextRef="From2022-07-152022-07-15_us-gaap_IPOMember" id="Fact001291" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,060,000</ix:nonFraction></span> ordinary shares priced at $<span id="xdx_90A_eus-gaap--SharesIssuedPricePerShare_iI_c20220715__us-gaap--SubsidiarySaleOfStockAxis__us-gaap--IPOMember_zpExQsu3ZIpa" title="Share price"><ix:nonFraction name="us-gaap:SharesIssuedPricePerShare" contextRef="AsOf2022-07-15_us-gaap_IPOMember" id="Fact001293" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">4.00</ix:nonFraction></span> per share.</span></p>
<!-- Field: Split-Segment; Name: 003 -->
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001295" name="us-gaap:IncomeTaxDisclosureTextBlock"><p id="xdx_806_eus-gaap--IncomeTaxDisclosureTextBlock_zJt1YaPllqI4" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
1</b>2 - <span id="xdx_826_zyc0nsQSdgxc">INCOME TAXES</span></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Corporate
income taxes</i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Cayman
Islands</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="text-decoration: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company was incorporated in the Cayman Islands and is not subject to tax on income or capital gains under the laws of the Cayman Islands.
The Company mainly conducts its operating business through its subsidiaries in the PRC and Hong Kong. Additionally, the Cayman Islands
does not impose a withholding tax on payments of dividends to shareholders.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">British
Virgin Islands</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="text-decoration: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s subsidiary incorporated in the British Virgin Islands is not subject to taxation.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration: underline">Hong
Kong</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="text-decoration: none; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s Hong Kong subsidiaries, including Hing Fat Industrial Limited, Kambo Locksets Limited, Bamberg (HK) Limited and Kambo
Hardware Limited, are subject to Hong Kong Profits Tax on their taxable income as reported in their statutory financial statements adjusted
in accordance with relevant Hong Kong tax laws. Hong Kong Profits Tax has been calculated at <span id="xdx_909_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20230101__20231231__us-gaap--IncomeTaxAuthorityNameAxis__us-gaap--InlandRevenueHongKongMember_zZ7qu3v1fSY8" title="Percentage of tax rate"><span id="xdx_905_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20220101__20221231__us-gaap--IncomeTaxAuthorityNameAxis__us-gaap--InlandRevenueHongKongMember_zXWFlrWxYBJf" title="Percentage of tax rate"><span id="xdx_902_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20210101__20211231__us-gaap--IncomeTaxAuthorityNameAxis__us-gaap--InlandRevenueHongKongMember_z9zmeolUJEbl" title="Percentage of tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2023-01-012023-12-31_us-gaap_InlandRevenueHongKongMember" id="Fact001297" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2022-01-012022-12-31_us-gaap_InlandRevenueHongKongMember" id="Fact001299" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2021-01-012021-12-31_us-gaap_InlandRevenueHongKongMember" id="Fact001301" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">16.5</ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span>% of the estimated assessable profit
for the years ended December 31, 2023, 2022 and 2021. Tax losses can be carried forward to offset profits in future years until fully
absorbed but cannot be carried back.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font: normal 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">PRC</span></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font: normal 10pt Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s PRC operating subsidiary, Dongguan Xingfa Hardware Products Co., Ltd, is 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 rate 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 &#8220;EIT Laws&#8221;), Chinese enterprises are subject to an income tax rate of <span id="xdx_90D_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_c20230101__20231231__us-gaap--IncomeTaxAuthorityNameAxis__us-gaap--StateAdministrationOfTaxationChinaMember_zmrtWZ9PQ7Cl" title="Percentage of tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2023-01-012023-12-31_us-gaap_StateAdministrationOfTaxationChinaMember" id="Fact001303" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">25</ix:nonFraction></span>% after appropriate tax adjustments. The
net tax loss attributable to those PRC entities can only be carried forward for a maximum period of <span id="xdx_902_ecustom--NetTaxLossAttributableEntitiesCarriedForwardMaximumPeriod_c20280101__20281231_zZlS13tS4Yec" title="Maximum period"><ix:nonNumeric contextRef="From2028-01-012028-12-31" format="ixt-sec:durwordsen" id="Fact001305" name="ILAG:NetTaxLossAttributableEntitiesCarriedForwardMaximumPeriod">five years</ix:nonNumeric></span>, through 2028.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"></span></p>

<ix:exclude><!-- Field: Page; Sequence: 120 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001307" name="us-gaap:ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock"><p id="xdx_89B_eus-gaap--ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock_zLnwentqp7h8" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"> (Loss)
income before provision for income taxes is as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B5_zGUKMDVF8T2b" style="display: none">SCHEDULE
OF PROFIT (LOSS) BEFORE PROVISION FOR INCOME TAXES</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_494_20230101__20231231_zmQN0uDf0Zu7" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_49D_20220101__20221231_zyLnAFrig6O6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_40B_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_hsrt--StatementGeographicalAxis__custom--CaymanIslandsAndBritishVirginIslandsMember_zA2spbleKuuj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 46%; text-align: left">Cayman and BVI</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-012023-12-31_custom_CaymanIslandsAndBritishVirginIslandsMember" id="Fact001309" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,658,203</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_custom_CaymanIslandsAndBritishVirginIslandsMember" id="Fact001310" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">138,363</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 2%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31_custom_CaymanIslandsAndBritishVirginIslandsMember" id="Fact001311" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">335,802</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td></tr>
  <tr id="xdx_407_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_hsrt--StatementGeographicalAxis__country--HK_zutZiZQbqIv6" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Hong Kong</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_country_HK" id="Fact001314" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,500,125</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31_country_HK" id="Fact001315" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">983,008</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr id="xdx_40A_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_hsrt--StatementGeographicalAxis__country--CN_zpp3d5UecN87" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">PRC</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-012023-12-31_country_CN" id="Fact001317" format="ixt:numdotdecimal" decimals="0" unitRef="USD">172,723</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_country_CN" id="Fact001318" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">17,415</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31_country_CN" id="Fact001319" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">67,705</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_408_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_zdWJ7H7dyzT4" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt; padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-01to2023-12-31" id="Fact001321" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">3,445,281</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31" id="Fact001322" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,655,903</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-01-012021-12-31" id="Fact001323" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,386,515</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
</table>

</ix:nonNumeric><p id="xdx_8AA_zbyE8mJsv6Pj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provision
for income taxes were $<span id="xdx_904_eus-gaap--IncomeTaxExpenseBenefit_c20230101__20231231_zMqI8AVE7Ph" title="Provision for income taxes"><ix:nonFraction name="us-gaap:IncomeTaxExpenseBenefit" contextRef="From2023-01-01to2023-12-31" id="Fact001325" format="ixt:numdotdecimal" decimals="0" unitRef="USD">56,237</ix:nonFraction></span>, <span id="xdx_902_eus-gaap--IncomeTaxExpenseBenefit_dxL_c20220101__20221231_znuvR6JJIv5l" title="Provision for income taxes::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1327">nil</span></span> and <span id="xdx_900_eus-gaap--IncomeTaxExpenseBenefit_dxL_c20210101__20211231_zbKFRzpGYyFi" title="Provision for income taxes::XDX::-"><span style="-sec-ix-hidden: xdx2ixbrl1329">nil</span></span> for the years ended December 31, 2023, 2022 and 2021.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001331" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><p id="xdx_89F_eus-gaap--ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock_zVu5s0QoF7ad" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Significant
components of deferred tax assets are as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B1_zEp5YhYafoAa" style="display: none">SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_491_20231231_zmaSBsGjXNFd" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_493_20221231_zLQcyI9n6kF2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_404_eus-gaap--DeferredTaxAssetsGrossAbstract_iB_z2kDsbUn6hU9" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Deferred tax assets:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_402_eus-gaap--DeferredTaxAssetsOperatingLossCarryforwards_i01I_maDTAGzXd1_zxk1NBQGtdba" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt; width: 64%; text-align: left; padding-bottom: 1.5pt">Net operating loss carryforwards</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 14%; text-align: right"><ix:nonFraction name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwards" contextRef="AsOf2023-12-31" id="Fact001336" format="ixt:numdotdecimal" decimals="0" unitRef="USD">972,930</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_40D_eus-gaap--DeferredTaxAssetsGross_i01TI_mtDTAGzXd1_maDTALNzuZF_zG3kqJ0Zz5R3" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_40B_eus-gaap--DeferredTaxLiabilitiesAbstract_iB_zHRWNUmwo7g" style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--DeferredTaxAssetsLiabilitiesNet_i01TI_mtDTALNzuZF_mtDTALNzo96_zodUHduYLNIk" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_406_eus-gaap--DeferredTaxAssetsValuationAllowance_i01NI_di_msDTALNzo96_zvcFoJDYcpOf" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">Less: Valuation allowance</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:DeferredTaxAssetsValuationAllowance" contextRef="AsOf2023-12-31" id="Fact001354" format="ixt:numdotdecimal" decimals="0" unitRef="USD">972,930</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:DeferredTaxAssetsValuationAllowance" contextRef="AsOf2022-12-31" id="Fact001355" format="ixt:numdotdecimal" decimals="0" unitRef="USD">636,688</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_40B_eus-gaap--DeferredTaxAssetsNet_i01TI_maDTALNzo96_zTbpdl95osK7" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 2.5pt">Deferred tax assets, net</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1357">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1358">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
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</ix:nonNumeric><p id="xdx_8A0_z0Exaxeq65V6" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Future
tax benefits which may arise as a result of net operating loss carry-forward have not been recognized in the accompanying consolidated
financial statements as their realization has not been determined likely to occur. As of December 31, 2023 and 2022, the Company believes
it is more likely than not that its PRC and HK subsidiaries will be unable to fully utilize their deferred tax assets related to their
net operating loss carry-forward in the PRC and Hong Kong. If the Company is unable to generate taxable income in its PRC and Hong Kong
operations, it is more likely than not that it will not have sufficient income to recognize the net deferred tax assets. As a result,
the Company provided a 100% valuation allowance on its net deferred tax assets of approximately $<span id="xdx_900_eus-gaap--DeferredTaxAssetsLiabilitiesNet_iI_c20231231__srt--StatementGeographicalAxis__country--CN_zClVxLtTOa8d" title="Net deferred tax assets"><span id="xdx_906_eus-gaap--DeferredTaxAssetsLiabilitiesNet_iI_c20231231__srt--StatementGeographicalAxis__country--HK_zBhW7B3DePHf" title="Net deferred tax assets"><ix:nonFraction name="us-gaap:DeferredTaxAssetsLiabilitiesNet" contextRef="AsOf2023-12-31_country_CN" id="Fact001360" format="ixt:numdotdecimal" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:DeferredTaxAssetsLiabilitiesNet" contextRef="AsOf2023-12-31_country_HK" id="Fact001362" format="ixt:numdotdecimal" decimals="0" unitRef="USD">973,000</ix:nonFraction></ix:nonFraction></span></span> and $<span id="xdx_906_eus-gaap--DeferredTaxAssetsLiabilitiesNet_iI_c20221231__srt--StatementGeographicalAxis__country--CN_z6heqXNSe2z3" title="Net deferred tax assets"><span id="xdx_90E_eus-gaap--DeferredTaxAssetsLiabilitiesNet_iI_c20221231__srt--StatementGeographicalAxis__country--HK_zN7gkBALfy0d" title="Net deferred tax assets"><ix:nonFraction name="us-gaap:DeferredTaxAssetsLiabilitiesNet" contextRef="AsOf2022-12-31_country_CN" id="Fact001364" format="ixt:numdotdecimal" decimals="0" unitRef="USD"><ix:nonFraction name="us-gaap:DeferredTaxAssetsLiabilitiesNet" contextRef="AsOf2022-12-31_country_HK" id="Fact001366" format="ixt:numdotdecimal" decimals="0" unitRef="USD">637,000</ix:nonFraction></ix:nonFraction></span></span> related to its
operations in the PRC and Hong Kong as of December 31, 2023 and 2022, respectively. The valuation allowance increased by $<span id="xdx_90B_eus-gaap--ValuationAllowanceDeferredTaxAssetChangeInAmount_c20230101__20231231_zjZz1ASzsN16" title="Increase in valuation allowance"><ix:nonFraction name="us-gaap:ValuationAllowanceDeferredTaxAssetChangeInAmount" contextRef="From2023-01-01to2023-12-31" id="Fact001368" format="ixt:numdotdecimal" decimals="0" unitRef="USD">336,242</ix:nonFraction></span>, $<span id="xdx_90C_eus-gaap--ValuationAllowanceDeferredTaxAssetChangeInAmount_c20220101__20221231_z4HiRkk54hU9" title="Increase in valuation allowance"><ix:nonFraction name="us-gaap:ValuationAllowanceDeferredTaxAssetChangeInAmount" contextRef="From2022-01-012022-12-31" id="Fact001370" format="ixt:numdotdecimal" decimals="0" unitRef="USD">242,472</ix:nonFraction></span>
and $<span id="xdx_90F_eus-gaap--ValuationAllowanceDeferredTaxAssetChangeInAmount_c20210101__20211231_zOU5ieoO3dhg" title="Increase in valuation allowance"><ix:nonFraction name="us-gaap:ValuationAllowanceDeferredTaxAssetChangeInAmount" contextRef="From2021-01-012021-12-31" id="Fact001372" format="ixt:numdotdecimal" decimals="0" unitRef="USD">185,995</ix:nonFraction></span> during the year ended December 31, 2023, 2022 and 2021, respectively.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001374" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><p id="xdx_893_eus-gaap--ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock_z0TK3O9xubag" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reconciliation
of effective income tax rate is as follows:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8B9_zXiGbG1j6rKi" style="display: none">SCHEDULE OF RECONCILIATION OF EFFECTIVE INCOME TAX RATE</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" id="xdx_49C_20230101__20231231_zsAOfoACUVB1" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center">For the years ended</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr id="xdx_40D_eus-gaap--EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate_pid_dp_uPure_maETR001_ziGLzav1wOP2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 46%; text-align: left">PRC statutory tax rate</td><td style="width: 2%">&#160;</td>
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 14%; text-align: right"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" contextRef="From2022-01-012022-12-31" id="Fact001377" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">25.0</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td><td style="width: 2%">&#160;</td>
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  <tr id="xdx_400_eus-gaap--EffectiveIncomeTaxRateReconciliationForeignIncomeTaxRateDifferential_pid_dp_uPure_maETR001_z4tKKzZNX7Z7" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Effect of tax rate differential (HK)</td><td>&#160;</td>
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  <tr id="xdx_404_eus-gaap--EffectiveIncomeTaxRateReconciliationNondeductibleExpense_pid_dp_uPure_maETR001_zuVs9AJ6Rkxj" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Tax effect of non-deductible expenses</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1385">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1386">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--EffectiveIncomeTaxRateReconciliationChangeInDeferredTaxAssetsValuationAllowance_pid_dp_uPure_maETR001_zK4fVU0L5OSe" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Valuation allowance</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationChangeInDeferredTaxAssetsValuationAllowance" contextRef="From2023-01-01to2023-12-31" id="Fact001388" format="ixt:numdotdecimal" decimals="INF" scale="-2" sign="-" unitRef="Pure">18.0</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationChangeInDeferredTaxAssetsValuationAllowance" contextRef="From2022-01-012022-12-31" id="Fact001389" format="ixt:numdotdecimal" decimals="INF" scale="-2" sign="-" unitRef="Pure">17.3</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationChangeInDeferredTaxAssetsValuationAllowance" contextRef="From2021-01-012021-12-31" id="Fact001390" format="ixt:numdotdecimal" decimals="INF" scale="-2" sign="-" unitRef="Pure">19.0</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr id="xdx_40C_eus-gaap--EffectiveIncomeTaxRateContinuingOperations_iT_pid_dp_uPure_mtETR001_z51HXOOcSRB9" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 2.5pt">Effective tax rate</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" contextRef="From2023-01-01to2023-12-31" id="Fact001392" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">1.6</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">%</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1393">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">%</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">&#160;</td><td style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl1394">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">%</td></tr>
  </table>

</ix:nonNumeric><p id="xdx_8AC_zBje69cGbMjc" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Uncertain
tax position</i></b></span></p>

<p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
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which would result in a material change to its tax positions. For the years ended December 31, 2023 and 2022, the Company did not incur
any tax related interest or penalties.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001400" name="us-gaap:SubsequentEventsTextBlock"><p id="xdx_809_eus-gaap--SubsequentEventsTextBlock_zDoWhdXVKq4c" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
1</b>3 - <span id="xdx_82D_zqmxtnxMDAk2">SUBSEQUENT EVENTS</span></span></p>

<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has analyzed its operations subsequent to December 31, 2023, through the date of this report and have determined that the Company
does not have any material subsequent events to disclose in these unaudited condensed consolidated financial statements.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b></b></span></p>

<ix:exclude><!-- Field: Page; Sequence: 121 -->
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001402" name="us-gaap:CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock"><p id="xdx_806_eus-gaap--CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock_zaW3bFAlINKh" style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE
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<p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company performed a test of its restricted net assets of the consolidated subsidiaries in accordance with the Securities and Exchange
Commission&#8217;s Regulation S-X Rule 4-08 (e) (3), &#8220;General Notes to Financial Statements&#8221; and concluded that it was
applicable for the Company to disclose the financial information of the parent company.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
subsidiaries did not pay any dividends to the Company for the periods presented. For the purpose of presenting parent-only financial
information, the Company records its investment in its subsidiaries under the equity method of accounting. Such investment is presented
on the separate condensed statement of financial position of the Company as &#8220;Investment in subsidiaries&#8221;.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ILA
became the parent company of the Company as a result of the execution of the Share Exchange Agreement in April 2020. ILA is a holding
company with no bank account, did not have any significant capital and other commitments, and did not have any long-term obligations,
or guarantees as of December 31, 2023. ILA did not have any business activities during the year ended December 31, 2023.</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<ix:nonNumeric contextRef="From2023-01-01to2023-12-31" escape="true" id="Fact001404" name="srt:ScheduleOfCondensedFinancialStatementsTableTextBlock"><p id="xdx_890_esrt--ScheduleOfCondensedFinancialStatementsTableTextBlock_zZ1zHksdQYXj" style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span id="xdx_8BA_zUlgKabSgL69" style="display: none">SCHEDULE
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<tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_404_eus-gaap--StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAbstract_iB" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--PreferredStockValue_i01I_pp0p0" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_409_eus-gaap--CommonStockValue_i01I_pp0p0" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Ordinary shares, par value $<span id="xdx_907_eus-gaap--CommonStockParOrStatedValuePerShare_iI_c20231231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_z36kufShjOn4" title="Ordinary shares, par value" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_90B_eus-gaap--CommonStockParOrStatedValuePerShare_iI_c20221231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_znnHVaodtDLe" title="Ordinary shares, par value" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:CommonStockParOrStatedValuePerShare" contextRef="AsOf2023-12-31_srt_ParentCompanyMember" id="Fact001449" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares"><ix:nonFraction name="us-gaap:CommonStockParOrStatedValuePerShare" contextRef="AsOf2022-12-31_srt_ParentCompanyMember" id="Fact001451" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">0.0001</ix:nonFraction></ix:nonFraction></span></span> per share; <span id="xdx_902_eus-gaap--CommonStockSharesAuthorized_iI_c20231231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_zz58mgGSfcC9" title="Ordinary shares, authorized" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_909_eus-gaap--CommonStockSharesAuthorized_iI_c20221231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_zX0aFjAZhwT" title="Ordinary shares, authorized" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:CommonStockSharesAuthorized" contextRef="AsOf2023-12-31_srt_ParentCompanyMember" id="Fact001453" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesAuthorized" contextRef="AsOf2022-12-31_srt_ParentCompanyMember" id="Fact001455" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">450,000,000</ix:nonFraction></ix:nonFraction></span></span> shares authorized; <span id="xdx_907_eus-gaap--CommonStockSharesIssued_iI_c20231231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_zZLbODVgHXH1" title="Ordinary shares, issued" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_908_eus-gaap--CommonStockSharesOutstanding_iI_c20231231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_zYlNoefdFww9" title="Ordinary shares, outstanding" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_90A_eus-gaap--CommonStockSharesIssued_iI_c20221231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_z5sq5Fb5i8ab" title="Ordinary shares, issued" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><span id="xdx_902_eus-gaap--CommonStockSharesOutstanding_iI_c20221231__srt--ConsolidatedEntitiesAxis__srt--ParentCompanyMember_zXYdwcrP61Sf" title="Ordinary shares, outstanding" class="xdx_phnt_RGlzY2xvc3VyZSAtIFNDSEVEVUxFIE9GIENPTkRFTlNFRCBCQUxBTkNFIFNIRUVUIChEZXRhaWxzKSAoUGFyZW50aGV0aWNhbCkA"><ix:nonFraction name="us-gaap:CommonStockSharesIssued" contextRef="AsOf2023-12-31_srt_ParentCompanyMember" id="Fact001457" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesOutstanding" contextRef="AsOf2023-12-31_srt_ParentCompanyMember" id="Fact001459" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesIssued" contextRef="AsOf2022-12-31_srt_ParentCompanyMember" id="Fact001461" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesOutstanding" contextRef="AsOf2022-12-31_srt_ParentCompanyMember" id="Fact001463" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">18,060,000</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span></span> shares issued and outstanding as of December 31, 2023 and 2022</td><td>&#160;</td>
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  <tr id="xdx_401_eus-gaap--AdditionalPaidInCapital_i01I_pp0p0" style="vertical-align: bottom; background-color: White">
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  <tr id="xdx_405_eus-gaap--RetainedEarningsAccumulatedDeficit_i01I_pp0p0" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr id="xdx_40E_eus-gaap--AccumulatedOtherComprehensiveIncomeLossNetOfTax_i01I_pp0p0" style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 10pt; text-align: left; padding-bottom: 1.5pt">Accumulated other comprehensive (loss) gain</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" contextRef="AsOf2023-12-31_srt_ParentCompanyMember" id="Fact001471" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">260,554</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr id="xdx_403_eus-gaap--StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest_i01TI_pp0p0_zEB8tBmtBea7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40A_eus-gaap--LiabilitiesAndStockholdersEquity_iTI_pp0p0_zlMNIhXUT1xb" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 2.5pt">TOTAL LIABILITIES AND SHAREHOLDERS&#8217; EQUITY</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><ix:nonFraction name="us-gaap:LiabilitiesAndStockholdersEquity" contextRef="AsOf2023-12-31_srt_ParentCompanyMember" id="Fact001477" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">16,402,393</ix:nonFraction></p></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
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  </table>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is the parent company statements of operations and comprehensive loss:</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span><span></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="display: none; vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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<tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">USD</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">USD</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center">(Unaudited)</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">(Unaudited)</td><td style="font-weight: bold">&#160;</td></tr>
  <tr id="xdx_407_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_i_pp0p0" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 46%; text-align: left; padding-bottom: 1.5pt">EQUITY LOSS</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 14%; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2023-01-012023-12-31_srt_ParentCompanyMember" id="Fact001480" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,658,203</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">)</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 14%; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2022-01-012022-12-31_srt_ParentCompanyMember" id="Fact001481" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,538,363</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">)</td><td style="width: 2%; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left; padding-bottom: 2.5pt">NET LOSS</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2023-01-012023-12-31_srt_ParentCompanyMember" id="Fact001484" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,658,203</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2022-01-012022-12-31_srt_ParentCompanyMember" id="Fact001485" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,538,363</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(<ix:nonFraction name="us-gaap:NetIncomeLoss" contextRef="From2021-01-012021-12-31_srt_ParentCompanyMember" id="Fact001486" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">1,386,515</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_40C_eus-gaap--ComprehensiveIncomeNetOfTaxAbstract_iB_zGU01Qps3lXl" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">COMPREHENSIVE LOSS</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr id="xdx_409_eus-gaap--NetIncomeLoss_i01_pp0p0" style="vertical-align: bottom; background-color: White">
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{"company-data": {"conformed-name": "Intelligent Living Application Group Inc.", "cik": "0001814963", "assigned-sic": "2540", "organization-name": "04 Manufacturing", "irs-number": "000000000", "state-of-incorporation": "K3", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-41444", "film-number": "24898073"}, "business-address": {"street1": "UNIT 02, 5/F., BLK A, PROFIT IND. BLDG.,", "street2": "1-15 KWAI FUNG ST., KWAI CHUNG, N.T.", "city": "HONG KONG", "state": "K3", "zip": "00000", "phone": "852 2481 7938"}, "mail-address": {"street1": "UNIT 02, 5/F., BLK A, PROFIT IND. BLDG.,", "street2": "1-15 KWAI FUNG ST., KWAI CHUNG, N.T.", "city": "HONG KONG", "state": "K3", "zip": "00000"}}
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31
,
2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from _________ to _________.
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of event requiring this shell company report:
Commission
file number:
001-41444
INTELLIGENT LIVING APPLICATION GROUP INC.
(Exact
name of Registrant as Specified in its Charter)
Cayman
Islands
(Jurisdiction
of Incorporation or Organization)
Unit
2, 5/F, Block A, Profit Industrial Building
1-15
Kwai Fung Crescent, Kwai Chung
New
Territories
,
Hong Kong
(Address
of Principal Executive Offices)
Bong
Lau
, Chief Executive Officer
Unit
2, 5/F, Block A, Profit Industrial Building
1-15
Kwai Fung Crescent, Kwai Chung
New
Territories
,
Hong Kong
+
852
2481 7938
Email:
info@i-l-a-g.com
(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 registered
Ordinary
    Shares, par value $0.0001
ILAG
Nasdaq
Capital Market
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, 2023, there were
18,060,000
ordinary shares issued and outstanding, par value US$0.0001 per share.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No
☒
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 ☐
No
☒
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.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☐
Non-accelerated
    filer
☒
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 firm that prepared or issued its audit report.
☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☒
U.S. GAAP
☐
    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
☐ No
☒
(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 Sections 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 ☐
TABLE
OF CONTENTS
Page
Introduction
ii
Forward-looking Statements
iii
PART I
1
Item
    1.
Identity of Directors, Senior Management and Advisers
1
Item
    2.
Offer Statistics and Expected Timetable
1
Item
    3.
Key Information
1
Item
    4.
Information On The Company
37
Item
    4A.
Unresolved Staff Comments
59
Item
    5.
Operating And Financial Review And Prospects
59
Item
    6.
Directors, Senior Management And Employees
72
Item
    7.
Major Shareholders And Related Party Transactions
81
Item
    8.
Financial Information
81
Item
    9.
The Offer And Listing
82
Item
    10.
Additional Information
82
Item
    11.
Quantitative And Qualitative Disclosures About Market Risk
92
Item
    12.
Description Of Securities Other Than Equity Securities
92
PART II
93
Item
    13.
Defaults, Dividend Arrearages And Delinquencies
93
Item
    14.
Material Modifications To The Rights Of Security Holders And Use Of Proceeds
93
Item
    15.
Controls And Procedures
93
Item 16.
[Reserved]
94
Item
    16A.
Audit Committee Financial Expert
94
Item
    16B.
Code Of Ethics
94
Item
    16C.
Principal Accountant Fees and Services
94
Item
    16D.
Exemptions From The Listing Standards For Audit Committees
95
Item
    16E.
Purchases Of Equity Securities By The Issuer And Affiliated Purchasers
95
Item
    16F.
Change In Registrant's Certifying Accountant
95
Item
    16G.
Corporate Governance
95
Item
    16H.
Mine Safety Disclosure
95
Item
    16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
95
Item
    16J.
Insider Trading Policy
95
Item
    16K.
Cybersecurity
95
PART III
96
Item
    17.
Financial Statements
96
Item
    18.
Financial Statements
96
Item
    19.
Exhibits
96
i
INTRODUCTION
In
this annual report on Form 20-F, unless otherwise indicated, "we," "us," "our," the "Company",
"Intelligent Living", "Registrant" and "ILAG" refer to Intelligent Living Application Group Inc.,
a company organized in the Cayman Islands, its predecessor entities and its subsidiaries.
Unless
indicated otherwise, references to:
●
"Bamberg"
                                            are to Bamberg (HK) Limited, which was incorporated under the laws of Hong Kong and is a
                                            wholly owned subsidiary of ILAG BVI; "China" or the "PRC" are to
                                            the People's Republic of China；
●
"EIT"
                                            are to PRC enterprise income tax; "Hing Fat" are to Hing Fat Industrial Limited,
                                            which was incorporated under the laws of Hong Kong and is a wholly owned subsidiary of ILAG
                                            BVI;
●
"Hong
Kong" are to Hong Kong Special Administrative Region of the People's Republic of China；
●
"HK$"
or "Hong Kong dollars" refers to the legal currency of Hong Kong；
●
"Intelligent
Living," "we," "us," "our company," "ILAG," and "our" are to Intelligent
Living Application Group Inc., a Cayman Islands exempted company with limited liability, and its subsidiary and consolidated entity;
●
"ILAG BVI" are to Intelligent Living Application Group Limited, a holding company incorporated under the laws of the British Virgin Islands and a wholly owned subsidiary of Intelligent Living Application Group Inc.;
●
"Kambo
Hardware" are to Kambo Hardware Limited, which was incorporated under the laws of Hong Kong and is a wholly owned subsidiary of
ILAG BVI;
●
"Kambo Locksets" are to Kambo Locksets Limited, which was incorporated under the laws of Hong Kong and is a wholly owned subsidiary of ILAG BVI
●
"MOFCOM"
                                            are to the Ministry of Commerce of the PRC;
●
"Ordinary
                                            Share(s)" are to our ordinary shares with a par value of US$0.0001 per share;
●
"Preferred
                                            Share(s)" are to our preferred shares with a par value of US$0.0001 per share;
●
"RMB"
                                            and "Renminbi" refer to the legal currency of China;
●
"SAFE"
                                            are to the State Administration of Foreign Exchange;
●
"US$,"
                                            "U.S. dollars," "$" and "dollars" are to the legal currency
                                            of the United States; and
●
Xingfa
                                            are to Dongguan Xingfa Hardware Products Co. Ltd., which was incorporated under the laws
                                            of China and is a wholly owned subsidiary of Hing Fat.
Our
business is primarily conducted in Hong Kong and China, an all of our revenues are received and denominated in HK$ and RMB. RMB is not
freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. This
annual report contains translations of HK$ and RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader.
We make no representation that the Renminbi, HK$ or U.S. dollar amounts referred to in this report could have been or could be converted
into U.S. dollars, HK$ or Renminbi, as the case may be, at any particular rate or at all.
We
completed an initial public offering of our ordinary shares at an initial offering price of US$4.00 per share on July 15, 2022. Our ordinary
shares, par value US$0.0001 per share, are traded on the Nasdaq Capital Market under the symbol "ILAG".
ii
FORWARD-LOOKING
STATEMENTS
This
report contains "forward-looking statements" for purposes of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 that represent our beliefs, projections and predictions about future events. Known and unknown risks, uncertainties
and other factors, including those listed under "Risk Factors," may cause our actual results, performance or achievements
to be materially different from those expressed or implied by the forward-looking statements. All statements other than statements of
historical fact are "forward-looking statements," including any projections of earnings, revenue or other financial items,
any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects
or other developments, any statements regarding future economic conditions or performance, any statements of management's beliefs,
goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as "may",
"will", "should", "could", "would", "predicts", "potential",
"continue", "expects", "anticipates", "future", "intends", "plans",
"believes", "estimates" and similar expressions, as well as statements in the future tense, identify forward-looking
statements.
We
have based these forward-looking statements largely on our current expectations and projections about future events that we believe may
affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include
statements relating to:
●
our
                                            goals and strategies;
●
our
                                            future business development, financial conditions and results of operations fluctuations
                                            in interest rates;
●
our
                                            expectations regarding demand for and market acceptance of our products and services;
●
projections
                                            of revenue, earnings, capital structure and other financial items;
●
competition
                                            in our industry;
●
relevant
                                            government policies and regulations relating to our industry; and
●
general
                                            economic and business conditions in the markets in which we operate.
These
forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking
statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from
our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are
generally set forth in "Risk Factors" and other sections in this report. You should thoroughly read this report and the documents
that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect.
We qualify all of our forward-looking statements by these cautionary statements.
This
report contains certain data and information that we obtained from various government and private publications. Statistical data in these
publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data,
or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market
price of our ordinary shares. In addition, the rapidly changing nature of the lockset and hardware marketplace industry results in significant
uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any
one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections
based on these assumptions. You should not place undue reliance on these forward-looking statements.
The
forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in
this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence
of unanticipated events. You should read this report and the documents that we refer to in this report and any exhibits filed to this
report completely and with the understanding that our actual future results may be materially different from what we expect.
iii
PART
I
ITEM
1.
IDENTITY
                                            OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not
Applicable.
ITEM
2.
OFFER
                                            STATISTICS AND EXPECTED TIMETABLE
Not
Applicable.
ITEM
3.
KEY
                                            INFORMATION
Our
Holding Company Structure and Operations in Hong Kong and China
We
are a Cayman Islands holding company without any operation and our operations are conducted by our wholly owned subsidiaries in Hong
Kong and China and this structure involves unique risks to investors.
1
There
are legal and operational risks associated with being based in and having all our operations in Hong Kong and China. The Chinese
government recently took regulatory actions on certain U.S. listed Chinese companies and made statement that it will exert more
oversight and control over offerings and listings by Chinese companies that are conducted overseas, such as those related to the use
of variable interest entities and data security or anti-monopoly concerns. On July 6, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal
activities in the securities market and promote the high-quality development of the capital market, which, among other things,
requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to
enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial
application of the PRC securities laws. On December 28, 2021, Cybersecurity Review Measures were published by Cyberspace
Administration of China or the CAC, National Development and Reform Commission, Ministry of Industry and Information Technology,
Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People's Bank of China,
State Administration of Radio and Television, China Securities Regulatory Commission ("CSRC"), State Secrecy
Administration and State Cryptography Administration and became effective on February 15, 2022, which provides that, Critical
Information Infrastructure Operators ("CIIOs") that purchase internet products and services and Online Platform
Operators engaging in data processing activities that affect or may affect national security shall be subject to the cybersecurity
review by the Cybersecurity Review Office. On November 14, 2021, CAC published the Administration Measures for Cyber Data Security
(Draft for Public Comments), or the "Cyber Data Security Measure (Draft)", which requires cyberspace operators with
personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of
Cybersecurity Review. On July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer,
effective on September 1, 2022, which requires the data processors to apply for data cross-border security assessment coordinated by
the CAC under the following circumstances: (i) any data processor transfers important data to overseas; (ii) any critical
information infrastructure operator or data processor who processes personal information of over 1 million people provides personal
information to overseas; (iii) any data processor who provides personal information to overseas and has already provided personal
information of more than 100,000 people or sensitive personal information of more than 10,000 people to overseas since January 1st
of the previous year; and (iv) other circumstances under which the data cross-border transfer security assessment is required as
prescribed by the CAC. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and
Listing by Domestic Enterprises (the "New Overseas Listing Rules") with five interpretive guidelines, which took effect
on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant
governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for
initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been
listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or
multiple acquisition(s), share swap, transfer of shares or other means. According to the Notice on Arrangements for Overseas
Securities Offering and Listing by Domestic Enterprises, published by the CSRC on February 17, 2023, a company that (i) has already
completed overseas listing or (ii) has already obtained the approval for the offering or listing from overseas securities regulators
or exchanges but has not completed such offering or listing before effective date of the new rules and also completes the offering
or listing before September 30, 2023 is considered as an existing listed company and is not required to make any filing until it
conducts a new offering in the future. Furthermore, upon the occurrence of any of the material events specified below after an
issuer has completed its offering and listed its securities on an overseas stock exchange, the issuer shall submit a report thereof
to the CSRC within 3 business days after the occurrence and public disclosure of the event: (i) change of control; (ii)
investigations or sanctions imposed by overseas securities regulatory agencies or other competent authorities; (iii) change of
listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. The New Overseas Listing
Rules provide that the determination as to whether a domestic company is indirectly offering and listing securities on an
overseas market shall be made on a substance over form basis, and if the issuer meets the following conditions, the offering and
listing shall be determined as an indirect overseas offering and listing by a Chinese domestic company: (i) any of the revenue,
profit, total assets or net assets of the Chinese domestic entity is more than 50% of the related financials in the issuer's
audited consolidated financial statements for the most recent fiscal year; and (ii) the senior managers in charge of business
operation and management of the issuer are mostly Chinese citizens or with regular domicile in China, the main locations of its
business operations are in China or main business activities are conducted in China. The New Overseas Listing Rules also
stipulate the legal consequences to the companies for breaches, including failure to fulfill filing obligations or filing documents
having false statement or misleading information or material omissions, which may result in a fine ranging from RMB1 million to
RMB10 million, and in cases of severe violations, the relevant responsible persons may also be barred from entering the securities
market. On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secretes Protection and the
National Archives Administration released the Provisions on Strengthening the Confidentiality and Archives Administration Related to
the Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions,
which took effect on March 31, 2023. PRC domestic enterprises seeking to offer securities and list in overseas markets, either
directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and
filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or
publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies,
securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that (i)
providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and
accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory
agencies and other entities and individuals shall be subject to corresponding procedures in accordance with relevant laws and
regulations; and (ii) any working papers formed in the territory of the PRC by securities companies and securities service agencies
that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in
the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with relevant
laws and regulations. As of the date of this prospectus, these new laws and guidelines have not impacted the Company's ability
to conduct its business, accept foreign investments, or list and trade on a U.S. We are headquartered in Hong Kong and our major
operational activities are carried out in Hong Kong, our main places of business are located in Hong Kong, and none of the senior
managers in charge of operation and management of the Company is Chinese citizen or domiciled in China. Hong Kong is a special
administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law of the
Hong Kong Special Administrative Region of the People's Republic of China, or the Basic Law, providing Hong Kong
with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication
under the principle of "one country, two systems". Also, all the senior managers in charge of business operation
and management of the Company and its manufacturing subsidiary in China are non- Chinese citizens and do not have regular
domicile in China, the main location of the business operations or business activities of the Company are in Hong Kong instead of
mainland China and our manufacturing subsidiary in China only supplies its products to its affiliates in Hong Kong and does not sell
them in mainland China. According to the advice by our Chinese legal counsel Guangdong Wesley Law Firm, we believe the New
Overseas Listing Rules by CSRC do not apply to the Company. The Company owns 100% equity interest of all its subsidiaries including
the manufacturing subsidiary in China and does not have a VIE structure. Our subsidiary in China manufactures and sells locksets to
its affiliate in Hong Kong and is not a cyberspace operator with personal information of more than 1 million users or activities
that affect or may affect national security and it does not have documents and materials which may adversely affect national
security or public interests. However, there are uncertainties in the interpretation and enforcement of these new laws and
guidelines, which could materially and adversely impact our business and financial outlook, may impact our ability to accept foreign
investments, offer our securities to investors or continue to list on a U.S. or other foreign exchange, and could impact our ability
to conduct our business. If there is significant change to current political arrangements between mainland China and Hong Kong,
companies operated in Hong Kong may face similar regulatory risks as mainland Chinese companies. Any change in foreign
investment regulations, and other policies in China or related enforcement actions by China government could result in a material
change in our operations and the value of our securities and could significantly limit or completely hinder our ability to offer our
securities to investors or cause the value of our securities to significantly decline or be worthless. The Company's auditor
is headquartered in the U.S. and it is not subject to the determinations announced by the PCAOB on December 16, 2021, which
determinations were vacated on December 15, 2022, and Holding Foreign Companies Accountable Act and related regulations currently do
not affect the Company as the Company's auditor is subject to PCAOB's inspection on a regular basis.
2
Permissions
Required from the PRC Authorities for Our Operations
Our
wholly owned subsidiary Dongguan Xingfa Hardware Products Co. Ltd. ("Xingfa") is incorporated and operating in mainland China.
Xingfa has received all permission required to obtain from Chinese authorities to operate its current business in China or issue the
ordinary shares of the Company to foreign investors, including Business license, Customs Registration Certificate, Bank Account Open
Permit and Approval regarding Environmental Protection. Currently, the Chinese government may intervene or influence our operations in
China or any securities offering at any time, which could result in a material change in our operations and our ordinary shares could
decline in value or become worthless. Other than these permits, we are not required to obtain permit and approval from Chinese authorities
to operate our business and to offer the securities being registered to foreign investors. We or our subsidiaries are not covered by
permissions requirements from the China Securities Regulatory Commission (CSRC), Cyberspace Administration of China (CAC) or any other
governmental agency that is required to approve our business and operations. We manufacture and sell lockset products and our products
and services do not pose national security risks, based on the advice of our PRC counsel, we are not subject to the report requirement
under Cybersecurity Review Measures published by Cyberspace Administration of China, National Development and Reform Commission, Ministry
of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce,
People's Bank of China, State Administration of Radio and Television, China Securities Regulatory Commission, State Secrecy Administration
and State Cryptography Administration on December 28, 2021, which became effective on February 15, 2022.
