20-F: J-Long Group Reports Strong Revenue Rebound and Profit Growth in Fiscal 2025 Amidst Strategic Expansion and Governance Enhancements

J-Long Group Limited, a distributor of garment trims, announced a significant 38% revenue increase and a 221% surge in net income for the fiscal year ended March 31, 2025, driven by increased customer orders and strategic expansion into Vietnam, despite ongoing internal control weaknesses.

Summary

• Revenue increased by 38% to $39,075,090 for the fiscal year ended March 31, 2025, up from $28,378,669 in fiscal year 2024.
• Net income attributable to J-Long Group Limited surged by 221% to $2,593,248 in fiscal year 2025, compared to $783,660 in fiscal year 2024.
• Gross profit rose to $11,257,239 in fiscal year 2025 from $6,797,258 in fiscal year 2024, with gross profit margin increasing to 29% from 24%.
• The company successfully regained compliance with Nasdaq's Minimum Bid Requirement Listing Rule on January 6, 2025, after receiving a non-compliance notification on May 13, 2024.
• A 1-for-10 reverse stock split became effective on December 10, 2024, reducing outstanding ordinary shares to 3,140,000.
• J-Long Trims Vietnam Co., Ltd (JLVN) was incorporated on May 27, 2024, as an operating subsidiary in Vietnam, with JLHK holding a 51% controlling stake.
• The company declared a special cash dividend of $6,000,000 on February 29, 2024, paid to shareholders on March 12, 2024, equating to approximately $0.19 per share pre-reverse split.
• Material weaknesses in internal control over financial reporting were identified as of March 31, 2025, primarily due to a lack of sufficient competent financial reporting and accounting personnel with US GAAP and SEC knowledge, limited information processing controls, inadequate segregation of duties, and lack of formal policies for significant accounting transactions.
• The company adopted a 2024 Equity Incentive Plan on June 17, 2024, reserving 628,000 shares, and granted 621,720 shares to consultants and an employee on November 26, 2024.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial recovery with significant revenue and net income growth, improved gross margins, and positive operating cash flow. Strategic expansion into Vietnam and continued Nasdaq compliance are positive indicators. However, the identified material weaknesses in internal controls and the inherent risks associated with operating in Hong Kong under PRC oversight, as well as reliance on a single major licensor, temper the overall positive sentiment. The lack of anticipated future dividends also limits direct shareholder returns.

Positives

• Achieved substantial revenue growth of 38% in fiscal year 2025, reaching $39,075,090, indicating strong market demand and effective sales strategies.
• Reported a significant increase in net income by 221% to $2,593,248 in fiscal year 2025, demonstrating improved profitability.
• Gross profit margin improved to 29% in fiscal year 2025 from 24% in fiscal year 2024, reflecting better cost management or pricing power.
• Successfully regained compliance with Nasdaq's minimum bid price requirement, ensuring continued listing on the Nasdaq Capital Market.
• Established a manufacturing plant in Vietnam (JLVN) in May 2024, diversifying operations and potentially improving cost efficiency.
• Maintained long-standing relationships with over 100 international brands and a 25-year partnership with a leading U.S. multinational conglomerate (3M Scotchlite authorized distributor).
• Demonstrated commitment to environmental sustainability and quality control through certifications like Bluesign SYSTEM PARTNER and Oeko-Tex STANDARD 100.
• Increased cash and cash equivalents to $10,669,134 by March 31, 2025, from $5,161,818 in the prior year, indicating strong cash generation from operations.

Negatives

• Identified material weaknesses in internal control over financial reporting, including insufficient competent financial reporting personnel, limited information processing controls, inadequate segregation of duties, and lack of formal policies for significant accounting transactions.
• Selling and marketing expenses increased by 60% to $3,318,418 in fiscal year 2025, outpacing revenue growth, partly due to higher commissions and share-based compensation.
• General and administrative expenses increased by 27% to $5,540,564 in fiscal year 2025, primarily due to higher officers' and directors' remuneration and professional fees.
• Revenue from Asia (excluding Hong Kong and China) continued to decrease, falling to $9,129,165 in FY2025 from $12,481,669 in FY2024 and $13,618,640 in FY2023.
• The company does not intend to pay dividends for the foreseeable future, relying on price appreciation for investor returns.
• Reliance on a single U.S. licensor (3M) for a significant portion of products poses a risk if the distribution agreements are terminated or unfavorably changed.
• The company's management team lacks extensive experience in managing a U.S. public company and complying with its complex laws and regulations.

Risks

• The PRC government may exercise significant oversight and discretion over business operations in Hong Kong, potentially intervening or imposing restrictions on cash movement and dividend distribution.
• Uncertainties exist regarding the interpretation and enforcement of PRC laws and regulations, which could change rapidly and affect the company's holding company structure or operations.
• Difficulty for overseas regulators to conduct investigations or collect evidence within China, including Hong Kong, potentially limiting legal protection for investors.
• Adverse regulatory developments in China and increased SEC scrutiny on U.S.-listed China-based companies could increase compliance costs and disclosure requirements, or lead to delisting under the HFCA Act.
• Potential subjection to PRC data security laws, which could materially and adversely affect business if compliance fails.
• Funds or assets in Hong Kong may not be available for use outside of Hong Kong due to potential PRC government restrictions on capital transfers.
• Geopolitical risks, high inflation, and uncertainties in Vietnam's economic, political, and legal environment could adversely impact future business operations in the region.
• Reliance on demand from major customers and the absence of long-term sales agreements could lead to fluctuating sales and difficulty in projecting future orders.
• Inability to timely and accurately respond to changes in market trends in outerwear, sportswear, and fashion apparel could affect competitiveness.
• Increases in procurement prices from materials and manufacturing services suppliers may adversely affect profitability if costs cannot be passed on to customers.
• Dependence on a U.S. licensor for most products and the non-exclusive, terminable nature of distribution agreements pose a significant business risk.
• Reliance on manufacturing services suppliers and potential disruptions at ports could adversely affect timely product delivery and business operations.
• Fierce competition in the highly fragmented reflective materials industry may necessitate competitive pricing strategies and impact market share.
• Inability to attract and retain core management and other key personnel could adversely affect operational stability and efficiency.
• Inadequate insurance coverage may not protect against all potential losses, particularly for business interruption or certain natural disasters.
• Ineffective inventory management could lead to obsolescence, write-downs, or shortages, impacting sales and reputation.
• Exposure to credit risks of customers, with potential adverse effects on working capital if major customers fail to settle outstanding amounts.
• Risk of default on credit facilities, which could lead to acceleration of debt and substantial adverse effects on operations.
• Seasonal fluctuations in demand for apparel products may lead to uneven operating results.
• Exposure to product returns and product liability claims, with potential for significant costs and reputational harm.
• Management's lack of experience in managing a U.S. public company and complying with its laws may adversely affect business and financial results.
• Potential for litigation, arbitration, or other legal proceedings to result in substantial costs and diversion of resources.
• Dependence on the reliability of computer systems and the ability to implement, maintain, and upgrade information technology and security measures.
• Inability to successfully implement future business plans and objectives due to factors beyond control, such as competition or resource limitations.
• Exposure to acts of war, terrorist attacks, epidemics (like COVID-19), political unrest, and adverse weather conditions.
• The trading price of Ordinary Shares may experience rapid and substantial volatility due to small capitalization, low public float, and external market factors.
• Difficulties in effecting service of legal process or enforcing foreign judgments in the Cayman Islands or Hong Kong against the company or its management.
• Shareholders may have more difficulties protecting their interests than they would as shareholders of a U.S. corporation due to differences in corporate law.
• Potential for the company to be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, leading to adverse tax consequences for U.S. holders.
• As a controlled company, the company may choose to exempt itself from certain Nasdaq corporate governance requirements, potentially affording less protection to public shareholders.

Future Outlook

The company intends to strengthen its design and development capabilities by hiring additional experienced personnel, expand its regional sales presence and marketing capabilities through increased marketing budget and participation in exhibitions, selectively pursue acquisitions and strategic investments focusing on companies with greater sales, R&D, and manufacturing capabilities, and increase warehouse and storage capacity to meet anticipated demand growth. The company currently intends to retain all available funds and future earnings for business operation and expansion and does not anticipate declaring or paying any dividends in the foreseeable future.