As
of the date of this report, we (1) are not required to obtain permissions from any PRC authorities to issue our ordinary shares to foreign
investors, (2) are not subject to permission requirements from CSRC, CAC or any other entity that is required to approve of our operations
in China, and (3) have not received or were denied such permissions by any PRC authorities. We are headquartered in Hong Kong with our
chief executive officer, chief financial officer, chief operating officer and all members of the board of directors based in Hong Kong
who are not Chinese citizens and most of our revenues and profits are generated by our subsidiaries in Hong Kong. Although we don't
believe we are a Chinese domestic entity as defined in the New Overseas Listing Rules published by CSRC on February 17, 2023, it is not
certain whether we might be determined as a Chinese entity under new rules, which will require us to file the offering related documents
with CSRC. Also, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council
jointly issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions,
which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal
securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC
regulatory environment, it is uncertain when and whether our PRC subsidiary, will be required to obtain permission from the PRC government
in connection with our listing on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied
or rescinded. If we or our subsidiaries do not receive or maintain such permissions or approvals, inadvertently conclude that such permissions
or approvals are not required, or applicable laws, regulations, or interpretations change and we are required to obtain such permissions
or approvals in the future, it could significantly limit or completely hinder our ability to offer or continue to offer our securities
to investors and cause the value of our securities to significantly decline or become worthless.
3
Transfer
of Cash To and From Our Subsidiaries
We
mainly conduct our marketing and sales, research and development and design activities through our wholly owned subsidiaries in Hong
Kong and manufacturing activities through our wholly owned subsidiary in China, Dongguan Xingfa Hardware Products Co., Limited. As a
result, almost all of our sales revenues are received by our Hong Kong subsidiaries which make payment to Xingfa for the cost of products
and reasonable markups. Transfers of funds among our Hong Kong subsidiaries or from our Hong Kong subsidiaries to the holding company
are free of restrictions. Remittances of funds from our Hong Kong subsidiaries to Xingfa are subject to review and conversion of HK$
or US$ to Renminbi Yuan ("RMB") through Xingfa's bank in China, which represents the SAFE to monitor foreign exchange
activities. Under the existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and
trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying
with certain procedural requirements with the banks. Currently, we don't have any intentions to distribute earnings or settle amounts
owed under our operating structure other than the agreements entered under normal business operation as discussed above.
Intelligent
Living Application Group Inc. ("ILAG") is incorporated in Cayman Islands as a holding company with no actual operations
and it currently conducts its business through its subsidiaries in Hong Kong and China. There has been no cash flows and transfers
of other assets between the holding company and its subsidiaries, other than that as of December 31, 2022, Kimbo Locksets and
Intelligent Living Application Group Limited (BVI), both wholly owned subsidiaries of ILAG have paid approximately $1,671,000 for
expenses related to the public offering of ILAG as intercompany loans and not as the dividend payment or distribution. During 2023,
ILAG BVI has paid approximately $972,000 for general and administration expenses as intercompany loans and not as the dividend
payment or distribution. None of our subsidiaries has made any dividend payment or distribution to our holding company as of the
date this report and they have no plans to make any distribution or dividend payment to the holding company in the near future.
Neither the Company nor any of its subsidiaries has made any dividends or distributions to U.S. investors as of the date of this
report.
At
operational level, Xingfa has sold products with markups to Hing Fat, in the amount of approximately $6.54 million and $11.56
million for the year ended December 31, 2023 and 2022, respectively. Hing Fat has sold products with markups to Kambo Locksets in the amount of
approximately $6.31 million and $11.01 million for the year ended December 31, 2023 and 2022, respectively. Hing Fat has made payment to Xingfa
approximately $6.45 million and $12.12 million for the year ended December 31, 2023 and 2022, respectively. Kambo Locksets has made payment to
Hing Fat for approximately $5.47 million and $12.14 million for the years ended December 31, 2023 and 2022, respectively.
All
transfers of cash are related to the operations of the subsidiaries in the ordinary course of business. For our Hong Kong subsidiaries,
our subsidiary in British Virgin Islands and the holding company ("Non-PRC Entities"), there is no restrictions on foreign
exchange for such entities and they are able to transfer cash among these entities, across borders and to US investors. Also, there is
no restrictions and limitations on the abilities of Non-PRC Entities to distribute earnings from their businesses, including from subsidiaries
to the parent company or from the holding company to the U.S. investors as well as the abilities to settle amounts owed. However, PRC
may impose greater restrictions on our Hong Kong subsidiaries' abilities to transfer cash out of Hong Kong and to the holding company,
which could adversely affect our business, financial condition and results of operations.
Regarding
cash transfer to and from Xingfa, we are able to have such transfer through banks in China under current account items, such as profit
distributions and trade and service-related foreign exchange transactions, which can be made in foreign currencies without prior approval
from SAFE by complying with certain procedural requirements with the banks. However, approval from or registration with appropriate government
authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as
the repayment of loans denominated in foreign currencies. PRC laws and regulations allow an offshore holding company to provide funding
to our wholly owned subsidiary in China only through loans or capital contributions, subject to the filing or approval of government
authorities and limits on the amount of capital contributions and loans. Subject to satisfaction of applicable government registration
and approval requirements, we may extend inter-company loans to our wholly owned subsidiary in China or make additional capital contributions
to fund Xingfa's capital expenditures or working capital. For an increase of its registered capital, Xingfa needs to file such
change of registered capital with the MOFCOM or its local counterparts. If the holding company provide funding to Xingfa through loans,
the total amount of such loans may not exceed the difference between the entity's total investment as approved by the foreign investment
authorities and its registered capital. Such loans must be registered with SAFE or its local branches. Under PRC law, Xingfa is also
required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve
funds reach 50% of its registered capital.
4
Selected
Financial Data
In
the table below, we provide you with historical selected financial data for our company. The selected consolidated statements of operations
data for the fiscal years ended December 31, 2023, 2022 and 2021 and the selected consolidated balance sheets data as of December 31,
2023 and 2022 have been derived from our audited consolidated financial statements, which are included in this annual report beginning
on page F-1. The selected consolidated balance sheet data for the year ended December 31, 2021 have been derived from our audited consolidated
balance sheet as of December 31, 2021, which is not included in this annual report. Our historical results do not necessarily indicate
results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified
in their entirety by reference to, our audited consolidated financial statements and related notes and "Item 5. Operating and Financial
Review and Prospects" below. Our audited consolidated financial statements are prepared and presented in accordance with US GAAP.
December
31,
    2023
December
    31, 2022
Current assets
$
12,102,160
$
16,015,777
Total non-current assets
$
6,181,698
$
5,786,297
Total assets
$
18,283,858
$
21,802,074
Total current liabilities
$
1,390,963
$
1,813,936
Total non-current liabilities
$
490,502
$
536,327
For
    the years ended December 31,
2023
2022
2021
Revenue
$
6,443,357
$
12,158,102
$
12,543,556
Operating expenses
$
4,527,090
$
4,461,258
$
3,109,966
Net loss
$
(3,501,518
)
$
(1,655,903
)
$
(1,386,515
)
For
    the years ended December 31,
2023
2022
2021
Net cash used in operating activities
$
(3,163,187
)
$
(4,170,876
)
$
(1,038,967
)
Net cash used in investing activities
$
(1,360,274
)
$
(4,181,724
)
$
(9,758
)
Net cash provided by (used in) financing activities
$
(154,976
)
$
17,397,802
$
876,334
Net increase (decrease) in cash
$
(4,681,921
)
$
9,034,522
$
(171,311
)
3.A.
[Reserved]
3.B.
Capitalization and Indebtedness
Not
Applicable.
3.C.
Reasons For The Offer And Use Of Proceeds
Not
Applicable.
3.D.
Risk Factors
An
investment in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described
below together with all other information contained in this annual report, including the matters discussed under the headings "Forward-Looking
Statements" and "Operating and Financial Review and Prospects" before you decide to invest in our
ordinary shares
.
We are a holding company with substantial operations in Hong Kong and China and are subject to a legal and regulatory environment that
in many respects differs from the United States. If any of the following risks, or any other risks and uncertainties that are not presently
foreseeable to us, actually occur, our business, financial condition, results of operations, liquidity and our future growth prospects
could be materially and adversely affected.
5
Summary
of Risk Factors
An
investment in our ordinary shares involves significant risks. Below is a summary of material risks we face, organized under relevant
headings. These risks are discussed more fully in
Item 3. Key Information—D. Risk Factors
.
Risks
                                            Related to Our Business
●
We
face risks related to health epidemics and other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to
cause business disruptions, resulting in a material adverse impact to our financial condition and results of operations.
●
We
                                                                                                                                                                                                                                          may not be able to successfully introduce smart lock and security and internet of things (IoT) products that are in research and
                                                                                                                                                                                                                                          development.
●
We
                                            incurred net losses for the year ended December 31, 2023 and the past two years and may not
                                            be able to generate sufficient operating cash flows and working capital from operation. Failure
                                            to manage our liquidity and cash flows may materially and adversely affect our financial
                                            condition and results of operations. As a result, we may need additional capital, and financing
                                            may not be available on terms acceptable to us, or at all.
●
Fluctuations
                                            in the price, availability or quality of raw materials used in our products could cause manufacturing
                                            delays, adversely affecting our ability to provide goods to our customers or increase costs,
                                            any of which could decrease our sales or earnings.
●
Xingfa
                                            may experience material disruptions to its manufacturing operations in China that could result
                                            in material delays, quality control issues, increased costs and loss of business opportunities,
                                            which may negatively impact our sales and financial results.
●
Changes
                                            in U.S. trade policies could significantly reduce the volume of export goods into the United
                                            States, which may materially reduce our profit margin and our sales in the United States.
●
Environmental
                                            regulations impose substantial costs and limitations on our operations and violation of environmental
                                            regulations might subject us to fines, penalties or suspension of production which could
                                            have material negative impact on our financial results.
●
We
are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis
of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective,
which may adversely affect investor confidence in our company and, as a result, the value of our Ordinary Shares.
●
We
                                            do not have any business insurance coverage.
Risks
                                            Related to Doing Business in China
●
Changes
                                            in China's economic, political or social conditions or government policies could have
                                            a material adverse effect on our business and results of operations.
●
Uncertainties
                                            and quick change in the interpretation and enforcement of Chinese laws and regulations with
                                            little advance notice could result in a material and negative impact on our business operation,
                                            decrease the value of our ordinary shares and limit the legal protections available to us.
●
Any
                                            failure to comply with PRC regulations regarding the registration requirements for employee
                                            stock incentive plans may subject the PRC plan participants or us to fines and other legal
                                            or administrative sanctions.
6
●
Regulatory
                                            bodies of the United States may be limited in their ability to conduct investigations or
                                            inspections of our operations in China.
●
The
                                            Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are
                                            evolving quickly. Further implementations and interpretations of or amendments to the HFCA
                                            Act or the related regulations, or a PCOAB's determination of its lack of sufficient
                                            access to inspect our auditor, might pose regulatory risks to and impose restrictions on
                                            us because of our operations in mainland China. A potential consequence is that our ordinary
                                            shares may be delisted by the exchange. The delisting of our ordinary shares, or the threat
                                            of our ordinary shares being delisted, may materially and adversely affect the value of your
                                            investment. Additionally, the inability of the PCAOB to conduct full inspections of our auditor
                                            deprives our investors of the benefits of such inspections.
●
Substantial
                                            uncertainties exist with respect to the interpretation and implementation of the newly enacted
                                            PRC Foreign Investment Law and how it may impact the viability of our current corporate structure,
                                            corporate governance, business operations and financial results.
●
Any
                                            change of regulations and rules by Chinese government, including the limitations on usage
                                            of power, additional environmental protection requirements, moving technology in and out
                                            of the PRC or restriction on cash transfer out of PRC, may intervene or influence our operations
                                            in China at any time and any additional control over offerings conducted overseas and/or
                                            foreign investment in issuers with Chinese operations could result in a material change in
                                            our business operations and/or the value of our ordinary shares and could significantly limit
                                            or completely hinder our ability to offer our ordinary shares to investors and cause the
                                            value of such securities to significantly decline or be worthless.
Risks
Related to Doing Business in Hong Kong
●
It
                                            will be difficult to acquire jurisdiction and enforce liabilities against us, our officers,
                                            directors and assets based in Hong Kong and China.
●
The
                                            Hong Kong legal system embodies uncertainties which could negatively affect our listing on
                                            Nasdaq and limit the legal protections available to you and us.
●
We
                                            cannot foresee the recently passed legislation of Basis Law Article 23 (Safeguarding National
                                            Security Ordinance) will create any legal impact on us, our business, our officers, our directors
                                            and assets based in Hong Kong and China. However, we cannot predict if our customers in the
                                            US may have special prospectus in doing business with us.
Risks
Related to Our Ordinary Shares
●
Our
                                            ordinary shares may be thinly traded and you may be unable to sell at or near ask prices
                                            or at all if you need to sell your shares to raise money or otherwise desire to liquidate
                                            your shares.
●
You
                                            may face difficulties in protecting your interests as a shareholder, as Cayman Islands law
                                            provides substantially less protection when compared to the laws of the United States and
                                            it may be difficult for a shareholder of ours to effect service of process or to enforce
                                            judgements obtained in the United States courts.
In
addition, please see "Risk Factors" below, and other information included in this report, for a discussion of these and other
risks and uncertainties that we face.
7
Risks
Related to Our Business
We face risks related to health epidemics and
other outbreaks, including the coronavirus (COVID-19), which has caused and may continue to cause business disruptions, resulting in a
material, adverse impact to our financial condition and results of operations.
In recent years, there have been outbreaks of epidemics in various countries. The recent
outbreak of COVID-19 has spread throughout the world, especially in China, the United States and Europe. On March 11, 2020, the
World Health Organization declared the outbreak a global pandemic. The pandemic has resulted in quarantines, travel restrictions,
and the temporary closure of office buildings and facilities in China and in the U.S. Our results of operations were materially
adversely affected by the outbreak of COVID-19.
In
2022, there were outbreaks of the Omicron variant of the COVID-19 in Hong Kong where our headquarters are located and other cities
in China, including Shenzhen, Shanghai, Guangzhou, Taiyuan, Changchun as well as Dongguan city where Xingfa is located, and travel
restrictions, mandatory COVID-19 tests, quarantine requirements and/or temporary closure of office buildings and facilities were imposed by local governments. China eased the strict lockdown procedures in early December 2022, which led to surge in
COVID infections in December 2022 and January 2023 and caused disruption our business operations as our migrant workers from other provinces in the manufacturing factory
had to leave and go home early for the new year holidays and did not come back until March 2023. Although our operations
have resumed to normal, we cautiously prepare for the
government authorities may issue new orders of office closure, travel and transportation restrictions in China if there is any new
variants or resurgence of the COVID-19, which will have material negative impact to our
business and financial conditions.
In general, our business could be materially adversely affected by the effects of epidemics or pandemic, including,
but not limited to, the COVID-19, avian influenza, severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, or other
outbreaks. In response to an epidemic or other outbreaks, government and other organizations may adopt regulations and policies that could
lead to severe disruption to our daily operations, including temporary closure of our offices and other facilities. These severe conditions
may cause us and/or our partners to make internal adjustments, including but not limited to, temporarily closing down businesses, limiting
business hours, and setting restrictions on travel and/or visits with clients and partners for a prolonged period of time. Various impacts
arising from a severe condition may cause business disruptions, resulting in a material, adverse impact to our financial condition and
results of operations.
8
The
growth of our business depends on our ability to accurately predict consumer trends and demand and successfully introduce new products
and product line extensions and improve existing products.
Our
growth depends, in part, on our ability to successfully introduce new products and product line extensions and improve and reposition
our existing products to meet the requirements of property owners and builders. This, in turn, depends on our ability to predict and
respond to evolving consumer trends, demands and preferences. The development and introduction of innovative new products and product
line extensions involve considerable costs. In addition, it may be difficult to establish new supplier relationships and determine appropriate
product selections when developing a new product or product line extension. Any new product or product line extension may not generate
sufficient customer interest and sales to become a profitable product or to cover the costs of its development and promotion and may
negatively affect our operating results and damage our reputation. If we are not able to anticipate, identify or develop and market products
to respond to the changes in the requirements and preferences of property owners and builders, or if our new product introductions or
repositioned products fail to gain consumer acceptance, we may not grow our business as anticipated, our sales may decline and our business,
financial condition and results of operations may be materially adversely affected.
We
may not be able to successfully introduce smart lock and security and internet of things (IoT) products that are current in research
and development.
We
have invested our efforts, time and resources in the research and development of smart locks in the past couple years and the outcome
is uncertain whether such development will be successful. We will continue to invest in the development of the software of smart locks
and equipment and machineries to manufacture parts and assembly line to produce smart locks. In early 2023, we have engaged a Hong Kong
based technology company to conduct research and development in a series of smart home products and devices as a part of our smart lock,
security and IoT products development strategy. Having considered the availability of talents and cost-benefit efficiency, we will incur
costs to outsource information technology developer(s) to develop software application and support functions of such new products. In
additional, we will incur marketing costs to generate customer interest and sales of such products in enough volume to make it a profitable
product. If we fail to design and develop appropriate functions for our smart locks to attract enough customers and establish commercial
manufacturing capabilities or if our smart lock products can't meet the regulatory requirements, our financial condition and results
of operations may be adversely affected. If we fail to obtain and maintain patent, trade secret and other intellectual property protection
and regulatory exclusivity for our new smart locks or if we are unable to ensure that we do not infringe, misappropriate or otherwise
violate the valid patent, trade secret or other intellectual property rights of third parties regarding smart locks on the market, our
business, financial condition and results of operations may be materially adversely affected.
We
may not be able to successfully implement our growth strategy on a timely basis or at all.
Our
future success depends, in large part, on our ability to implement our growth strategy, including expanding distribution and improving
placement of our products in the stores of our retail customers, attracting new consumers to our brands, introducing new products and
product line extensions and expanding into new markets. Our ability to implement this growth strategy depends, among other things, on
our ability to:
●
enter
                                            into distribution and other strategic arrangements with current and new retailers and other
                                            potential distributors of our products;
●
continue
                                            to effectively compete in our distribution channels;
●
increase
                                            our brand recognition by effectively implementing our marketing strategy and advertising
                                            initiatives;
●
create
                                            and maintain brand loyalty;
●
develop
                                            new products and product line extensions that appeal to consumers;
●
maintain
                                            and, to the extent necessary, improve our high standards for product quality, safety and
                                            integrity;
●
maintain
                                            sources for the required supply of quality raw materials and ingredients to meet our growing
                                            demand; and
●
identify
                                            and successfully enter and market our products in new geographic areas and market segments.
9
We
may not be able to successfully implement our growth strategy and may need to change our strategy from time to time. If we fail to implement
our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful, our business, financial condition
and results of operations may be materially adversely affected.
We
incurred net losses for the year ended December 31, 2023 and the past two years and may not be able to generate sufficient operating
cash flows and working capital from operation. Failure to manage our liquidity and cash flows may materially and adversely affect our
financial condition and results of operations. As a result, we may need additional capital, and financing may not be available on terms
acceptable to us, or at all.
We
incurred net losses of $3,501,518, $1,655,903 and $1,386,515 for the years ended December 31, 2023, 2022 and 2021, respectively. As a
result, we have generated negative cash flows from operating activities of approximately $3.2 million, $4.1million and approximately
$1.0 million for the years ended December 31, 2023, 2022 and 2021. We can offer no assurance that we will operate profitably or that we
will generate positive cash flows in the next twelve months, given our substantial expenses in relation to our revenue at this stage
of our Company. Inability to collect our accounts receivable in a timely and sufficient manner, or the inability to offset our expenses
with adequate revenue, may adversely affect our liquidity, financial condition and results of operations. We completed our public
offering with net proceeds of approximately $16.86 million in July 2022. We believe that our cash on hand and anticipated cash flows
from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary
course of business for the next 12 months, we cannot assure you this will be the case.
If
and when we are unable to generate sufficient cash flows from operations to meet our working capital requirements and various operating
needs, we may need to raise additional funds for our operations and such funds may not be available on commercially acceptable terms,
if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future
opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition
and results of operations. If we are unable to achieve or maintain profitability, the market price of our shares may significantly decrease.
Any
damage to our reputation or our brand may materially adversely affect our business, financial condition and results of operations.
We
have long business relationships with our customers by maintaining high quality and quick service response. Maintaining our strong reputation
with consumers and our suppliers is critical to our success. Our brands may suffer if our marketing plans or product initiatives are
not successful. The importance of our brands may increase if competitors offer products with designs and functions similar to ours. Further,
our brands may be negatively impacted due to real or perceived quality issues or if consumers perceive us as being untruthful in our
marketing and advertising, even if such perceptions are not accurate. The failure to maintain high standards for product quality and
integrity, including raw materials obtained from suppliers, or allegations of product quality issues, even if untrue or caused by our
raw material suppliers, may reduce demand for our products or cause production and delivery disruptions. We maintain guidelines and procedures
to ensure the quality and integrity of our products. However, we may be unable to detect or prevent product quality issues, particularly
in instances of the attempts to cover up or obscure deviations from our guidelines and procedures. If any of our products become unfit
for use or cause injury, we may have to engage in a product recall and/or be subject to liability. In addition, if our products have
quality issues, we could incur significant expenses related to the replacement of our products. Damage to our reputation or our brands
or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and
increased costs and our business, financial condition and results of operations may be materially adversely affected.
10
To
the extent our customers purchase products in excess of consumer demand in any period, our sales in a subsequent period may be adversely
affected as our customers seek to reduce their inventory levels.
From
time to time, our customers may purchase more products than they expect to sell during a particular time period. Our customers may grow
their inventory in anticipation of, or during, our promotional events, which typically provide for reduced prices during a specified
time or other customer incentives. Our customers may also grow inventory in anticipation of a price increase for our products, or otherwise
over-order our products as a result of overestimating demand for our products. If a customer increases its inventory during a particular
reporting period as a result of a promotional event, anticipated price increases or otherwise, then sales during the subsequent reporting
period may be adversely impacted as our customers seek to reduce their inventory to customary levels. This effect may be particularly
pronounced when the promotional event, price increase or other event occurs near the end or beginning of a reporting period or when there
are changes in the timing of a promotional event, price increase or similar event, as compared to the prior year. To the extent our customers
seek to reduce their usual or customary inventory levels or change their practices regarding purchases in excess of consumer demand,
our net sales and results of operations may be materially adversely affected in that period.
We
operate in a highly competitive industry and may lose market share or experience margin erosion if we are unable to compete effectively.
We
compete on the basis of product quality, design and performance, brand awareness and loyalty, product variety, reputation, price and
promotional efforts. We compete with a significant number of companies of varying sizes, including divisions or subsidiaries of larger
companies who may have greater financial resources and larger customer bases than we have. As a result, these competitors may be able
to identify and adapt to changes in consumer preferences more quickly than us due to their resources and scale. They may also be more
successful in marketing and selling their products, better able to increase prices to reflect cost pressures and better able to increase
their promotional activity, which may impact us and the entire lockset manufacturing industry. If these competitive pressures cause our
products to lose market share or experience margin erosion, our business, financial conditions and results of operations may be materially
adversely affected.
Fluctuations
in the price, availability or quality of raw materials used in our products could cause manufacturing delays, adversely affect our ability
to provide goods to our customers or increase costs, any of which could decrease our sales or earnings.
Our
major raw material purchases include copper, iron, zinc alloy and packaging materials comprised of paper and plastic. We depend on outside
suppliers for these raw materials and must obtain sufficient quantities of quality raw materials from these suppliers at acceptable prices
and in a timely manner. We do not maintain fixed supply contracts with our suppliers. Unfavorable fluctuations in the price, quality
or availability of required raw materials could negatively affect our ability to meet the demands of our customers. Our inability to
meet customers' demands could result in the loss of future sales.
The
profitability of our products depends in part upon the margin between the cost to us of certain raw materials and our fabrication costs
associated with converting such raw materials into assembled products, as compared to the selling price of our products. We intend to
continue to base the selling prices of our products in part upon their associated raw material costs. However, we may not be able to
pass all increases in raw material costs or increases in the costs associated with taking possession of raw materials through to our
customers in the future. The inability to offset price increases of raw materials by sufficient product price increases could have a
material adverse effect on our consolidated financial condition, results of operations and cash flows.
We
do not engage in hedging transactions to protect against raw material fluctuations but attempt to mitigate the short-term risks of price
swings by purchasing raw materials in advance based on production needs or reaching agreements with some of our suppliers to keep the
cost of raw materials stable. We also attempt to lower consumption of raw materials by lowing waste rate and recycled materials without
compromising product quality.
11
Xingfa
may experience material disruptions to its manufacturing operations in China that could result in material delays, quality control issues,
increased costs and loss of business opportunities, which may negatively impact our sales and financial results.
We
rely primarily upon our manufacturing facilities of Xingfa, which is located in Shatian Town, Dongguan City, Guangdong Province, China,
to produce our products. While we seek to operate our facilities in compliance with applicable rules and regulations and take measures
to minimize the risks of disruption at our facilities, a material disruption at our manufacturing facilities could prevent us from meeting
customer demand, reduce our sales and negatively impact our financial results. Our manufacturing facilities, or any of our machines,
could cease operations unexpectedly due to a number of events, including: prolonged power failures; equipment failures; disruptions in
the transportation infrastructure including roads, bridges, railroad tracks; fires, floods, earthquakes, health epidemics, acts of war,
or other catastrophes, which could also pose a risk to injury or damage to personnel, the property of others, which in turn could lead
to considerable financial costs and may also have negative legal consequences. Our future growth strategy may include an expansion of
our manufacturing capacity to meet increasing demand for our existing products. Any projects undertaken by us to increase such capacity
may not be constructed on the anticipated timetable or within budget. We may also experience quality control issues as we implement these
manufacturing upgrades and ramp up production. Any such material disruption may prevent us from shipping our products on a timely basis,
reduce our sales and market share and negatively impact our financial results.
We
face risks associated with managing operations in China, any of which could decrease our sales or earnings and could significantly limit
or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline
or be worthless.
All
of our manufacturing operations currently are conducted in China. There are a number of risks inherent in doing business in China, including
the following: unfavorable political or economic factors; fluctuations in foreign currency exchange rates; potentially adverse tax consequences;
unexpected legal or regulatory changes; lack of sufficient protection for intellectual property rights; difficulties in recruiting and
retaining personnel, and managing international operations; and less developed infrastructure. Furthermore, changes in the political,
economic and social conditions in China from which these risks are derived could make it more difficult to provide products to our customers.
Our inability to manage these risks successfully could adversely affect our business and manufacturing operations and could significantly
limit or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly
decline or be worthless.
Changes
in U.S. trade policies could significantly reduce the volume of export goods into the United States, which may materially reduce our
profit margin and our sales in the United States.
The
U.S. administration and members of Congress have made public statements indicating possible significant changes in U.S. trade policy
and have taken certain actions that have impacted the U.S. and China trade relationship, including imposing tariffs on certain goods
imported into the United States from China. The increase of tariffs for products made in China has triggered retaliatory actions
from China, resulting in "trade wars" and increased costs for goods imported into the United States, which have and may
continue to reduce customer demand for our products if the importers who pay for those tariffs add such tariff amounts to their
selling prices. We have reduced our sales price and profit margin to absorb some of the tariffs, however, importers may still reduce
their orders. Such reductions have caused and may continue to materially and adversely affect our sales, profit margin and our
business. Although the U.S. has started to review and remove the increased tariff previously imposed on certain items importing from
China, it has not impacted our products sold to the U.S. and if we can't establish new manufacturing facilities outside of
China, continue to reduce our production costs and/or develop new products to attract customers who are willing to pay higher
prices, our business and profits will be materially and adversely affected.
12
We
have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.
We
derive a significant portion of our revenues from a few major customers. For the years ended December 31, 2023 and 2022, four
customers accounted for 88.2% and 85.7% of our revenues, respectively. In addition, our five largest customers in aggregate accounted
for approximately 92% and 91% of our revenues for the years ended December 31, 2023 and 2022, respectively. There are inherent risks whenever
a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future
level of demand for our products that will be generated by these customers or the future demand for our products by these customers in
the end-user marketplace. If any of these customers experience declining or delayed sales due to market, economic or competitive conditions,
we could be pressured to reduce our prices or they could decrease the purchase quantity of our products, which could have an adverse
effect on our margins and financial position, and could negatively affect our revenues and results of operations. If any of our three
largest customers terminates the purchase of our products, such termination would materially negatively affect our revenues, results
of operations and financial condition.
Our
operating results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our
operating results, including the levels of our net revenues, expenses, net (loss)/income and other key metrics, may vary significantly
in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating
results may not be meaningful. Accordingly, the results for any one period are not necessarily an indication of future performance. Fluctuations
in results may adversely affect the market price of our ordinary shares. Factors that may cause fluctuations in our financial results
include:
●
our
                                            ability to attract new customers and retain existing customers;
●
changes
                                            in our mix of products and introduction of new products;
●
the
                                            amount and timing of operating expenses related to the maintenance and expansion of our business,
                                            operations and infrastructure;
●
Increase
                                            the cost of raw materials and/or labor;
●
our
                                            decision to manage order volume growth during the period;
●
the
                                            impact of competitors or competitive products;
●
increases
                                            in our costs and expenses that we may incur to grow and expand our operations and to remain
                                            competitive;
●
changes
                                            in the legal or regulatory environment or proceedings, including enforcement by government
                                            regulators, fines, orders or consent decrees;
●
increase
                                            of tariffs, general economic, industry and market conditions, including changes in Chinese,
                                            U.S. or global business or macroeconomic conditions;
●
the
                                            timing of expenses related to the development or acquisition of technologies or businesses;
                                            and
●
the
                                            additional costs related to being a public company.
13
Despite
our marketing efforts, we may not be able to promote and maintain our brand in an effective and cost-efficient way and our business and
results of operations may be harmed accordingly.
We
believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing
customers. Successful promotion of our brand and our ability to attract quality customers depends largely on the effectiveness of
our marketing efforts and the success of the channels we use to promote our products. Our efforts to promote our sales and to build
our brand have caused us to incur selling and marketing expenses in the amount of approximately $60,000, $105,000 and approximately
$150,000 for the years ended December 31, 2023, 2022 and 2021, respectively. Our COO has taken a marketing trip recently to promote
our products in the US for new and potential customers. Despite our marketing efforts, it is likely that our future marketing
efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the
immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to
successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition
would be adversely affected, which may impair our ability to grow our business.
If
we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely
affected.
Our
inventories are mostly raw materials, such as copper, iron, zinc alloy and packaging materials comprised of paper and plastic, which
require us to manage our inventory effectively. We depend on our demand forecasts for various kinds of raw materials and pre-made products
to make purchase decisions and to manage our inventory. Such demand, however, can change significantly between the time inventory is
ordered and the date by which we hope to sell it. Demand may be affected by seasonality, the economy, new product launches, pricing and
discounts, product defects, changes in customer spending patterns, changes in customer tastes and other factors, and our customers may
not order products in the quantities that we expect. The acquisition of certain types of inventory may require significant lead time
and prepayment.
Furthermore,
as we plan to continue expanding our product offerings, we expect to include a wider variety of products and raw materials in our inventory,
which will make it more challenging for us to manage our inventory and logistics effectively. We cannot guarantee that our inventory
levels will be able to meet the demands of customers, which may adversely affect our sales. If we fail to manage our inventory effectively,
we may be subject to a heightened risk of inventory obsolescence resulting in a decline in inventory value, and significant inventory
write-downs or write-offs. Any of the above may materially and adversely affect our results of operations and financial condition. On
the other hand, if we underestimate demand for our products, or if our suppliers fail to supply quality raw materials and pre-made products
in a timely manner, we may experience inventory shortages, which might result in diminished brand loyalty and lost revenues, any of which
could harm our business and reputation.
We
may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We
regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success,
and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements
with our employees and others to protect our proprietary rights. Thus, we cannot assure you that any of our intellectual property rights
would not be challenged, invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us
with competitive advantages. In addition, because of the rapid pace of technological change, parts of our business rely on Internet of
Things (IoT) technology, the network of physical objects that feature an IP address for internet connectivity, and the communication
that occurs between these objects and other Internet-enabled devices and systems which will alert the users under pre-set conditions,
developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third
parties on reasonable terms, or at all.
14
It
is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject
to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation.
Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies
available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce
our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we
take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce
our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources.
We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become
available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting
or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of
operations.
We
may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We
cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks,
patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future
be subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party
trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other
aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property
rights against us in China, Hong Kong, the United States or other jurisdictions. If any third-party infringement claims are brought against
us, we may be forced to divert management's time and other resources from our business and operations to defend against these claims,
regardless of their merits.
Additionally,
the application and interpretation of China's intellectual property right laws and the procedures and standards for granting trademarks,
patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure
you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property
rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property,
and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations
may be materially and adversely affected.
From
time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management
attention, disrupt our business and adversely affect our financial results.
We
may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our marketplace
and better serve our customers. These transactions could be material to our financial condition and results of operations if consummated.
If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even
if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
Strategic
investments or acquisitions will involve risks commonly encountered in business relationships, including:
●
difficulties
                                            in assimilating and integrating the operations, personnel, systems, data, technologies, products
                                            and services of the acquired business;
●
inability
                                            of the acquired technologies, products or businesses to achieve expected levels of revenue,
                                            profitability, productivity or other benefits;
●
difficulties
                                            in retaining, training, motivating and integrating key personnel;
●
diversion
                                            of management's time and resources from our normal daily operations;
15
●
difficulties
                                            in successfully incorporating licensed or acquired technology and rights into our product
                                            offerings;
●
difficulties
                                            in maintaining uniform standards, controls, procedures and policies within the combined organizations;
●
difficulties
                                            in retaining relationships with customers, employees and suppliers of the acquired business;
●
risks
                                            of entering markets in which we have limited or no prior experience;
●
regulatory
                                            risks, including remaining in good standing with existing regulatory bodies or receiving
                                            any necessary pre-closing or post-closing approvals, as well as being subject to new regulators
                                            with oversight over an acquired business;
●
assumption
                                            of contractual obligations that contain terms that are not beneficial to us, require us to
                                            license or waive intellectual property rights or increase our risk for liability;
●
failure
                                            to successfully further develop the acquired technology;
●
liability
                                            for activities of the acquired business before the acquisition, including intellectual property
                                            infringement claims, violations of laws, commercial disputes, tax liabilities and other known
                                            and unknown liabilities;
●
potential
                                            disruptions to our ongoing businesses; and
●
unexpected
                                            costs and unknown risks and liabilities associated with strategic investments or acquisitions.
We
may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business
strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended
benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to
the successful development of new or enhanced products or that any new or enhanced products, if developed, will achieve market acceptance
or prove to be profitable.
Our
business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to
continue in their present positions, our business may be severely disrupted.
Our
business operations depend on the continued services of our senior management, particularly the executive officers named in this report.
While we have the ability to provide different incentives to our management, we cannot assure you that we can continue to retain their
services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to
replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition
and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain
qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there
is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises
between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements
in China or we may be unable to enforce them at all.
The
relative lack of public company experience of our management team may put us at a competitive disadvantage.
Our
management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such
as those imposed by the Sarbanes-Oxley Act of 2002, ("Sarbanes-Oxley"). Our senior management does not have much experience
managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures
on a timely basis. Our senior management may be unable to implement programs and policies in an effective and timely manner or that adequately
respond to the increased legal, regulatory and reporting requirements associated with being a publicly traded company. Our failure to
comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to
the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect
on our business and stock price.
16
We
lease our facilities from third parties and there is no assurance that we will be able to renew our leased facilities on favorable terms,
or at all.
We
currently lease all of the properties we use to operate our business. Our headquarters are located in Hong Kong comprising office premises
of approximately 300 m
2
. Our production facilities are located in Dongguan, Guangdong Province of China, where Xingfa leases
a total floor area of approximately 17,560 m
2
. The lease terms on these premises expire on February 28, 2026. In October 2022,
Xingfa acquired an electroplating production line which is on a 2,033 m
2
floor area premise in an environmental protection
industrial park in Dongguan, which is specially approved for infrastructures such as electroplating and other high pollution productions.
The lease term on this premise expires on October 31, 2026. If we are unable to renew these leases on favorable terms, or at all, we
would be required to find new leased space, which space may be more expensive to lease than our current facilities. Also, the lease may
be terminated early due to unexpected change of land usage by the local government.
Moreover,
the lessor of Xingfa has not provided us with a real estate ownership certificate for the manufacturing facility. Under the relevant
PRC laws and regulations, if the lessor is unable to obtain certificate of title, such lease contract may be recognized as void and as
a result, Xingfa may be required to vacate the relevant properties. Although the lessor agreed to compensate Xingfa's loss or provide
Xingfa with other properties for its current business operation, we might not be able to recover all the losses and our business might
be negatively impacted.
Competition
for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We
believe our success depends on the efforts and talent of our employees, including engineering, risk management, information technology,
financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified
and skilled employees. Competition for highly skilled marketing, engineering, information technology, risk management and financial personnel
is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation
and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may
be able to offer more attractive terms of employment.
In
addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek
to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and
the quality of our products could diminish, resulting in a material adverse effect to our business.
Increases
in labor costs in the PRC may adversely affect our business and results of operations.
The
economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected
to continue to increase. In addition, Xingfa is required by PRC laws and regulations to pay various statutory employee benefits, including
pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated
government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate
payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees,
fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless
we are able to control our labor costs or pass on these increased labor costs to our customers or end users by increasing the prices
of our products, our financial condition and results of operations may be adversely affected.
If
we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.
We
believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and
cultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain
these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including
our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
17
Environmental
regulations impose substantial costs and limitations on our operations and violation of environmental regulations might subject us to
fines, penalties or suspension of production which could have material negative impact on our financial results.
Xingfa
uses a variety of chemicals and produce significant emissions and powder dust in our lockset manufacturing operations. The stamping and
casting machines in the manufacturing facility create high decibel noise. As such, Xingfa is subject to various national and local environmental
laws, occupational safety and health ("OSH") laws and regulations in China concerning issues such as air emissions, wastewater
discharge, and solid waste management and disposal. These laws and regulations can restrict or limit our operations and expose us to
liability and penalties for non-compliance. For example, in April 2018, Xingfa was ordered by Dongguan Environmental Protection Bureau
to pay a fine of RMB100,000 (approximately $15,000) for failure to meet the air emission requirement, which Xingfa has paid and corrected
the non-compliance emission. While we believe that Xingfa's facilities are in material compliance with all applicable environmental
and OSH laws and regulations, the risks of substantial unanticipated costs and liabilities related to compliance with these laws and
regulations are an inherent part of our business. It is possible that future conditions may develop, arise or be discovered that create
new environmental compliance or remediation liabilities and costs. While we believe that we can comply with existing environmental legislation
and regulatory requirements and that the costs of compliance have been included within budgeted cost estimates, compliance may prove
to be more limiting and costly than anticipated. If Xingfa fails to comply with the environmental regulations, it could face fines, penalties
and our production facility-y(-ies) operations might be suspended until we comply, which could have material negative impact on our operation
and financial results.
In
addition to our core production facility, we acquire an electroplating production line. It is a result of polluted water drainage requirements
are more stringent. This pushes cost of electroplating increase. As a result, we acquired a licensed production line. However, we may
expose to sudden change in environmental regulations to require additional remediation costs for the electroplating production line,
which would have material negative impact to our operation and financial results.
We
are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis
of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective,
which may adversely affect investor confidence in our company and, as a result, the value of our Ordinary Shares.
We
are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness
of our internal control over financial reporting for the year ending December 31, 2023, the first fiscal year beginning after our initial
public offering. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal
control over financial reporting and, after we cease to be an "emerging growth company," a statement that our independent
registered public accounting firm has issued an opinion on our internal control over financial reporting.
We
are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform
the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation
in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control
over financial reporting, we will be unable to assert that our internal controls are effective.
If
we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered
public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence
in the accuracy and completeness of our financial reports, which would cause the price of our Ordinary Shares to decline, and we may
be subject to investigation or sanctions by the SEC.
To
comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls
and procedures and hiring accounting or internal audit staff.
At
such time that our independent registered public accounting firm is required to formally attest to the effectiveness of our internal
control over financial reporting, it may issue a report that is adverse in the event it is not satisfied with the level at which our
controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future.
We
do not have any business insurance coverage.
Insurance
companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies.
Currently, we and our subsidiaries do not have any business liability or disruption insurance to cover our operations. We have determined
that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms
make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and
the diversion of resources, which could have an adverse effect on our results of operations and financial condition.
18
Risks
Related to Doing Business in China.
Changes
in China's economic, political or social conditions or government policies could have a material adverse effect on our business
and results of operations.
All
of our manufacturing operations are located in China. Accordingly, our business, prospects, financial condition and results of operations
may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth
in China as a whole.
The
Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement,
level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented
measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and
the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still
owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development
by imposing industrial policies and change of enforcement practice of such rules and policies can change quickly with little advance
notice. The Chinese government also exercises significant control over China's economic growth through allocating resources, controlling
payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries
or companies.
While
the Chinese economy has experienced significant growth over the past four decades, growth has been uneven, both geographically and among
various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation
of resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial
condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.
Since the outbreak of COVID-19, China's economic growth has slowed down significantly, and the recovery has
been slow. Any prolonged slowdown in the Chinese economy may reduce the demand for our
products and materially and adversely affect our business and results of operations.