Management Comments

• Management confirms that based on PRC laws and regulations effective as of the date of this report, our operations in Hong Kong and our registered public offering in the United States are not subject to the review nor prior approval of the Cyberspace Administration of China (the CAC) nor the China Securities Regulatory Commission (the CSRC).
• Management confirms that JL, Sun Choice, and our operating subsidiary, JLHK, are not required to obtain any permissions or approvals from any Chinese authorities to operate their business as of the date of this Annual Report.
• Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent.
• Management does not expect any financial institutions will fail to meet their obligations resulting in material credit losses to us.
• Management monitors foreign exchange exposure and will consider hedging significant foreign exchange exposure should the need arise.
• Management monitors interest rate exposure and will consider hedging significant interest rate exposures should the need arise.
• Management believes that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, suitable additional space will be available on commercially reasonable terms to accommodate any expansion of our operations.
• Our directors expect that our Operating Subsidiaries will not directly incur significant costs for compliance with any applicable environmental protection rules and regulations in the future.
• Our directors believe our insurance coverage is adequate to insure against the risks relating to our operations, given the size and nature of our business.
• Our management has concluded that our internal control over financial reporting is not effective as of March 31, 2025.
• Management is committed to continuing efforts to enhance the effectiveness of our internal control over financial reporting.

Industry Context

J-Long Group operates in the highly fragmented and competitive reflective materials and garment trims industry. Its long-standing relationships with over 100 international apparel brands and a 25-year partnership with a leading U.S. multinational conglomerate (3M Scotchlite) provide a strong competitive advantage. The company's expansion into Vietnam with a new manufacturing facility aligns with the industry trend of moving production to lower-cost regions in Southeast Asia to improve cost efficiency. The focus on sustainable practices, evidenced by Bluesign and Oeko-Tex certifications, positions the company favorably in an increasingly environmentally conscious market. The apparel market's seasonality, with peak orders from December to March and July to October, influences the company's operational cycles.

Comparison to Industry Standards

• The company's gross profit margin of 29% in FY2025, up from 24% in FY2024, suggests an improvement in profitability that could be competitive within the fragmented garment trims industry, where cost efficiency is a key factor.
• The establishment of a manufacturing facility in Vietnam (JLVN) aligns with a broader industry trend among apparel manufacturers to relocate production to Southeast Asia, such as Vietnam, to achieve economies of scale and lower marginal costs, as noted in the filing's competitive factors.
• The company's long-term relationships with over 100 international apparel brands and a 25-year partnership with 3M Scotchlite reflect a strong client relationship strategy, which is a critical competition factor in the industry where brand owners value historical partnerships highly.
• The company's certifications (Bluesign SYSTEM PARTNER, Oeko-Tex STANDARD 100, HIGG Facility Environmental Module) demonstrate a commitment to environmental sustainability and quality control, which are increasingly important standards for attracting and retaining customers in the global apparel market.
• The identified material weaknesses in internal control over financial reporting, particularly the lack of sufficient competent personnel with US GAAP and SEC knowledge, indicate a gap compared to the robust internal control standards expected of publicly traded companies, especially those listed on U.S. exchanges.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not a party to, and is not aware of any threat of, any legal proceeding that is likely to have a material adverse effect on its business, financial condition, or operations as of the date of this Annual Report.

Related Party Transactions

• Sales of garment trims to Guangdong Rongmian Accessories Technology Co., Ltd. (40% owned by Mr. Edwin Wong) amounted to $156,816 in FY2024, but ceased in FY2025.
• Purchases of garment trims from Guangdong Rongmian Accessories Technology Co., Ltd. amounted to $5,853,973 in FY2024 and $7,773,382 in FY2025.
• Commission income from Guangdong Rongmian Accessories Technology Co., Ltd. was $111,326 in FY2025.
• Purchases of garment trims from New Sole (Shanghai) Technology Ltd. (33% owned by Mr. Danny Wong) amounted to $308,093 in FY2024 and $2,198,891 in FY2025.
• Purchases of garment trims from Jiaxing Newsole Reflective Material Co., Ltd. (90% owned by New Sole (Shanghai) Technology Ltd.) amounted to $1,250,837 in FY2024 and $990,417 in FY2025.
• Purchases of garment trims from J-Long Vietnam Company Limited (wholly owned by Mr. Danny Wong) amounted to $66,110 in FY2025.
• Administrative services provided by J-Long Vietnam Company Limited amounted to $128,539 in FY2025.
• Lease payments for office and warehouse space from Charm Vision Holdings Limited (99.9% owned by Mr. Danny Wong) were $216,831 in FY2024 and $157,202 in FY2025.
• Lease payments for a carpark from Charm Vision Holdings Limited were $12,308 in FY2024 and $8,923 in FY2025.
• Lease payments for office and warehouse space from Everlink Enterprises Limited (wholly owned by Mr. Danny Wong) were $143,192 in FY2024 and $103,815 in FY2025.
• Mr. Danny Tze Ching Wong provides unlimited joint or personal guarantees for the company's bank facilities.
• The company rents a residential property it owns to Mr. Danny Wong, receiving approximately $64,103 in rent for FY2025.
• A short-term loan of HK$3,800,000 (approx. $488,260) was made from Everlink Enterprises Limited in January 2024, fully collected in FY2025.
• A loan from J-Long Trims Pte. Ltd. (controlled by controlling shareholder of Guangdong Rongmian Accessories Technology Co., Ltd.) of $200,000 was received in March 2025, with a 12-month term and 4% annual interest.