Uncertainties
and quick change in the interpretation and enforcement of Chinese laws and regulations with little advance notice could result in a material
and negative impact our business operation, decrease the value of our ordinary shares and limit the legal protections available to us.
The
PRC legal system is based on written statutes, and prior court decisions have limited value as precedents. Since these laws and regulations
are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are
not always uniform and enforcement of these laws, regulations and rules involves uncertainties. The enforcement of laws and that rules
and regulations in China can change quickly with little advance notice and the risk that the Chinese government may intervene or influence
our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China- based issuers,
could result in a material change in our operations and/or the value of our ordinary shares.
We
cannot rule out the possibility that the PRC government will institute a licensing regime or pre-approval requirement covering our industry
at some point in the future. If such a licensing regime or approval requirement were introduced, we cannot assure you that we would be
able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and
impede our ability to continue our operations.
From
time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative
and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult
to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal
systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published
in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and
rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property
(including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to
continue our operations.
19
We
rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have,
and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct
our business.
We
are a holding company, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing
requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we
may incur. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other distributions to us.
Under
PRC laws and regulations, our PRC subsidiary, as a wholly foreign-owned enterprise in China, may pay dividends only out of its respective
accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned
enterprise in China is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory
reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.
Any
limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and
conduct our business.
PRC
regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion
may delay or prevent us from using the proceeds of offering to make loans to or make additional capital contributions to our PRC subsidiary,
which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Under
PRC laws and regulations, we are permitted to utilize the proceeds from offerings to fund our PRC subsidiary by making loans to or additional
capital contributions to our PRC subsidiary, subject to applicable government registration and approval requirements.
Any
loans to our PRC subsidiary, which are treated as foreign-invested enterprises under PRC laws, are subject to PRC regulations and foreign
exchange loan registrations. For example, loans by us to our PRC subsidiary to finance its activities cannot exceed statutory limits
and must be registered with the local counterpart of the State Administration of Foreign Exchange, or SAFE. The statutory limit for the
total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by China's
Ministry of Commerce ("MOFCOM") or its local counterpart and the amount of registered capital of such foreign-invested company.
20
We
may also decide to finance our PRC subsidiary by means of capital contributions. These capital contributions must be filed with the MOFCOM
or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested
enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides
that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes
within the business scope approved by the applicable government authority and unless otherwise provided by law, may not be used for equity
investments within the PRC. Although on July 4, 2014, SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform
in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular
36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises
in certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement
of the foreign exchange capitals of the foreign-invested enterprises established within the designate areas and such enterprises mainly
engaging in investment are allowed to use its RMB capital converted from foreign exchange capitals to make equity investment, our PRC
subsidiary is not established within the designated areas. On March 30, 2015, SAFE promulgated Circular 19, to expand the reform nationwide.
Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises
to make equity investments by using RMB funds converted from foreign exchange capital. However, Circular 19 continues to prohibit foreign-invested
enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business
scope, providing entrusted loans or repaying loans between non-financial enterprises. In addition, SAFE strengthened its oversight of
the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such
RMB capital may not be altered without SAFE's approval, and such RMB capital may not in any case be used to repay RMB loans if
the proceeds of such loans have not been used. Violations of these Circulars could result in severe monetary or other penalties. These
circulars may significantly limit our ability to use RMB converted from the net proceeds of any offering to fund the establishment of
new entities in China by our PRC subsidiary, to invest in or acquire any other PRC companies through our PRC subsidiary, or to establish
variable interest entities in the PRC.
In
light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from any offering
to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity
and our ability to fund and expand our business.
21
PRC
regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary's ability to increase its
registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties
under PRC law.
SAFE
promulgated the Circular on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip Investment through
Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local
branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or
financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle
undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation
term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 was issued
to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip
Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving
the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice
has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch
in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
If
our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiary may be prohibited
from distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted
in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described
above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
Currently,
to our knowledge, all our 5% or more shareholders are not PRC citizens or residents, however, we cannot assure you whether our other
shareholders or beneficial owners will include the PRC residents or entities in the future and whether they will comply with, and
make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial
owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could
subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC
subsidiary's ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely
affect our business and prospects.
Fluctuations
in exchange rates could have a material adverse effect on our results of operations and the value of your investment.
Substantially
all of our manufacturing and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations
in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets
and the proceeds from any offering. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiary is
RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated
statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate
fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation
in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when
reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results
of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends
on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on
the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated
may make it more difficult to perform period-to-period comparisons of our reported results of operations.
There
remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or
depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any
dividends payable on, our ordinary shares in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive
from our initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an
adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the
U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the market price
of our ordinary shares.
22
Very
limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into
any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging
transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge
our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict
our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your
investment.
Governmental
control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
The
PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency
out of China. Under our current corporate structure, our company in the Cayman Islands may rely on dividend payments from our PRC subsidiary
to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account
items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without
prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in
foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of
the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the
beneficial owners of our Company who are PRC residents. But approval from or registration with appropriate government authorities is
required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of
loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies
for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to
satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.
Failure
to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
Xingfa
is required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social
insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages
of salaries, including bonuses and allowances, of its employees up to a maximum amount specified by the local government from time to
time at locations where Xingfa operate its businesses. The requirement of employee benefit plans has not been implemented consistently
by the local governments in China given the different levels of economic development in different locations. As of the date of this report,
we believe that Xingfa has made employee benefit payments in material aspects. If Xingfa fails to make adequate payments in the future,
it may be required by the social security premium collection agency to make or supplement contributions within a stipulated period, and
shall be subject to a late payment fine computed from the due date at the rate of 0.05% per day; where payment is not made within the
stipulated period, the relevant administrative authorities shall impose a fine ranging from one to three times the amount of the amount
in arrears. If Xingfa is subject to fines in relation to the underpaid employee benefits, our financial condition and results of operations
may be adversely affected.
23
Non-compliance
with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.
Xingfa
has been subject to stricter regulatory requirements in terms of entering into labor contracts with its employees and paying various
statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance
and maternity insurance to designated government agencies for the benefit of its employees. Pursuant to the PRC Labor Contract Law, or
the Labor Contract Law, that became effective in January 2008 and was amended in December 2012 and became effective on July 1, 2013,
and its implementing rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employees' probation and unilaterally terminating
labor contracts. In the event that Xingfa decides to terminate some of its employees or otherwise change its employment or labor practices,
the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner,
which could adversely affect our business and results of operations. We believe Xingfa's current practice complies with the Labor
Contract Law and its amendments. However, the relevant governmental authorities may take a different view and impose fines on us.
As
the interpretation and implementation of labor-related laws and regulations are still evolving, our employment practices could violate
labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If Xingfa is deemed
to have violated relevant labor laws and regulations, Xingfa could be required to provide additional compensation to its employees and
our business, financial condition and results of operations could be materially and adversely affected.
Any
failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC
plan participants or us to fines and other legal or administrative sanctions.
In
February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007. Pursuant to these rules,
PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock
incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic
qualified agent, which could be the PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition,
an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the
purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who have resided
in the PRC for a continuous period of not less than one year and who have been granted options or other awards are subject to these regulations.
Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute
additional capital into our PRC subsidiary and limit our PRC subsidiary's ability to distribute dividends to us. We also face regulatory
uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees
under PRC law. See "Regulations— Regulations of People's Republic of China —Employee Stock Incentive Plan."
24
If
we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders.
Under
the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a "de facto management
body" within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income
at the rate of 25%. The implementation rules define the term "de facto management body" as the body that exercises full and
substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In
April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for
determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located
in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those
controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation's
general position on how the "de facto management body" test should be applied in determining the tax resident status of all
offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise
group will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China and will be subject
to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day
operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made
or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and
records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting
board members or senior executives habitually reside in the PRC.
We
believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See "Taxation—People's
Republic of China Taxation." However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities
and uncertainties remain with respect to the interpretation of the term "de facto management body." As some of our management
members are based in or frequently travel to China, it remains unclear how the tax residency rule will apply to our case. If the PRC
tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income
tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially
reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC
tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other
disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case
of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC
sources. It is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their
country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns
on your investment in our ordinary shares.
Regulatory
bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China.
From
time to time, the Company may receive requests from certain US agencies to investigate or inspect the Company's operations, or
to otherwise provide information. While the Company will be compliant with these requests from these regulators, there is no guarantee
that such requests will be honored by those entities who provide services to us or with whom we associate, especially as those entities
are located in China. Furthermore, an on-site inspection of our facilities in China by any of these regulators may be limited or entirely
prohibited. Such inspections, though permitted by the Company and its affiliates, are subject to the unpredictability of the Chinese
enforcers, and may therefore be impossible to facilitate. According to Article 177 of the PRC Securities Law which became effective in
March 2020, the securities regulatory authority of the State Council may establish a regulatory cooperation mechanism with the securities
regulatory authorities of another country or region, to implement cross-border supervision and administration and no overseas securities
regulator is allowed to directly conduct an investigation or evidence collection activities within the territory of the PRC. Accordingly,
without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the
documents and materials relating to securities business activities to overseas parties.
25
The
Holding Foreign Companies Accountable Act, or the HFCA Act, and the related regulations are evolving quickly. Further implementations
and interpretations of or amendments to the HFCA Act or the related regulations, or a PCOAB's determination of its lack of sufficient
access to inspect our auditor, might pose regulatory risks to and impose restrictions on us because of our operations in mainland China.
A potential consequence is that our ordinary shares may be delisted by the exchange. The delisting of our ordinary shares, or the threat
of our ordinary shares being delisted, may materially and adversely affect the value of your investment. Additionally, the inability
of the PCAOB to conduct full inspections of our auditor deprives our investors of the benefits of such inspections
The
Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. In accordance with the HFCA Act, trading
in securities of any registrant on a national securities exchange or in the over-the-counter trading market in the United States may
be prohibited if the PCAOB determines that it cannot inspect or fully investigate the registrant's auditor for three consecutive
years beginning in 2021, and, as a result, an exchange may determine to delist the securities of such registrant. On June 22, 2021, the
U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, would amend the HFCA Act and require the SEC to
prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for
two consecutive years instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted
if our auditor is unable to meet the PCAOB inspection requirement. On December 29, 2022, a legislation entitled "Consolidated Appropriations
Act, 2023" (the "Consolidated Appropriations Act"), was signed into law by President Biden. The Consolidated Appropriations
Act contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act, which reduces the
number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
On
November 5, 2021, the SEC adopted the PCAOB rule to implement HFCA Act, which provides a framework for the PCAOB to determine whether
it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position
taken by one or more authorities in that jurisdiction.
On
December 2, 2021, SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The
rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (the "Commission-Identified
Issuers"). A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual
report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual
report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements
in its annual report filing covering the fiscal year ended December 31, 2022.
On
December 16, 2021, the PCAOB issued its determinations (the "Determination") that they are unable to inspect or investigate
completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong. The Determination includes lists
of public accounting firms headquartered in mainland China and Hong Kong that the PCAOB is unable to inspect or investigate completely.
On
August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance
of the People's Republic of China governing inspections and investigations of audit firms based in China and Hong Kong. On December
15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting
firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should
PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need
to issue a new determination.
The
enactment of the HFCA Act and related regulations and any additional actions, proceedings, or new rules resulting from these efforts
to increase U.S. regulatory access to audit information could cause investors uncertainty for affected issuers and the market price of
our ordinary shares could be adversely affected, and we could be delisted if our auditor is unable to meet the PCAOB inspection requirement.
26
The
lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based
in China and Hong Kong. As a result, investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China and Hong Kong makes it more difficult to evaluate the effectiveness of these accounting firm's
audit procedures and quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections.
Our
auditor, Wei, Wei & Co., LLP, an independent registered public accounting firm that is headquartered in the United States, as an
auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the
United States pursuant to which the PCAOB conducts inspections to assess its compliance with the applicable professional standards.
Our auditor has been inspected by the PCAOB on a regular basis with the last inspection in 2022 and it is not included in the PCAOB
Determinations. However, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent
criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy
of personnel and training, or sufficiency of resources, geographic reach, or experience as it relates to our audit. If it is later
determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in
a foreign jurisdiction or any other reasons, the lack of inspection could cause the trading in our securities to be prohibited under
the Holding Foreign Companies Accountable Act, and as a result Nasdaq may delist our securities. If our securities are unable to be
listed on another securities exchange, such a delisting would substantially impair your ability to sell or purchase our securities
when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price
of our ordinary shares. Further, new laws and regulations or changes in laws and regulations in both the United States and China
could affect our ability to list our ordinary shares on Nasdaq, which could materially impair the market for and market price for
our securities.
Enhanced
scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue
in the future.
The
PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular,
equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular
698, which became effective in January 2008, and Circular 698 was abolished and void as of December 1, 2017.
Under
Circular 698, where a non-resident enterprise conducts an "indirect transfer" by transferring the equity interests of a PRC
"resident enterprise" indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise,
being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company
structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at
a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident
enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable
adjustment to the taxable income of the transaction.
In
February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced
a new tax regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect
transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer
of a foreign intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable
commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public
securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated
to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an "indirect transfer" by transferring
the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being
the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the
overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring
PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer
of equity interests in a PRC resident enterprise.
27
We
face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions
involving the transfer of shares in our Company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue
such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation and request our PRC
subsidiary to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject
to filing obligations or being taxed, under Circular 59 and Circular 7, and may be required to expend valuable resources to comply with
Circular 59 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which
may have a material adverse effect on our financial condition and results of operations.
The
PRC tax authorities have the discretion under SAT Circular 59, and Circular 7 to make adjustments to the taxable capital gains based
on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no
specific plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve
complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax
authorities make adjustments to the taxable income of the transactions under SAT Circular 59 and Circular 7, our income tax costs associated
with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.
Substantial
uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it
may impact the viability of our current corporate structure, corporate governance, business operations and financial results.
On
March 15, 2019, the National People's Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 and
replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law,
the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation
rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment
regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements
for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation
and implementation and how it may impact the viability of our current corporate governance and business operations in China and financial
results of the Company.
Any
change of regulations and rules by Chinese government including the limitations on usage of power, additional environmental protection
requirements, moving technology in and out of the PRC or restriction on cash transfer out of PRC may intervene or influence our operations
in China at any time and any additional control over offerings conducted overseas and/or foreign investment in issuers with Chinese operations
could result in a material change in our business operations and/or the value of our ordinary shares and could also significantly limit
or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline
or be worthless.
Our
manufacturing facility and operation in China may be intervened or influenced by the new regulations and policies by Chinese government.
For example, between July 2 and July 6, 2021, Cyberspace Administration of China, or the CAC, announced cybersecurity investigations
of the business operations of certain U.S.-listed Chinese companies. On July 6, 2021, the General Office of the Central Committee of
the Communist Party of China and the General Office of the State Council jointly issued "The Opinions on Severely Cracking Down
on Illegal Securities Activities According to Law", or "the Opinions". The Opinions emphasized the needs to strengthen
the administration over illegal securities activities and the supervision over overseas listings by Chinese companies. According to the
Opinions, Measures, including promoting the construction of relevant regulatory systems, will be taken to control the risks and manage
the incidents from overseas listed Chinese companies.
28
On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic
Enterprises (the "New Overseas Listing Rules") with five interpretive guidelines, which took effect on March 31, 2023.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and
report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and
listing in an overseas market; b) an issuer making a subsequent overseas securities offering after having been listed on an overseas
market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple
acquisition(s), share swap, transfer of shares or other means. The new rules provide that the determination as to whether a domestic
company is indirectly offering and listing securities on an overseas market shall be made on a substance over form basis, and if the
issuer meets the following conditions, the offering and listing shall be determined as an indirect overseas offering and listing by
a Chinese domestic company: (i) any of the revenue, profit, total assets or net assets of the Chinese domestic entity is more than
50% of the related financials in the issuer's audited consolidated financial statements for the most recent fiscal year; and
(ii) the senior managers in charge of business operation and management of the issuer are mostly Chinese citizens or with regular
domicile in China, the main locations of its business operations are in China or main business activities are conducted in China.
Although we are headquartered in Hong Kong with all our executive officers and directors based in Hong Kong who are not Chinese
citizens and most of our revenues and profits are generated by our subsidiaries in Hong Kong, it is not certain whether we might be
determined by CSRC as a Chinese entity under New Overseas Listing Rules which will require us to file the offering related documents
with CSRC.
On
December 28, 2021, Cybersecurity Review Measures published by Cyberspace Administration of China or the CAC, National Development and
Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, Ministry of State Security, Ministry
of Finance, Ministry of Commerce, People's Bank of China, State Administration of Radio and Television, China Securities Regulatory
Commission, State Secrecy Administration and State Cryptography Administration, effective on February 15, 2022, which provides that,
Critical Information Infrastructure Operators ("CIIOs") and Online Platform Operators engaging in data processing activities
that affect or may affect national security shall be subject to the cybersecurity review by the Cybersecurity Review Office. In addition,
CIIOs and Online Platform Operators that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity
Review Office, if they plan to conduct listings in foreign countries. On November 14, 2021, CAC published the Administration Measures
for Cyber Data Security (Draft for Public Comments), or the "Cyber Data Security Measure (Draft)". Cyber Data Security Measure
(Draft) provides that data processors shall apply for Cybersecurity Review for certain events, such as the merger, restructuring, division
of an internet platform operator that holds a large amount of data relating to national security, economic development or public interests
which affects or may affect the national security; overseas listing of a data processor that processes personal data for more than one
million individuals; Hong Kong listing of a data processor that affects or may affect national security; other data processing activities
that affect or may affect the national security. Although we are not an CIIO or an Online Platform Operator as defined in the Review Measures
and do not process personal data for more than one million individuals under Cyber Data Security Measure (Draft), it is not certain whether
any future regulations will impose restrictions on the business that we are currently engaging in China, which is manufacturing lockset.
As of the date of this report, we have not received any notice from any authorities identifying us as a CIIO, Online Platform Operator
or requiring us to undertake a cybersecurity review by the CAC.
On
July 23, 2021, General Office of the State Council promulgated "Opinions on Further Reducing Students' Homework Burden and
After-school Tutoring Burden at the Stage of Compulsory Education", pursuant to which the institutions that offer tutoring of school
curriculum shall be registered as non-profit organizations and are not allowed to make profits and raise capital. The new regulation
also disallows foreign investment in these institutions through acquisitions, franchise or contractual agreements. Although we only manufacture
lockset products in China and do not engage in CIIO, Online Platform Operator or any education or tutoring related business, our offering
and listing on Nasdaq may be negatively affected by these new regulations as they have materially negatively affected stock prices of
the U.S listed Chinese companies which are the CIIOs, Online Platform Operators or in the tutoring business. Any additional restriction,
scrutiny or negative publicity of the U.S.-listed Chinese companies could cause the U.S. investors less interested in our ordinary shares,
or completely hinder our ability to offer our ordinary shares to investors and cause the value of such securities to significantly decline
or be worthless.
29
Furthermore,
the PRC government authorities may adopt new rules and regulations and impose additional limitations or restrictions on us based on
the industry that we operate in, for example, the "dual control of energy consumption" policy to control the total power
consumption and efficiency which has caused disruptions to Xingfa's production schedule in 2021, or more stringent
environmental protection requirements for air emissions, wastewater treatment and solid waste management and disposal which could
restrict or limit our operations and expose us to liability and penalties for non-compliance. The new rules or regulations may also
impose additional restrictions on us for moving technology in and out of the PRC or restriction on our cash transfer out of PRC from
current accounts. Such new rules or actions taken by the PRC government authorities may intervene or influence our operations at any
time, which may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer
securities to you and reduce the value of our securities.
Uncertainties
regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along
with the risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings
conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance
and/or the value of our ordinary shares or impair our ability to raise money.
If
we become subject to additional scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to
expend significant resources to investigate and resolve the matter which could harm our business operations, securities offering and
our reputation and could result in a loss of your investment in our ordinary shares, especially if such matter cannot be addressed and
resolved favorably.
Recently,
U.S. public companies that have substantial operations in China have been the subject of intense scrutiny, criticism and negative publicity
by investors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around
financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative
publicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases, has become
virtually worthless. Some of these companies have been subject to shareholder lawsuits and SEC enforcement actions and have conducted
internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative
publicity will have on us, our business and securities offering. If we become the subject of any unfavorable allegations, whether such
allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend
our company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our business
operations will be severely hindered and your investment in our ordinary shares could be rendered worthless.
Risks
Related to Doing Business in Hong Kong.
The
Hong Kong legal system embodies uncertainties which could negatively affect our listing on Nasdaq and limit the legal protections available
to you and us.
As
one of the conditions for the handover of the sovereignty of Hong Kong to China, China had to accept some conditions such as Hong Kong's
Basic Law before its return. The Basic Law ensured Hong Kong will retain its own currency (the Hong Kong Dollar), legal system, parliamentary
system and people's rights and freedom for fifty years from 1997. This agreement has given Hong Kong the freedom to function in
a high degree of autonomy. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but
not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition. Hong Kong
continues using the English common law system.
However,
if the PRC reneges on its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong's common
law legal system and may in turn bring about uncertainty in, for example, listing our ordinary shares on Nasdaq Stock Exchange.
This
also could materially and adversely affect our business and operation. Additionally, intellectual property rights and confidentiality
protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect
of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation
or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections
available to us, including our ability to enforce our agreements with our customers.
30
Any
social unrest in Hong Kong may affect our business and financial results.
Hong
Kong is a special administrative region of the PRC with its own government. Hong Kong enjoys a high degree of autonomy from the PRC under
the principle of "one country, two systems." However, there can be no assurance that our financial condition and results
of operations will not be adversely affected as a consequence of the exercise of PRC sovereignty over Hong Kong. In particular, in 2019 and 2020, there has been a series of large demonstrations in Hong Kong that has adversely affected the business volume and operations of
local businesses, airports and public transportation systems. On July 14, 2020, the President of U.S. signed an executive order to end
the special status enjoyed by Hong Kong under the United States-Hong Kong Policy Act of 1992. Hong Kong's position and reputation
as an international financial and trade center may be further damaged, and our business may be materially and adversely affected.
We
                                            may be affected by the recently effect by the Basic Law Article 23: Safeguarding National
                                            Security Ordinance
On
March 23, 2024, the Basic Law Article 23: Safeguarding National Security Ordinance was effect. We have accessed the content and believe
our business operation in Hong Kong will not be adversely affected. However, we cannot assure our customers in US may have different
point of view and this would in turn adversely affect the sales orders from our US customers.
We
may be affected by the currency peg system in Hong Kong.
Since
1983, Hong Kong dollars have been pegged to the US dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that
this policy will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong
dollar cost of our expenditures denominated in foreign currency may increase. This would in turn adversely affect the operations and
profitability of our business.
It
will be difficult to acquire jurisdiction and enforce liabilities against us, our officers, directors and assets based in Hong Kong and
China.
Almost
all of our assets are located in Hong Kong and China and our officers and directors currently reside outside of the United States and
most of them are in Hong Kong. There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign
judgments between Hong Kong and the United States. In a common law action for enforcement of a foreign judgment in Hong Kong, the enforcement
is subject to various conditions, including but not limited to, that the foreign judgment is a final judgment conclusive upon the merits
of the claim, the judgment is for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges,
the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary
to public policy of Hong Kong.
See Enforceability of Civil Liabilities – Hong Kong.
China does not have any treaties or
other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of
foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against
us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security
or public interest.
See Enforceability of Civil Liabilities – China
. As a result, it may be difficult or not possible for
United States investors to enforce their legal rights, to effect service of process upon us, our directors or officers or to enforce
judgments of United States courts predicated upon civil liabilities and criminal penalties of us, our directors and officers under federal
securities laws.
Risks
Related to Our Ordinary Shares
Risks
Relating to Our Shares
We
may fail to meet continued listing requirements on the NASDAQ Capital Market
On
October 19, 2023, the Company received a letter from the Nasdaq Stock Market ("Nasdaq") notifying the Company that, because
the closing bid price for the Company's ordinary shares listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company
no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires
a minimum bid price of $1.00 per share (the "Minimum Bid Price Requirement"). On April 17, 2024, the Company received a written
notification from the NASDAQ Stock Market Listing Qualifications Staff (the "Staff") indicating that the Company has been
granted an additional 180 calendar day period or until October 14, 2024, to regain compliance with the $1.00 minimum closing bid price
requirement for continued listing on the NASDAQ Capital Market pursuant to NASDAQ Listing Rule (the "Minimum Bid Price Requirement").
31
NASDAQ's
determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other
applicable requirements for initial listing on the NASDAQ Capital Market, with the exception of the bid price requirement, and the Company's
written notice to NASDAQ of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split,
if necessary. If at any time during this additional time period the closing bid price of the Company's security is at least $1.00
per share for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance and this matter will
be closed. If compliance cannot be demonstrated by October 14, 2024, Staff will provide written notification that the Company's
securities will be delisted. At that time, the Company may appeal the Staff's determination to a Hearings Panel (the "Panel")
of NASDAQ.
This
notification from Nasdaq has no immediate effect on the listing or trading of the Company's ordinary shares, which will continue
to trade on the Nasdaq Capital Market under the symbol "ILAG". The Company will monitor the closing bid price of its ordinary
shares and will consider various options to regain compliance before October 14, 2024.
Our
ordinary shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to
raise money or otherwise desire to liquidate your shares.
Our
ordinary shares may be "thinly-traded," meaning that the number of persons interested in purchasing our ordinary shares at
or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors,
including the fact that we are relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment
community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse
and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time
as we became more seasoned. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal
or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. A broad or active public trading market for our ordinary shares may not develop
or be sustained.
The
market price for our ordinary shares may be volatile.
The
market price for our ordinary shares may be volatile and subject to wide fluctuations due to factors such as:
●
the
                                            perception of U.S. investors and regulators of U.S. listed Chinese companies;
●
actual
                                            or anticipated fluctuations in our operating results;
●
changes
                                            in financial estimates by securities research analysts;
●
negative
                                            publicity, studies or reports;
●
conditions
                                            in the international lockset, hardware and real estate markets;
●
our
                                            capability to catch up with the technology innovations in the industry;
●
changes
                                            in the economic performance or market valuations of other lockset and hardware companies;
●
announcements
                                            by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital
                                            commitments;
●
addition
                                            or departure of key personnel;
●
fluctuations
                                            of exchange rates among RMB, HK dollar and the U.S. dollar; and
●
general
                                            economic, health or political conditions in Hong Kong, China and worldwide.
32
In
addition, the securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the
operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of
our ordinary shares.
Volatility
in our ordinary shares price may subject us to securities litigation.
The
market for our ordinary shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share
price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated
securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in
the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert
management's attention and resources.
In
order to raise sufficient funds to enhance operations, we may have to issue additional securities at prices which may result in substantial
dilution to our shareholders.
If
we raise additional funds through the sale of equity or convertible debt, our current shareholders' percentage ownership will be
reduced. In addition, these transactions may dilute the value of ordinary shares outstanding. We may have to issue securities that may
have rights, preferences and privileges senior to our ordinary shares. We cannot provide assurance that we will be able to raise additional
funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not
be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations
and financial condition.
We
are not likely to pay cash dividends in the foreseeable future.
We
currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect
to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate. Should we determine to pay
dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from our subsidiaries. Our
subsidiaries may, from time to time, be subject to restrictions on their ability to make distributions to us, including restrictions
on the conversion of RMB into US dollars or other hard currency and other regulatory restrictions.
You
may face difficulties in protecting your interests as a shareholder, as Cayman Islands law provides substantially less protection when
compared to the laws of the United States and it may be difficult for a shareholder of ours to effect service of process or to enforce
judgements obtained in the United States courts.
Our
corporate affairs are governed by our amended and restated memorandum and articles of association and by the Cayman Islands Companies
Act (As Revised) ("Companies Act") and common law of the Cayman Islands. The rights of shareholders to take legal action
against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman
Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in
part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law. Decisions of the Privy Council
(which is the final court of appeal for British Overseas Territories such as the Cayman Islands) are binding on a court in the Cayman
Islands. Decisions of the English courts, and particularly the Supreme Court of the United Kingdom and the Court of Appeal are generally
of persuasive authority but are not binding on the courts of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities
of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the
United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provide
significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative
action before the United States federal courts. The Cayman Islands courts are also unlikely to impose liabilities against us in original
actions brought in the Cayman Islands, based on certain civil liability provisions of United States securities laws.
Currently,
all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States.
All of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion
of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process
within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments
predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
33
As
a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our
officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to United States domestic public companies.
We
are a foreign private issuer within the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable
to United States domestic public companies. For example:
●
we
                                            are not required to provide as many Exchange Act reports, or as frequently, as a domestic
                                            public company;
●
for
                                            interim reporting, we are permitted to comply solely with our home country requirements,
                                            which are less rigorous than the rules that apply to domestic public companies;
●
we
                                            are not required to provide the same level of disclosure on certain issues, such as executive
                                            compensation;
●
we
                                            are exempt from provisions of Regulation FD aimed at preventing issuers from making selective
                                            disclosures of material information;
●
we
                                            are not required to comply with the sections of the Exchange Act regulating the solicitation
                                            of proxies, consents or authorizations in respect of a security registered under the Exchange
                                            Act; and
●
we
                                            are not required to comply with Section 16 of the Exchange Act requiring insiders to file
                                            public reports of their share ownership and trading activities and establishing insider liability
                                            for profits realized from any "short-swing" trading transaction.
We
are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we will file reports
on Form 6-K as a foreign private issuer. However, the information we are required to file with or furnish to the SEC will be less extensive
and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the
same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
We
are an "emerging growth company" within the meaning of the Securities Act, and if we take advantage of certain exemptions
from disclosure requirements available to emerging growth companies, this could make it more difficult to compare our performance with
other public companies
.
We
are an "emerging growth company" within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period,
which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as
an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This
may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging
growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.
34
As
an "emerging growth company" under applicable law, we will be subject to reduced disclosure requirements. Such reduced disclosure
may make our ordinary shares less attractive to investors.
For
as long as we remain an "emerging growth company", as defined in the JOBS Act, we will elect to take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies",
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights
available to shareholders of more mature companies. If some investors find our ordinary shares less attractive as a result, there may
be a less active trading market for our ordinary shares and our share price may be more volatile.
Because
we are a foreign private issuer and are exempt from certain NASDAQ corporate governance standards applicable to U.S. issuers, you may
have less protection than you would have if we were a domestic issuer.
The
Nasdaq Listing Rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign
private issuer, however, we are permitted to follow home country practice in lieu of the above requirements. On June 23, 2023, the Company
has notified Nasdaq that it will follow its home country practice in lieu of the provisions under Rule 5620(a), Rule 5635(a), Rule 5635(c)
and Rule 5635(d) of the NASDAQ Stock Market Marketplace Rules (the "Rules") by relying on the exemption provided for foreign
private issuers under Marketplace Rule 5615(a)(3). Rule 5620(a) requires that the Company to hold an annual meeting of shareholders no
later than one year after the end of the Company's fiscal year-end; Rule 5635(a) of the Rules requires shareholder approval for
the issuance of securities in connection with the acquisition of the stock or assets of another company; Rule 5635(c) of the Rules requires
shareholder approval
prior to the issuance of securities when a stock option or purchase plan is
to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock
may be acquired by officers, directors, employees
; and Rule 5635(d) of the Rules requires shareholder approval prior to an issuance
of securities, other than in a public offering, equal to 20% or more of the voting power outstanding at a price less than the lower of:
(i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii)
the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding
the signing of the binding agreement.
The corporate governance practice in our home country, the
Cayman Islands, does not require the Company to follow or comply with the requirements of Rule 5620(a), Rule 5635(a), Rule 5635(c) and
Rule 5635(d). We will comply with other corporate governance requirements of the Nasdaq Listing Rules. However, we may consider following
home country practice in lieu of additional requirements under the Nasdaq Listing Rules with respect to certain corporate governance
standards in the future which may afford less protection to investors.
We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging growth
company."
As
a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley
Act of 2002, as well as rules subsequently implemented by the SEC and NASDAQ Capital Market, impose various requirements on the corporate
governance practices of public companies. We are an "emerging growth company," as defined in the JOBS Act and will remain
an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion
of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed
to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million
as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year
period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable
generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment
of the emerging growth company's internal control over financial reporting and permission to delay adopting new or revised accounting
standards until such time as those standards apply to private companies.
Compliance
with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more
time-consuming and costly. After we are no longer an "emerging growth company," or until five years following the
completion of our initial public offering, whichever is earlier, we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC.
For example, as a public company, we have increased the number of independent directors and adopt policies regarding internal
controls and disclosure controls and procedures to become a public company. We have incurred additional costs in obtaining director
and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements.
It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are
currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with
any degree of certainty the amount of additional costs we may incur or the timing of such costs.
35
Four
members of our management team will have substantial influence over our Company and their interests may not be aligned with the interests
of our other shareholders.
Mr.
Bong Lau, our Chief Executive Officer and chairman of the Board and his brother Mr. Bun Lau, our Chief Operating Officer, each owns 12.96%
of our issued and outstanding ordinary shares. Mr. Wynn Hui, our Chief Technical Officer and executive director of the Board and his
son Mr. Errol Hui, our Vice President of Engineering, each owns 12.96% of our issued and outstanding ordinary shares. As a result of
their significant shareholding, Mr. Bong Lau, Mr. Bun Lau, Mr. Wynn Hui and Mr. Errol Hui have, and will continue to have, substantial
influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets,
election of directors and other significant corporate actions. They may take actions that are not in the best interests of us or our
other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could
deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the
market price of our ordinary shares. These actions may be taken even if they are opposed by our other shareholders.
We
may become a "controlled company" within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions
from certain corporate governance requirements that provide protection to shareholders of other companies.
We
do not believe we are a "controlled company" as defined under the NASDAQ Stock Market Rules. However, in the event that four
of our principal shareholders, Mr. Bong Lau, Mr. Bun Lau, Mr. Wynn Hui and Mr. Errol Hui, who beneficially own more than 50% of our issued
and outstanding ordinary shares, decide to act as a group, we may be deemed to be a "controlled company". For so long as
we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate
governance rules, including:
●
an
    exemption from the rule that a majority of our board of directors must be independent directors; an exemption from the rule that
    the compensation of our chief executive officer must be determined or recommended solely by independent directors; and
●
an
    exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
As
a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance
requirements.
Cayman
Islands economic substance requirements may have an effect on our business and operations.
Pursuant
to the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands, or the ES Act, that came into force on January
1, 2019, a "relevant entity" is required to satisfy the economic substance test set out in the ES Act. A "relevant
entity" includes an exempted company incorporated in the Cayman Islands as is our Company. Based on the current interpretation
of the ES Act, we believe that our Company, Intelligent Living Applicant Group Inc., is a pure equity holding company since it only holds
equity participation in other entities and only earns dividends and capital gains. Accordingly, for so long as our Company, Intelligent
Living Applicant Group Inc., is a "pure equity holding company", it is only subject to the minimum substance requirements,
which require us to (i) comply with all applicable filing requirements under the Companies Act; and (ii) has adequate human resources
and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no
assurance that we will not be subject to more requirements under the ES Law. Uncertainties over the interpretation and implementation
of the ES Act may have an adverse impact on our business and operations.
36
ITEM
4.
INFORMATION ON THE COMPANY
A.
History and Development of the Company
For
40 years, we have manufactured and sold high quality mechanical locksets to customers mainly in the United States and Canada, and we
continue to diversify and refine our product offerings to meet our customers' needs. The predecessor of Hing Fat commenced our
business of selling door locksets in 1981. In 1983, we started a small manufacturing workshop in China to produce door locksets with
imported materials to fulfill for our customer orders, which becomes our current manufacturing subsidiary, Xingfa. Our mission was "dedicated
to manufacture high quality lockset products at affordable prices."
Since
2000, we have offered our products with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards, which are developed
by Builders Hardware Manufacturing Association (BHMA) for ANSI. Our focus is producing mechanical locksets, including locksets for outdoor
uses, such as main entrances and gates, and indoor uses, to promote sustainable growth in our business and competitiveness in the market.
To continue driving growth, we have designed our products to go beyond a basic lockset for security purposes; we offer a wide range of
ODM door locksets to various customer segments from "Premium Series" to "Economy-oriented Series" with classic
to contemporary looks, functions and colors. Currently, our products are sold mainly in the USA, and some in Canada, Macau and China.
We
sell our products mainly to the US and Canada ("North America") through one of our Hong Kong registered subsidiaries Kambo
Locksets. Another Hong Kong registered subsidiary, Kambo Hardware, targets and distributes locksets and related hardware to countries
other than the North America market and serves our customers in the Asian countries including Thailand and Australia.
In
1993, as the laws and regulations for processing with imported materials entity had changed in China, we established our wholly foreign
owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited ("Xingfa") located in Shatian County, Dongguan
City, Guangdong Province of PRC. Xingfa is equipped with various types of machines such as die casting machines, furnace, polishing machines
and other machines for metal processing in a 17,560 m
2
manufacturing facility. In light of excess production capacity due
to current economic conditions, Xingfa has subleased one plant building of approximately 4,300 m
2
to reduce our operating
costs.
●
We
    restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under Hong Kong law ("Hing Fat"), as the holding company of Xingfa to manage
    the door lockset manufacturing activities of Xingfa and to conduct research and development.
●
On
    March 26, 2014, Kambo Locksets Limited ("Kambo Locksets") was incorporated under Hong Kong law. Kambo Locksets is a trading
    company focusing on marketing and sales of our products in North America market and became our subsidiary as a result of reorganization.
●
On
    February 25, 2015, Kambo Hardware Limited ("Kambo Hardware") was incorporated under Hong Kong law. Its primary business
    is to sell our products to markets outside of the North America.
●
Bamberg
    (HK) Limited ("Bamberg") was incorporated on June 24, 2016 under Hong Kong law. Through Bamberg, we started marketing
    our products under our own brand "Bamberg" to establish and focus on internet sales channels, such as Amazon.com.
●
On
    July 17, 2019, the Company issued 500,000,000 ordinary shares to its shareholders. On August 14, 2019, these shareholders surrendered
    an aggregate of 499,990,000 ordinary shares to the Company at no consideration. The transaction is considered as a recapitalization
    prior to the Company's initial public offering.
●
A
    reorganization of the Company's legal entity structure was completed in April 2020. The reorganization involved the incorporation
    of ILAG in July 2019 and execution of the Share Exchange Agreement between ILAG and ILA BVI in April 2020 (the "Share Exchange
    Agreement") whereby ILAG took control of ILA BVI and its wholly owned subsidiaries by acquiring all the outstanding shares
    of ILA BVI with ordinary shares of ILAG. Pursuant to the Share Exchange Agreement, ILAG and ILA BVI exchanged 2,550,000 shares of
    ILA BVI for 12,990,000 ordinary shares of ILAG. This transaction was treated as a recapitalization of the Company and the financial
    statements give retroactive effect to this transaction.
37
●
On
                                            July 16, 2021, the Board of Directors and Shareholders of the Company approved the Amended
                                            and Restated Memorandum and Articles of Association of the Company and our authorized share
                                            capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000
                                            ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value
                                            of $0.0001 each.
●
On
                                            July 17, 2019, Intelligent Living Application Group Inc. was established as a holding company
                                            and it is a Cayman Islands exempted company limited by shares and were incorporated as an
                                            offshore holding company for listing purposes and for further expansion flexibility. Intelligent
                                            Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application
                                            Group Limited, which was incorporated on March 19, 2014 under the laws of British Virgin
                                            Islands.
●
Through
                                            Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in
                                            Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of
                                            the equity interest in Xingfa.
The
Company has subsidiaries in countries and jurisdictions including PRC and Hong Kong. Details of the subsidiaries and VIE of the Company
are set out below:
Name of Entity
Date of
Incorporation
Place of
Incorporation
% of
Ownership
Principal
Activities
Intelligent Living Application Group Inc.
July 2019
Cayman Islands
100
Holding company
Intelligent Living Application Group Limited
March 2014
BVI
100
Intermediate holding company
Kambo Locksets Limited
March 2014
Hong Kong
100
Trading company
Kambo Hardware Limited
February 2015
Hong Kong
100
Trading company
Bamberg (HK) Limited
June 2016
Hong Kong
100
Sales of self branded products
Hing Fat Industrial Limited
March 2009
Hong Kong
100
Holding Company
Dongguan Xingfa Hardware Products Co. Ltd.
August 1993
PRC
100
Manufacturing
On
July 15, 2022, the Company closed its initial public offering ("IPO") of 5,060,000 ordinary shares, par value $0.0001 per
share, priced at $4.00 per share. The aggregate gross proceeds from the IPO were $20.24 million, before deducting underwriting discounts
and other related expenses. The ordinary shares of the Company began trading on The Nasdaq Capital Market on July 13, 2022 under the
ticker symbol "ILAG."