Stakeholder Impact

• **Shareholders**: Positive impact from significant revenue and net income growth, and successful Nasdaq compliance. However, the lack of anticipated future dividends means returns are solely dependent on share price appreciation, and material weaknesses in internal controls pose a risk to financial reporting reliability.
• **Employees**: The company maintains a good working relationship with employees, provides competitive salaries, and offers continuous education and training programs, which should positively impact employee morale and retention. The establishment of a Vietnam subsidiary also creates new employment opportunities.
• **Customers**: The company's commitment to quality control, diversified product portfolio, and expansion of sales and marketing capabilities aim to better serve customer needs and secure continuous orders. The new Vietnam manufacturing facility is expected to support production and delivery schedules.
• **Suppliers**: The company maintains strong and stable relationships with its materials and manufacturing services suppliers, including a 25-year relationship with its U.S. licensor. This provides a steady supply chain, but reliance on a few major suppliers and the non-exclusive nature of agreements pose risks.
• **Creditors**: The company's improved financial performance and positive operating cash flow enhance its ability to meet financial obligations. However, the reliance on personal guarantees from Mr. Danny Wong for bank facilities indicates a continued dependence on key individuals for credit access.

Next Steps

• Continue to implement measures to improve internal control over financial reporting, including recruiting additional U.S. GAAP and SEC-knowledgeable personnel, setting up comprehensive accounting policies, and enhancing internal audit functions.
• Actively pursue renewal of the Bluesign SYSTEM PARTNER certification, which expired on June 26, 2025.
• Strengthen design and development capabilities by hiring additional experienced personnel with skills and prior working experience in apparel brands.
• Expand regional sales presence and marketing capabilities by increasing the sales and marketing team in Hong Kong and increasing the marketing budget for online and offline promotions.
• Selectively pursue acquisitions and strategic investments, focusing on companies with greater sales and marketing, R&D, and manufacturing capabilities, especially in reflective, heat transfers, and eco-friendly materials.
• Increase warehouse and storage capacity to facilitate growth in demand for materials and products.

Key Dates

Recommendation

J-Long Group Limited has demonstrated a strong financial rebound in fiscal year 2025, with impressive revenue and net income growth, and an improved gross profit margin. The successful resolution of the Nasdaq bid price deficiency is a positive for market stability. Strategic initiatives, such as the Vietnam manufacturing expansion and enhanced sales efforts, position the company for continued growth. However, the identified material weaknesses in internal controls over financial reporting are a significant concern that needs to be fully addressed to ensure financial transparency and investor confidence. Furthermore, the company's stated intention to retain all future earnings for business expansion, rather than paying dividends, means that investor returns will be solely dependent on capital appreciation, which can be volatile given the company's relatively small public float and exposure to geopolitical and industry-specific risks. A 'hold' recommendation is appropriate as the positive operational momentum is balanced by internal control deficiencies and external market uncertainties, warranting a cautious approach until further progress on governance and sustained performance is demonstrated.

Keywords

Garment Trims, Reflective Materials, Heat Transfers, Apparel Industry, Hong Kong, Vietnam, SEC Filing, Form 20-F, Financial Results, Revenue Growth, Net Income, Nasdaq Listing, Internal Controls, Corporate Governance, Supply Chain, 3M Scotchlite, International Brands, Manufacturing, Risk Factors, PCAOB, HFCA Act, Related Party Transactions