On
October 12, 2022 (the "Effective Date"), Hing Fat Industrial Limited and Dongguan Xingfa Hardware Products Co., Ltd. ("Buyer")
entered into an Asset Purchase Agreement (the "Agreement") with Hu Xiongjie, a citizen of Singapore (the "Seller"),
pursuant to which the Seller agreed to sell to the Buyer an electroplating production line, including but not limited to equipment, machinery,
tanks, fixtures, flowlines, improvements and mixed property located in Dongguan City, Guangdong, China (the "Asset") for
an aggregate purchase price (the "Purchase Price") of $4,500,000 in cash. The Seller's clientele details, books, accounting
records and liabilities are excluded from this transaction. Pursuant to the Agreement, Buyer shall pay a refundable deposit of $2,000,000
on Effective Date and Buyer shall check operational conditions and access the value of the Asset at current market rate within ten (10)
days of the Effective Date, and if Buyer accepts the Purchase Price, an intermediate payment of $1,000,000 shall be then paid. Upon closing,
Buyer shall pay Seller an additional amount of $1,000,000. A residual of $500,000 shall be held by the Buyer for one (1) year from closing
date as quality guarantee for possible tax liabilities, defects or required repair(s) of the Asset. The balance of Purchase Price shall
be paid after deduction of costs of repairment related to unidentified defects or problems with the Asset at transfer date. As of the
date of this report, the Buyer has paid all $4,500,000 to the Seller.
Our
principal executive offices are located at Unit 2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New
Territories, Hong Kong. Our telephone number at this address is +852 2481 7938. Our registered office in the Cayman Islands is located
at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111. Our agent for service of process in the United States is Cogency,
located at 122 East 42
nd
Street, 18
th
Floor, New York, NY 10168, United States. Investors should contact us for
any inquiries through the address and telephone number (852) 2481-7938 of our principal executive offices.
The
SEC maintains a web site at www.sec.gov that contains reports and other information regarding issuers that file electronically with the
SEC using its EDGAR system.
38
See
"Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures"
for a discussion of our capital expenditures.
B.
Business Overview
Our
mission is to make life safer and smarter by designing and producing affordable, high-quality locksets and smart security systems.
Headquartered
in Hong Kong, we manufacture and sell high quality mechanical locksets to customers mainly in the United States (US) and Canada and have
continued to diversify and refine our product offerings in the past 40 years to meet our customers' needs. We believe Xingfa is
one of the pioneers of mechanical lockset manufacturing in China. Since inception, to cope with our development and increase customer
satisfaction in quality, we keep investing in self-designed automated product lines, new craftsmanship and developing new products including
smart locks. In order to obtain the confidence of our customers, Xingfa has obtained the ISO9001quality assurance certificate.
Starting
in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed
by the Builders Hardware Manufacturing Association (BHMA) for ANSI. Our focus in producing mechanical locksets - including locksets for
outdoors (such as main entrances and gates) and indoors - has resulted in sustainable growth in our business and raised our competitiveness.
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer
("ODM") door locksets to various customer segments from "Premium Series" to "Economy-oriented Series"
with classic to contemporary looks, functions and colors.
To
meet increasing consumer needs for smart locks and smart home products, Hing Fat been researching and developing smart locks in the past
couple years. Hing Fat has been working on smart locks functions, communication protocols, available designs and have internally worked
out a general solution plan including mechanical and electronic parts but still need to further develop the software related parts for
such locks which we need external help. Most of our research and development on smart locks have been done internally by our technician
and engineers, except that Hing Fat hired outside services for approximately $25,000 in 2017. Because of tariff war and outbreak of COVID-19,
we did not further progress on the software for our smart locks until early 2023. Since then, we have reinitiated the process to develop
devices and software applications for our smart locks and expect to have first smart lock product by the end of 2024.
Currently,
approximately 99% of our revenues are from products sold to the US market, and the remaining products are sold to Canadian market. We
build our distribution network by working together with our large and small business partners in different geographic areas to sell our
products. More information about geographical penetration of our revenues can be found in "
Segment reporting in Note 2 of Notes
to the Consolidated Financial Statements
".
39
Our Products
We
produce various ODM indoor and outdoor locksets mainly for importers, builders and the construction market in the USA. Since 2016, we
market our self-branded products, Bamberg, in South-east Asia. In addition, we are selling our self-branded products through reputable
online shops.
●
Locksets
                                            functions
Mechanical
locksets are mechanical devices which secure an opening by keeping a door closed until a release mechanism is activated. It can be a
lever, knob, key, thumb-turn or button. Mechanical locksets are very common on exterior/interior doors in residential and multi-family
applications. There are several types of mechanical locksets, and the most common functions for mechanical locksets are as follows:
●
Deadbolts
– are used for front doors and doors which may require an additional security from
                                            a deadbolt, combined in a lockset with one of the functions above. It can be locked by a
                                            thumb-turn from the inside or by a key from the outside.
●
Entry
                                            locksets
– are used for bedrooms, front doors, and back doors. It can be locked
                                            by a thumb-turn from the inside or by a key from the outside.
●
Privacy
                                            locksets
– are used for restrooms or dressing rooms. It can be locked from the
                                            inside with a thumb turn for privacy, and it can be unlocked from the outside using a tool,
                                            a screwdriver for example, rather than a key.
40
●
Passage
                                            locksets
– are used where doors do not need to lock. There is no key and no lock
                                            function.
●
Storeroom
                                            locks
– are used for storerooms. It should always be locked from the outside and
                                            a key is used to open the door. When the key is removed, the door is locked from the outside
                                            again. There is no lock/unlock the door from the inside.
Our Customized Keying Options
One
of our value propositions is the ability to customize the keys for our door locksets based on specific customer requests. Below is a
summary of our various professional custom-made keying options applicable to our products:
●
Types
                                            of Keying Options
The
term "keying" refers to the way keys will be used to operate the cylinders that are installed in the door locksets. Keys
can be assigned to different groups that will and will not open the cylinders. Keying determines which keys work at each opening. A cylinder
will contain a certain number of pins generally ranging from 5 pins or more. The pins vary in height. This variation in height and the
cuts on the key can generate different keying combinations. It can provide access to the cylinder to lock or unlock the locksets.
●
Keyed
                                            Different (KD)
Each
cylinder is keyed different. It means that each lock is operated by a unique key. A key used at one door cannot be used to open other
doors.
●
Keyed
                                            Alike (KA)
Each
cylinder is keyed alike. It means that every lock can be opened by the same key. This is useful in an area where a limited number of
keys is required, such as a residential unit area with storage closets or common rooms that only need one key combination.
●
Master
                                            Keyed (MK)
Each
cylinder has its own individual key which cannot open other locksets in the system and all locksets in the system can be opened by one
master key. A master keyed system is useful where someone requires a higher level of access authority, such as the building owner.
41
●
Construction
                                            Keyed (CK)
A
construction key is needed when contractors need entry to a building during construction. When new homes are under construction, a contractor
will provide a general key to carpenters, painters, and other contractors. This allows easy access to several homes without requiring
different keys, and prevents duplication and later entry into the homes once a homeowner moves in. Once construction is complete, the
owner's keys will block further access by the contractors. The following diagram shows how it works.
Our Suppliers
In
past years, our primary raw materials are brass, iron and zinc alloy. We started to use stainless steel to partially substitute
brass from second half of 2021. And we managed to replace substantial usage of brass with stainless steel in 2023. Raw materials by
weight of our locksets basing on bill of materials and actual weighting, approximately 50% are iron, approximately 38% are zinc
alloy, approximately 1% are brass and 11% are stainless steel for the year ended December 31, 2023, while approximately 49% are
iron, approximately 40% are zinc alloy, approximately 6% are brass, and 5% are stainless steel for the same period of 2022. We
don't have long term purchase contracts with our suppliers but only purchase via orders. For procurement purpose, management
will get master quote from at least two suppliers for every three (3) months. Management will bargain purchase price by taking into
account price trends of brass, iron, zinc alloy, and stainless steel commodity and quantity volume discount. Xingfa has purchased
approximately 11 tonnes brass, 490 tonnes iron, 373 tonnes zinc alloy and 103 tonnes stainless steel for the year ended December 31,
2023, while 88 tonnes brass, 697 tonnes iron, 569 tonnes zinc alloy, and 63 tonnes stainless steel for the year ended December 31,
2022.
Xingfa
purchased iron from five Chinese suppliers in Guangdong province in year 2023.
Xingfa
purchased zinc alloy from two suppliers. One supplier ships zinc alloy from Shanghai and Dongguan while one Hong Kong supplier ships
them from Shenzhen in 2023.
Xingfa
purchased brass from various subsidiaries of two suppliers in Dongguan and Shanghai in 2023.
42
Xingfa
purchased stainless steel from four suppliers in Guangdong province in 2023.
We
have business relationships with our iron, zinc alloy and brass suppliers for over 5 years. Some of them are public companies or
subsidiaries of public companies listed on Shanghai, Shenzhen or Hong Kong Stock Exchanges and the supplies and availabilities of
our raw materials have never been an issued for us in the past. Also, all of our primary raw materials are general commercial
commodities. For 2023, total global production of: (i) brass is approximately 22 million tonnes; (ii) iron is approximately 2.5
billion tonnes and (iii) zinc alloy is approximately 12.4 million tonnes; (iii) stainless steel is approximately 60 million tonnes.
(source: ResearchAndMarkets.com) There are numbers of suppliers in China of our raw materials. Therefore, even our existing
suppliers may be temporarily short in inventory, we can place purchase order to other suppliers without difficulty and price
premium.
Intellectual Property
We
regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success,
and we rely on trademark and trade secret law and confidentiality and invention assignment with our employees and others to protect our
proprietary rights.
We
mostly rely on our know-how for production processes and our patents have expired. Currently, Bamberg (HK) Limited has one registered
trademark for Bamberg in the U.S. and one registered trademark for Bamberg in Hong Kong, which are utilized for our self-branded products,
and the Company has one trademark of ILAG in Hong Kong as our group holding company logo for our general company image and marketing
purpose. In addition, we and our subsidiaries have three registered domain names in Hong Kong, namely
i-l-a-g.com, kambo.com.hk
and
bamberggroup.com
.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual
properties. Monitoring unauthorized use of our intellectual properties is difficult and costly, and we cannot be certain that the steps
we have taken will prevent misappropriation of our intellectual properties. From time to time, we may have to resort to litigation to
enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.
In
addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement
of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing
technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, even if we are able
to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.
See
"Risk Factors—Risks Related to Our Business—We may not be able to prevent others from unauthorized use of our intellectual
property, which could harm our business and competitive position." and "—We may be subject to intellectual property
infringement claims, which may be expensive to defend and may disrupt our business and operations."
Competition
We
are facing competition from worldwide brands such as Kwiksets, Schlage, and other domestic manufacturers in Hong Kong and China. The
Company positions its products as affordable high-quality mechanical Grade 2 and Grade 3 locksets. In Asia, there are only a few manufacturers
in China and South-east Asia that are capable of competing with us on such products.
Mechanical
lockset companies have been consolidating in the last decade (see table: Competitive Landscaping, below). Sizable multinational companies
keep expanding by acquiring or merging with other lockset companies. Currently, the major player in the world is ASSA Abloy AB (ASSA
B: STO), a Swedish conglomerate that sells cover products and services ranging from locks, doors, gates and entrance automation, which
owns brands such as Abloy, Yale Mul-T-Lock and Medeco. Other well-known brands including Kwikset by the Hardware and Home Improvement
(HHI), division of ASSA ABLOY (STO: AAY.ST), Schlage by Allegion PLC (NYSE: ALLE), Defiant by Home Depot (NYSE: HD), and Delaney Hardware
in Cumming, USA. The PRC market is fragmented because various international lockset standards are all applicable in China. Thus, various
brands of locksets all compete in PRC which makes the Chinese lockset market highly competitive.
43
We
mostly compete with manufacturing subsidiaries and factories of those worldwide brands on product quality as well as the manufacturers
in China on price. The key for our sustainability is to maintain high quality, fine craftsmanship and procurement at affordable prices.
In additional, high capital expense for building a new locket manufacturing facility and our longtime created reputation set up barriers
of entry by new players.
Our
Competitive Strengths
We
have four decades of experience in mechanical lockset manufacturing. This gave us the ability to design our own automated production
lines to meet our customers' needs effectively and efficiently. Xingfa is few of manufacturers who is able to finish complicated
stamping and casting with few machineries by optimizing production progresses. We are currently offering 108 basic designs of various
locksets in our product catalogue (see "Our Products" for sample images) and we also have many other designs stored in the
library of engineering department of Hing Fat, all of which enable us to provide our customers with products of many varieties with different
functions, outlooks and colors. We have accumulated extensive design and production know-hows of our lock core in the past thirty years.
Our experience and expertise in the design of mechanical locksets helps us expand our product lines and quickly respond to the changes
of market trends and demands of our customers.
To
comply with stringent requirements of U.S. standards, Xingfa has obtained ISO9000 certificate, and its manufacturing facility has been
reviewed and audited by U.S. customers from time to time for compliance of social responsibility about labor welfare and safety, environmental
protection and other requirements from such customers. To serve our customers better, Xingfa has equipped with professional keying machineries
which is a very niche service being provided by lockset manufacturers in China and Asia Pacific region. In Asia, we only have a few peer
competitors in China and South-east Asia due to high capital expense requirement for the manufacturing facility and professional know-hows
of the products and industry.
We
have launched research in smart locks functions, communication protocols, available designs and suppliers of electronic parts in the
market as a part of our R & D process of smart lock products. Our in-depth knowledge in lockset mechanics makes it easier for us
to enter into smart locks market by incorporating relevant electronic parts into our locksets after we develop the software system.
We expect to launch our first smart lock product by the end of 2024. In additional, our long relationship with our customers makes
it quicker for us to introduce new products including future smart locks to the market.
With
our years of operational history, Xingfa has built a loyal and experienced work force and manufacturing management, which can drive manufacturing
facility expansion without additional talent. Along with long-term relationships with reputable customers and recent access to e-commerce
channels, we believe we are able to attract customers with our new products.
Regulations
Regulations
of People's Republic of China
This
section sets forth a summary of the most significant rules and regulations that affect our business activities in China through our wholly
owned subsidiary Xingfa.
44
Regulations Relating to Foreign Investment
Negative List of Industries for Foreign
Investment
Investment
activities in the PRC by foreign investors were principally governed by the Guidance Catalogue of Industries for Foreign Investment,
or the Guidance Catalog, which was promulgated and is amended from time to time by the Ministry of Commerce, or MOFCOM, and the National
Development and Reform Commission, or NDRC. The Guidance Catalog lays out the basic framework for foreign investment in China, classifying
businesses into three categories with regard to foreign investment: "encouraged," "restricted" and "prohibited."
Industries not listed in the catalog are generally deemed as falling into a fourth category "permitted" unless specifically
restricted by other PRC laws. The NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Foreign Investment
Access (2021 Edition) (the "2021 National Negative List") and the Special Administrative Measures (Negative List) for Foreign
Investment Access in Pilot Free Trade Zones (2021 Edition) (the "2021 FTZ Negative List") (collectively the "2021 Negative
Lists") on December 27, 2021, which took effect on January 1, 2022. Industries listed on the 2021 Negative Lists are divided into
two categories: restricted and prohibited. Industries not listed on the 2021 Negative Lists are generally deemed as constituting a third
"permitted" category. The establishment of wholly foreign-owned enterprises is generally allowed in permitted industries.
Some restricted industries are limited to equity or contractual joint ventures, while in some cases, Chinese partners are required to
hold the majority interests in such joint ventures. In addition, projects falling under the restricted category are subject to higher-level
government approvals. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in
the Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations. Any domestic enterprise
engaging in businesses prohibited by the 2021 Negative Lists that lists, issues securities and trades shares overseas must obtain pre-approval
consent from relevant competent regulator; overseas investors must not engage in the operation and management of the enterprise, and
the percentage of foreign shareholding is subject to the relevant provisions in the administrative measures for domestic securities investments
by foreign investors.
To
comply with PRC laws and regulations, we rely on equity investment with our WFOE subsidiary to operate our business in China. See "Risk
Factors—Risks Related to Our Corporate Structure—PRC regulation of loans to and direct investment in PRC entities by offshore
holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of securities offering
to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity
and our ability to fund and expand our business."
Foreign Investment Law
On
March 15, 2019, the National People's Congress approved the Foreign Investment Law, which became effective on January 1, 2020 and
replace three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture
Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. Furthermore, the
Implementing Regulations of the Foreign Investment Law of the PRC, or the Implementing Regulations of FIL, was promulgated on December
26, 2019 and became effective on January 1, 2020. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize
its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate
legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework
for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair
competition.
According
to the Foreign Investment Law and the Implement the Implementing Regulations of FIL, "foreign investment" refers to investment
activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign
country (collectively referred to as "foreign investor") within China, and the investment activities include the following
situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within
China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise
within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and
(iv) investments in other means as provided by laws, administrative regulations, or the State Council.
45
The
NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) (the
"2021 National Negative List") and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot
Free Trade Zones (2021 Edition) (the "2021 FTZ Negative List") (collectively the "2021 Negative Lists") on December
27, 2021, which took effect on January 1, 2022. Compared to the last Special Administrative Measures for Market Access of Foreign Investment
(Negative List) promulgated by the NDRC and the MOFCOM in June 2020, the 2021 Negative Lists cuts down the number of items restricted
or prohibited to foreign investors from 33 to 31, widening access to more industries and fields. However, the 2021 Negative Lists prescribe
that any domestic enterprise engaging in businesses prohibited by the Negative Lists that lists, issues securities and trades shares
overseas must obtain pre-approval consent from relevant competent regulator; overseas investors must not engage in the operation and
management of the enterprise, and the percentage of foreign shareholding is subject to the relevant provisions in the administrative
measures for domestic securities investments by foreign investors. The Foreign Investment Law provides that foreign invested entities
operating in foreign restricted or prohibited industries will require market entry clearance and other approvals from relevant PRC governmental
authorities. The current industry entry clearance requirements governing investment activities in the PRC by foreign investors are set
out in 2021 Negative Lists.
Furthermore,
the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment
may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.
In
addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments
in the PRC, including, among other things, that local governments shall abide by their commitments to the foreign investors; foreign-invested
enterprises are allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory procedures shall
be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of
foreign investors is prohibited; mandatory technology transfer is prohibited; and the capital contributions, profits, capital gains,
proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or proceeds
received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMB or a foreign currency. Also,
foreign investors or the foreign investment enterprise should be subject to legal liabilities for failing to report investment information
in accordance with the requirements.
Regulations on Intellectual Property
Rights
The
PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks and domain
names.
Copyright.
Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC promulgated in
February 2010 which took effect in April 2010 (the "Copyright Law") which has been amended by SCNPC on November 11, 2020
and became effective on June 1, 2021, and related rules and regulations. Under the Copyright Law, the term of protection for copyrighted
software of legal persons is 50 years and ends on December 31 of the 50
th
year from the date of first publishing of the software.
Patent.
The Patent Law of the PRC promulgated in December 2008, which became effective in October 2009 and recently has been amended by SCNPC
on October 17, 2020 and became effective on June 1, 2021, provides for patentable inventions, utility models and designs. An invention
or utility model for which patents may be granted shall have novelty, creativity and practical applicability. The State Intellectual
Property Office under the State Council is responsible for examining and approving patent applications. The protection period is 20 years
for inventions and 10 years for utility models and designs, all of which commence from the date of application of patent rights under
current Patent Law of the PRC. The protection period has been slightly amended in recent amendment which became effective on June 1,
2021. The terms of protection for invention and utility patents will still be 20 years and 10 years, respectively, in general. The term
of protection for a design patent will be extended from 10 years to 15 years. In addition, for invention patents, in case it is only
granted after 4 years or more from its filing date or 3 years or more after a request for substantive examination date, the applicant
can request for an extension of protection term for any unreasonable delay.
46
Trademark.
The Trademark Law of the PRC promulgated in August 2013 which took effect in May 2014 (the "Trademark Law") and it was
last amended on April 23, 2019 and the amendments became effective on November 11, 2019. Its implementation rules protect registered
trademarks. The Trademark Office of National Intellectual Property Administration, PRC, formerly the PRC Trademark Office of the State
Administration of Market Regulation is responsible for the registration and administration of trademarks throughout the PRC. The Trademark
Law has adopted a "first-to-file" principle with respect to trademark registration. The validity period of registered trademarks
is 10 years from the date of approval of trademark application, and may be renewed for another 10 years provided relevant application
procedures have been completed within 12 months before the end of the validity period.
Domain
Name.
Domain names are protected under the Administrative Measures for the Internet Domain Names of the PRC promulgated by the Ministry
of Industry and Information Technology of the PRC effective on December 20, 2004 and the Administrative Measures for Internet Domain
Names promulgated by Ministry of Industry and Information Technology ("MIIT"), effective on November 1, 2017 (the "Domain
Name Measures"). MIIT is the major regulatory body responsible for the administration of the PRC internet domain names. The Domain
Names Measures has adopted a "first-to-file" principle with respect to the registration of domain names.
Regulations on Environmental Protection
and Work Safety
Regulations on Environmental Protection
Pursuant
to the
Environmental Protection Law of the PRC
promulgated by the Standing Committee of the National People's Congress ("SCNPC")
on December 26, 1989, amended on April 24, 2014 and effective on January 1, 2015, any entity which discharges or will discharge pollutants
during the course of its operations or other activities must implement effective environmental protection safeguards and procedures to
control and properly treat waste gas, waste water, waste residue, dust, malodorous gases, radioactive substances, noise vibrations, electromagnetic
radiation and other hazards produced during such activities. The preparation of relevant development and utilization plans and the construction
of the projects having impact on environment shall be subject to environmental impact assessment in accordance with the law. Furthermore,
the enterprises and business operators on which the management system for the pollutants discharge permit and registration is implemented
shall discharge pollutants according to their respective pollutants discharge permits or registrations and shall not discharge pollutants
without obtaining a pollutants discharge permit or registration.
Environmental
protection authorities impose various administrative penalties on persons or enterprises in violation of the
Environmental Protection
Law
. Such penalties include warnings, fines, orders to rectify within the prescribed period, orders to cease construction, orders
to restrict or suspend production, orders to make recovery, orders to disclose relevant information or make an announcement, imposition
of administrative action against relevant responsible persons, and orders to shut down enterprises. Any person or entity that pollutes
the environment resulting in damage could also be held liable under the
Civil Code of PRC
. In addition, environmental organizations
may also bring lawsuits against any entity that discharges pollutants detrimental to the public welfare. In addition, on May 28, 2020,
National People's Congress promulgated the Civil Code of PRC, which took effective on January 1, 2021, to replace the PRC Inheritance
Law, Adoption Law, PRC Contract Law, the General Principles of the Civil Law of the PRC, the PRC Marriage Law, the PRC Guarantee Law,
the PRC Property Law and the PRC Tort Liability Law. Seven parts are introduced in the Civil Code of PRC, including General Part, Right
in Rem, Contracts, Personality Rights, Marriage and Family, Inheritance, Tort Liability.
The
Law of the PRC on the Prevention and Control of Occupational Diseases, or the Occupational Diseases Prevention Law, promulgated by the
SCNPC on October 27, 2001, became effective on May 1, 2002, and latest amended on December 29, 2018 is applicable to activities for the
prevention and control of diseases contracted by the workers due to their exposure in the course of work to dust, radioactive substances
and other toxic and harmful substances. Pursuant to the Occupational Diseases Prevention Law, the employer shall strictly abide by the
national occupational health standards and implement the measures for occupational disease prevention and control in accordance with
laws and regulations. Violation of the Occupational Diseases Prevention Law may result in the imposition of fines and penalties, the
suspension of operation, an order to cease operation, and/or criminal liability in severe cases.
47
Regulations on Work Safety
Under
relevant construction safety laws and regulations, including the
Work Safety Law of the PRC
which was promulgated by the SCNPC
on June 29, 2002, amended on August 27, 2009, August 31, 2014 and June 10, 2021, and effective as of September 1, 2021, production and
operating business entities must establish objectives and measures for work safety and improve the working environment and conditions
for workers in a planned and systematic way. A work safety protection scheme must also be set up to implement the work safety job responsibility
system. In addition, production and operating business entities must arrange work safety training and provide their employees with protective
equipment that meets the national standards or industrial standards. Automobile and components manufacturers are subject to the aforementioned
environment protection and work safety requirements.
Regulations Relating to Labor Protection
Labor Contract Law
The
PRC Labor Contract Law, or the Labor Contract Law, which became effective on January 1, 2008 and was amended on December 28, 2012 and
became effected on July 1, 2013, is primarily aimed at regulating rights and obligations of employer and employee relationships, including
the establishment, performance and termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts shall be concluded
in writing if labor relationships are to be or have been established between employers and the employees. Employers are prohibited from
forcing employees to work above certain time limits, and employers shall pay employees for overtime work in accordance to national regulations.
In addition, employee wages shall be no lower than local standards on minimum wages and must be paid to employees in a timely manner.
Interim Provisions on Labor Dispatch
Pursuant
to the
Interim
Provisions
on Labor Dispatch,
or the Labor Dispatch Provisions, promulgated by the Ministry of Human Resources
and Social Security on January 24, 2014, which became effective on March 1, 2014, dispatched workers are entitled to equal pay with full-time
employees for equal work. Employers are allowed to use dispatched workers for temporary, auxiliary or substitutive positions, and the
number of dispatched workers may not exceed 10% of the total number of employees.
Social Insurance and Housing Fund
Pursuant
to the Social Insurance Law of the PRC implemented on July 1, 2011, amended on December 29, 2018 and became effective on the same day,
employers are required to provide their employees in the PRC with welfare benefits covering pension insurance, unemployment insurance,
maternity insurance, labor injury insurance and medical insurance. These payments are made to local administrative authorities. Any employer
that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within
a prescribed time limit and be subject to a late fee. If the employer still fails to rectify the failure to make the relevant contributions
within the prescribed time, it may be subject to a fine ranging from one to three times the amount overdue. In accordance with the
Regulations
on the Management of Housing Fund
which was promulgated by the State Council in 1999 and last amended on March 24, 2019 and became
effective on the same day, employers must register at the designated administrative centers and open bank accounts for depositing employees'
housing funds. Employers and employees are also required to pay and deposit housing funds, which shall be the product of employees'
average monthly salaries of the previous year multiplied by the contribution rate of the housing provident fund of the employer. Where,
in violation of the provisions of these Regulations, an employer is overdue in the contribution of, or underpays, the housing provident
fund, the housing provident fund management center shall order it to make the contribution within a prescribed time limit; where the
contribution has not been made after the expiration of the time limit, an application may be made to a people's court for compulsory
enforcement.
48
Employee Stock Incentive Plan
Pursuant
to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan
of Overseas Listed Company, or Circular 7, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors, and
other senior management who participate in any stock incentive plan of a publicly-listed overseas company and who are PRC citizens or
non-PRC citizens residing in China for a continuous period of no less than one year, subject to a few exceptions, are required to register
with SAFE through a qualified domestic agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other
procedures. In addition, the SAT has issued certain circulars concerning employee stock options and restricted shares. Under these circulars,
employees working in the PRC who exercise stock options or are granted restricted shares will be subject to PRC individual income tax.
The PRC subsidiaries of an overseas listed company are required to file documents related to employee stock options and restricted shares
with relevant tax authorities and to withhold individual income taxes of employees who exercise their stock option or purchase restricted
shares. If the employees fail to pay or the PRC subsidiaries fail to withhold income tax in accordance with relevant laws and regulations,
the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC governmental authorities.
Regulations Relating to Taxes
Income Tax
The
PRC Enterprise Income Tax Law, or the EIT Law, imposes a uniform enterprise income tax rate of 25% on all PRC resident enterprises, including
foreign-invested enterprises, unless they qualify for certain exceptions. The enterprise income tax is calculated based on the PRC resident
enterprise's global income as determined under PRC tax laws and accounting standards. If a non-resident enterprise sets up an organization
or establishment in the PRC, it will be subject to enterprise income tax for the income derived from such organization or establishment
in the PRC and for the income derived from outside the PRC but with an actual connection with such organization or establishment in the
PRC. The EIT Law and its implementation rules permit certain "high and new technology enterprises strongly supported by the state"
that independently own core intellectual property and meet statutory criteria, to enjoy a reduced 15% enterprise income tax rate. In
January 2016, the SAT, the Ministry of Science and Technology and the MOF jointly issued the Administrative Rules for the Certification
of High and New Technology Enterprises specifying the criteria and procedures for the certification of High and New Technology Enterprises.
On
April 22, 2009, the SAT issued the Circular of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled
Overseas Registered Enterprises as Resident Enterprises in Accordance With the De Facto Standards of Organizational Management, or the
SAT Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled
enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled
by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular
may reflect the SAT's general position on how the "de facto management body" text should be applied in determining
the tax resident status of all offshore enterprises. According to the SAT Circular 82, an offshore incorporated enterprise controlled
by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its "de facto management
body" in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are
met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise's
financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise's
primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the
PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. Further to SAT Circular 82, on
July 27, 2011, the SAT issued the Announcement of the State Administration of Taxation on Printing and Distributing the Administrative
Measures for Income Tax on PRC-controlled Resident Enterprises Incorporated Overseas (Trial Implementation), or the SAT Bulletin 45,
which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for
procedures and administration details for determination of resident status and administration on post-determination matters.
49
Value-added Tax
The
Provisional Regulations of the PRC on Value-added Tax, the VAT Regulation, were promulgated by the State Council on December 13, 1993
and came into effect on January 1, 1994 which were subsequently amended from time to time. The Detailed Rules for the Implementation
of the Provisional Regulations of the PRC on Value-added Tax (Revised in 2011) was promulgated by the MOF on December 25, 1993 and subsequently
amended on December 15, 2008 and October 28, 2011, or collectively, the VAT Law. On November 19, 2017, the State Council promulgated
the Decisions on Abolishing the Provisional Regulations of the PRC on Business Tax and Amending the Provisional Regulations of the PRC
on Value-added Tax, or the Order 691. On April 4, 2018, MOF and SAT jointly promulgated the Circular on Adjustment of Value-Added Tax
Rates, or Circular 32. According to the VAT Law, the Order 691 and the Circular 32, all enterprises and individuals engaged in the sale
of goods, the provision of processing, repair and replacement services, sales of services, intangible assets, real property and the importation
of goods within the territory of the PRC are the taxpayers of VAT. The VAT tax rates generally applicable are simplified as 16%, 10%,
6% and 0%, and the VAT tax rate applicable to the small-scale taxpayers is 3%. Furthermore, according to the Announcement on Relevant
Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of Finance, the State Administration of Taxation and
the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previously subject to VAT rates of
16% and 10% respectively become subject to lower VAT rates of 13% and 9% respectively starting from April 1, 2019.
Dividend Withholding Tax
The
EIT Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident
investors which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but
the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived
from sources within the PRC.
Pursuant
to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance Arrangement, and other applicable
PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions
and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the
Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Circular on Certain
Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, issued on February 20, 2009 by
the SAT, if the relevant PRC tax authorities determine, in their discretions, that a company benefits from such reduced income tax rate
due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According
to the Circular on Several Questions regarding the "Beneficial Owner" in Tax Treaties, which was issued on February 3, 2018
by the SAT and took effect on April 1, 2018, when determining the applicant's status of the "beneficial owner" regarding
tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation,
whether the applicant is obligated to pay more than 50% of his or her income in twelve months to residents in third country or region,
whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region
to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken
into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further provides that
applicants who intend to prove his or her status of the "beneficial owner" shall submit the relevant documents to the relevant
tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers' Enjoyment of
the Treatment under Tax Agreements.
50
On
February 3, 2015, the SAT issued the Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties
by Non-Tax Resident Enterprises, or the SAT Public Notice 7. The SAT Public Notice 7 extends its tax jurisdiction to cover not only where
a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests
of an overseas holding company, or an Indirect Transfer, but also to transactions involving transfer of other taxable assets through
offshore transfer of a foreign intermediate holding company. The SAT Public Notice 7 also brings challenges to both foreign transferor
and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers
a taxable asset indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident
enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer
to the relevant tax authority. Using a "substance over form" principle, the PRC tax authority may disregard the existence
of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding
or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee
or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for
the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under
PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
On
October 17, 2017, the SAT issued the Public Notice on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises,
or the SAT Public Notice 37, which came into effect on December 1, 2017. According to SAT Public Notice 37, where the non-resident enterprise
fails to declare its tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay its tax due within required
time limits, and the non-resident enterprise shall declare and pay its tax payable within such time limits specified by the tax authority.
If the non-resident enterprise voluntarily declares and pays its tax payable before the tax authority orders it to do so, it shall be
deemed that such enterprise has paid its tax payable in time.
Regulations relating to Foreign Exchange
General Administration of Foreign Exchange
Under
the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and most recently amended on August 5, 2008 and various
regulations issued by the State Administration of Foreign Exchange of the PRC, or the SAFE and other relevant PRC government authorities,
Renminbi is convertible into other currencies for current account items, such as trade-related receipts and payments and payment of interest
and dividends. The conversion of Renminbi into other currencies and remittance of the converted foreign currency outside the PRC for
of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from the
SAFE or its local office.
Payments
for transactions that take place within the PRC must be made in Renminbi. Unless otherwise approved, PRC companies may not repatriate
foreign currency payments received from abroad or retain the same abroad. Foreign-invested enterprises may retain foreign exchange in
accounts with designated foreign exchange banks under the current account items subject to a cap set by the SAFE or its local office.
Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution engaged in settlement
and sale of foreign exchange pursuant to relevant SAFE rules and regulations. For foreign exchange proceeds under the capital accounts,
approval from the SAFE is generally required for the retention or sale of such proceeds to a financial institution engaged in settlement
and sale of foreign exchange.
Pursuant
to the Circular of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the
SAFE Circular 59, promulgated by SAFE on November 19, 2012, which became effective on December 17, 2012 and subsequently amended from
time to time, approval of SAFE is not required for opening a foreign exchange account and depositing foreign exchange into the accounts
relating to the direct investments. The SAFE Circular 59 also simplified foreign exchange-related registration required for the foreign
investors to acquire the equity interests of Chinese companies and further improve the administration on foreign exchange settlement
for foreign-invested enterprises.
The
Circular on Further Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, or the SAFE Circular 13, effective
from June 1, 2015, cancels the administrative approvals of foreign exchange registration of direct domestic investment and direct overseas
investment and simplifies the procedure of foreign exchange-related registration. Pursuant to the SAFE Circular 13, the investors shall
register with banks for direct domestic investment and direct overseas investment.
51
The
Circular on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise, or the SAFE
Circular 19, which was promulgated by the SAFE on March 30, 2015 and became effective on June 1, 2015, provides that a foreign-invested
enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital
account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights and interests (or for
which the bank has registered the injection of the monetary capital contribution into the account). Pursuant to the SAFE Circular 19,
for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capital on a discretionary basis;
a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business; where an
ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise
must first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment
with the foreign exchange administration or the bank at the place where it is registered.
The
Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or the SAFE Circular
16, which was promulgated by the SAFE and became effective on June 9, 2016, provides that enterprises registered in the PRC may also
convert their foreign debts from foreign currency into Renminbi on self-discretionary basis. The SAFE Circular 16 also provides an integrated
standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign
debts) on self-discretionary basis, which applies to all enterprises registered in the PRC.
In
January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness
and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance
of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing
board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic
entities must retain income to account for previous years' losses before remitting any profits. Moreover, pursuant to Circular
3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts
and other proof as a part of the registration procedure for outbound investment.
On
October 23, 2019, SAFE issued Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border
Trade and Investment, or the Circular 28, which took effect on the same day. Circular 28 allows non-investment foreign-invested enterprises
to use their capital funds to make equity investments in China, provided that such investments do not violate the effective special entry
management measures for foreign investment (negative list) and the target investment projects are genuine and in compliance with laws.
Since Circular 28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties.
Pursuant
to the SAFE Circular 13 and other laws and regulations relating to foreign exchange, when setting up a new foreign invested enterprise,
the foreign invested enterprise shall register with the bank located at its registered place after obtaining the business license, and
if there is any change in capital or other changes relating to the basic information of the foreign-invested enterprise, including without
limitation any increase in its registered capital or total investment, the foreign invested enterprise must register such changes with
the bank located at its registered place after obtaining approval from or completing the filing with competent authorities. Pursuant
to the relevant foreign exchange laws and regulations, the above-mentioned foreign exchange registration with the banks will typically
take less than four weeks upon the acceptance of the registration application.
According
to the Foreign Investment Law, Measures for Reporting of Information on Foreign Investment, promulgated by MOFCOM, and State Administration
for Market Regulation, or the SAMR on December 30, 2019 and became effective on January 1, 2020, the Administrative Rules on the Company
Registration, which was promulgated by the State Council on June 24, 1994, became effective on July 1, 1994 and latest amended on February
6, 2016, and other laws and regulations governing the foreign invested enterprises and company registrations, the establishment of a
foreign invested enterprise and any capital increase and other major changes in a foreign invested enterprise shall be registered with
the SAMR, or its local counterparts, and investment information shall be submitted to the competent commerce authorities through the
enterprise registration system and the National Enterprise Credit Information Publicity System, if such foreign invested enterprise does
not involve special access administrative measures prescribed by the PRC government.
Based
on the forgoing, if we intend to provide funding to our wholly foreign owned subsidiaries through a capital injection at or after their
establishment, we must register the establishment thereof and any follow-on capital increase in our wholly foreign owned subsidiaries
with the SAMR or its local counterparts, submit such information via the enterprise registration system and the National Enterprise Credit
Information Publicity System and register such with the local banks for the foreign exchange related matters.
52
Offshore Investment
Under
the Circular of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration over the Overseas
Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37, issued
by the SAFE and effective on July 4, 2014, PRC residents are required to register with the local SAFE branch prior to contributing assets
or equity interests in an offshore special purpose vehicle, or SPV, which is defined as offshore enterprises directly established or
indirectly controlled by PRC residents for investment and financing purposes, with the enterprise assets or interests they hold in China
or overseas. The term "control" means obtain the operation rights, right to proceeds or decision-making power of a SPV through
acquisition, trust, holding shares on behalf of others, voting rights, repurchase, convertible bonds or other means. An amendment to
registration or subsequent filing with the local SAFE branch by such PRC resident is also required if there is any change in basic information
of the offshore company or any material change with respect to the capital of the offshore company. At the same time, the SAFE has issued
the Operation Guidance for the Issues Concerning Foreign Exchange Administration over Round-trip Investment regarding the procedures
for SAFE registration under the SAFE Circular 37, which became effective on July 4, 2014 as an attachment of Circular 37.
Under
the relevant rules, failure to comply with the registration procedures set forth in the SAFE Circular 37 may result in bans on the foreign
exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent
or affiliates, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.
Regulations on Dividend Distribution
The
principal laws and regulations regulating the dividend distribution of dividends by foreign-invested enterprises in the PRC include the
PRC Company Law, as amended in 1999, 2004, 2005, 2013 and 2018, and Foreign Investment Law and the Implementing Regulations of FIL which
replaced the Wholly Foreign-owned Enterprise Law promulgated in 1986 and amended in 2000 and 2016 and its implementation regulations
promulgated in 1990 and subsequently amended in 2001 and 2014, the PRC Equity Joint Venture Law promulgated in 1979 and subsequently
amended in 1990, 2001 and 2016 and its implementation regulations promulgated in 1983 and subsequently amended in 1986, 1987, 2001, 2011
and 2014, and the PRC Cooperative Joint Venture Law promulgated in 1988 and amended in 2000, 2016 and 2017 and its implementation regulations
promulgated in 1995 and amended in 2014 and 2017. Under the current regulatory regime in the PRC, foreign-invested enterprises in the
PRC may pay dividends only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations.
A PRC company is required to set aside as statutory reserve funds of at least 10% of its after-tax profit, until the cumulative amount
of such reserve funds reaches 50% of its registered capital unless laws regarding foreign investment provide otherwise. A PRC company
shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years
may be distributed together with distributable profits from the current fiscal year.
Regulations Relating to M&A Rule
and Overseas Listing in the PRC
On
August 8, 2006, six PRC governmental and regulatory agencies, including MOFCOM and CSRC, promulgated the Rules on Acquisition of Domestic
Enterprises by Foreign Investors, or the M&A Rules, governing the mergers and acquisitions of domestic enterprises by foreign investors
that became effective on September 8, 2006 and was revised on June 22, 2009. The M&A Rules, among other things, require that if an
overseas company established or controlled by PRC companies or individuals, or PRC Citizens, intends to acquire equity interests or assets
of any other PRC domestic company affiliated with the PRC Citizens, such acquisition must be submitted to MOFCOM for approval. The M&A
Rules also requires that an offshore SPV that is controlled directly or indirectly by the PRC companies or individuals and that has been
formed for overseas listing purposes through acquisitions of PRC domestic interest held by such PRC companies or individuals, shall obtain
the approval of CSRC prior to overseas listing and trading of such SPV's securities on an overseas stock exchange.
53
On
February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises
(the "New Overseas Listing Rules") with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas
Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information
under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market;
b) an issuer making a subsequent overseas securities offering after having been listed on an overseas market; c) a domestic company seeking
an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other
means. The new rules provide that the determination as to whether a domestic company is indirectly offering and listing securities on
an overseas market shall be made on a substance over form basis, and if the issuer meets the following conditions, the offering and listing
shall be determined as an indirect overseas offering and listing by a Chinese domestic company: (i) any of the revenue, profit, total
assets or net assets of the Chinese domestic entity is more than 50% of the related financials in the issuer's audited consolidated
financial statements for the most recent fiscal year; (ii) the senior managers in charge of business operation and management of the
issuer are mostly Chinese citizens or with regular domicile in China, the main locations of its business operations are in China or main
business activities are conducted in China. We are headquartered in Hong Kong with all our executive officers and directors based in
Hong Kong who are not Chinese citizens and most of our revenues and profits are generated by our subsidiaries in Hong Kong.
PRC Laws and Regulations Related to Data
Cross-border Transfer and personal information protection
Measures for the Security Assessment of Data Cross-border Transfer
On
July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022,
which requires the data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances:
(i) any data processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor
who processes personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides
personal information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information
of more than 10,000 people to overseas since January 1st of the previous year and ; and (iv) other circumstances under which the data
cross-border transfer security assessment is required as prescribed by the CAC.
Personal Information Protection Law of the PRC
On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the People's Republic of China (the "Personal
Information Protection Law"), effective from November 1, 2021. The Personal Information Protection Law requires, among others,
that (i) the processing of personal information should have a clear and reasonable purpose which should be directly related to the processing
purpose, in a method that has the least impact on personal rights and interests, and (ii) the collection of personal information should
be limited to the minimum scope necessary to achieve the processing purpose to avoid the excessive collection of personal information.
Different types of personal information and personal information processing will be subject to various rules on consent, transfer, and
security. Entities handling personal information bear responsibilities for their personal information handling activities, and shall
adopt necessary measures to safeguard the security of the personal information they handle. Otherwise, the entities handling personal
information could be ordered to correct, or suspend or terminate the provision of services, and face confiscation of illegal income,
fines or other penalties.
Hong Kong Regulations
As
we conduct business in Hong Kong through our wholly subsidiaries Kambo Locksets, Kambo Hardware, Bamberg and Hing Fat, our business operations
are subject to various regulations and rules promulgated by the Hong Kong government. The following is a brief summary of the Hong Kong
laws and regulations that currently and materially affect our business. This section does not purport to be a comprehensive summary of
all present and proposed regulations and legislation relating to the industries in which we operate.
54
Hong Kong Laws and Regulations relating
to Trade Description
Trade
Descriptions Ordinance
(Chapter 362 of the Laws of Hong Kong) ("TDO"), which came into full effect in Hong Kong on 1
April 1981 aims to prohibit false or misleading trade description and statements to goods and services provided to the customers during
or after a commercial transaction. Pursuant to the TDO, any person in the course of any trade or business applies a false trade description
to any goods or supply or offers to supply them commits an offence and a person also commits the same offence if he/she is in possession
for sale or for any purpose of trade or manufacture of any goods with a false description. The TDO also provides that traders may commit
an offence if they engage in a commercial practice that has a misleading omission of material information of the goods, an aggressive
commercial practice, involves bait advertising, bait and switch or wrong acceptance of payment.
Hong Kong Laws and Regulations relating
to Sales of Goods
Pursuant
to
Sale of Goods Ordinance
(Chapter 26 of the Laws of Hong Kong) ("SOGO"), which came into full effect in Hong Kong
on August 1, 1896, in every contract of sale, there is an implied warranty that the goods are free, and will remain free until the time
when the property is to pass, from any charge or encumbrance not disclosed or known to the buyer before the contract is made and that
the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the
benefit of any charge or encumbrance so disclosed or known. The SOGO provides that there is an implied condition that the goods shall
correspond with the description where there is a contract for the sale of goods by description, and there is any implied condition or
warranty as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. Where the seller sells goods
in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality.
Hong Kong Laws and Regulations relating
to Intellectual Properties Rights
Trade
Marks Ordinance
(Chapter 559 of the Laws of Hong Kong) ("TMO"), which came into full effect in Hong Kong on 4 April 2003
provides the framework for the Hong Kong's system of registration of trademarks and sets out the rights attached to a registered
trade mark, including logo and a brand name. The TMO restricts unauthorized use of a sign which is identical or similar to the registered
mark for identical and/or similar goods and/or services for which the mark was registered, where such use is likely to cause confusion
on the part of the public. The TMO provides that a person may also commit a criminal offence if that person fraudulently uses a trade
mark, including selling and importing goods bearing a forged trade mar, or possessing or using equipment for the purpose of forging a
trade mark.
Patents
Ordinance
(Chapter 514 of the Laws of Hong Kong), which came into full effect in Hong Kong on June 27, 1997 provides the framework
for "re-registration" system of Chinese, UK and European patents in Hong Kong. Pursuant to
Patents (Amendment) Ordinance
2016, which came into full effect in Hong Kong on 19 December 2019 provide a new framework for a new patent system - an "original
grant patent" system, running in parallel with the "re-registration" system.
Copyright
Ordinance
(Chapter 528 of the Laws of Hong Kong) ("CO"), which came into full effect in Hong Kong on June 27 1997 provides
comprehensive protection for recognized categories of underlying works such as literary, dramatic, musical and artistic works. The CO
restricts unauthorized acts such as copying and/or making available copies to the public of a copy right work.
Hong Kong Laws and Regulations relating
to Competition
Competition
Ordinance
(Chapter 619 of the Laws of Hong Kong) ("Competition Ordinance"), which came into full effect in Hong Kong
on December 14, 2015 prohibits and deters undertakings in all sectors from adopting anti-competitive conduct which has the object or
effect of preventing, restricting or distorting competition in Hong Kong. The key prohibitions include (i) prohibition of agreements
between businesses which have the object or effect of preventing, restricting or distorting competition in Hong Kong; and (ii) prohibiting
companies with a substantial degree of market power from abusing their power by engaging in conduct that has the object or effect of
preventing, restricting or distorting competition in Hong Kong. The penalties for breaches of the Competition Ordinance include, but
are not limited to, financial penalties of up to 10% of the total gross revenues obtained in Hong Kong for each year of infringement,
up to a maximum of three years in which the contravention occurs.
55
Hong Kong Laws and Regulations relating
to Employment
Pursuant
to
Employment Ordinance
(Chapter 57 of the Laws of Hong Kong) ("EO"), which came into full effect in Hong Kong on
September 27, 1968, all employees covered by the EO are entitled to basic protection under the EO including but not limited to payment
of wages, restrictions on wages deductions and the granting of statutory holidays.
Pursuant
to
Mandatory Provident Fund Schemes Ordinance
(Chapter 485 of the Laws of Hong Kong) ("MPFSO"), which came into full
effect in Hong Kong on December 1, 2000, every employer must take all practicable steps to ensure that the employee becomes a member
of a Mandatory Provident Fund (MPF) scheme. An employer who fails to comply with such a requirement may face a fine and imprisonment.
The MPFSO provides that an employer who is employing a relevant employee must, for each contribution period, from the employer's
own funds, contribute to the relevant MPF scheme the amount determined in accordance with the MPFSO.
Pursuant
to
Employees' Compensation Ordinance
(Chapter 282 of the Laws of Hong Kong) ("ECO"), which came into full effect
in Hong Kong on December 1, 1953, all employers are required to take out insurance policies to cover their liabilities under the ECO
and at common law for injuries at work in respect of all of their employees. An employer failing to do so may be liable to a fine and
imprisonment.
Pursuant
to
Minimum Wage Ordinance
(Chapter 608 of the Laws of Hong Kong) ("MWO"), which came into full effect in Hong Kong
on May 1, 2011, an employee is entitled to be paid wages no less than the statutory minimum wage rate during the wage period. With effect
from May 1, 2019, the statutory minimum hourly wage rate is HK$37.5. Failure to comply with MWO constitutes an offence under EO.
Cayman
Islands Data Protection
We
have certain duties under the Data Protection Act (as revised) of the Cayman Islands, or the DPA, based on internationally accepted principles
of data privacy.
Privacy
Notice
This
privacy notice puts our shareholders on notice that through your investment into us you will provide us with certain personal information
which constitutes personal data within the meaning of the DPA, or personal data.
Investor
Data
We
will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could
be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the
extent legitimately required to conduct our activities of on an ongoing basis or to comply with legal and regulatory obligations to which
we are subject. We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical
and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data
and against the accidental loss, destruction or damage to the personal data.
In
our use of this personal data, we will be characterized as a "data controller" for the purposes of the DPA, while our affiliates
and service providers who may receive this personal data from us in the conduct of our activities may either act as our "data processors"
for the purposes of the DPA or may process personal information for their own lawful purposes in connection with services provided to
us.
We
may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating
to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact
details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence
records, passport number, bank account details, source of funds details and details relating to the shareholder's investment activity.
56
Who this Affects
If
you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements
such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in
relation your investment in us, this will be relevant for those individuals and you should transit the content of this Privacy Notice
to such individuals or otherwise advise them of its content.
How We May Use a Shareholder's Personal
Data
We
may, as the data controller, collect, store and use personal data for lawful purposes, including, in particular: (i) where this is necessary
for the performance of our rights and obligations under any agreements; (ii) where this is necessary for compliance with a legal and
regulatory obligation to which we are or may be subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or
(iii) where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental
rights or freedoms.
Should
we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will
contact you.
Why We May Transfer Your Personal
Data
In
certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the
relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange
this information with foreign authorities, including tax authorities.
We
anticipate disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain
entities located outside the US, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.
The
Data Protection Measures We Take
Any
transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance
with the requirements of the DPA.
We
and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures
designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage
to, personal data.
We
shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms
or those data subjects to whom the relevant personal data relates.
Contacting
the Company
For
further information on the collection, use, disclosure, transfer or processing of your personal data or the exercise of any of the rights
listed above, please contact us through our website at www. i-l-a-g.com or through phone number +852 2481 7938.
57
C.
Organizational structure
Below
is the Company's corporate structure chart as of the date of this report.
D.
Property, Plants and Equipment
Our
headquarter and sales office in Hong Kong are operating in an approximately 300m
2
office located in an industrial building.
The office is leased from a related company, Kambo Security Products Limited. Kambo Security Products Limited is owned by Mr. Yu Bong
Lau (Bong), Mr. Bun Lau, Mr. Wynn Hui and Mr. Po Ching Hui, brother of Mr. Wynn Hui. The rent paid to Kambo Security Products Limited
is determined according to the market value of similar property quotes from a Hong Kong property agent. We most recently renewed the
lease of the property starting from January 1, 2024 for a term of one year, with annual rent of HK$576,000 (approximately US$74,000).
Our
manufacturing facility is operated under our WFOE named Dongguan Xingfa Hardware Products Co., Ltd. ("Xingfa"), which is
equipped with different types of machines in a 17,560 m
2
production facility which is able to produce about 6,000,000
locksets per annum. Xingfa leases 15,810 m
2
of land use rights for our factory from March 1, 2024 to February 28, 2026
from Dongguan Shatian Town Hengliu Equity Economic Union, a third party, with annual rent of approximately RMB 3,748,000
(approximately US$529,000).
58
We
have acquired an electroplating production line located at 5/F., Tower A, Shun Hang Environment Projection Industrial Park, Shatian Town,
Dongguan, Guangdong. The lease for the factory that the production line is from April 1, 2023 to September 30, 2026 with Dongguan
Shun Hang Metal Productions Company Limited, a third party, with annual rent of approximately RMB 660,000 (approximately US$93,000).
Currently,
we mainly lease the following properties to conduct our business:
Property
    Address
Lessor
Annual
    Rent
Lease
Expiration
Date
Purposes/Use
Unit
    2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New Territories, Hong Kong
Kambo
    Security Products Limited
Approx.
    $74,000
December
    31, 2024
Head
    Quarter Office
No.
    43, Min Tian Main Street, Shatian Town, Dongguan, Guangdong, PRC
Dongguan
    Shatian Town Hengliu Equity Economic Union
Approx.
    $529,000
February
    28, 2026
Production
    Plant and Office
5/F.,
    Tower A, Shun Hang Environment Projection Industrial Park, Shatian Twon, Dongguan, Guangdong, PRC
Dongguan
    Shun Hang Metal Productions Company Limited
Approx.
    $93,000
September
    30, 2026
Production
    Plant
We
believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
ITEM
4A.
UNRESOLVED STAFF COMMENTS
Not
Applicable
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information—D.
Risk Factors" or in other parts of this annual report on Form 20-F.
5A. Operating Results
Overview
Headquartered
in Hong Kong, we manufacture and sell high quality mechanical locksets to customers mainly in the United States (US) and Canada and have
continued to diversify and refine our product offerings in the past 40 years to meet our customers' needs. We believe our wholly
owned subsidiary Xingfa is one of the pioneers of mechanical lockset manufacturing in China. Since inception, to cope with our development
and increase customer satisfaction in quality, we keep investing in self-designed automated product lines, new craftsmanship and developing
new products including smart locks. In order to obtain the confidence of our customers, Xingfa has obtained the ISO9001quality assurance
certificate.
Starting
in 2000, we offer products that comply with the American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed
by the Builders Hardware Manufacturing Association (BHMA) for ANSI. Our focus in producing mechanical locksets - including locksets for
outdoors (such as main entrances and gates) and indoors which raised our competitiveness.
To maintain our growth, our products are beyond a simple lockset for security purposes, we offer a wide range of Original Design Manufacturer
("ODM") door locksets to various customer segments from "Premium Series" to "Economy-oriented Series"
with classic to contemporary looks, functions and colors.
59
Currently,
approximately 99% of our revenues are from products sold to the US market, and the remaining products are sold to Canadian market. We
build our distribution network by working together with our large and small business partners in different geographic areas to sell our
products. More information about geographical penetration of our revenues can be found in "Segment reporting in Note 2 of Notes
to the Consolidated Financial Statements".
For
40 years, we manufacture and sell high quality mechanical locksets and continue to grow and increase our product offerings. The predecessor
of Hing Fat commenced our business of selling door locksets in 1981. In 1983, we started processing door locksets to fulfill orders from
US customers with imported materials at a small manufacturing workshop in China which becomes our current manufacturing subsidiary, Xingfa.
Since then, our mission is to "produce high quality lockset products at affordable prices."
We
sell our products mainly to the US and Canada ("North America") through one of our Hong Kong registered subsidiaries, Kambo
Locksets. Another Hong Kong registered subsidiary, Kambo Hardware, targets and distributes locksets and related hardware to countries
other than the US and Canada. And it mainly serves our customers in Asian countries. We will further illustrate our development and group
structure in the following paragraphs.
In
1993, as the laws and regulations for processing with imported materials entity had changed in China, we established our wholly foreign
owned entity (WFOE) subsidiary, Dongguan Xingfa Hardware Products Limited ("Xingfa") located in Shatian County, Dongguan
City, Guangdong Province of PRC. Xingfa is equipped with various types of machines such as die casting machines, furnace, polishing machines
and other machines for metal processing in a 17,560 m
2
manufacturing facility. In light of excess production capacity due
to current economic conditions, Xingfa has subleased one plant building of approximately 4,300 m
2
to reduce our operating
costs.
●
We
                                            restructured our corporate organization in 2009 and incorporated Hing Fat Industrial Limited under
                                            Hong Kong law ("Hing Fat"), as the holding company of Xingfa to manage the door
                                            lockset manufacturing activities of Xingfa and to conduct research and development.
●
On
                                            March 26, 2014, Kambo Locksets Limited was incorporated
                                            under Hong Kong law. Kambo Locksets is a trading company focusing on marketing and sales
                                            of our products in North America market and became our subsidiary as a result of reorganization.
●
On
                                            February 25, 2015, Kambo Hardware Limited was incorporated under Hong Kong law. Its primary
                                            business is to sell our products to markets outside of the North America.
●
Bamberg
                                            (HK) Limited ("Bamberg") was incorporated on June 24, 2016 under Hong Kong law.
                                            Through Bamberg, we started marketing our products under our own brand "Bamberg"
                                            to establish and focus on internet sales channels, such as Amazon.com
●
On
                                            July 17, 2019, Intelligent Living Application Group Inc. was established as a holding company
                                            and it is a Cayman Islands exempted company limited by shares and were incorporated as an
                                            offshore holding company for listing purposes and for further expansion flexibility. Intelligent
                                            Living Application Group Inc. owns 100% of the equity interest in Intelligent Living Application
                                            Group Limited, which was incorporated on March 19, 2014 under the laws of British Virgin
                                            Islands.
●
On
                                            July 17, 2019, the Company issued 500,000,000 ordinary shares to its shareholders. On August
                                            14, 2019, these shareholders surrendered an aggregate of 499,990,000 ordinary shares to the
                                            Company at no consideration. The transaction is considered as a recapitalization prior to
                                            the Company's initial public offering.
60
●
A
                                            reorganization of the Company's legal entity structure was completed in April 2020.
                                            The reorganization involved the incorporation of ILAG in July 2019 and execution of the Share
                                            Exchange Agreement between ILAG and ILA BVI in April 2020 (the "Share Exchange Agreement")
                                            whereby ILAG took control of ILA BVI and its wholly owned subsidiaries by acquiring all the
                                            outstanding shares of ILA BVI with ordinary shares of ILAG. Pursuant to the Share Exchange
                                            Agreement, ILAG and ILA BVI exchanged 2,550,000 shares of ILA BVI for 12,990,000 ordinary
                                            shares of ILAG. This transaction was treated as a recapitalization of the Company and the
                                            financial statements give retroactive effect to this transaction.
●
On
                                            July 16, 2021, the Board of Directors and Shareholders of the Company approved the Amended
                                            and Restated Memorandum and Articles of Association of the Company and our authorized share
                                            capital currently is $50,000 divided into 500,000,000 shares, comprising of (i) 450,000,000
                                            ordinary shares, par value of $0.0001 each; and (ii) 50,000,000 preferred shares, par value
                                            of $0.0001 each. The Company originally issued 500,000,000 ordinary shares on July 17, 2019.
                                            On August 14, 2019, all of existing shareholders of the Company agreed to surrender an aggregate
                                            of 499,990,000 ordinary shares to the Company at no consideration.
●
Through
                                            Intelligent Living Application Group Limited in BVI, we own 100% of the equity interest in
                                            Hing Fat, Kambo Locksets, Kambo Hardware and Bamberg, and through Hing Fat, we own 100% of
                                            the equity interest in Xingfa.
Until 2018, we have maintained a profitable
business with steady growth in our revenues and earnings. In 2018, we experienced the sudden impact caused by the tariff war between
the US and China that resulted in a decrease in or suspension of orders in late 2018 and first half of 2019. Our sales orders from our
customers in the US have stabilized and recovered since the middle of 2019 as the market digested information about the tariff war. However,
our factory was temporarily closed in early 2020 and the supply chain and logistic for raw materials and delivery of finished products
were disrupted because of COVID-19. In 2022, there were outbreaks of the Omicron variant of the COVID-19 in Hong Kong and many other
cities in China, including Shenzhen, Shanghai, Guangzhou, Taiyuan, Changchun as well as Dongguan city where Xingfa is located, and travel
restrictions, mandatory COVID-19 tests, quarantine requirements and/or temporary closure of office buildings and facilities were imposed
by local governments. China eased the strict lockdown procedures in early December 2022, which led to surge in COVID infections in December
2022 and January 2023 and caused disruption our business operations as our migrant workers from other provinces in the manufacturing
factory had to leave and go home early for the new year holidays and did not come back until March 2023. Our recovery from COVID-19 pandemic
was negatively impacted high interest rate which has caused a slowdown in real estate market in US, from which we generate most of our
revenues. Our revenues were approximately $6.4 million and $12.2 million for the years ended December 31, 2023 and 2022, respectively.
We
deployed alternative pricing strategies to alleviate the negative impact from COVID-19 and higher tariffs as we raised our unit
product selling price in July 2021. Due to the price increase, slow recovery from COVID-19 and the high interest rate in the US,
our revenues decreased by approximately $5.7 million or 47% for the year ended December 31, 2023 comparing to the same period of
2022. Our gross margin decreased to 9.8% for the year ended December 31, 2023 from 18.1% of the same period in 2022. If the idle
capacity impact was removed, our profit margin decreased to 15.2% in 2023. The
decrease
in margin during 2023 was
mainly due to the
increase of labor cost
s and raw materials such as zinc alloy and iron.
During 2021, three major
shareholders and executive directors of the Company forgave and waived their receivable owed by the subsidiaries of the Company for
$717,949 ($153,846 in 2020) which have been recognized as shareholders contribution. We renegotiated bank borrowings with lower
interest rate to sustain our operation cash needs. Our bank borrowing outstanding as of December 31, 2023 was approximately $0.1
million as compared to approximately $0.6 million as of December 31, 2022. Selling and marketing expenses decreased to $59,841 in
2023 from $105,473 for the same period in 2022, Our general and administrative expenses increased to approximately $4.4 million for
the year ended December 31, 2023 from approximately $4.2 million for the same period of 2022 because of increase in compensation to
directors and executive officers and professional fees as a public company. Finance costs were decreased to $26,935 for the year
ended December 31, 2023 from $147,588 for the same period in 2022. The combination of all above factors, along with decrease in
other income and increase of provision for income tax, have resulted in an increase of our net loss of $1,845,615 to $3,501,518 for
the year ended December 31, 2023 from $1,655,903 for the year ended December 31, 2022.
61
Currently,
our customer and geographical market concentration are high. To mitigate the issues of concentration of customers and geographical markets,
we are contacting property developers and hotel/service apartment developers in China and South-east Asia in an attempt to diversify
our customer base and reduce our market concentration. The following table shows revenues from customers that accounted for more than
10% of our total operating revenues:
For the years ended December
    31,
2023
2022
2021
Customer A
$
1,786,656
27.5
%
$
5,654,248
46.5
%
$
6,833,866
54.5
%
Customer B
888,595
13.7
%
1,871,116
15.4
%
1,588,156
12.7
%
Customer C
1,723,506
26.5
%
1,586,681
13.1
%
1,310,376
10.5
%
Customer D
1,332,746
20.5
%
1,306,755
10.7
%
—
—
%
$
5,731,503
88.2
%
$
10,418,800
85.7
%
$
9,732,398
77.7
%
The
following table sets forth the Company's revenues from customers by geographical areas based on the location of the customers:
For the years ended December
    31,
2023
2022
2021
US
$
6,364,773
$
11,717,347
$
12,233,382
Canada
78,584
440,755
310,174
Total
$
6,443,357
$
12,158,102
$
12,543,556
Our
gross margin was approximately 6.8% due to the tariff war between US and China started in 2018. To mitigate the impact of tariff
war, we have launched a series of procurement actions to reduce the costs, and we managed to gradually improve our gross margins,
which was 9.8% for 2023, 18.1% for 2022 and 10.5% for 2021. In addition, once market demands resume to normal along with our
continuous efforts in expanding product selections and varieties, better procurement of raw materials, ability to improve production
efficiency, attracting new customers and initiatives to reduce our overhead costs, we hope to return to profitability. As the permit
for electro-plating production is more stringently regulated in China, in 2022, we acquired an electro-plating production line in an
industrial park near our Xingfa factory to reduce outsourced electro-plating costs. However, the interest increment cycle and
delayed economic recovery have made our customers more cautious in placing more orders. As a result, our gross margin was negatively
affected by amortization of idle capacity. To increase the utilization rate, the management is developing electro-plating business
to provide services to third parties with our newly acquired plant and also continued the development of new smart lock products for
mainland China, Cambodia and Hong Kong markets which expect to launch by the end of 2024.
Key Factors Affecting Our Results
We
believe the key factors affecting our financial condition and results of operations include the followings:
●
Our
                                            Relationship with Customers.
We rely heavily on customers' demand to sell our products.
                                            Our four largest customers accounted for 88.2% and 85.7% for the years ended December 31,
                                            2023 and 2022, respectively. In addition, our five largest customers in aggregate accounted
                                            for approximately 92% and 91% for the years ended December 31, 2023 and 2022, respectively.
                                            Our strategy is to attempt to strengthen our direct relationships with these customers to
                                            secure and expand the sales orders from these customers in the future.
●
Cost
                                            of Goods Sold.
Our products are produced in our manufacturing plant Xingfa in Dongguan,
                                            Guangdong Province in the PRC. Cost of raw materials, labor costs and manufacturing overhead
                                            incurred will affect our product cost, and we generally do not have long-term contractual
                                            arrangements with our suppliers. We typically maintain good relationships with our suppliers.
                                            Increases to raw material prices, minimum wage requirements of our staff in the PRC and consumables
                                            could negatively affect our gross profit margins and results of operations to the extent
                                            that we are unable to pass these costs on to our customers. If we experience shortages in
                                            the supply of certain raw materials or if we get inferior quality raw materials, we may not
                                            be able to find or develop alternative supply sources, which could result in delays, reductions
                                            in manufacturing and product shipments and could adversely impact the quality of our products,
                                            all of which could adversely affect our results of operations and financial condition. We
                                            have not experienced significant shortages of raw materials in the past, and we will continue
                                            to monitor the fluctuation of our costs and our relationship with our suppliers.
62
●
More
                                            Stringent Environmental and OSH Protection Requirements in the PRC
. Environmental and
                                            OSH protection authorities impose various administrative penalties on persons or enterprises
                                            in violation of the Environmental Protection Law and Occupational Safety and Health Law of
                                            the PRC and Xingfa is subject to such laws and regulations. Such penalties include warnings,
                                            fines, orders to rectify within the prescribed period, orders to cease construction, orders
                                            to restrict or suspend production, orders to make recovery, orders to disclose relevant information
                                            or make an announcement, imposition of administrative action against relevant responsible
                                            persons, and orders to shut down facility. Any person or entity that pollutes the environment
                                            resulting in damage could also be held liable under the Tort Law of the PRC. In addition,
                                            environmental organizations may also bring lawsuits against any entity that discharges pollutants
                                            detrimental to the public welfare. We engaged an independent laboratory to conduct review
                                            of the compliance with environmental laws and regulations by Xingfa. We believe Xingfa has
                                            established sufficient measures and systems to implement and comply with the requirements
                                            of such laws and regulations. We and Xingfa may incur additional costs to ensure compliance
                                            with environmental and worker safety and health protection requirements in the PRC. To cope
                                            with the green requirements as well as our mission of ESQ achievement, we decided to enhance
                                            our production line.
●
Relations
                                            Between the US and China
. At various times during recent years, the US and China have
                                            had significant disagreements over political and economic issues. Controversies may arise
                                            in the future between these two countries. These controversies also could make it more difficult
                                            for us to provide our products to our customers in the US. The international trade policies
                                            of China and the US could adversely affect our business, and the imposition of trade sanctions
                                            and tariffs relating to imports, taxes, import duties and other charges on imports from China,
                                            including those applied specifically to our products, or the imposition of taxes, import
                                            duties or other charges on exports to the U.S. could increase our costs and affect our operating
                                            results negatively. The U.S. government currently has suspended the increases of tariffs
                                            from 7.5% to 25%, pending the results of US and China trade negotiations. Although the U.S.
                                            has started to review and remove the increased tariff previously imposed on certain items
                                            importing from China, which is not related to our products sold to the U.S. Starting in January
                                            2021, we stopped absorbing tariffs cost for our U.S. customers and U.S. might further increase the tariffs that will affecting our products.
●
Competition:
In order to continue to compete effectively, we must maintain our reputation for innovation
                                            and high-quality products and be flexible and innovative in responding to rapidly changing
                                            market demands. The number of our direct competitors and the intensity of competition may
                                            increase as we expand into other product lines such as smart locksets. Our competitors may
                                            enter into business combinations or alliances that strengthen their competitive positions
                                            or prevent us from taking advantage of such combinations or alliances. Our competitors also
                                            may be able to respond more quickly and effectively than we can to new or changing opportunities,
                                            standards or consumer preferences. Our results of operations and market position may be adversely
                                            impacted by our competitors and the competitive pressures in the lockset industries.
Key Operating Metrics
Our
management regularly reviews a number of metrics to evaluate our business, measure our performance, identify trends, formulate financial
projections and make strategic decisions. The main metrics we consider are the results for the years ended December 31, 2023, 2022 and
2021, as set forth in the table below.
For the years ended December 31,
2023
2022
2021
Revenues
$
6,443,357
$
12,158,102
$
12,543,556
Gross margin
9.8
%
18.1
%
10.5
%
Net loss
$
(3,501,518
)
$
(1,655,903
)
$
(1,386,515
)
Inventory turnover (in days)
294
174
153
Accounts receivable turnover (in days)
58
41
27
We
project our revenue based on purchase orders from our customers, the current principal driver of our business. Then, we will
estimate the expected gross profit based on our in-house standard material and cost table in order to determine what our gross
profit percentage should be. If there will be a downtrend trend of revenue, we will try to lower our costs such as raw materials and
direct labor. Normally, when there is no disruption on logistics such as the ones caused by COVID-19. Raw materials and packaging
consumables will be kept at a safe level that may sustain potential production needs for about two months. Potential production
needs include quantities from purchase orders received and projected sales. Taking into account production time, inventory turnover
and accounts receivable turnover and our cash position, we then project our working capital needs and also identify potential sales
sources.
63
When
we see declining trends from purchase orders received, we will start reviewing our material costs and expenses in order to mitigate
the impact to our gross margin. Starting in 2018, we saw the number of purchase orders from customers declined because of the
US-China tariff war. Before getting the final determination of the tariffs, we suffered a decrease of gross profit margin to 6.8% in
2018. In order to maintain product quality, we do not pay our labor based on production quantity. As a socially responsible
organization, we did not lay off employees before the expiration of their employment contacts, but we reduced recruiting of
unskilled labor since the beginning of 2019. Also, we reviewed the production processes of Xingfa and were able to decrease our raw
material costs and waste to the extent that product quality could be maintained. In 2021, outbreaks of various variants of COVID-19
further created negative impacts on global logistics. The number of purchase orders from our customers for 2023 were lower than
those in fiscal year 2022 because of interest rate increase in the US. Units of product shipped during 2023 were
approximately 1.3 million units (including approximately 0.1 million units of spare parts) comparing to approximately 2.4 million
units (including approximately 0.2 million units of spare parts) in 2022 and approximately 2.8 million units (including
approximately 0.2 million units of spare parts) in 2021. Because of product mix shifted and change of combination of metal raw
materials, our gross margin was down to 9.8% (if the idle capacity impact was removed, our profit margin decreased to 15.2%) in 2023
from 18.1% in 2022 (10.5% in 2021). In order to enhance gross margin, the management raised product unit sales price and replace
brass with stainless steel. In addition, we have not absorbed certain increased tariff cost for our customers since January
2022.
Our
inventory turnover days increased to approximately 294 days for year ended December 31, 2023, from 174 days for the year ended
December 31, 2022. This was caused mainly by impact fewer purchase orders from our customers due to increase of interest rate
and slower than expected recovery from COVID-19. Because our spare parts are universally applicable for all models of our product
and, in order to ensure utilization of our labor, we have stocked up and meet some short notice purchase orders from potential new
customers.
Starting
in 2020, we are studying and hope to improve our sales mix, namely more ODM and more self-branded products, geographic market mix,
namely the US, South-east Asia and China, cost structure and procurement options in order to further optimize our profit
performance. However, as the combined effect of slow recovery post COVID-19 and the amortization of our electroplating production
line, we have incurred a lower gross margin during the fiscal year 2023. We continue to promote higher value products to our
customers in 2023 and developing smart lock product series. Despite our efforts to optimize our product mix and cost
structure, purchase orders from our customers were slowed
down as the reasons discussed above. As we have to keep our factory operating and utilization of labor, we have stocked up to achieve the expected short delivery
time to meet potential new customers demand, therefore, our inventory turnover in days was negatively affected. We believe that we can
further reduce our cost of raw materials with new processing techniques, to maintain volume rebates of raw materials and enhance our
gross margin as we optimize our product-mix to focus our marketing efforts on higher margin products and new products. To better
manage our gross margin in light of rising cost of raw materials, we leverage extensive product quality testing to identify
alternative raw materials mix that is designed to lower our production costs. Since the second half of 2021, we have been using
stainless steel to substitute brass.
Results of Operations
The
following table summarizes our consolidated statements of operations for the periods indicated. This information should be read together
with our consolidated financial statements and related notes included elsewhere in this report. The operating results in any period are
not necessarily of the results that may be expected for any future period.
64
For the years ended December 31, 2023
and 2022
For the years ended
December 31,
Change
2023
2022
Change
%
USD
USD
USD
Selected Consolidated Statements of Operations and Comprehensive Loss Data:
Revenues
$
6,443,357
$
12,158,102
$
(5,714,745
)
(47.0
)%
Cost of goods sold
(5,464,591
)
(9,961,988
)
4,497,397
(45.1
)%
Cost of goods sold – idle capacity
(345,424
)
—
—
—
%
Gross profit
633,342
2,196,114
(1,562,772
)
(71.2
)%
Selling and marketing expenses
(59,841
)
(105,473
)
45,632
(43.3
)%
General and administrative expenses
(4,440,314
)
(4,208,197
)
(232,117
)
5.5
%
Finance costs
(26,935
)
(147,588
)
120,653
(81.7
)%
Loss from operations
(3,893,748
)
(2,265,144
)
(1,628,604
)
71.9
%
Total other income, net
448,467
609,241
(160,774
)
(26.4
)%
Loss before provision for income taxes
(3,445,281
)
(1,655,903
)
(1,789,378
)
108.1
%
Provision for income taxes
(56,237
)
—
(56,237
)
—
%
Net loss
$
(3,501,518
)
$
(1,655,903
)
$
(1,845,615
)
111.5
%
Loss per share - basic and diluted
$
(0.19
)
$
(0.11
)
$
(0.08
)
72.7
%
Revenues
Our
revenues from sales of door locksets decreased by $5,714,745, or 47.0% for the year ended December 31, 2023 to $6,443,357 from $12,158,102
for the year ended December 31, 2022. The decrease was mainly due to decrease in units sold in 2023. Our total number of products sold
was approximately 1.3 million units (including approximately 0.1 million units of spare parts) for the year ended December 31, 2023 comparing
to 2.4 million units (including approximately 0.2 million units of spare parts) for the year ended December 31, 2022.
Cost of Goods Sold
Cost
of goods sold was $5,464,591 for the year ended December 31, 2023 as compared to $9,961,988 for the same period of 2022. Cost of goods
sold was 84.8% and 81.9% of revenues for the year ended December 31, 2023 and 2022, respectively. The increase in cost of goods sold
as a percentage of revenue was mainly caused by the addition of new machinery along with revamped production procedures, increase of
labor and decrease of sales due to weak demand in our major market.
Cost
of goods sold includes the cost of raw materials (mainly copper, stainless steel, iron and zinc alloy), direct labor (including wages
and social security contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and taxes.
As a small business with limited resources, we currently lack the ability to hedge our raw materials position and we monitor raw material
price trends closely to manage our production needs.
Cost of goods sold – idle capacity
Idle
capacity consists of direct production costs in excess of charges allocated to the Company's finished goods in production. Such
costs relate primarily to depreciation expense related to the Company's electroplating equipment that cannot be directly attributable
to the production process. Idle capacity expenses amounted to $345,424 and nil for the years ended December 31, 2023 and 2022, respectively.
Gross
Profit
Gross
profit was $633,342 for the year ended December 31, 2023, a decrease of $1,562,772, or 71.2% from $2,196,114 for the same period of 2022.
Gross margin was 9.8% for the year ended December 31, 2023, decrease from 18.1% for the same period of 2022 as a result of depreciation expense of
new machinery, increase in direct labor cost and weak demand of our major market in the US, during the year ended December 31, 2023.
65
We
believe that we can enhance our gross margin as we are researching new processing procedures to use durable but lower cost materials.
Selling and marketing expenses
Major
components of selling and marketing expenses are transportation, custom declarations, sales commissions. Selling and marketing expenses
decreased by $45,632, or 43.3% to $59,841 for the year ended December 31, 2023 from $105,473 for the year ended December 31, 2022. The
decrease was due mainly to reduction in freight and transportation fees.
General and Administrative Expenses
General
and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives
as well as legal and professional fees, depreciation and amortization of non-production property and equipment. General and administrative
expenses increased by $232,117, or 5.5%, to $4,440,314 for the year ended December 31, 2023 from $4,208,197 for the year ended December
31, 2022. This increase was due mainly to additional amortization on leasehold improvement and stock options granted to officers and employees
of the company under the Company's 2022 Omnibus Equity Plan (the "Equity Plan").
Finance Costs
Finance
costs decreased by $120,653, or 81.7%, to $26,935 for the year ended December 31, 2023 from $147,588 for the year ended December 31,
2022. The decrease was mainly due to reduce in interest payment for a short-term loan to a third party during the year ended
December 31, 2023. During the years ended December 31, 2023 and 2022, interest expense related to bank borrowings was $18,859 and
$26,836, respectively.
Provision for Income Taxes
Provision
for income tax was $56,237 in the fiscal year of 2023, an increase of $56,237 from $nil for fiscal year of 2022.
Our
PRC entity in 2023 and 2022 was subject to the statutory PRC enterprise income tax rate of 25.0%. Our subsidiaries in Hong Kong are
subject to Hong Kong taxation on income derived from their activities conducted in Hong Kong at a rate of 16.5%.
Net loss and Loss per Share
Net
loss increased $1,845,615 to $3,501,518 for the year ended December 31, 2023 from $1,655,903 for the year ended December 31, 2022.
66
For
the years ended December 31, 2022 and 2021
For the years ended
December 31,
Change
2022
2021
Change
%
USD
USD
USD
Selected Consolidated Statements of Operations and Comprehensive Loss Data:
Revenues
$
12,158,102
$
12,543,556
$
(385,454
)
(3.1
)%
Cost of goods sold
(9,961,988
)
(11,231,253
)
1,269,265
(11.3
)%
Gross profit
2,196,114
1,312,303
883,811
67.3
%
Selling and marketing expenses
(105,473
)
(150,152
)
44,679
(29.8
)%
General and administrative expenses
(4,208,197
)
(2,902,040
)
(1,306,157
)
45.0
%
Finance costs
(147,588
)
(57,774
)
(89,814
)
155.5
%
Loss from operations
(2,265,144
)
(1,797,663
)
(467,481
)
26.0
%
Total other income, net
609,241
411,148
198,093
48.2
%
Loss before provision for income taxes
(1,655,903
)
(1,386,515
)
(269,388
)
19.4
%
Provision for income taxes
—
—
—
—
%
Net loss
$
(1,655,903
)
$
(1,386,515
)
$
(269,388
)
19.4
%
Loss per share - basic and diluted
$
(0.11
)
$
(0.11
)
$
—
—
%
Revenues
Our
revenues from sales of door locksets slightly decreased by $385,454, or 3.1% for the year ended December 31, 2022 to $12,158,102 from
$12,543,556 for the year ended December 31, 2021. The decrease was mainly due to decrease in units sold in 2022 as we raise the prices
for our products. Our total number of products sold was approximately 2.4 million units (including approximately 0.2 million units of
spare parts) for the year ended December 31, 2022 comparing to 2.8 million units (including approximately 0.2 million units of spare
parts) for the year ended December 31, 2021.
Cost of Goods Sold and Gross Profit
Our
cost of goods sold includes cost of raw materials (such as copper, iron and zinc alloy), direct labor (including wages and social security
contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and other taxes. As a small business
with limited resources, we currently don't have the ability to hedge our raw materials position, and we must monitor raw material
price trends closely to manage our production needs.
Cost
of goods sold was 81.9% and 89.5% of revenues for the years ended December 31, 2022 and 2021 respectively. The 11.3% decrease was mainly
caused by new combination of meatal raw materials since the 2nd half of 2021.
As
a result for the reasons discussed above, our gross margin increased to 18.1% in 2022 from 10.5% in 2021. The management's actions
taken to further lower our cost of goods sold even to offset external factors that caused increase of costs mainly due to COVID-19.
Our
gross margin has been significantly impacted by the trade war that started in 2018. We believe that we can further reduce our cost of
raw materials as we negotiate for volume rebates and enhance our gross margin as we optimize our product-mix to focus our marketing efforts
on higher margin products and COVID-19 is gradually under control in the U.S. and globally. In order to enhance gross margin level, the
management raised product unit sales price since second half of 2021. In addition, we have decided that we would not absorb certain increased
tariff cost for our customers starting in January 2022.
Selling and marketing expenses
Major
components of selling and marketing expenses are transportation, custom declarations, sales commissions. Selling and marketing expenses
decreased by $44,679, or 29.8% to $105,473 for the year ended December 31, 2022 from $150,152 for the year ended December 31, 2021. The
decrease was due mainly to reduction in business travelling and sales commissions.
67
General and Administrative Expenses
General
and administrative expenses consist primarily of personnel costs for our accounting and administrative support personnel and executives
as well as legal and professional fees, depreciation and amortization of non-production property and equipment. General and administrative
expenses increased by $1,306,157, or 45.0%, to $4,208,197 for the year ended December 31, 2022 from $2,902,040 for the year ended December
31, 2021. This increase was due mainly to additional professional fees and depreciation and amortization of equipment.
Finance Costs
Finance
costs increased $89,814, or 155.5%, to $147,588 for the year ended December 31, 2022 from $57,774 for the year ended December 31, 2021.
The increase was mainly due to interest from short-term loan of $112,142 in year 2022. Also, the increased cost was partially offset
by decrease in borrowing interests. During the years ended December 31, 2022 and 2021, interest expense related to bank borrowings was
$26,836 and $48,910, respectively.
Loss before Provision for Income Taxes
and Loss per Share
Loss
before provision for income taxes increased $269,388 to $1,655,903 for the year ended December 31, 2022 from $1,386,515 for the years
ended December 31, 2021.
5B. Liquidity and Capital Resources
Liquidity and Capital Resources
We
are a holding company incorporated in the Cayman Islands. We conduct our operations primarily through our subsidiaries in Hong Kong and
China. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our subsidiaries incur debt on their
behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, Xingfa is
permitted to pay dividends in accordance with PRC accounting standards and regulations. Under PRC law, Xingfa is required to set aside
at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of
its registered capital. Additionally, Xingfa may allocate a portion of its after-tax profits based on PRC accounting standards to its
enterprise expansion fund and staff bonus and welfare funds, at its discretion. Xingfa may also allocate a portion of its after-tax profits
based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary
funds are not distributable as cash dividends. Under existing PRC foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies
without prior SAFE approval as long as certain routine procedural requirements are fulfilled. However, capital account transactions,
which include foreign direct investment and loans, must be approved by and/or registered with SAFE and its local branches.
Our
cost structure is relatively fixed and our working capital requirements are generally influenced by our order backlog. We need substantial
operating funds to pay for raw materials; maintain an appropriate level of work-in-process inventory; and keep the production facility
open. To support our working capital needs, we maintain a credit facility with the Bank of China (Hong Kong) Limited for approximately
$897,000 since 2021 compared to approximately $769,000 in 2020, which is guaranteed by our directors and their personal properties. In 2021,
a shareholder and director forgave an advance of $717,948 ($153,846 in 2020) to the Company and treated as a shareholder contribution.
Our
working capital was $10,711,197, $14,201,841 and $2,213,523 as of December 31, 2023, 2022 and 2021. Our cash and cash equivalents were
$4,483,730, $9,165,651 and $131,129 as of December 31, 2023, 2022 and 2021, respectively. While our business has been negatively impacted
by the tariffs, COVID-19 and high interest rate in all 2023, 2022 and 2021, we believe we are able to obtain sufficient operating funds from our
existing shareholders, potential investors or extend Hong Kong government guaranteed low interest bank borrowing to operate our business.
On
July 15, 2022, we closed our initial public offering, raising net proceeds of approximately $16.86 million after deducting underwriting
commission and offering expenses. We believe that our current working capital is sufficient to support our operations for the next twelve
months. We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments,
or if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that
our cash requirements exceed the amount of cash, cash equivalents and restricted cash we have on hand at the time, we may seek to issue
equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to
our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants
that would restrict our operations. Our obligation to bear credit risk for certain financing transactions we facilitate may also strain
our operating cash flow. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
68
Cash
Flows
A
summary of the sources and uses of cash and cash equivalents is as follows:
For the years end December 31,
2023
2022
2021
USD
USD
USD
Selected Consolidated Statements of Cash Flows Data:
Net cash (used in) operating activities
$
(3,163,187
)
$
(4,170,876
)
$
(1,038,967
)
Net cash (used in) investing activities
(1,360,274
)
(4,181,724
)
(9,758
)
Net cash provided by (used in) financing activities
(154,976
)
17,397,802
876,334
Effect of exchange rate on cash
(3,484
)
(10,680
)
1,080
Net decrease in cash
(4,681,921
)
9,034,522
(171,311
)
Cash and cash equivalents at beginning of year
9,165,651
131,129
302,440
Cash and cash equivalents at end of year
$
4,483,730
$
9,165,651
$
131,129
Operating Activities
Net
cash used in operating activities was $3,163,187 for the year ended December 31, 2023 and was primarily attributable to (i) the net
loss of $3,501,518; (ii) an increase in inventory of $586,551; (iii) an increase in deposits of $ 71,188; (iv) an decrease in
accounts payable of $67,945; (v) a increase in prepayment of $ 1,412,318; (vi) a decrease in other payables and accruals of $
50,253; (vii) a decrease in advance from customers of $6,364; and being offset by (i) a decrease in account receivables of
$1,119,804; (ii) non-cash item of $693,531 of depreciation and amortization and $667,016 of options issued for equity compensation
plan; (iii) increase in taxes payable of $31,972; (iv) an increase in cash flow by other elements of $20,627.
Net
cash used in operating activities was $4,170,876 for the year ended December 31, 2022 and was primarily attributable to (i) the net loss
of $1,655,903; (ii) a decrease in accounts payable of $1,631,595; (iii) an increase in accounts receivable of $697,873; (iv) a decrease
of the advance from customers of $216,269; (v) an increase in prepayment of $180,974; (vi) a decrease in other payables and accruals
of $960,292; (vii) a decrease in cash flow by other elements of $42,771; and being offset by (i) a decrease in other receivables of $268,621;
(ii) non-cash item of $408,473 including $303,269 of depreciation and amortization, $105,204 of bad-debt being offset; (iii) decrease
in inventory of $535,182; (iv) an increase in cash flow by other elements of $2,525.
Net
cash used in operating activities was $1,038,967 for the year ended December 31, 2021 and was primarily attributable to (i) the net loss
of $1,386,515; (ii) non-cash item of $259,122 of depreciation and amortization; (iii) an increase in accounts receivable of $199,392;
(iv) an increase in inventory of $712,854; (v) an increase in prepayment of $140,151; (vi) an increase in other receivables of $134,161;
(vii) an increase in accounts payable of $530,221; (viii) an increase in other payables and accruals of $545,903; (ix) an increase of
the advance from customers of $222,633, and (x) a decrease in cash flow by other elements of $23,773.
Investing
Activities
Net
cash used in investing activities was $1,360,274 for the year ended December 31, 2023 was primarily attributable to leasehold
improvement and purchase of property and equipment for electroplating production.
Net
cash used in investing activities was $4,181,724 for the year ended December 31, 2022 was primarily attributable to purchase of property
and equipment for electroplating production.
Net
cash used in investing activities was $9,758 for the year ended December 31, 2021 was primarily attributable to purchase of property
and equipment.
Financing
Activities
Net
cash used in financing activities was $154,976 for the year ended December 31, 2023 and was primarily attributable to repayments of bank
borrowings.
69
Net
cash provided by financing activities was $17,397,802 for the year ended December 31, 2022 and was primarily attributable to proceeds
from public offering of $18,048,369; offset by (i) payments of finance lease liability of $8,391, and (ii) repayment of bank borrowings
of $642,176.
Net
cash provided by financing activities was $876,334 for the year ended December 31, 2021 and was primarily attributable to (i) payments
of finance lease liability of $32,954, offset by an increase of bank borrowings of $191,339 and (ii) cash proceeds from shareholder capital
contribution of $717,949.
Capital Expenditures
We
had capital expenditures of $1,360,274 and $4,181,724 for the years ended December 31, 2023 and 2022, respectively. Our capital expenditures
were mainly used for purchases of production equipment and office equipment. We intend to fund our future capital expenditures with lease
financing, if available, proceeds from our offering and other financing alternatives. We will continue to make capital expenditures to
support the growth of our business.
Bank Facility
On
November 3, 2017, Kambo Locksets Limited obtained banking facilities from the Bank of China (Hong Kong) Limited pursuant to which it
may borrow up to HK$ 6.0 million (approximately $0.8 million) for working capital purposes. On June 24, 2021, this banking facilities
was increased to HK$ 7.0 million (approximately $0.9 million). The credit facility bears interest at 5.5% and it is personally guaranteed
by Mr. Wynn Hui and Mr. Bong Lau (both major shareholders and directors of the Company). The credit facility does not have an expiration
date and is collateralized by a property owned by Kambo Security Products Limited, a related party.
Off-Balance Sheet Arrangements
We
have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have
not entered into any derivative contracts that are indexed to our shares and classified as shareholders' equity or that are not
reflected in our consolidated financial statements.
5C. Research and Development, Patents
and Licenses, etc.
See
"Item 4. Information on the Company—B. Business Overview —"Intellectual Property."
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 to December 31, 2023 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
An
accounting estimate is considered critical if it requires assumptions to be made based on assumptions about matters that are highly uncertain
at the time such estimate is made and if different accounting estimates that reasonably could have been used, or changes in the accounting
estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following
accounting estimates involve a higher degree of judgment and complexity in their application of assumptions.
We
prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions.
We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences
and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component
of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
70
Revenue
recognition
The
Company follows FASB ASC 606, Revenue from Contracts with Customers in accounting for its revenues. The core principle of the revenue
standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps
are applied to achieve that core principle:
Step
1: Identify the contract with the customer
Step
2: Identify the performance obligations in the contract
Step
3: Determine the transaction price
Step
4: Allocate the transaction price to the performance obligations in the contract
Step
5: Recognize the allocated revenue when the company satisfies a performance obligation
The
Company derives substantially all of its revenue from product sales, specifically sale of door locksets, locksets and related hardware
to customers. Revenue from product sales is recognized when control passes to the customer, which generally occurs at a point in time
when products are delivered FOB (freight on board). Revenue is recorded net of tariffs, VAT and discounts.
Leases
The
Company follows FASB ASU 2016-02, "Leases" (Topic 842) and measures the lease liability based on the present value of the
lease payments discounted by the relevant borrowing rate and reduces the carrying value of the lease liability for lease payments made.
The
Company accounts for all significant leases as either operating or finance leases. At lease inception, if the lease meets any of the
following five criteria, the Company will classify it as a finance lease: (i) the lease transfers ownership of the underlying asset to
the Company by the end of the lease term, (ii) the lease grants the Company an option to purchase the underlying asset that the lessee
is reasonably certain to exercise, (iii) the lease term is for the major part of the remaining economic life of the underlying asset,
(iv) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected
in the lease payments equals or exceeds substantially all (90% or more) of the fair value of the underlying asset, or (v) 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. Otherwise,
the lease will be treated as an operating lease.
For
leases with a term of 12 months or less, the Company is permitted to and did make an accounting policy election by class of underlying
assets not to recognize lease assets and lease liabilities. During the years ended December 31, 2023 and 2022, the Company recognized
lease expense for such leases on a straight-line basis over the lease term.
Income
taxes
The
Company accounts for income taxes in accordance with FASB ASC Section 740. The Company is subject to the tax laws of the PRC and Hong
Kong (a special administrative region of PRC). The charge for taxation is based on actual results for the year as adjusted for items
that are non-assessable or disallowed; and it is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date. The Company is not currently subject to tax in the Cayman Islands or the British Virgin Islands.
71
Deferred
taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the Company's consolidated financial statements and the corresponding tax basis used
in the computation of assessable tax profit of loss. 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 future taxable income can be utilized with deferred
tax liabilities and/or net operating loss carry forwards. 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 statement of operations, except
when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Net
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 net deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the
relevant taxing 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, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that
has a greater than 50% likelihood of being realized on examination. For tax positions not meeting the "more likely than not"
test, no tax benefit is recorded. Penalties and interest incurred related to uncertain tax positions are classified in income tax expense
in the period incurred. Tax returns filed for the years ended December 31, 2020 to 2023 in the PRC and Hong Kong are subject to examination
by the applicable tax authorities.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6.A. Directors and Executive Officers
The
following table sets forth information regarding our executive officers and directors as of the date of this report.
Directors
    and Executive Officers
Age
Position/Title
Bong Lau (Yu Bong Lau)
46
Chief Executive Officer,
    Chairman of the Board and Director
Frederick Wong (Ching Wan Wong)
56
Chief Financial Officer
Bun Lau (Yu Bun Lau)
44
Chief Operations Officer
    and Director
Wynn Hui (Po Wang Hui)
73
Chief Technical Officer
    and Director
Errol Hui (Shun Hong Hui)
35
Vice President of Engineering
Tony Zhong (Wei Zhong)
41
Vice President of Finance
Monique Ho(1)(2)(3) (Ting Mei Ho)
49
Independent Director
Chun Fai (Kenneth) Liu (1)(2)(3)(4)
35
Independent Director
Carina Chui(1)(2)(3) (Wan Yee Carina Chui)
45
Independent Director
Henry Yeung (Wing Hang Yeung)(5)
40
Independent Director
(1)
Member of audit committee.
(2)
Member of compensation committee.
(3)
Member of nominating and corporate governance committee.
(4)
Mr. Kenneth Liu was appointed as a director on July 4
,
2023 to fill the vacancy created by the resignation of Mr. Jochen Koehler.
(5).
Mr. Yeung was appointed on January 15, 2024.
Bong
Lau,
Chief Executive Office and Chairman of the Board of the Directors of the Company (the "Board")
Mr.
Bong Lau was appointed as a director of the Board on July 17, 2019 and Chairman of the Board on June 1, 2020. Mr. Lau joined the Company
in 1999 and has over 20 years of extensive experience in managing door security hardware businesses. Mr. Lau also works well together
with our large and small partners geographically to build solid distribution networks, implements marketing and business expansion strategies.
He is primarily responsible for the overall sales strategy, distribution management and corporate strategies of the Company. In 1996,
Mr. Lau studied in Civil Engineering at the University of Alberta for 2 years.
72
Frederick
Wong,
Chief Financial Officer
Mr.
Wong was appointed as our Chief Financial Officer on June 1, 2020. He has almost 30 years of experience in accounting, internal control,
financial control and capital markets. Mr. Wong has served as an independent director of Network CN Inc. (OTC PINK: NWCN) since January
1, 2022. He has served as compliance offer for China Finance Investment Holdings Limited (Stock Code: 0875.HK) from November 1, 2018
to May 31, 2020. Mr. Wong has also served as a member of the board of directors for On Real International Holdings Limited (Stock Code:
8245.HK) from March 31, 2016 to April 22, 2022, Top Standard Corp. (Stock Code: 8510.HK) since January 24, 2020, and Prime Intelligence
Solutions Group Limited (Stock Code: 8379.HK) since June 17, 2022. From September 2017 to August 2018, Mr. Wong was the chief financial
officer of O Media Limited, a Macau media company in gaming. He was a director of Network CN, Inc. (stock code: NWCN) in U.S.A. between
September 2015 and July 2017, and the authorized representative and company secretary of China Oil Gangran Energy Group Holdings Limited
(Stock Code: 8132.HK) from December 2015 to November 2016 and continued acting as the authorized representative until January 2017. Mr.
Wong is a CPA of Hong Kong, CPA of Canada, CPA of Australia and fellow member of Hong Kong Institute of Taxation. Mr. Wong received a
Bachelor of Business Administration from the Chinese University of Hong Kong in 1989, a Bachelor or Business from the University of Southern
Queensland, Australia, in 1992 and studied EMBA courses offered by the Troy University (formerly known as Troy State University), Alabama,
U.S. from 1999 to 2000.
Bun
Lau,
Chief Operating Officer and Director
Mr.
Bun Lau was appointed as the Chief Operating Officer of the Company on June 1, 2020. Mr. Bun Lau was a director of the Board from July
17, 2019 to May 24, 2022, and he was appointed as a director of the Board on January 15, 2024. Mr. Lau joined the Company in 2005 and
has over 15 years of working experience in the door security hardware industry. Mr. Bun Lau is the brother of Mr. Bong Lau. Mr. Lau is
primarily responsible for the business development and product sales strategy. He is also responsible for the corporate strategies of
the Company and the overall administrative management process. Prior to joining the Company, he worked at Citic Ka Wah Bank and was responsible
for reviewing credit limits, acceptable levels of risk, terms of payment and enforcement actions with customers from 2003 to 2004. Mr.
Lau graduated from The University of Alberta in Canada majoring in Decision Information System and Management in 2003.
Wynn
Hui,
Chief Technology Officer and Director
Mr.
Hui is one of the founders of the Company and he has been with the Company since 2009. He is also the Managing Director of Xingfa, our
manufacturing factory in China. Wynn has over 50 years' experience in factory production specialized in manufacturing plastic,
metal and electronic products in the security hardware industry.
Errol
Hui,
Vice President of Engineering
Mr.
Hui joined the Company in 2013. Mr. Hui is primarily responsible for the product development, product management and continuous enhancement
of production management. He is also responsible for the corporate strategies of the Company. Mr. Hui graduated from The University of
Manchester in U.K. majoring in Actuarial Science in 2011.
Tony
Zhong,
Vice President of Finance
Mr.
Zhong joined the Company on February 1, 2020. Mr. Zhong has over 10 years of experience in accounting, internal control, financial control,
SEC reporting and capital markets. Since 2011, Mr. Zhong has been the Vice President of Finance of Troops, Inc. (formerly known as SGOCO
Group, Ltd. And NASDAQ: TROO). He was a Financial Manager of China Hydroelectric Corporation, from 2007 to 2011. Mr. Zhong started his
career with KPMG in Beijing from 2005 to 2006. He received a Bachelor of Arts in Finance, Accounting and Management from Nottingham University,
UK in 2005, and a Bachelor of Science in Applied Accounting from Oxford Brooks University, UK in 2015. Mr. Zhong is a Chartered Global
Management Accountant, and was also admitted as a Fellow of the chartered institute of Management Accountants on December 21, 2018. Mr.
Zhong was also admitted as a Fellow of the institute Public Accountant (Australia) and a Fellow of the Institute of Financial Accountants
(UK) on October 22, 2020.
73
Monique
Ho,
Independent Director
Ms.
Ho was appointed as a director of the Company on June 1, 2020. Ms. Ho is a marketing savvy director who has over 20 years of experience
in media. She is the founder and Chief Executive Officer of Toppa Media Savvy Limited (TMS) that is listed on the Stock Exchange of Hong
Kong under OOH Holdings Limited (Stock Code: 8091.HK) since 2018. Ms. Ho is also the co-founder of an online fashion media ztylez.com,
established in 2017. In her early years after graduating with a Bachelor of Science Degree from California State University, Los Angeles
in 1997, Ms. Ho was a junior Marketing Officer at Cable News Network (CNN) in CNN Asia Pacific Headquarter in Hong Kong from 1999 to
2000.
Carina
Chui,
Independent Director
Ms.
Chui was appointed as a director of the Company on June 1, 2020. Ms. Chui has over 16 years of finance and accounting experience from
accounting, auditing and corporate financial management. She has served as the chief financial officer of Numiracle Group Limited since
January 1, 2014. She is a fellow member of the Hong Kong Institute of Certified Public Accountants (HKICPA) since 2013 and The American
Institute of Certified Public Accountants (AICPA) since 2011. She received a Bachelor degree in Economics from University of California,
Los Angeles in 2001 and an MBA from Hong Kong University of Science and Technology in 2014.
Kenneth
Liu,
Independent Director
Mr.
Liu Chun Fai ("Mr. Liu"), was appointed as a director of the Company on June 30, 2023. Mr. Liu has served as Chairman
and Executive Director of China Eco-Farming Limited (HK Stock Exchange Code: 8166) since February 2022. Mr. Liu was the Executive
Director of Inves Tech Holdings Limited (HK Stock Exchange Code: 1087) from August 2020 to April 2022 and a director of Blue Sky
Solar Energy Management Limited from November 2018 to April 2022. Mr. Liu was the Executive Director of CEFC Hong Kong Financial
Investment Company Limited (HK Stock Exchange Code:1520, formally known as Runway Global Holdings Company Limited) from November
2016 to June 2019 and the Manager of FT Corporate Strategy Limited from October 2013 to June 2016. Mr. Liu
studied Administrative Studies at York University, Toronto, Ontario from 2007 to 2011 and he is a member of Chaozhou
Chamber of Commerce.
Henry
Yeung,
Independent Director
Mr.
Yeung was appointed as a director of the Company on January 15, 2024. Mr. Yeung has more than 19 years of management experience. Mr.
Yeung has served as vice chairman and general manager of Jewellery City Group, a retail company of luxury jewelleries and watches, since
2004. Mr. Yeung has also served as the director of Green World Technology Ltd., a company developing environmental protection technologies,
since 2017.
6.B.
Compensation
For
the fiscal years ended December 31, 2023 and 2022, we paid an aggregate of approximately $950,000 and $972,000 in cash to our directors
and executive officers, respectively. For share incentive grants to our officers and directors, see "—Share Incentive Plans." We
have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and
directors.
Our
PRC subsidiary is required by law to make contributions equal to certain percentages of each employee's salary for his or her pension
insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.
74
Employment
Agreements, Director Agreements and Indemnification Agreements
We
have entered into employment agreements with each of our executive officers. Pursuant to these agreements, each of our executive officers
is employed for an initial term of one year, renewable upon mutual agreement of the Company and the executive officer.
The
executive officers are entitled to a fixed salary and to participate in our equity incentive plans, if any and other company benefits,
each as determined by the Board or a committee designated by the Board from time to time.
We
may terminate the executive officer's employment for cause, at any time, without notice or remuneration, for certain acts, such
as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or material breach of any term of
any employment or other services, confidentiality, intellectual property or non-competition agreements with the Company. In such case,
the executive officer will solely be entitled to accrued and unpaid salary through the effective date of such termination, and his/her
right to all other benefits will terminate, except as required by any applicable law. The executive officer is not entitled to severance
payments upon any termination.
The
executive officer may voluntarily terminate his/her employment for any reason and such termination shall take effect 30 days after the
receipt by Company of the notice of termination. Upon the effective date of such termination, the executive officer shall be entitled
to (a) accrued and unpaid salary and vacation through such termination date; and (b) all other compensation and benefits that were vested
through such termination date. In the event the executive officer is terminated without notice, it shall be deemed a termination by the
Company for cause.
Each
of our executive officers has agreed not to use for his/her personal purposes nor divulge, furnish, or make accessible to anyone or use
in any way (other than in the ordinary course of the business of the Company) any confidential or secret information or knowledge of
the Company, whether developed by him/herself or by others.
In
addition, each executive officer has agreed to be bound by non-competition restrictions during the term of his or her employment and
for six months following the last date of employment.
Each
executive officer also has agreed not to (i) solicit or induce, on his/her own behalf or on behalf of any other person or entity, any
employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates; or (ii) solicit or induce,
on his/her own behalf or on behalf of any other person or entity, any customer or prospective customer of the Company or any of their
respective affiliates to reduce its business with the Company or any of its affiliates.
We
have entered into director agreements with each of our independent directors which agreements set forth the terms and provisions of their
engagement.
In
addition, we have entered into indemnification agreements with each of our directors and executive officers that provide such persons
with additional indemnification beyond that provided in our current memorandum and articles of association.
Share
Incentive Plans
The
Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the "Equity
Plan") on October 20, 2022, which was approved at the stockholders' meeting on December 16, 2022. The total aggregate ordinary
shares of the Company authorized for issuance during the term of the Equity Plan is limited to 2,500,000 shares.
As
of April 29, 2024, stock options to purchase 820,000 ordinary shares have been granted and outstanding under the Equity Plan. The following
paragraphs summarize the terms of the Equity Plan:
Administration
.
The Equity Plan requires that a committee of non-employee directors to administer the Equity Plan. Currently, our Compensation Committee,
which we refer here as the Committee, administers the Equity Plan. Among other powers and duties, the Committee determines the employees
who will be eligible to receive awards and establishes the terms and conditions of all awards. Unless prohibited by applicable law or
the applicable rules of a stock exchange, the Committee may delegate its authority and administrative duties under the Equity Plan.
75
Shares
Subject to the Equity Plan
. The shares issuable under the Equity Plan are our ordinary shares that are authorized but unissued
or reacquired ordinary shares, including shares repurchased by the Company as treasury shares. The total aggregate ordinary shares of
the Company authorized for issuance during the term of the Equity Plan is limited to 2,500,000 shares. The Committee must equitably adjust
awards and the number of shares available under the Equity Plan in the event of a recapitalization, stock split, stock dividend, extraordinary
cash dividend, split-up, spin-off, reclassification, combination or other exchange of shares.
Types
of Awards and Eligibility
. The Equity Plan provides for five types of awards and they are: Stock Options, Stock Appreciation
Rights ("SAR"), Unrestricted Stock, Restricted Stock and Restricted Stock Units ("RSU"). The Eligible Persons
under the Equity Plan include Employees, Outside Directors, Consultants and New Hires of the Company or its subsidiaries, as selected
by our Board or the designated committee thereof.
Vesting
and Forfeiture
.
The Committee determines the time and conditions under which the award will vest or the period of time
after which the restriction shall lapse as part of making an award. Vesting or the lapse of the period of restriction may, in the Committee's
discretion, be based solely upon continued employment or service for a specified period of time, or may be based upon the achievement
of specific performance goals (individual, corporation or other basis), or both. Vesting means the time at which an option, SAR or RSU
holder may exercise his or her award at the end of the period of restriction that applies to Restricted Stock. Vesting or lapse provisions
need not be uniform among awards granted at the same time or to persons similarly situated. Vesting and lapse requirements will be set
forth in the applicable award agreement. The Committee, in its discretion, may accelerate vesting of any award at any time. Unless otherwise
determined by the Committee and included in the Participant's Award Agreement, in the event that a Participant's Service
with the Corporation and all Related Corporations is terminated for any reason, all Awards held by the Participant which are unexercised
or have not yet vested as of such date shall expire, terminate, and become unexercisable as of such termination date, provided, however,
that if the Participant's Service terminates for reasons other than Cause, all outstanding vested Options and SARs held by the
Participant as of his or her termination date shall continue to be exercisable until the earlier of the expiration of their term or the
date that is three months after such termination date..
Prohibition
on Repricing
. Except as required or permitted pursuant to a corporate transaction (including, without limitation, any recapitalization
or reorganization), in no event will an Option or SAR be amended to reduce the exercise or base price or be canceled in exchange for
cash, other awards or Options or SARs with an exercise price or base price less than the exercise price of the original Option or base
price of the original SAR without shareholder approval.
Limits
on Transfers of Awards/Beneficiary Designation
. All awards are exercisable only by the participant during the participant's
lifetime, and are transferable only by will or by the laws of descent and distribution; provided, however, that the Committee may permit
a transfer of an award, other than an Incentive Stock Option, to a family member of an individual, subject to such restrictions as the
Committee may provide. Participants may designate a beneficiary or beneficiaries to receive their benefits under the Equity Plan if they
die before receiving any or all of such benefit.
Amendment
and Termination.
Our Board of Directors may amend, suspend or terminate the Equity Plan, without consent of stockholders or participants,
provided, however, that amendments must be submitted to the stockholders for approval if shareholder approval is required by applicable
law, and any amendment or termination that may adversely affect the rights of participants with outstanding awards requires the consent
of such participants. The Committee may amend any award agreement, provided the amendment is not to re-price or constructively re-price
any award.
Term.
The Equity Plan is effective immediately and will terminate on the earliest to occur of (i) the 10th anniversary of the Equity
Plan's effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issued
as fully-vested shares.
On
February 22, 2023, (the "Grant Date"), the Compensation Committee of the Board of Directors (the "Board") of
the Company granted stock options to purchase 820,000 ordinary shares of the Company (the "Shares") at an exercise price
of $1.23 per share, pursuant to the Company's 2022 Omnibus Equity Plan, to sixteen officers, directors and employees of the Company
and its subsidiaries (the "Grantees") The Grants vested immediately on the Grant Date and each of the Grantees also entered
into a Stock Option Agreement with the Company on February 22, 2023. The options will expire five (5) years from the Grant Date and may
be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement. As of April 29, 2024, none has
been exercised.
76
6.C.
Board Practices
Terms
of Directors and Officers
Our
officers are elected by and serve at the discretion of the Board and may be removed by the Board. Our directors are not subject to a
set term of office and hold office until the next general meeting called for the election of directors and until their successor is duly
elected or such time as they die, resign or are removed from office by a shareholders' ordinary resolution or the unanimous written
resolution of all shareholders. A director will be removed from office automatically if, among other things, the director becomes bankrupt
or makes any arrangement or composition with his creditors generally or is found to be or becomes of unsound mind.
Our
board of directors currently consists of 7 directors. We have established an audit committee, a compensation committee and a corporate
governance and nominating committee. Each of the committees of the board of directors has the composition and responsibilities described
below.
Board
Diversity Matrix
The
following table sets forth Board level diversity statistics based on self-identification of members of our Board as of April 29, 2024.
Board
    Diversity Matrix (As of April 29, 2024)
Country
    of Principal Executive Offices:
Hong
    Kong, China
Foreign
    Private Issuer:
Yes
Disclosure
    Prohibited Under Home Country Law:
No
Total
    Number of Directors
7
Female
Male
Non-Binary
Did
    Not Disclose Gender
Part
    I: Gender Identity
Directors
2
5
0
0
Part
    II: Demographic Background
Underrepresented
    Individual in Home Country Jurisdiction
0
LGBTQ+
0
Did
    Not Disclose Demographic Background
0
Audit
Committee
Ms.
Carina Chui, Ms. Monique Ho and Mr. Kenneth Liu are members of our Audit Committee, where Ms. Carina Chui serves as the chairlady. All
members of our Audit Committee satisfy the independence standards promulgated by the SEC and by Nasdaq as such standards apply specifically
to members of audit committees.
We
have adopted and approved a charter for the Audit Committee. In accordance with our Audit Committee Charter, our Audit Committee shall
perform several functions, including:
●
evaluate
                                            the independence and performance of, and assess the qualifications of, our independent auditor,
                                            and engage such independent auditor;
●
approve
                                            the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services,
                                            and approve in advance any non-audit service to be provided by the independent auditor;
●
monitor
                                            the independence of the independent auditor and the rotation of partners of the independent
                                            auditor on our engagement team as required by law;
●
review
                                            the financial statements to be included in our Annual Report on Form 20-F and Current Reports
                                            on Form 6-K and review with management and the independent auditors the results of the annual
                                            audit and reviews of our quarterly financial statements;
●
oversee
                                            all aspects our systems of internal accounting control and corporate governance functions
                                            on behalf of the board;
77
●
review
                                            and approve in advance any proposed related-party transactions and report to the full Board
                                            on any approved transactions; and
●
provide
                                            oversight assistance in connection with legal, ethical and risk management compliance programs
                                            established by management and the Board, including Sarbanes-Oxley Act implementation, and
                                            make recommendations to the Board regarding corporate governance issues and policy decisions.
We
have determined that Ms. Carina Chui possesses accounting or related financial management experience that qualifies her as an "audit
committee financial expert" as defined by the rules and regulations of the SEC.
Compensation
Committee
Ms.
Monique Ho, Ms. Carina Chui and Mr. Kenneth Liu are members of our Compensation Committee and Ms. Monique Ho is the chairlady. All members
of our Compensation Committee are qualified as independent under the current definition promulgated by Nasdaq. We have adopted and approved
a charter for the Compensation Committee. In accordance with the Compensation Committee's Charter, the Compensation Committee is
responsible for overseeing and making recommendations to the Board regarding the salaries and other compensation of our executive officers
and general employees and providing assistance and recommendations with respect to our compensation policies and practices. The Compensation
Committee is responsible for, among other things:
●
To
                                            approve compensation principles that apply generally to Company employees;
●
To
                                            make recommendations to the board of directors with respect to incentive compensation plans
                                            and equity-based plans and to oversee the application of the Company's compensation recoupment/clawback policy;
●
To
                                            administer and otherwise exercise the various authorities prescribed for the Compensation
                                            Committee by the Company's incentive compensation plans and equity-based plans;
●
To
                                            select a peer group of companies against which to benchmark/compare the Company's compensation
                                            systems for principal officers elected by the board of directors;
●
To
                                            annually review the Company's compensation policies and practices and assess whether
                                            such policies and practices are reasonably likely to have a material adverse effect on the
                                            Company;
●
To
                                            determine and oversee stock ownership guidelines and stock option holding requirements, including
                                            periodic review of compliance by principal officers and members of the board of directors;
Nominating
and Corporate Governance Committee
Ms.
Carina Chui, Ms. Monique Ho and Mr. Kenneth Liu are members of our Nominating and Corporate Governance Committee and Mr. Kenneth Liu
is the chairman. All members of our Nominating and Corporate Governance Committee are qualified as "independent" under the
current definition promulgated by Nasdaq. We have adopted a charter for the Nominating and Corporate Governance Committee. In accordance
with its charter, the Nominating and Corporate Governance Committee is responsible for identifying and proposing new potential director
nominees to the board of directors for consideration and reviewing our corporate governance policies.
The
Nominating and Corporate Governance Committee is responsible for, among other things:
●
Identify
                                            and screen individuals qualified to become Board members consistent with the criteria approved
                                            by the board of directors, and recommend to the board of directors nominees for election
                                            at the next annual or special meeting of shareholders at which directors are to be elected
                                            or to fill any vacancies or newly created directorships that may occur between such meetings;
●
Recommend
                                            directors for appointment to Board committees;
78
●
Make
                                            recommendations to the board of directors as to determinations of director independence;
●
Oversee
                                            the evaluation of the board of directors;
●
Make
                                            recommendations to the board of directors as to compensation for the Company's directors;
                                            and
●
Review
                                            and recommend to the board of directors the Corporate Governance Guidelines and Code of Business
                                            Conduct and Ethics for the Company.
Director
Independence
Our
Board reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly, and the
Company has determined that Ms. Monique Ho, Ms. Carina Chui, Mr. Kenneth Liu and Mr. Henry Yeung are "independent
directors" as defined by NASDAQ.
6.D.
Employees
As
of December 31, 2023, we had a total of 255 employees. We had a total of 374 employees as of December 31, 2022. The following table sets
forth the breakdown of our employees as of December 31, 2023 by function:
Hong
    Kong
Department
Headcount
Headquarter
PRC
    Production
Management
10
7
3
Finance
    and accounting
7
4
3
Sales
    and Marketing
3
3
—
Purchasing
2
—
2
Warehouse
11
—
11
Production
199
—
199
Quality
    Control
3
—
3
Administration
15
4
11
Technical
5
—
5
Total
255
18*
237
*One
vice president of finance based in Beijing.
As
of December 31, 2023, 17 employees are based in Hong Kong, where our principal executive offices are located, one vice president of
finance was based in Beijing, and the remaining employees were located in Dongguan, China.
As
required by PRC regulations, Xingfa participates in various government statutory employee benefit plans, including social insurance funds,
namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and
a maternity insurance plan, and a housing provident fund. Xingfa is required under PRC law to make contributions to employee benefit
plans at specified percentages of the salaries, bonuses and certain allowances of its employees, up to a maximum amount specified by
the local government from time to time. As of the date of this report, we believe Xingfa has made employee benefit payments in material
aspects. However, if Xingfa were found by the relevant authorities that it failed to make adequate payments, it may be required to make
up the contributions for these plans as well as to pay late fees and fines. See "
Risk Factors—Risks Related to Doing Business
in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us
to penalties
."
We
enter into standard labor and confidentiality agreements with our employees. We believe that we maintain a good working relationship
with our employees, and we have not experienced any major labor disputes.
We
understand that our success depends on our ability to attract, train and retain our employees. Therefore, as part of our human
resources strategy, we offer employees competitive salaries, stock awards, performance-based cash bonuses and promotions, engagement
activities, various welfare as well as other incentives. We design and provide training to our employees regularly in order to
enhance their professional skills and foster their career development. We also recognize the importance of keeping our employees
safe. During the outbreak of COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees
and have followed local government orders to prevent the spread of COVID-19.
79
6.E.
Share Ownership
The
following table sets forth information with respect to the beneficial ownership of our ordinary shares as of April 29, 2024 for:
●
each
                                            beneficial owner of 5% or more of our issued and outstanding ordinary shares;
●
each
                                            of our directors and executive officers; and
●
all
                                            of our directors and executive officers as a group.
Beneficial
ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares issuable
upon the exercise of options that are immediately exercisable or exercisable within 60 days of the date hereof.
Except
as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and
investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information
is not necessarily indicative of beneficial ownership for any other purpose.
The
calculations in the table below are based on 18,060,000 ordinary shares issued and outstanding as of the date of April 29, 2024.
Except
as otherwise indicated in the table below, addresses of our directors, executive officers and named beneficial owners are in care of
Intelligent Living Application Group Inc., Unit 2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New
Territories, Hong Kong, Tel: + (852) 2481 7938.
Ordinary
    Shares
Beneficially
    Owned
Number
    of Shares
Percentage
    of
(including
    Share Options)
Shares
Directors
    and Executive Officers:
Bong
    Lau
2,540,000
(1)
13.9
%
Bun
    Lau
2,480,000
(2)
13.6
%
Wynn
    Hui
2,540,000
(3)
13.9
%
Frederick
    Wong
60,000
(4)
*
Errol
    Hui
2,480,000
(5)
13.6
%
Tony
    Zhong
40,000
(6)
*
Monique
    Ho
5,000
(7)
*
Kenneth
Liu
-
-
Carina
    Chui
5,000
(7)
*
Henry Yeung
-
-
5%
    or Greater Shareholders:
Bong
    Lau
2,340,000
(1)
13.9
%
Bun
    Lau
2,340,000
(2)
13.6
%
Wynn
    Hui
2,340,000
(3)
13.9
%
Errol
    Hui
2,340,000
(5)
13.6
%
All
    directors and executive officers as a group (10 individuals)
10,150,000
56.2
%
(1)
including 200,000 stock options exercisable since February 22, 2023.
(2)
including 140,000 stock options exercisable since February 22, 2023.
(3)
including 200,000 stock options exercisable since February 22, 2023.
(4)
including 60,000 stock options exercisable since February 22, 2023.
(5)
including 140,000 stock options exercisable since February 22, 2023.
(6)
including 40,000 stock options exercisable since February 22, 2023.
(7)
including 50,000 stock options exercisable since February 22, 2023.
*
less than 1%
80
ITEM
7.
MAJOR
                  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A.
Major Shareholders
See
Item 6.E., "Share Ownership" for a description of our major shareholders.
7.B.
Related Party Transactions
Employment
Agreements, Director Agreements and Indemnification Agreements
See
"Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Employment
Agreements, Director Agreements and Indemnification Agreements."
Share
Incentives
See
"Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers —Share Incentive
Plans."
Other
Transactions with Related Parties
The
relationship and the nature of related party transactions are summarized as follow:
In
2018, the Company entered into a rental agreement with Kambo Security Products Limited for office space in Hong Kong. The rental
agreement has been renewed annually. Kambo Security Products Limited is owned by Mr. Bong Lau, Mr. Wynn Hui, and Mr. Bun Lau, major
shareholders and directors of the Company. Rent expense for the years ended December 31, 2023, 2022 and 2021 was approximately $74,000,
$54,100 and $54,100, respectively.
7.C.
Interests of Experts and Counsel
Not
applicable.
ITEM
8.
FINANCIAL
                  INFORMATION
Consolidated
Statements and Other Financial Information
The
financial statements required by this item may be found at the end of this Annual Report on 20-F, beginning on page F-1.
Legal
Proceedings
We
are currently not involved in any material legal or administrative proceedings. From time to time, we may be subject to various legal
or administrative claims and proceedings arising in the ordinary course of business. Such legal or administrative claims and proceedings,
even if without merit, could result in the expenditure of financial and management resources and potentially result in civil liability
for damages.
81
Dividends
We
have not declared or paid cash dividends since the Company was incorporated in July 2019 in Cayman Island and we have no plan to declare
or pay any dividends in the near future on our ordinary shares. We currently intend to retain most, if not all, of our available funds
and any future earnings to operate and expand our business.
We
are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our Hong Kong and PRC subsidiary for
our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiary
to pay dividends to us. See "
Item 4.B. Business Overview—Regulations —Regulations on Dividend Distribution.
"
Our
board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides
to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. Cash dividends
on our ordinary shares, if any, will be paid in U.S. dollars.
No
Significant Changes
Except
as disclosed elsewhere in this annual report, no other significant changes to our financial condition have occurred since the date of
the annual financial statements contained herein.
ITEM
9.
THE
                  OFFER AND LISTING
9.A.
Offer and Listing Details
Our
ordinary shares are listed for trading on the NASDAQ Capital Market under the symbol "ILAG" The shares began trading on July
13, 2022 on the NASDAQ Capital Market.
9.B.
Plan of Distribution
Not
Applicable.
9.C.
Markets
Our
ordinary shares have been listed on the Nasdaq Capital Market since July 13, 2022 under the symbol "ILAG".
9.D.
Selling Shareholders
Not
Applicable.
9.E.
Dilution
Not
Applicable.
9.F.
Expenses of the Issuer
Not
Applicable.
ITEM
                                            10.
ADDITIONAL
                                            INFORMATION
10.A.
Share Capital
Not
Applicable.
82
10.B.
Memorandum and Articles of Association
We
are a Cayman Islands exempted company limited by shares and our affairs are governed by our current memorandum and articles of association
and the Companies Act (As Revised) of the Cayman Islands, which we refer to as the "Companies Act" below, and the common
law of the Cayman Islands.
Our
authorized share capital is $50,000 divided into 500,000,000 shares, consists of: (i) 450,000,000 Ordinary Shares, par value $0.0001
per share and (ii) 50,000,000 Preferred Shares, par value $0.0001 per share. As of April 29, 2024, 18,060,000 Ordinary Shares are issued
and outstanding and no preferred share is issued or outstanding.
We
incorporate by reference into this annual report our amended and restated memorandum and articles of association, which was filed as
Exhibits 3.2 and 3.3 to our registration statement on Form F-1 (File Number 333-248684) initially filed with the Securities and Exchange
Commission on September 9, 2020, as amended and declared effective on July 12, 2022. Our shareholders adopted our amended and restated
memorandum and articles of association by way of a special resolution on July 16, 2021.
Our
registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111.
According
to clause 3 of our amended and restated memorandum of association (the "Memorandum"), subject to the provisions of the Memorandum,
the objects for which the Company is established are unrestricted.
Board
of Directors
See
"
Item 6. Directors, Senior Management and Employees
."
Ordinary
Shares
Dividends.
Subject to any rights and restrictions of any other class or series of shares, our board of directors may, from time to time, declare
dividends on the shares issued and authorize payment of the dividends out of our lawfully available funds. Dividends may be declared
and paid out of the profits of the Company, realized or unrealized, or from any reserve set aside from profits which the Directors determine
is no longer needed. The Board may also declare and pay dividends out of share premium account or any other fund or account which can
be authorized for this purpose in accordance with the Act. "Share premium account," represents the excess of the price paid
to our company on issue of its shares over the par or "nominal" value of those shares, which is similar to the U.S. concept
of additional paid in capital.
No
dividend shall bear interest against the Company.
Voting
Rights.
The holders of our ordinary shares are entitled to one vote per share, including the election of directors. Voting at any
meeting of shareholders is by show of hands unless a poll is demanded. On a show of hands every shareholder present in person or by proxy
shall have one vote. On a poll every shareholder entitled to vote (in person or by proxy) and shall have one vote for each share for
which he/she is the holder. A poll may be demanded by the chairman of such meeting or by any one or more shareholders who together hold
not less than ten percent (10%) of the votes attached to the then issued share capital of the Company, present in person or in the case
of a shareholder being a corporation by its duly authorized representative or by proxy for the time being entitled to vote at the meeting.
A any general meeting of the Company, two (2) shareholders entitled to vote and present in person or by proxy or (in the case of a shareholder
being a corporation) by its duly authorized representative representing not less than one-third of the votes attached to the then issued
share capital of the Company throughout the meeting shall form a quorum for all purposes. While not required by our articles of association,
a proxy form will accompany any notice of general meeting convened by the directors to facilitate the ability of shareholders to vote
by proxy.
Any
ordinary resolution to be made by the shareholders requires the affirmative vote of a simple majority of the votes of the ordinary shares
cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes of the ordinary
shares cast. Under Cayman Islands law, some matters, such as amending the memorandum and articles, changing the name or resolving to
be registered by way of continuation in a jurisdiction outside the Cayman Islands, require approval of shareholders by a special resolution.
83
There
are no limitations on non-residents or foreign shareholders to hold or exercise voting rights on the ordinary shares imposed by foreign
law or by the memorandum and articles of association of our Company. However, no person will be entitled to vote at any general meeting
or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting
and unless all calls or other sums presently payable by the person in respect of ordinary shares in the Company have been paid.
Winding
Up; Liquidation.
Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on
liquidation for the time being attached to any class or classes of shares (i) if the Company shall be wound up and the assets available
for distribution amongst the shareholders of the Company shall be more than sufficient to repay the whole of the capital paid up at the
commencement of the winding up, the excess shall be distributed pari passu amongst such shareholders in proportion to the amount paid
up on the shares held by them respectively and (ii) if the Company shall be wound up and the assets available for distribution amongst
the Shareholders as such shall be insufficient to repay the whole of the paid-up capital such assets shall be distributed so that, a
nearly as may be, the losses shall be borne by the Shareholders in proportion to the capital paid up, or which ought to have been paid
up, at the commencement of the winding up on the shares held by them respectively. The liquidator may, with the authority of a special
resolution and any other sanction required by the Act, divide among the Shareholders in specie or kind the whole or any part of the assets
of the Company and whether or not the assets are of the same of different kinds.
Calls
on Ordinary Shares and Forfeiture of Ordinary Shares.
Our board of directors may from time to time make calls upon shareholders for
any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time and
place of payment. Any ordinary shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption
of Ordinary Shares.
We may issue shares that are, or at the Company's option, or at the option of the holders of such shares
are, subject to redemption on such terms and in such manner as it may, before the issuance of the shares, determine. Under the Companies
Act, shares of a Cayman Islands exempted company may be redeemed or repurchased out of profits of the company, out of the proceeds of
a fresh issue of shares made for that purpose, out of share premium account or out of capital, provided the memorandum and articles authorize
this and the company has the ability to pay its debts as they come due in the ordinary course of business.
No
Preemptive Rights.
Holders of ordinary shares will have no pre-emptive or preferential right to purchase any securities of our company.
Variation
of Rights Attaching to Shares.
If at any time the share capital is divided into different classes of shares, the rights attaching
to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the memorandum and articles,
be modified or abrogated with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.
Anti-Takeover
Provisions.
Some provisions of our current memorandum and articles of association may discourage, delay or prevent a change of control
of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to
issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred
shares without any further vote or action by our shareholders.
Transfer
of Ordinary Shares.
Subject to the restrictions contained in our current articles of association, any of our shareholders may transfer
all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board
of directors.
Our
board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up
or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
●
the
                                            instrument of transfer is lodged with us, accompanied by the certificate for the ordinary
                                            shares to which it relates and such other evidence as our board of directors may reasonably
                                            require to show the right of the transferor to make the transfer;
●
the
                                            instrument of transfer is in respect of only one class of shares;
●
the
                                            instrument of transfer is properly stamped, if required;
84
●
in
                                            the case of a transfer to joint holders, the number of joint holders to whom the share is
                                            to be transferred does not exceed four; and
●
a
                                            fee of such maximum sum as the Nasdaq Capital Market may determine to be payable or such
                                            lesser sum as our directors may from time to time require is paid to us in respect thereof.
If
our directors refuse to register a transfer, they shall, within three months after the date on which the instrument of transfer was lodged,
send to each of the transferor and the transferee notice of such refusal.
The
registration of transfers may, on ten calendar days' notice being given by advertisement in such one or more newspapers, by electronic
means or by any other means in accordance with the Nasdaq Rules, be suspended and the register closed at such times and for such periods
as our board of directors may, in their absolute discretion, from time to time determine, provided, however, that the registration of
transfers shall not be suspended nor the register closed for more than 30 calendar days in any calendar year.
Inspection
of Books and Records.
Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of
our list of shareholders or our corporate records (other than the memorandum and articles of association, the register of mortgages and
charges, and copies of any special resolutions passed by our shareholders). However, we will provide our shareholders with annual audited
financial statements.
General
Meeting of Shareholders.
Shareholders' meetings may be convened by a majority of our board of directors or our chairman. Advance
notice of not less than ten clear days is required for the convening of our annual general shareholders' meeting and any other
general meeting of our shareholders. A quorum required for and throughout a meeting of shareholders consists of at least two shareholders
entitled to vote and present in person or by proxy or (in the case of a shareholder being a corporation) by its duly authorized representative
representing not less than one-third of all voting power of our share capital in issue.
Exempted
Company.
We are an exempted company incorporated with limited liability under the Companies Act. The Companies Act distinguishes
between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business
mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are
essentially the same as for an ordinary company except that an exempted company:
●
does
                                            not have to file an annual return of its shareholders with the Registrar of Companies;
●
is
                                            not required to open its register of members for inspection to the public;
●
does
                                            not have to hold an annual general meeting;
●
may
                                            issue shares with no par value;
●
may
                                            obtain an undertaking against the imposition of any future taxation (such undertakings are
                                            usually given for 20 years in the first instance);
●
may
                                            register by way of continuation in another jurisdiction and be deregistered in the Cayman
                                            Islands;
●
may
                                            register as a limited duration company; and
●
may
                                            register as a segregated portfolio company.
"Limited
liability" means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the
company.
85
Preferred
Shares
Each
of the class or classes (however designated) as the board of directors may determine in accordance with these articles of association.
Subject to the Companies Act (As Revised), any preferred shares may be issued or converted into shares that, at a determinable date or
at the option of the Company or the holder thereof, are to be redeemed or are liable to be redeemed on such terms and in such manner
as the board of directors may in their absolute discretion determine.
In
particular and without prejudice to the generality of the foregoing, the Board is empowered to authorize by resolution or resolutions
from time to time the issuance of one or more classes or series of preferred shares and to fix the designations, powers, preferences
and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any,
including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption
privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase or decrease the size of
any such class or series (but not below the number of shares of any class or series of preferred shares then outstanding) to the extent
permitted by law. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of
any class or series of preferred shares may, to the extent permitted by law, provide that such class or series shall be superior to,
rank equally with or be junior to the preferred shares of any other class or series.
Except
as otherwise expressly provided in the resolution or resolutions providing for the establishment of any class or series of preferred
shares, no vote of the holders of preferred shares or ordinary shares shall be a prerequisite to the issuance of any shares of any class
or series of the preferred shares authorized by and complying with the conditions of the Memorandum and Articles of Association.
10.C.
Material Contracts
We
have not entered into any material contracts other than in the ordinary course of business and other than those described in this annual
report.
10.D.
Exchange Controls
Cayman
Islands
Currently
there is no exchange control regulations in the Cayman Islands and Hong Kong applicable to us and shareholders.
See
"Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange"
for exchange controls in China.
10.E.
Taxation
The
following summary of the material Cayman Islands, Hong Kong, PRC and U.S. tax consequences of an investment in our ordinary shares is
based upon laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect. This summary is not intended to be, nor should it be construed as, legal or tax advice and is not exhaustive of all
possible tax considerations. This summary also does not deal with all possible tax consequences relating to an investment in our ordinary
shares, such as the tax consequences under state, local, or under the tax laws of jurisdictions other than the Cayman Islands, Hong Kong,
PRC and the United States. Investors should consult their own tax advisors with respect to the tax consequences of the acquisition, ownership
and disposition of our ordinary shares.
Cayman
Islands Taxation
Under
the law of the Cayman Islands as currently in effect, a holder of the securities who is not a resident of the Cayman Islands is not liable
for Cayman Islands tax on dividends paid with respect to the securities and all holders of the securities are not liable to the Cayman
Islands for tax on gains realized during that year on the sale or disposal of such ordinary shares. The Cayman Islands does not impose
a withholding tax on dividends paid by a company incorporated or re-registered under the Companies Act.
There
are no capital gains, gift or inheritance taxes levied by the Cayman Islands on companies incorporated under the Companies Act. In addition,
shares of companies incorporated under the Companies Act are not subject to transfer taxes, stamp duties or similar charges.
86
There
is no income tax treaty or convention currently in effect between the United States and the Cayman Islands or between China and the Cayman
Islands.
People's
Republic of China Taxation
Pursuant
to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and
Tax Evasion on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise
directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise
to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority.
Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax
Agreements, or Circular 81, a resident enterprise of the counter-party to such Tax Arrangement should meet the following conditions,
among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must directly own the required percentage
of equity interests and voting rights in such PRC resident enterprise; and (ii) it should directly own such percentage in the PRC resident
enterprise anytime in the 12 months prior to receiving the dividends. Furthermore, the Administrative Measures for Non-Resident Enterprises
to Enjoy Treatments under Tax Treaties (For Trial Implementation), or the Administrative Measures, which became effective in October
2009, requires that the non-resident enterprises must obtain the approval from the relevant tax authority in order to enjoy the reduced
withholding tax rate under the tax treaties. There are also other conditions for enjoying such reduced withholding tax rate according
to other relevant tax rules and regulations. Accordingly, Hing Fat Industrial Limited may be able to enjoy the 5% withholding tax rate
for the dividends it receives from the WFOE, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules
and regulations and obtains the approvals as required under the Administrative Measures. However, according to Circular 81, if the relevant
tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment,
the relevant tax authorities may adjust the favorable withholding tax in the future.
Hong
Kong Taxation
The
taxation of income and capital gains of holders of ordinary shares is subject to the laws and practices of Hong Kong and of jurisdictions
in which holders of ordinary shares are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions
under Hong Kong law is based on current law and practice, is subject to changes therein and does not constitute legal or tax advice.
The discussion does not deal with all possible tax consequences relating to an investment in the ordinary shares. Accordingly, each prospective
investor (particularly those subject to special tax rules, such as banks, dealers, insurance companies, tax-exempt entities and holders
of 10% or more of our voting capital stock) should consult its own tax advisor regarding the tax consequences of an investment in the
ordinary shares. The discussion is based upon laws and relevant interpretations thereof in effect as of the date of this report, all
of which are subject to change. There is no reciprocal tax treaty in effect between Hong Kong and the United States.
Tax
on Dividends
Under
the current practices of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of dividends paid by us as
a company incorporated in Cayman Islands.
Profits
Tax
No
tax is imposed in Hong Kong in respect of capital gains from the sale of property (such as the ordinary shares). Trading gains from the
sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong
Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5%
and 15% on corporations and unincorporated businesses, respectively, and at a maximum rate of 15% on individuals. Liability for Hong
Kong profits tax may thus arise in respect of trading gains from sales of ordinary shares realized by persons carrying on a business
or trading or dealing in securities in Hong Kong.
Stamp
Duty
Hong
Kong stamp duty, currently charged at the rate of HK$1.3 per HK$1,000 or part thereof on the higher of the consideration for or the value
of the ordinary shares, will be payable by the purchaser on every purchase and by the seller on every sale of ordinary shares (i.e.,
a total of HK$2.6 per HK$1,000 or part thereof is currently payable on a typical sale and purchase transaction involving ordinary shares).
In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of ordinary shares. If one of the parties to the
sale is a non-Hong Kong resident and does not pay the required stamp duty, the duty not paid will be assessed on the instrument of transfer
(if any) and the transferee will be liable for payment of such duty. No Hong Kong stamp duty is payable upon the transfer of ordinary
shares outside Hong Kong.
87
Estate
Duty
The
Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable
and no estate duty clearance papers are needed for an application for a grant of representation in respect of holders of ordinary shares
whose death occurs on or after February 11, 2006.
United
States Federal Income Tax Considerations
The
following is a discussion of United States federal income tax considerations relating to the acquisition, ownership, and disposition
of our ordinary shares by a U.S. Holder, as defined below, that acquires our ordinary shares and holds our ordinary shares as "capital
assets" (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the "Code").
This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations or change,
possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the "IRS") with respect to
any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take
a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important to particular
investors in light of their individual circumstances, including investors subject to special tax rules (such as, for example, certain
financial institutions, insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in
securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations)),
investors who are not U.S. Holders, investors that own (directly, indirectly, or constructively) 10% or more of our voting stock, investors
that hold their ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction), or investors
that have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those
summarized below. In addition, this discussion does not address any tax laws other than the United States federal income tax laws, including
any state, local, alternative minimum tax or non-United States tax considerations, or the Medicare tax. Each potential investor is urged
to consult its tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations
of an investment in our ordinary shares.
General
For
purposes of this discussion, a "U.S. Holder" is a beneficial owner of our ordinary shares that is, for United States federal
income tax purposes, (i) an individual who is a citizen or treated as a tax resident of the United States, (ii) a corporation (or other
entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United
States or any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for United
States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary
supervision of a United States court and which has one or more United States persons who have the authority to control all substantial
decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code.
If
a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ordinary
shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership.
Partnerships and partners of a partnership holding our ordinary shares are urged to consult their tax advisors regarding an investment
in our ordinary shares.
The
discussion set forth below is addressed only to U.S. Holders that purchase ordinary shares. Prospective purchasers are urged to consult
their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state,
local, foreign and other tax consequences to them of the purchase, ownership and disposition of our ordinary shares.
Taxation
of Dividends and Other Distributions on our Ordinary Shares
Subject
to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to
the ordinary shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend
income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not
be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
88
With
respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable
to qualified dividend income, provided that (1) the ordinary shares are readily tradable on an established securities market in the United
States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange
of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which
the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax
treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the ordinary shares are readily tradable
on an established securities market in the United States. Under U.S. Internal Revenue Service authority, ordinary shares are considered
for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on
certain exchanges, which presently include the Nasdaq. You are urged to consult your tax advisors regarding the availability of the lower
rate for dividends paid with respect to our ordinary shares, including the effects of any change in law after the date of this report.
To
the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal
income tax principles), it will be treated first as a tax-free return of your tax basis in your ordinary shares, and to the extent the
amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings
and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a
dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described
above.
Taxation
of Dispositions of Ordinary Shares
Subject
to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other
taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis
(in U.S. dollars) in the ordinary shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including
an individual U.S. Holder, who has held the ordinary shares for more than one year, you may be eligible for reduced tax rates on any
such capital gains. The deductibility of capital losses is subject to limitations.
Passive
Foreign Investment Company ("PFIC")
A
non-U.S. corporation is considered a PFIC for any taxable year if either:
●
at
                                            least 75% of its gross income for such taxable year is passive income; or
●
at
                                            least 50% of the value of its assets (based on an average of the quarterly values of the
                                            assets during a taxable year) is attributable to assets that produce or are held for the
                                            production of passive income (the "asset test").
Passive
income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of
a trade or business) and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets
and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by
value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we hold
will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based
on the market value of our ordinary shares from time to time, which could cause the value of our non-passive assets to be less than 50%
of the value of all of our assets (including the cash raised in any offering) on any particular quarterly testing date for purposes of
the asset test.
We
must make a separate determination each year as to whether we are a PFIC. Depending on the amount of cash we hold, together with any
other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent taxable
year, at least 50% of our assets may be assets held for the production of passive income. We will make this determination following the
end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated variable interest entity, as being
owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such
entity but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating
results in our consolidated financial statements. In particular, because the value of our assets for purposes of the asset test will
generally be determined based on the market price of our ordinary shares and because cash is generally considered to be an asset held
for the production of passive income, our PFIC status will depend in large part on the market price of our ordinary shares and the amount
of cash we hold. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the
application of the PFIC rules is subject to uncertainty in several respects. We are under no obligation to take steps to reduce the risk
of our being classified as a PFIC, and as stated above, the determination of the value of our assets will depend upon material facts
(including the market price of our ordinary shares from time to time that may not be within our control). If we are a PFIC for any year
during which you hold ordinary shares, the shares will continue to be treated as stock in a PFIC for all succeeding years during which
you hold ordinary shares. However, if we cease to be a PFIC and you did not previously make a timely "mark-to-market" election
as described below, you may avoid some of the adverse effects of the PFIC regime by making a "purging election" (as described
below) with respect to the ordinary shares.
89
If
we are a PFIC for your taxable year(s) during which you hold ordinary shares, you will be subject to special tax rules with respect to
any "excess distribution" that you receive and any gain you realize from a sale or other disposition (including a pledge)
of the ordinary shares, unless you make a "mark-to-market" election as discussed below. Distributions you receive in a taxable
year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years
or your holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:
●
the
                                            excess distribution or gain will be allocated ratably over your holding period for the ordinary
                                            shares;
●
the
                                            amount allocated to your current taxable year, and any amount allocated to any of your taxable
                                            year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary
                                            income, and
●
the
                                            amount allocated to each of your other taxable year(s) will be subject to the highest tax
                                            rate in effect for that year and the interest charge generally applicable to underpayments
                                            of tax will be imposed on the resulting tax attributable to each such year.
The
tax liability for amounts allocated to years prior to the year of disposition or "excess distribution" cannot be offset by
any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as
capital, even if you hold the ordinary shares as capital assets.
A
U.S. Holder of "marketable stock" (as defined below) in a PFIC may make a mark-to-market election for such stock to elect
out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed
to hold) ordinary shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the
excess, if any, of the fair market value of the ordinary shares as of the close of such taxable year over your adjusted basis in such
ordinary shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess,
if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, such
ordinary loss is allowable only to the extent of any net mark-to-market gains on the ordinary shares included in your income for prior
taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition
of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale
or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously
included for such ordinary shares. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If
you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to
distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under "—
Taxation of Dividends and Other Distributions on our ordinary shares" generally would not apply.
The
mark-to-market election is available only for "marketable stock", which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar quarter ("regularly traded") on a qualified exchange or other market
(as defined in applicable U.S. Treasury regulations), including Nasdaq. If the ordinary shares are regularly traded on Nasdaq and if
you are a holder of ordinary shares, the mark-to-market election would be available to you were we to be or become a PFIC.
Alternatively,
a U.S. Holder of stock in a PFIC may make a "qualified electing fund" election with respect to such PFIC to elect out of
the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally
include in gross income for a taxable year such holder's pro rata share of the corporation's earnings and profits for the
taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information
regarding its earnings and profits as required under applicable U.S. Treasury regulations.
90
We
do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you
hold ordinary shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621
in each such year and provide certain annual information regarding such ordinary shares, including regarding distributions received on
the ordinary shares and any gain realized on the disposition of the ordinary shares.
If
you do not make a timely "mark-to-market" election (as described above), and if we were a PFIC at any time during the period
you hold our ordinary shares, then such ordinary shares will continue to be treated as stock of a PFIC with respect to you even if we
cease to be a PFIC in a future year, unless you make a "purging election" for the year we cease to be a PFIC. A "purging
election" creates a deemed sale of such ordinary shares at their fair market value on the last day of the last year in which we
are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating
the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the
fair market value of the ordinary shares on the last day of the last year in which we are treated as a PFIC) and holding period (which
new holding period will begin the day after such last day) in your ordinary shares for tax purposes.
You
are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our ordinary shares and the
elections discussed above.
Information
Reporting and Backup Withholding
Payments
of dividends and sales proceeds that are made within the United States or through certain U.S.-related intermediaries may be subject
to information reporting and backup withholding, unless (i) the U.S. Holder is a corporation or other "exempt recipient"
or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is
not subject to backup withholding. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to
a U.S. Holder will be allowed as a credit against the U.S. Holder's U.S. federal income tax liability and may entitle it to a refund,
provided that the required information is timely furnished to the IRS.
Information
with respect to foreign financial assets
Certain
U.S. Holders who are individuals (and, under proposed regulations, certain entities) may be required to report information relating to
an interest in our ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained
by certain U.S. financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of this legislation
on their ownership and disposition of our ordinary shares.
10.F.
Dividends and Paying Agents
Not
Applicable.
10.G.
Statement by Experts
Not
Applicable.
91
10.H.
Documents on Display
We
are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers.
Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information
filed with the SEC can be obtained over the internet at the SEC's website at www.sec.gov or inspected and copied at the public
reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information regarding
the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that
contains reports and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign
private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy
statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act. You may also visit us on the world wide web at http://www.i-l-a-g.com. However, information
contained on our website does not constitute a part of this annual report.
10.I.
Subsidiary Information
Not
Applicable.
10.J.
Annual Report to Security Holders
Not
Applicable.
ITEM
11.
QUANTITATIVE
                                            AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Liquidity
risk
We
are exposed to liquidity risk, which is the risk that we will be unable to provide sufficient capital resources and liquidity to meet
our commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures.
When necessary, we will turn to other financial institutions to obtain short-term funding to meet the liquidity shortage.
Inflation
risk
Inflationary
factors, such as increases in personnel and overhead costs, could impair our operating results. Although we do not believe that inflation
has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have
an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if
the revenues from our products do not increase with such increased costs.
Interest
rate risk
We
are exposed to interest rate risk on our interest-bearing assets and liabilities. As part of our asset and liability risk management,
we review and take appropriate steps to manage our interest rate exposures on our interest-bearing assets and liabilities. We have not
been exposed to material risks due to changes in market interest rates, and not used any derivative financial instruments to manage the
interest risk exposure during the year ended December 31, 2023 and 2022.
Foreign
currency translation and transaction
The
Company's reporting currency is the USD. The functional currency of its Hong Kong subsidiaries is the Hong Kong dollar (the "HKD"),
and the functional currency of its PRC subsidiary is the Renminbi (the "RMB"). RMB is not freely convertible into foreign
currencies for capital account transactions. The value of RMB against the U.S. dollar and other currencies is affected by, among other
things, changes in China's political and economic conditions and China's foreign exchange policies. To date, we have not
entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk.
ITEM
12.
DESCRIPTION
                                            OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
Debt Securities
Not
applicable.
B.
Warrants and Rights
Not
applicable.
C.
Other Securities
Not
applicable.
92
PART
II
ITEM
13.
DEFAULTS,
                                            DIVIDEND ARREARAGES AND DELINQUENCIES
Not
Applicable.
ITEM
14.
MATERIAL
                                            MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
See
"Item 10—Additional Information—B. Memorandum and Articles of Association—Common Shares" for a description
of the rights of securities holders, which remain unchanged.
Use
of Proceeds
The
following "Use of Proceeds" information relates to the registration statement on Form F-1, as amended (File number: 333-248684)
in relation to the initial public offering of 5,060,000 ordinary shares of the Company. Our initial public offering closed on July 15,
2022. Network1 Financial Securities, Inc. was the representative of the underwriters for our initial public offering. We offered and
sold 5,060,000 ordinary shares and received net proceeds of approximately $16.86 million, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us. The registration statement was declared effective by the SEC on July 12, 2022.
The total expenses incurred for our company's account in connection with our initial public offering was approximately $3.38 million,
which included approximately $1.52 million in underwriting discounts and commissions for the initial public offering and approximately
$1.86 million in other costs and expenses for our initial public offering. None of the transaction expenses included payments to directors
or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None
of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers
or their associates, persons owning 10% or more of our equity securities or our affiliates.
As
of the date of this annual report, we have used some of net proceeds received from our initial public offering, including approximately
$4.5 million to acquire an electroplating production line, approximately $6.5 million for in working capital,
approximately $4.4 million for
smart lock device and products research and development
. There is no material change in the use of proceeds as described in our registration
statement on Form F-1. We still intend to use the remainder of the proceeds from our initial public offering as disclosed in our registration
statement on Form F-1.
ITEM
15.
CONTROLS
                                            AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by
this report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, due
to the material weaknesses identified below, as of December 31, 2023, our disclosure controls and procedures were not effective in ensuring
that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules and forms, and that the information required to be
disclosed by us in the reports that we file or submit under the Exchange Act was accumulated and communicated to our management, including
our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
93
Management's
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules
13a-15 (f) under the Exchange Act. As required by Section 404 of the Sarbanes-Oxley Act and related rules as promulgated by the SEC,
our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of
our internal control over financial reporting as of December 31, 2023, based on criteria established in the framework in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of
December 31, 2023.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may deteriorate.
In
the course of management's preparation and our independent registered public accounting firm's auditing of our consolidated
financial statements as of and for the year ended December 31, 2023, we and our independent registered public accounting firm identified
one material weakness in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company
Accounting Oversight Board, a "material weakness" is a deficiency, or combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements
will not be prevented or detected on a timely basis, in accordance with the standards established by the Public Company Accounting Oversight
Board of the United States.
The
material weakness identified relates to our not having sufficient in-house personnel in our accounting department with sufficient knowledge
of the U.S. GAAP and SEC reporting rules to prepare and review financial statements and related disclosures in accordance with U.S. GAAP
and applicable requirements by SEC. Due to the foregoing material weakness, management concluded that as of December 31, 2023, our internal
control over financial reporting was ineffective.
To
remedy our identified material weakness identified to date, we plan to take the steps necessary to remediate the ineffectiveness, such
as (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen
the financial reporting function and to set up a financial and system control framework, and (ii) implementing regular and continuous
U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel.
However,
we cannot assure you that we will remediate our material weakness in a timely manner, or at all. See "
Item 3. Key Information—Risk
Factors—Risks Related to Our Business— We are obligated to develop and maintain proper and effective internal control over
financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal
controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value
of our Ordinary Shares.
"
As
a company with less than US$1.235 billion in revenue for our last fiscal year, we qualify as an "emerging growth company"
pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are
otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under
Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company's internal control over financial
reporting.
Attestation
Report of the Registered Public Accounting Firm
As
a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant
to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise
applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404
of the Sarbanes-Oxley Act of 2002, in the assessment of the emerging growth company's internal control over financial reporting.
This annual report on Form 20-F does not include an attestation report of our registered public accounting firm because we are an emerging
growth company.
Changes
in Internal Control
Other
than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered
by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM
16.
[Reserved]
ITEM
16.A.
AUDIT
                                            COMMITTEE FINANCIAL EXPERT
Our
board of directors has determined that Ms. Carina Chui, Chairlady of our audit committee and an independent director (under the standards
set forth in Nasdaq Stock Market Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act), is an audit committee financial expert.
ITEM
16.B.
CODE
                                            OF ETHICS
Our
board of directors has adopted a code of ethics that applies to all of the directors, officers and employees of our company. We have
filed our code of business conduct and ethics as Exhibit 99.1 of our registration statement on Form F-1 (File Number: 333-248684), as
amended, initially filed with the SEC on September 9, 2020.
ITEM
16.C.
PRINCIPAL
                                            ACCOUNTANT FEES AND SERVICES
The
following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered
by Wei, Wei & Co., LLP, our independent registered public accounting firm, for the periods indicated.
Year
Year
Ended
Ended
December
    31,
December
    31,
2023
2022
Audit
    fees(1)
$
295,326
$
273,000
Audit
    related fees(2)
—
—
Tax
    fees(3)
—
—
All
    other fees(4)
—
—
TOTAL
$
295,326
$
273,000
(1)
"Audit
                                            fees" means the aggregate fees billed for each of the fiscal years for professional
                                            services rendered by our principal accountant for the audit of our annual financial statements
                                            or services that are normally provided by the accountant in connection with statutory and
                                            regulatory filings or engagements for those fiscal years.
(2)
"Audit
                                            related fees" means the aggregate fees billed for each of the fiscal years for assurance
                                            and related services by our principal accountant that are reasonably related to the performance
                                            of the audit or review of our financial statements and are not reported under paragraph (1).
94
(3)
"Tax
                                            Fees" represents the aggregate fees billed in each of the fiscal years listed for the
                                            professional tax services rendered by our principal auditors.
(4)
"All
                                            Other Fees" represents the aggregate fees billed in each of the fiscal years listed
                                            for services rendered by our principal auditors other than services reported under "Audit
                                            fees," "Audit-related fees" and "Tax fees."
The
policy of our audit committee and our board of directors is to pre-approve all audit and non-audit services provided by our principal
auditors, including audit services, audit-related services, and other services as described above, other than those for de minimis services
which are approved by the audit committee or our board of directors prior to the completion of the services.
ITEM
16D.
EXEMPTIONS
                                            FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not
Applicable.
ITEM
16E.
PURCHASES
                                            OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Neither
we nor any "affiliated purchaser," as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities
during the period covered by this annual report.
ITEM
16F.
CHANGE
                                            IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not
Applicable.
ITEM
16G.
CORPORATE
                                            GOVERNANCE
As a Cayman Islands exempted company listed on the
Nasdaq Capital Market, or Nasdaq, we are subject to the Nasdaq corporate governance requirements. However, Nasdaq rules permit a foreign
private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the
Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance requirements. Currently, we
follow our home country practice in lieu of the provisions under Rule 5620(a), Rule 5635(a), Rule 5635(c) and Rule 5635(d) of the NASDAQ
Stock Market Marketplace Rules (the "Rules"). Rule 5620(a) requires that the Company to hold an annual meeting of shareholders
no later than one year after the end of the Company's fiscal year-end; Rule 5635(a) of the Rules requires shareholder approval
for the issuance of securities in connection with the acquisition of the stock or assets of another company; Rule 5635(c) of the Rules
requires shareholder approval
prior to the issuance of securities when a stock option or purchase
plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which
stock may be acquired by officers, directors, employees
; and Rule 5635(d) of the Rules requires shareholder approval prior to
an issuance of securities, other than in a public offering, equal to 20% or more of the voting power outstanding at a price less than
the lower of: (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement;
or (ii) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately
preceding the signing of the binding agreement. The corporate governance practice in our home country, the Cayman Islands, does not require
the Company to follow or comply with the requirements of Rule 5620(a), Rule 5635(a), Rule 5635(c) and Rule 5635(d). If we choose to follow
additional home country practice in the future, our shareholders may be afforded less protection than they would otherwise enjoy under
the Nasdaq corporate governance requirements applicable to U.S. domestic issuers. See "
Item 3. Key Information — D. Risk
Factors— Risks Related to Our Ordinary Shares—Because we are a foreign private issuer and are exempt from certain NASDAQ
corporate governance standards applicable to U.S. issuers, you may have less protection than you would have if we were a domestic issuer.
"
ITEM
16H.
MINE
                                            SAFETY DISCLOSURE
Not
applicable.
ITEM
16I.
DISCLOSURE
                                            REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not
applicable.
Item
                                            16J.
Insider
                                            Trading Policies
The
Company has adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by directors, senior
management and employees that are reasonably designed to promote compliance with applicable insider trading laws, rules and regulations,
and any listing standards applicable to the Company. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual
Report.
Item
  16K.
Cybersecurity
The
management of the Company is responsible for the cyber security risk management program as well as to identify, assess, mitigate,
and remediate risks and material issues. The Company's cyber security risk management program is supervised by our IT manager,
who reports directly to the Company's Chief Operation Officer. The IT manager and Information Security Personnel are
responsible for developing and implementing cybersecurity strategy, policies, standards, architecture and processes. We also engaged
a third-party expert Mr. Kowk Leung MA to provide additional support to our Information Security
Personnel and IT manager whenever needed. Mr. Ma received his Master's Degree of Industry Based Information Technology from University
of Wollongong Australia and is a Microsoft Certified Solution Developer (MCSD) and he has extensive experiences in development of IT application
systems and support, including retail system, inventory control system, ERP development and accounting system integration with various
system, stock broker ordering system, stock mobile phone ordering, and garment's color size assortment system, network planning
and firewall setup. Mr. Ma is familiar with operation system/server such as Novell, DOS, Windows 98, Windows ME, Window NT, Window
2000 Server, Window 2003 Server , Windows XP, FTP, IIS and Linux and he is also familiar with Database system such as MS SQL server ,
MySQL Visual Foxpro Database, Foxbase, Dbase III and Dbase IV and Tools or computer language familiar such as Clipper, Dbase, Foxbase.
Pascal, C, Visual Foxpro, Visual Basic, VB.Net, Visual C++, Com+, Crystal Report, UML.
Our Information Security Personnel reports to IT manager and is responsible
for coordinating and managing the response to reported weaknesses or events, including documentation, evidence collection, and event closure.
He also ensures the incident response plan is regularly updated based on experience, lessons learned, and industry developments, while
providing necessary training to employees involved in the procedure.
The
IT Manager plays a key role in defining strategies and procedures for cyber incident response, leading the incident response team, and
overseeing detection, response, and recovery efforts. He also ensures the regular review and update of the incident response plan based
on lessons learned and emerging threats.
The
Information Security Personnel reports any substantial threats, risks, and incidents to the IT manager. Subsequently, the IT manager
will escalate the report to the Chief Operating Officer, if necessary, who will then report it to the Board for any material threats
or breaches.
The
Company has set up the password requirement, control of authorization on a need-to-know basis, categorize sensitive information so that
they can be managed and transmitted at different security levels.
The
Company has adopted "Cyber Incident Response Plan Policy" so that suspicious activities or incidents can be quickly identified
and reported through the system to the management team.
To
oversee and identify risks from cybersecurity threats associated with our use of third-party service providers, we maintain third-party
risk management efforts designed to help protect against the misuse of information technology and security breaches.
Other
than those, the Company currently does not have processes to oversee and identify the risks from cyber security threats associated with
its use of any third-party service provider.
As
of date of this report, there has been no cybersecurity incidents, have materially affected the Company yet.
95
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 and related notes required by this item are contained on pages F-1 through F-20.
ITEM
19.
EXHIBITS
Exhibit
    No.
Description
1.1
Amended and Restated Memorandum of Association (incorporated herein by reference to Exhibit 3.2 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
1.2
Amended and Restated Articles of Association (incorporated herein by reference to Exhibit 3.3 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
2.1
Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-269458), filed with the SEC on January 30, 2023)
2.2*
Description of Securities
4.1
Form of Underwriters' Warrant (incorporated herein by reference to Exhibit 4.1 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.2
Share Exchange Agreement between the Registrant and shareholders of Intelligent Living Application Group Limited dated on April 8, 2020 (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.3
Form of Indemnification Agreement by and between the Registrant and executive officers and directors of the Registrant incorporated herein by reference to Exhibit 10.10 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.4
Director Agreement by and between the Registrant and Carina Chui incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.5
Director Agreement by and between the Registrant and Monique Ho incorporated herein by reference to Exhibit 10.12 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.6
Renewal of Employment Agreement by and between the Registrant and Yu Bong Lau in June 2022 incorporated herein by reference to Exhibit 10.14 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.7
Renewal of Employment Agreement by and between the Registrant and Yu Bun Lau in June 2022 incorporated herein by reference to Exhibit 10.15 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.8
Renewal of Employment Agreement by and between the Registrant and Frederik Wong in June 2022 incorporated herein by reference to Exhibit 10.16 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.9
Renewal of Employment Agreement by and between the Registrant and Wynn Hui in June 2022 incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
4.10
Asset Purchase Agreement by and among Hing Fat Industrial Limited, Dongguan Xingfa Hardware Products Co., Ltd. and Hu Xiongjie dated October 12, 2022, incorporated herein by reference to Exhibit 10.1 to the Form 6-K, filed with the SEC on October 17, 2022
4.11
Form of Stock Option Agreement, incorporated herein by reference to Exhibit 4.21 to the Form 20-F, filed with the SEC on April 28, 2023
4.12
Director Agreement by and between the Registrant and Chun Fai (Kenneth) Liu dated July 4, 2023, incorporated herein by reference to Exhibit 10.1 to the Form 6-K, filed with the SEC on July 7, 2023
4.13
Director Agreement by and between the Registrant and Wing Hang (Henry) Yeung dated January 15, 2024, incorporated herein by reference to Exhibit 10.1 to the Form 6-K, filed with the SEC on January 19, 2024
4.14*
Renewal of Employment Agreement by and between the Registrant and Bong Lau in June 202
3
4.15*
Renewal of Employment Agreement by and between the Registrant and Bun Lau in June 2023
4.16*
Renewal of Employment Agreement by and between the Registrant and Fred Wong in June 2023
4.17*
Renewal of Employment Agreement by and between the Registrant and Wynn Hui in June 2023
8.1*
List of Subsidiaries of the Registrant
11.1
Code of Business Conduct and Ethics (incorporated herein by reference to Exhibit 99.1 to the registration statement on Form F-1 (File No. 333-248684), as amended, initially filed with the SEC on September 9, 2020)
12.1*
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*
CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*
CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*
Consent of Wei, Wei & Co., LLP
15.2*
Consent of Guangdong Wesley Law Firm
19.1*
Insider Trading Policy
97.1*
Clawback Policy
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).
*
Filed as an exhibit hereto.
96
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.
INTELLIGENT
    LIVING APPLICATION GROUP INC.
/s/
    Bong Lau
Name:
Bong
    Lau
Title:
Chief
    Executive Officer and Chairman of the Board
Date:
    April 30, 2024
97
INTELLIGENT
LIVING APPLICATION GROUP INC.
CONSOLIDATED
FINANCIAL STATEMENTS
98
INTELLIGENT
LIVING APPLICATION GROUP INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE
OF CONTENTS
Page(s)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PCAOB ID:
2388
)
F-2
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2023 AND 2022
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
F-4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-7
F-
1
REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
    the Board of Directors and Shareholders of
Intelligent
    Living Application Group Inc.
Opinion
    on the Financial Statements
We
    have audited the accompanying consolidated balance sheets of Intelligent Living Application Group Inc. and Subsidiaries (collectively,
    the "Company") as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive
    loss, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2023,
    and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements
    present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results
    of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, 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 audit 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/
Wei, Wei & Co., LLP
Flushing,
    New York
April
    30, 2024
We
    have served as the Company's auditor since 2019.
F-
2
INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
As of December 31,
2023
2022
USD
USD
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
4,483,730
$
9,165,651
Accounts receivable
445,500
1,624,809
Inventories
5,027,747
4,472,487
Prepayments
1,899,584
487,703
Other receivables
245,599
265,127
Total current assets
12,102,160
16,015,777
NON-CURRENT ASSETS
Deposits
72,637
1,449
Property and equipment, net
5,673,584
5,134,566
Right-of-use assets, net
435,477
650,282
Total non-current assets
6,181,698
5,786,297
Total assets
$
18,283,858
$
21,802,074
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank borrowings - current
$
129,722
$
201,222
Accounts payable
324,626
396,628
Advance from customers
—
6,364
Other payables and accruals
625,350
677,972
Taxes payable
31,972
—
Operating lease liabilities - current
279,293
531,750
Total current liabilities
1,390,963
1,813,936
NON-CURRENT LIABILITIES
Bank borrowings
334,319
417,795
Operating lease liabilities
156,183
118,532
Total non-current liabilities
490,502
536,327
Total liabilities
1,881,465
2,350,263
COMMITMENTS AND CONTINGENCIES
—
—
SHAREHOLDERS' EQUITY
Preferred shares, par value $
0.0001
per share;
50,000,000
shares authorized;
none
issued and outstanding as of December 31, 2023 and 2022
—
—
Ordinary shares, par value $
0.0001
per share;
450,000,000
shares authorized;
18,060,000
issued and outstanding as of December 31, 2023 and 2022
1,806
1,806
Additional paid-in capital
23,804,550
23,137,534
Deficit
(
7,143,409
)
(
3,641,891
)
Accumulated other comprehensive loss
(
260,554
)
(
45,638
)
Total shareholders' equity
16,402,393
19,451,811
Total liabilities and shareholders' equity
$
18,283,858
$
21,802,074
The
accompanying notes are an integral part of these consolidated financial statements.
F-
3
INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended
December 31,
2023
2022
2021
USD
USD
USD
REVENUES
$
6,443,357
$
12,158,102
$
12,543,556
COST OF GOODS SOLD
(
5,464,591
)
(
9,961,988
)
(
11,231,253
)
COST OF GOODS SOLD - IDLE CAPACITY
(
345,424
)
—
—
GROSS PROFIT
633,342
2,196,114
1,312,303
SELLING AND MARKETING EXPENSES
(
59,841
)
(
105,473
)
(
150,152
)
GENERAL AND ADMINISTRATIVE EXPENSES
(
4,440,314
)
(
4,208,197
)
(
2,902,040
)
FINANCE COSTS
(
26,935
)
(
147,588
)
(
57,774
)
LOSS FROM OPERATIONS
(
3,893,748
)
(
2,265,144
)
(
1,797,663
)
OTHER INCOME
Interest income
244,840
27,928
199
Foreign exchange gain
47,237
125,480
9,318
Other income
156,390
455,833
401,631
Total other income, net
448,467
609,241
411,148
LOSS BEFORE PROVISION FOR INCOME TAXES
(
3,445,281
)
(
1,655,903
)
(
1,386,515
)
PROVISION FOR INCOME TAXES
(
56,237
)
—
—
NET LOSS
$
(
3,501,518
)
$
(
1,655,903
)
$
(
1,386,515
)
COMPREHENSIVE LOSS
Net loss
$
(
3,501,518
)
$
(
1,655,903
)
$
(
1,386,515
)
Foreign currency translation adjustments
(
214,916
)
(
420,941
)
52,289
COMPREHENSIVE LOSS
$
(
3,716,434
)
$
(
2,076,844
)
$
(
1,334,226
)
Weighted average number of ordinary shares outstanding
Basic and diluted
18,060,000
15,342,849
13,000,000
LOSS PER SHARE - BASIC AND DILUTED
$
(
0.19
)
$
(
0.11
)
$
(
0.11
)
The
accompanying notes are an integral part of these consolidated financial statements.
F-
4
INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Preferred shares
Common Stock
Accumulated
Number
Number
Additional
Other
of
Par
of
Par
Paid-in
Comprehensive
Shares
Value
Shares
Value
Capital
Deficit
Gain (Loss)
Total
USD
USD
USD
USD
USD
USD
BALANCE, January 1, 2021
—
$
—
13,000,000
$
1,300
$
4,371,723
$
(
599,473
)
$
323,014
$
4,096,564
Net loss
—
—
—
—
—
(
1,386,515
)
—
(
1,386,515
)
Shareholder contribution
—
—
—
—
717,949
—
—
717,949
Foreign currency translation adjustment
—
—
—
—
—
—
52,289
52,289
BALANCE, December 31, 2021
—
—
13,000,000
1,300
5,089,671
(
1,985,988
)
375,303
3,480,286
Shares issued on initial public offering
—
—
5,060,000
506
18,047,863
—
—
18,048,369
Net loss
—
—
—
—
—
(
1,655,903
)
—
(
1,655,903
)
Shareholder contribution
—
—
—
—
—
—
—
—
Foreign currency translation adjustment
—
—
—
—
—
—
(
420,941
)
(
420,941
)
BALANCE, December 31, 2022
—
—
18,060,000
1,806
23,137,534
(
3,641,891
)
(
45,638
)
19,451,811
Net loss
—
—
—
—
—
(
3,501,518
)
—
(
3,501,518
)
Stock options granted under Equity
Plan
—
—
—
—
667,016
—
—
667,016
Foreign currency translation adjustment
—
—
—
—
—
—
(
214,916
)
(
214,916
)
BALANCE, December 31, 2023
—
$
—
18,060,000
$
1,806
$
23,804,550
$
(
7,143,409
)
$
(
260,554
)
$
16,402,393
The
accompanying notes are an integral part of these consolidated financial statements.
F-
5
INTELLIGENT
LIVING APPLICATION GROUP INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2023
2022
2021
USD
USD
USD
CASH FLOWS FROM OPFRATING ACTIVITIES:
Net loss
$
(
3,501,518
)
$
(
1,655,903
)
$
(
1,386,515
)
Adjustments to reconcile net loss to cash (used in) operating activities:
Depreciation and amortization
693,531
303,269
259,122
Bad debt written-off
—
105,204
—
Options issued for equity compensation plan
667,016
Change in operating assets and liabilities
Accounts receivable
1,119,804
(
697,873
)
(
199,392
)
Inventories
(
586,551
)
535,182
(
712,854
)
Prepayments
(
1,412,318
)
(
180,974
)
(
140,151
)
Deposits
(
71,188
)
2,525
13
Other receivables
20,627
268,621
(
134,161
)
Accounts payable
(
67,945
)
(
1,631,595
)
530,221
Advance from customers
(
6,364
)
(
216,269
)
222,633
Other payables and accruals
(
50,253
)
(
960,292
)
545,903
Taxes payable
31,972
—
—
Operating lease liabilities
—
(
42,771
)
(
23,786
)
Net cash (used in) operating activities
(
3,163,187
)
(
4,170,876
)
(
1,038,967
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(
1,360,274
)
(
4,181,724
)
(
9,758
)
Net cash (used in) investing activities
(
1,360,274
)
(
4,181,724
)
(
9,758
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of shares in IPO
—
18,048,369
—
Payments of principal finance lease
—
(
8,391
)
(
32,954
)
Proceeds from shareholder contribution
—
—
717,949
Proceeds from short-term loan
—
1,964,072
—
Repayments of short-term loan
—
(
1,964,072
)
—
Proceeds from bank borrowings
—
—
191,339
Repayments of bank borrowings
(
154,976
)
(
642,176
)
—
Net cash (used in) provided by financing activities
(
154,976
)
17,397,802
876,334
EFFECT OF EXCHANGE RATE ON CASH
(
3,484
)
(
10,680
)
1,080
NET (DECREASE) INCREASE IN CASH
(
4,681,921
)
9,034,522
(
171,311
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
9,165,651
131,129
302,440
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
4,483,730
$
9,165,651
131,129
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest
$
18,859
$
208,565
$
49,688
Cash paid for income taxes
$
125,067
$
—
$
—
The
accompanying notes are an integral part of these consolidated financial statements.
F-
6
NOTE
1 -
ORGANIZATION AND BUSINESS
Intelligent
Living Application Group Inc. ("ILA") and its consolidated subsidiaries (collectively referred to as the "Company")
are in the business of the manufacture and sale of door locksets. The Company sells its door locksets primarily to customers in the United
States of America ("US") and Canada.
ILA
is a holding company incorporated in the Cayman Islands on July 17, 2019, under the Cayman Islands Companies Act as an exempted company
with limited liability. ILA has no substantive operations other than holding all of the outstanding share capital of Intelligent Living
Application Group Limited ("ILA BVI"). ILA BVI was established under the laws of the British Virgin Islands on March 19,
2014; and it is a company holding all of the outstanding equity of Kambo Hardware Limited, Kambo Locksets Limited, Bamberg (HK) Limited,
Hing Fat Industrial Limited and Dongguan Xingfa Hardware Products Co., Ltd.
On
July 15, 2022, the Company closed its initial public offering ("IPO") of
5,060,000
ordinary shares, par value $
0.0001
per
share, priced at $
4.00
per share. The aggregate gross proceeds from the IPO were $
20.24
million, before deducting underwriting discounts
and other related expenses. The ordinary shares of the Company began trading on the Nasdaq Capital Market on July 13, 2022 under the
ticker symbol "ILAG."
F-
7
Below
is a summary of legal entities controlled by ILA after the reorganization.
Date
    of
Place
    of
Legal
    Entity
incorporation
incorporation
Principal
    activities
Intelligent
    Living Application Group Inc.
July
    17, 2019
Cayman
    Islands
Holding
    company
Intelligent
    Living Application Group Limited
March
    19, 2014
British
    Virgin Islands
Intermediate
    holding company
Kambo
    Locksets Limited
March
    26, 2014
Hong
    Kong, PRC
Sale
    of door locksets to US and Canadian market
Kambo
    Hardware Limited
February
    25, 2015
Hong
    Kong, PRC
Sale
    of locksets and related hardware to other markets
Bamberg
    (HK) Limited
June
    24, 2016
Hong
    Kong, PRC
Sale
    of self-branded door locksets
Hing
    Fat Industrial Limited
March
    23, 2009
Hong
    Kong, PRC
Designs
    door locksets; holding company of Dongguan Xingfa
Dongguan
    Xingfa Hardware Products Co., Ltd.
August
    6, 1993
The
    People Republic of China (the "PRC")
Manufactures
    door locksets
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 ("US GAAP").
Basis
of consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All subsidiaries are wholly-owned.
All significant intercompany transactions and balances have been eliminated upon consolidation.
The
consolidated financial statements have been prepared on a historical cost basis, except for financial assets and financial liabilities
which have been measured at fair value. The consolidated financial statements are presented in United States dollars ("USD").
Use
of estimates
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the reporting periods presented. Significant accounting
estimates reflected in the Company's consolidated financial statements include the useful lives and residual value of property
and equipment. Actual results could differ from those estimates.
Foreign
currency translation
The
Company's reporting currency is the USD. The functional currency of its Hong Kong subsidiaries is the Hong Kong dollar (the "HKD"),
and the functional currency of its PRC subsidiary is the Renminbi (the "RMB"). Results of operations and cash flows are translated
at the average exchange rates during the period, and assets and liabilities are translated at the exchange rate at the end of the period.
Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Translation adjustments resulting
from this process are included in accumulated other comprehensive gain (loss). Transaction gains and losses that arise from exchange
rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations
as incurred.
F-
8
Translation
of amounts from HKD into USD has been made at the following exchange rates:
Balance sheet items, except for equity accounts:
December 31, 2023
HKD
7.81
to $
1
December 31, 2022
HKD
7.80
to $
1
December 31, 2021
HKD
7.80
to $
1
Statement of operations and cash flow items:
For the year ended December 31, 2023
HKD
7.83
to $
1
For the year ended December 31, 2022
HKD
7.76
to $
1
For the year ended December 31, 2021
HKD
7.76
to $
1
Translation
of amounts from RMB into USD has been made at the following exchange rates:
Balance sheet items, except for equity accounts:
December 31, 2023
RMB
7.08
to $
1
December 31, 2022
RMB
6.96
to $
1
December 31, 2021
RMB
6.38
to $
1
Statement of operations and cash flow items:
For the year ended December 31, 2023
RMB
7.05
to $
1
For the year ended December 31, 2022
RMB
6.7
3
to $
1
For the year ended December 31, 2021
RMB
6.45
to $
1
Cash
and cash equivalents
Cash
and cash equivalents comprise cash on hand and at banks, which are not restricted as to use; and highly liquid investments that are readily
convertible into known amounts of cash, which have a short maturity of generally within three months when acquired. As of December 31,
2023 and 2022, the Company did not have any cash equivalents. The Company maintains bank accounts in the PRC and Hong Kong.
Expected
credit losses
On
January 1, 2023, the Company adopted ASC 326, Credit Losses ("ASC 326"), which replaced previously issued guidance regarding
the impairment of financial instruments with an expected loss methodology that will result in more timely recognition of credit losses.
The Company used a modified retrospective approach and did not restate the comparable prior periods. The adoption did not have a material
impact on the Company's consolidated financial statement.
In accordance with ASC 326, the Company maintains an allowance for credit losses in accordance with ASC 326 and records the allowance for credit
losses, if warranted, as an offset to assets such as accounts receivable, and the estimated credit losses charged to the allowance are classified
as general and administrative expenses in the consolidated statements of operations and comprehensive loss. The Company assesses
collectability by reviewing receivables on a collective basis where similar characteristics exist, primarily based on the size and nature
of specific customers' receivables. In determining the amount of the allowance for credit losses, the Company considers historical
collectability based on past due status, the age of the receivable balances, credit quality of the Company's customers based on
ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other
factors that may affect the Company's ability to collect from customers. Bad debts are written off as incurred.
F-
9
Inventories
Inventories
consist of raw materials, work-in-progress and finished goods. They are stated at the lower of cost or net realizable value, as determined
using the weighted average cost method. Management compares the cost of inventories with the related net realizable value and will set
up an allowance to write down the cost of inventories to its net realizable value, if it is lower than cost. As of December 31, 2023
and 2022, the Company determined that
no
allowance for slow-moving or obsolete inventories was necessary.
Other
receivables
Other
receivables primarily include receivables from employees related to social security benefits and VAT receivable. Management reviews the
composition of other receivables and determines if an allowance for doubtful accounts is needed. A provision for doubtful accounts is
made when collection of the full amount is no longer probable. As of December 31, 2023 and 2022, the Company determined that
no
allowance
was necessary.
Prepayments
and deposits
Prepayments
consisted mainly of prepaid marketing research expenses, prepaid manufacture expenses, prepaid research and development expenses, prepaid
taxes, prepaid insurance, and prepaid software license. As of December 31, 2023 and 2022, prepaid marketing research expenses amounted
to $
755,355
and $
nil
, prepaid manufacture expenses amounted to $
399,442
and
nil
, and prepaid research and development expenses amounted
to $
299,581
and
nil
, respectively. Deposits, a non-current asset, are related to long-term office rental. These amounts are refundable
and bear no interest. Prepayments and deposits are classified as either current or non-current based on the terms of the respective agreements.
These prepayments are unsecured and are reviewed periodically to determine whether their carrying value has become impaired. As of December
31, 2023 and 2022, management believes that the Company's prepayments and deposits are
no
t
impaired.
Property
and equipment
Property
and equipment are stated at cost net of accumulated depreciation, amortization and impairment, if necessary. Depreciation and amortization
are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service.
Estimated useful lives are as follows:
Category
Estimated useful life
Office equipment
5
-
10
years
Production equipment
5
-
10
years
Motor vehicles
5
years
Leasehold improvements
Over the shorter of remaining lease term or the estimated useful lives of the assets
Repairs
and maintenance are charged to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment
are capitalized as additions to the related assets. The cost and related accumulated depreciation and amortization 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.
Revenue
recognition
The
Company follows FASB ASC 606, Revenue from Contracts with Customers in accounting for its revenues. The core principle of the revenue
standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps
are applied to achieve that core principle:
Step
1: Identify the contract with the customer
Step
2: Identify the performance obligations in the contract
Step
3: Determine the transaction price
Step
4: Allocate the transaction price to the performance obligations in the contract
Step
5: Recognize the allocated revenue when the company satisfies a performance obligation
F-
10
The
Company derives substantially all of its revenue from product sales, specifically sale of door locksets, locksets and related hardware
to customers. Revenue from product sales is recognized when control passes to the customer, which generally occurs at a point in time
when products are delivered FOB (freight on board). Revenue is recorded net of tariffs, VAT and discounts.
Cost
of goods sold
Cost
of goods sold consists primarily of the cost of raw materials (mainly brass, stainless steel, iron and zinc alloy), direct and indirect
labor and related benefits, and manufacturing overhead that is directly attributable to the production process, and related production
costs from molding of raw materials to production of door locksets such as handles, panels and spindles, product assembly, quality control
and packaging and shipping. Write-down of inventory, export tax rebates, if any, are also recorded in cost of goods sold. For the years
ended December 31, 2023 and 2022, the Company received export tax rebates of approximately RMB
2,906,000
(approximately $
412,000
) and
RMB
6,628,000
(approximately $
985,000
), respectively.
Cost
of goods sold – idle capacity
Idle
capacity consists of direct production costs in excess of charges allocated to the Company's finished goods in production. Such
costs relate primarily to depreciation expense related to the Company's electroplating equipment that cannot be directly attributable
to the production process. Idle capacity expenses amounted to $
345,424
and
nil
for the years ended December 31, 2023 and 2022, respectively.
Other
Income
Other
income consists primarily of proceeds from sale of raw materials waste (mainly iron), and rental income from sublease of extra factory
space.
Leases
The
Company follows FASB ASU 2016-02, "Leases" (Topic 842) and measures the lease liability based on the present value of
the lease payments discounted by the relevant borrowing rate and reduces the carrying value of the lease liability for lease payments
made.
The
Company accounts for all significant leases as either operating or finance leases. At lease inception, if the lease meets any of the
following five criteria, the Company will classify it as a finance lease: (i) the lease transfers ownership of the underlying asset to
the Company by the end of the lease term, (ii) the lease grants the Company an option to purchase the underlying asset that the lessee
is reasonably certain to exercise, (iii) the lease term is for the major part of the remaining economic life of the underlying asset,
(iv) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected
in the lease payments equals or exceeds substantially all (90% or more) of the fair value of the underlying asset, or (v) 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. Otherwise,
the lease will be treated as an operating lease.
For
leases with a term of 12 months or less, the Company is permitted to and did make an accounting policy election by class of underlying
assets not to recognize lease assets and lease liabilities. During the years ended December 31, 2023 and 2022, the Company recognized
lease expense for such leases on a straight-line basis over the lease term.
F-
11
Income
taxes
The
Company accounts for income taxes in accordance with FASB ASC Section 740. The Company is subject to the tax laws of the PRC and Hong
Kong (a special administrative region of PRC). The charge for taxation is based on actual results for the year as adjusted for items
that are non-assessable or disallowed; and it is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date. The Company is not currently subject to tax in the Cayman Islands or the British Virgin Islands.
Deferred
taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the Company's consolidated financial statements and the corresponding tax basis used
in the computation of assessable tax profit of loss. 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 future taxable income can be utilized with deferred
tax liabilities and/or net operating loss carry forwards. 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 statement of operations, except
when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Net
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 net deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the
relevant taxing 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, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that
has a
greater than 50% likelihood of being realized on examination
. For tax positions not meeting the "more likely than not"
test, no tax benefit is recorded. Penalties and interest incurred related to uncertain tax positions are classified in income tax expense
in the period incurred. Tax returns filed for the years ended December 31, 2020 to 2023 in the PRC and Hong Kong are subject to examination
by the applicable tax authorities.
Value
added tax
The
Company is subject to value added tax ("VAT") in the PRC. Revenue generated and purchases within the PRC from domestic suppliers
are generally subject to VAT at the rate of
13
% starting in April 2019. Certain VAT is refundable after filing rebate applications. As
of December 31, 2023 and 2022, the Company is entitled to receive a refund of approximately $
216,000
and $
200,000
, respectively, which
amounts are recorded in other receivables on the Company's consolidated balance sheets.
Related
parties
Parties
are considered to be related to the Company if they, directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members
of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with
if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting
parties might be prevented from fully pursuing its separate interests.
Share-based
compensation
The
Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the "Equity
Plan") on October 20, 2022, which was approved at the stockholders' meeting on December 16, 2022. The total aggregate ordinary
shares of the Company authorized for issuance during the term of the Equity Plan is limited to
2,500,000
shares.
On
February 22, 2023, (the "Grant Date"), the Compensation Committee of the Board of Directors (the "Board") of
the Company granted stock options to purchase
820,000
ordinary shares of the Company (the "Shares") at an exercise price
of $
1.23
per share, pursuant to the Equity Plan, to sixteen officers, directors and employees of the Company
and its subsidiaries (the "Grantees"). The Grants vested immediately on the Grant Date and each of the Grantees also entered
into a Stock Option Agreement with the Company on February 22, 2023. The options will expire five (
5
) years from the Grant Date and may
be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement.
The related cost of share-based payments for the ordinary shares is measured by fair
value ("FV") at the Grant Date. The FV is determined by using a binomial model. The cost is recognized in employee benefit
expenses recorded in the Company's consolidated statements of operations and comprehensive loss, together with a corresponding amount
in additional paid-in capital.
F-
12
Comprehensive
income (loss)
Comprehensive
income (loss) is defined as the increase or decrease in equity of the Company during a period from transactions and other events and
circumstances excluding transactions resulting from investments by owners and distributions to owners. Amongst other disclosures, ASC
220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components
of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements.
For each of the periods presented, the Company's comprehensive loss included the net loss and foreign currency translation adjustments
that are presented in the consolidated statements of operations and comprehensive loss.
Segment
reporting
The
Company follows ASC 280, Segment Reporting. The Company's Chief Executive Officer as the chief operating decision-maker reviews
the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a
whole and has determined that the Company has only one reportable segment. The Company operates and manages its business as a single
segment.
The
following table sets forth the Company's revenue from customers by geographical areas based on the location of the customers:
For the years ended
December 31,
2023
2022
2021
US
$
6,364,773
$
11,717,347
$
12,233,382
Canada
78,584
440,755
310,174
Total
$
6,443,357
$
12,158,102
$
12,543,556
The
following table sets forth the Company's property and equipment, for the purpose of geographical information:
As of December 31,
2023
2022
PRC
$
4,863,530
$
4,966,262
Hong Kong
810,054
168,304
Total
$
5,673,584
$
5,134,566
Earnings
(loss) per share
In
accordance with ASC 260, Earnings per Share, basic earnings (loss) per share is computed by dividing net income (loss) attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted income per share is calculated
by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any,
by the weighted average number of ordinary shares and dilutive ordinary equivalent shares outstanding during the period. Ordinary share
equivalents are excluded from the computation of diluted income per share as their effects would be anti-dilutive.
Recent
accounting pronouncements
In
December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about an
entity's effective tax rate reconciliation and additional discloses on income taxes paid. The new requirements are effective for
annual periods beginning after December 15, 2024. The guidance is to be applied prospectively, with an option for retrospective application.
The Company is currently evaluating the impact of this new guidance.
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on its consolidated financial statements.
F-
13
Concentration
of credit risk
Details
of the customers accounting for 10% or more of the Company's total revenues are as follows:
For the years ended
December 31,
2023
2022
2021
Customer A
$
1,786,656
27.5
%
$
5,654,248
46.5
%
$
6,833,866
54.5
%
Customer B
888,595
13.7
%
1,871,116
15.4
%
1,588,156
12.7
%
Customer C
1,723,506
26.5
%
1,586,681
13.1
%
1,310,376
10.5
%
Customer D
1,332,746
20.5
%
1,306,755
10.7
%
—
—
%
$
5,731,503
88.2
%
$
10,418,800
85.7
%
$
9,732,398
77.7
%
Details
of the customers which accounted for 10% or more of the Company's accounts receivable are as follows:
As of December 31,
2023
2022
Customer A
$
110,963
24.9
%
$
1,129,520
69.5
%
Customer B
165,600
37.2
%
312,327
19.2
%
Customer C
135,074
30.3
%
182,853
11.3
$
41
1
,637
92.4
%
$
1,624,700
100.0
%
Liquidity risk
The
Company reported consecutive years of net loss of approximately $
3.5
million and $
1.7
million for the years ended December 31, 2023 and
2022, respectively. In light of the dependency on its key customers and significant decline in its revenues (from approximately $
12.2
million for the year ended December 31, 2022 to $
6.4
million for the year ended December 31, 2023), the Company's operating cash
flows and liquidity could be negatively impacted by the risk of potential loss of business (or reduction in purchase orders) from any
such customers. The Company has historically funded its working capital needs from operations, equity financing and bank loans. In managing
the Company's liquidity risk, management monitors the Company's operating cash flows, evaluates its collection risk and priorities
its capital spending. As of December 31, 2023, the Company had cash of approximately $
4.5
million. Based on the Company's current
business plan and cash flows projection, management believes the operating activities and existing funds can provide sufficient liquidity
to meet the Company's working capital requirements for at least twelve months from the date of this report.
Supplier
risk
The
Company's operations are dependent on a limited number of suppliers for its major raw materials. There can be no assurance that
the Company will be able to secure the raw materials supply from these suppliers. Any termination or suspension of the supply arrangements,
any change in cooperation terms, or the deterioration of cooperation relationships with these suppliers may materially and adversely
affect the Company's results of operations.
Details
of the suppliers accounting for 10% or more of total purchases are as follows:
As of December 31,
2023
2022
2021
Supplier A
$
747,881
22.3
%
$
1,453,212
21.7
%
$
1,701,515
19.9
%
Supplier B
—
—
%
679,950
10.2
%
1,407,690
16.5
%
$
747,881
22.3
%
$
2,133,162
31.9
%
$
3,109,205
36.4
%
Details
of the suppliers which accounted for 10% or more of accounts payable are as follows:
As of December 31,
2023
2022
Supplier A
$
94,913
29.2
%
$
185,982
11.1
%
Supplier B
80,577
24.8
%
—
—
%
Supplier C
34,434
10.6
%
—
—
%
$
209,924
64.6
%
$
185,982
11.1
%
Foreign
currency risk
The
RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People's Bank
of China, controls the conversion of RMBs into foreign currencies. The value of the RMB is subject to changes in central government policies
and international economic and political developments that affect supply and demand in the China Foreign Exchange Trading System market
of cash and cash equivalents and restricted cash. The Company had $
81,226
and $
263,350
of cash and cash equivalents denominated in RMB
as of December 31, 2023 and 2022, respectively.
Certain
transactions of the Company are denominated in HKD which is different from the functional currency of the Company, and therefore the
Company is exposed to foreign currency risk. As the HKD is currently pegged to the USD, management considers that there is no significant
foreign currency risk arising from the Company's monetary assets denominated in USD.
F-
14
The
Company currently does not have a foreign currency hedging policy. However, management monitors the Company's foreign exchange
exposure periodically and will consider hedging significant foreign exchange exposure should the need arise.
NOTE
3 -
ACCOUNTS RECEIVABLE
Accounts
receivable as of December 31, 2023 and 2022 consisted of the following:
As of December 31,
2023
2022
Accounts receivable
$
445,500
$
1,624,809
Less: allowance for estimated credit losses
—
—
$
445,500
$
1,624,809
As
of December 31, 2023, 2022 and 2021,
no
allowance for estimated credit losses has been established as management believes that amounts outstanding are fully collectible.
For the year ended December 31, 2023 and 2022, the Company had written-off uncollectible accounts receivable of
nil
and $
105,204
respectively. As the date of this report, the Company's accounts receivable as of December 31, 2023 have been collected in
full.
NOTE
4 -
INVENTORIES
The
composition of inventories are as follows:
As of December 31,
2023
2022
Raw materials
$
48,422
$
35,270
Work-in-progress
4,615,592
4,300,962
Finished goods
363,733
136,255
Total
$
5,027,747
$
4,472,487
During
the years ended December 31, 2023, 2022 and 2021, there were
no
inventory reserves or inventory write offs.
NOTE
5 -
PROPERTY AND EQUIPMENT, NET
Property
and equipment, net consisted of the following:
As of December 31,
2023
2022
Office equipment
$
185,280
$
187,234
Production equipment
7,746,905
7,357,634
Motor vehicles
387,741
389,333
Leasehold improvements
876,709
95,539
Less: accumulated depreciation and amortization
(
3,523,051
)
(
2,895,174
)
Property and equipment, net
$
5,673,584
$
5,134,566
Total
depreciation and amortization expenses were $
693,531
, $
303,269
and $
259,122
for the years ended December 31, 2023, 2022 and 2021, respectively.
F-
15
NOTE
6 -
OTHER PAYABLES AND ACCRUALS
Other
payables and accruals consist of the followings:
As of December 31,
2023
2022
Accrued production cost
$
252,569
$
309,956
Accrued salary
177,995
161,761
Accrued social security benefits
110,906
105,155
Accrued utilities
34,683
25,817
Accrued business tax and others
49,198
75,283
Total
$
625,350
$
677,972
NOTE
7 -
RELATED PARTY BALANCES AND TRANSACTIONS
In
2018, the Company entered into a rental agreement with Kambo Security Products Limited for office space in Hong Kong. The rental
agreement is renewed annually. Kambo Security Products Limited is owned by Mr. Bong Lau, Mr. Wynn Hui, and Mr. Bun Lau, major
shareholders of ILA.
The major shareholders of ILA are committed to renewing the rental agreement with the Company for no less than
5 additional years
. Rent expense for the years ended December 31, 2023 2022 and 2021 was approximately $
74,000
,
$
54,100
and $
54,100
,
respectively.
NOTE
8 -
BANK BORROWINGS
On
May 14, 2021, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited for the maximum amount of HKD
1.0
million
(approximately $
0.1
million) for working capital purposes, with the term from June 14, 2021 to May 13, 2029, bearing interest at
2.75
%
per annum. Under the facilities, the Company borrowed HKD
1.0
million (approximately $
0.1
million), which is repayable in
96
equal monthly
installments of principal and interest thereon, commencing June 14, 2021.
On
October 8, 2020, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited for the maximum amount of HKD
1.0
million (approximately $
0.1
million) for working capital purposes, with the term from November 25, 2020 to November 24, 2028, bearing
interest at
2.75
% per annum. Under the facilities, the Company borrowed HKD
1.0
million ($
0.1
million), which is repayable in
96
equal
monthly installments of principal and interest thereon, commencing December 25, 2020.
On
April 28, 2020, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited for the maximum amount of HKD
4.0
million (approximately $
0.5
million) for working capital purposes, with the term from May 18, 2020 to May 17, 2028, bearing interest
at
2.75
% per annum. Under the facilities, the Company borrowed HKD
4.0
million ($
0.5
million), which is repayable in
96
equal monthly
installments of principal and interest thereon, commencing June 18, 2020.
On
November 3, 2017, the Company obtained banking facilities from the Bank of China (Hong Kong) Limited pursuant to which the Company may
borrow up to HKD
6.0
million (approximately $
0.8
million) for working capital purposes. On June 24, 2021, this banking facilities was
increased to HKD
7.0
million (approximately $
0.9
million). The credit facility bears interest at
5.5
% and it is personally guaranteed
by Mr. Wynn Hui and Mr. Bong Lau (both major shareholders and directors of the Company). The credit facility does not have an expiration
date and is collateralized by a property owned by Kambo Security Products Limited, a related party.
During
the years ended December 31, 2023, 2022 and 2021, interest expense related to these credit facilities was $
18,859
, $
26,836
and $
48,910
,
respectively.
The
following table represents the maturity of the Company's bank borrowings as of December 31, 2023:
For the years ending December 31,
Amount
2024
$
129,722
2025
86,154
2026
89,330
2027
92,623
2028
58,740
2029
7,472
Total Bank Borrowings
$
464,041
F-
16
NOTE
9 -
RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
The
Company determines if a contract contains a lease at inception. US GAAP requires that the Company's leases be evaluated and classified
as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the
lease term used in the evaluation includes the non-cancellable period for which the Company has the right-to-use the underlying asset,
together with renewal option periods when the exercise of the renewal option is reasonably certain or failure to exercise such option
would result in an economic penalty.
The
Company has the following operating leases:
●
Real
                                            estate leases for its manufacturing factory and electroplating production line in the PRC
                                            (annual payment of approximately $
622,000
) that will expire on
February 28, 2026
and
September
                                            30, 2026
, respectively. Various office parking facilities (annual payment of approximately
                                            $
16,000
) that will
expire on April 30, 2024 and November 30, 2024, March 31, 2024, respectively
.
●
Office
                                            equipment lease (annual payment of approximately $
4,000
) that will expire on
December 20,
                                            2025
, and various real estate leases for its office space in Hong Kong (annual payment of
                                            approximately $
173,000
) that will
expire on December 31, 2024, June 15, 2024 and July 31,
                                            2024, respectively
.
The
Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The leases
generally do not contain options to extend at the time of expiration.
Upon
adoption of ASU 2016-02, on January 1, 2019, the Company recognized lease liabilities of approximately $
1.7
million, with corresponding
right-of-use ("ROU") assets of the same amount based on the present value of the future minimum rental payments of the lease,
using an incremental borrowing rate of
4.75
% to
5.63
% based on the duration of the lease terms.
The
following table sets forth the five-year maturity schedule of the Company's lease liabilities:
For the years ending December 31,
Amount
2024
$
292,190
2025
93,185
2026
69,888
Total operating lease payments
455,263
Less: imputed interest
(
19,786
)
Present value of operating lease liabilities
$
435,477
Operating
lease expenses are allocated between the cost of revenues and selling, general, and administrative expenses. Total operating lease expenses
were approximately $
778,000
, $
497,000
and $
408,000
for the years ended December 31, 2023, 2022 and 2021, respectively.
NOTE
10 –
STOCK-BASED COMPENSATION
The
Company operates a share-based payment scheme (the "Scheme") for the purpose of providing incentives and rewards to eligible
participants who contribute to the success of the Company's operations. Eligible participants of the Scheme include the Company's
directors, employees and consultants.
The
2022 Omnibus Equity Plan
The
Board of Directors of the Company approved and adopted Intelligent Living Application Group Inc. 2022 Omnibus Equity Plan (the "Equity
Plan") on October 20, 2022, which was approved at the stockholders' meeting on December 16, 2022. The total aggregate ordinary
shares of the Company authorized for issuance during the term of the Equity Plan is limited to
2,500,000
shares.
F-
17
On
February 22, 2023, (the "Grant Date"), the Compensation Committee of the Board of Directors (the "Board") of
the Company granted stock options to purchase
820,000
ordinary shares of the Company (the "Shares") at an exercise price
of $
1.23
per share, pursuant to Equity Plan, to sixteen officers, directors and employees of the Company
and its subsidiaries (the "Grantees") The Grants vested immediately on the Grant Date and each of the Grantees also entered
into a Stock Option Agreement with the Company on February 22, 2023. The options will expire five (
5
) years from the Grant Date and may
be exercised by cashless exercise pursuant to the terms and conditions of the Stock Option Agreement.
The
stock options granted to officers, directors and employees are accounted for as equity awards and measured at their Grant Date fair values
of $
667,016
by using a binomial model. As of December 31, 2023, none of the Grants has been exercised. The Company does not believe that
the stock options granted will have any dilution impact on the Company's earnings per share since these stock options has not been
exercised as of December 31, 2023 and the Company operated at a loss for the year ended December 31, 2023.
NOTE
1
1 –
EQUITY TRANSACTIONS
Preferred
shares
On
July 16, 2021, the Company amended its articles of association and authorized
50,000,000
preferred shares with a par value of $
0.0001
.
No
preferred shares were issued or registered in the IPO. There were
no
preferred shares issued and outstanding as of December 31, 2023
and 2022.
O
rdinary
shares
On
July 15, 2022, the Company closed its IPO of
5,060,000
ordinary shares priced at $
4.00
per share.
NOTE
1
2 -
INCOME TAXES
Corporate
income taxes
Cayman
Islands
The
Company was incorporated in the Cayman Islands and is not subject to tax on income or capital gains under the laws of the Cayman Islands.
The Company mainly conducts its operating business through its subsidiaries in the PRC and Hong Kong. Additionally, the Cayman Islands
does not impose a withholding tax on payments of dividends to shareholders.
British
Virgin Islands
The
Company's subsidiary incorporated in the British Virgin Islands is not subject to taxation.
Hong
Kong
The
Company's Hong Kong subsidiaries, including Hing Fat Industrial Limited, Kambo Locksets Limited, Bamberg (HK) Limited and Kambo
Hardware Limited, are subject to Hong Kong Profits Tax on their taxable income as reported in their statutory financial statements adjusted
in accordance with relevant Hong Kong tax laws. Hong Kong Profits Tax has been calculated at
16.5
% of the estimated assessable profit
for the years ended December 31, 2023, 2022 and 2021. Tax losses can be carried forward to offset profits in future years until fully
absorbed but cannot be carried back.
PRC
The
Company's PRC operating subsidiary, Dongguan Xingfa Hardware Products Co., Ltd, is 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 rate 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"), Chinese enterprises are subject to an income tax rate of
25
% after appropriate tax adjustments. The
net tax loss attributable to those PRC entities can only be carried forward for a maximum period of
five years
, through 2028.
F-
18
(Loss)
income before provision for income taxes is as follows:
For the years ended
December 31,
2023
2022
2021
Cayman and BVI
$
(
1,658,203
)
$
(
138,363
)
$
(
335,802
)
Hong Kong
(
1,959,799
)
(
1,500,125
)
(
983,008
)
PRC
172,723
(
17,415
)
(
67,705
)
Total
$
(
3,445,281
)
$
(
1,655,903
)
$
(
1,386,515
)
Provision
for income taxes were $
56,237
,
nil
and
nil
for the years ended December 31, 2023, 2022 and 2021.
Significant
components of deferred tax assets are as follows:
As of December 31,
2023
2022
Deferred tax assets:
Net operating loss carryforwards
$
972,930
$
651,643
Total deferred tax assets
972,930
651,643
Deferred tax liabilities:
Depreciation
—
(
14,955
)
Total deferred tax liabilities
—
(
14,955
)
Total deferred tax assets-net
972,930
636,688
Less: Valuation allowance
(
972,930
)
(
636,688
)
Deferred tax assets, net
$
—
$
—
Future
tax benefits which may arise as a result of net operating loss carry-forward have not been recognized in the accompanying consolidated
financial statements as their realization has not been determined likely to occur. As of December 31, 2023 and 2022, the Company believes
it is more likely than not that its PRC and HK subsidiaries will be unable to fully utilize their deferred tax assets related to their
net operating loss carry-forward in the PRC and Hong Kong. If the Company is unable to generate taxable income in its PRC and Hong Kong
operations, it is more likely than not that it will not have sufficient income to recognize the net deferred tax assets. As a result,
the Company provided a 100% valuation allowance on its net deferred tax assets of approximately $
973,000
and $
637,000
related to its
operations in the PRC and Hong Kong as of December 31, 2023 and 2022, respectively. The valuation allowance increased by $
336,242
, $
242,472
and $
185,995
during the year ended December 31, 2023, 2022 and 2021, respectively.
Reconciliation
of effective income tax rate is as follows:
For the years ended
December 31,
2023
2022
2021
PRC statutory tax rate
25.0
%
25.0
%
25.0
%
Effect of tax rate differential (HK)
(
4.8
)
(
7.7
)
(
6.0
)
Tax effect of non-deductible expenses
(
0.6
)
—
—
Valuation allowance
(
18.0
)
(
17.3
)
(
19.0
)
Effective tax rate
1.6
%
—
%
—
%
Uncertain
tax position
There
were
no
uncertain tax positions as of December 31, 2023 and 2022 and management does not anticipate any potential future adjustments
which would result in a material change to its tax positions. For the years ended December 31, 2023 and 2022, the Company did not incur
any tax related interest or penalties.
NOTE
1
3 -
SUBSEQUENT EVENTS
The
Company has analyzed its operations subsequent to December 31, 2023, through the date of this report and have determined that the Company
does not have any material subsequent events to disclose in these unaudited condensed consolidated financial statements.
F-
19
NOTE
1
4 -
CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
The
Company performed a test of its restricted net assets of the consolidated subsidiaries in accordance with the Securities and Exchange
Commission's 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 information of the parent company.
The
subsidiaries did not pay any dividends to the Company for the periods presented. For the purpose of presenting parent-only financial
information, the Company records its investment in its subsidiaries under the equity method of accounting. Such investment is presented
on the separate condensed statement of financial position of the Company as "Investment in subsidiaries".
ILA
became the parent company of the Company as a result of the execution of the Share Exchange Agreement in April 2020. ILA is a holding
company with no bank account, did not have any significant capital and other commitments, and did not have any long-term obligations,
or guarantees as of December 31, 2023. ILA did not have any business activities during the year ended December 31, 2023.
The
following is the parent company balance sheets:
As of December 31,
2023
2022
USD
USD
(Unaudited)
(Unaudited)
ASSETS
NON-CURRENT ASSETS
Investment in subsidiaries
$
16,402,393
$
19,451,811
TOTAL ASSETS
$
16,402,393
$
19,451,811
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
$
—
$
—
SHAREHOLDERS' EQUITY
Preferred shares, par value $
0.0001
per share;
50,000,000
shares authorized;
none
issued and outstanding as of December 31, 2023 and 2022
—
—
Ordinary shares, par value $
0.0001
per share;
450,000,000
shares authorized;
18,060,000
shares issued and outstanding as of December 31, 2023 and 2022
1,806
1,806
Additional paid-in capital
19,586,674
18,919,658
Retained earnings
(
2,925,533
)
575,985
Accumulated other comprehensive (loss) gain
(
260,554
)
(
45,638
)
TOTAL SHAREHOLDERS' EQUITY
16,402,393
19,451,811
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
16,402,393
$
19,451,811
The
following is the parent company statements of operations and comprehensive loss:
For the Years Ended
December 31,
2023
2022
2021
USD
USD
USD
(Unaudited)
(Unaudited)
(Unaudited)
EQUITY LOSS
$
(
1,658,203
)
$
(
1,538,363
)
$
(
1,386,515
)
NET LOSS
$
(
1,658,203
)
$
(
1,538,363
)
$
(
1,386,515
)
COMPREHENSIVE LOSS
Net loss
$
(
1,658,203
)
$
(
1,538,363
)
$
(
1,386,515
)
Foreign currency translation adjustments
(
214,916
)
(
420,941
)
52,289
COMPREHENSIVE LOSS
$
(
1,873,119
)
$
(
1,959,304
)
$
(
1,334,226
)
F-
20