F-1/A: Philippine Green Technologies Firm Files for Nasdaq Public Offering

A Philippine-based waste materials and scrap metal recycling company is seeking to list its Class A Ordinary Shares on the Nasdaq Global Market through an initial public offering, aiming to expand production capabilities and global market presence.

Summary

• One and one Green Technologies. INC, a Cayman Islands holding company, conducts its primary business of recycling, production, and trading of scrap metals in the Philippines through Variable Interest Entities (VIEs), Yoda Metal and DL Metal.
• The company reported revenues of $53,463,785 for the fiscal year ended December 31, 2024, a 29.54% increase from $41,270,484 in 2023.
• Net income for FY2024 was $6,476,772, up from $5,567,174 in FY2023.
• Gross profit increased to $10,570,827 in FY2024 from $8,882,183 in FY2023, though gross margin slightly decreased from 21.52% to 19.77% due to higher raw material purchase prices.
• The company is offering 2,500,000 Class A Ordinary Shares in its initial public offering, representing approximately 5.64% of Class A Ordinary Shares post-offering, with an estimated price range of $4 to $6 per share.
• Expected gross proceeds from the offering are approximately $10,000,000, or $11,500,000 if the over-allotment option is fully exercised.
• Net proceeds from the offering are estimated at $8.07 million, allocated for business expansion (15% for machinery, 5% for land, 15% for new manufacturing facility) and working capital (65%).
• The company operates with an annual processing capacity of approximately 300,000 tons of electronic waste and metal scraps.
• Ms. Caifen Yan, Chairman of the Board and Director, will control approximately 91.75% of the aggregate voting power post-offering through One and one International Limited, making the company a 'controlled company' under Nasdaq rules.

Sentiment

Score: 7

Explanation: The company demonstrates strong financial growth and a clear strategic vision for expansion, leveraging its environmentally friendly technology and government authorizations. However, significant risks related to customer/supplier concentration, lack of insurance, and the complex VIE structure, coupled with the inherent uncertainties of an IPO and operating in a politically sensitive region, temper the overall positive outlook.

Positives

• Significant revenue growth of 29.54% from FY2023 to FY22024, reaching $53,463,785.
• Increased net income from $5,567,174 in FY2023 to $6,476,772 in FY2024.
• Possesses environmentally friendly technology, including an exhaust gas recirculation system, which enhances efficiency and minimizes contamination, setting it apart from competitors.
• Fully authorized by the Philippine government to process hazardous wastes under The Basel Convention, holding all necessary permits and licenses (ECC, Permit to Operate, Discharge Permit, Import and Export Permit).
• Benefits from an experienced and visionary management team with extensive industry knowledge and a vast network of suppliers and customers.
• Operates in a resource recycling industry that exhibits counter-cyclical characteristics, showing resilience to economic recessions.
• Has established stable customer and supplier bases, with over 60 suppliers and nine principal importers.
• Plans to extend production capabilities by leveraging advanced separation technology to isolate precious metals from copper products, expecting an 8% to 10% increase in profit margins for that product line.
• Aims to reduce transportation costs by acquiring a bulk carrier terminal and setting up a new manufacturing facility nearby, projected to save approximately $5 million per 100,000 tons annually.

Negatives

• Substantial supplier concentration, with four suppliers accounting for approximately 79.5% of total purchases in FY2024 and three suppliers accounting for 85% in FY2023.
• High customer concentration, with three major customers accounting for approximately 96.03% of total revenue in FY2024 and two customers accounting for 73.83% in FY2023.
• Does not currently maintain any commercial insurance coverage, exposing the company to significant operational and financial risks from accidents, property damage, or legal claims.
• Reliance on a Variable Interest Entity (VIE) structure in the Philippines, which may be less effective than direct ownership and could incur substantial costs to enforce contractual arrangements.
• Exposure to geopolitical, regulatory, and economic risks due to reliance on customers in China and Hong Kong, and political/social instability in the Philippines.
• Executive officers have limited prior experience conducting an initial public offering and managing a public company.
• The dual-class share structure concentrates voting control with Ms. Caifen Yan (91.75% voting power post-offering), potentially limiting control for other shareholders.
• The company may incur net losses in the future due to anticipated increases in operating expenses and public company administrative costs.
• The initial public offering price is substantially higher than the company's current net tangible book value per share, leading to immediate and substantial dilution for new investors.

Risks

• The Group does not have a long operating history as an integrated group, potentially leading to operational, financial, and other difficulties.
• Limited experience operating as a standalone public company, which may cause slower reactions to industry changes and divert management attention.
• Potential for future losses due to increasing operating expenses and public company costs, which may not be offset by revenue growth.
• Historical financial and operating results are not a guarantee of future performance, subject to unpredictable factors like economic conditions, inflation, and interest rates.
• Substantial supplier concentration poses risks if major suppliers fail to meet obligations or relationships deteriorate.
• Dependence on a small group of customers for most revenue means loss or reduction in purchases from any key customer could materially affect business.
• Reliance on customers in China and Hong Kong exposes the company to significant geopolitical, regulatory, and economic risks.
• Operational, regulatory, and reputational risks related to environmental compliance, workplace safety, and handling of waste materials, with potential for more stringent regulations and compliance costs.
• Absence of commercial insurance coverage exposes the company to significant financial liabilities from accidents, property damage, equipment failures, and legal claims.
• Potential for litigation and regulatory investigations and proceedings, which may result in claims for damages, asset freezing, diversion of management attention, and reputational damage.
• Future strategic acquisitions, investments, and partnerships could pose risks, increase leverage, dilute existing shareholders, and impact profitability.
• Any failure by the VIEs or their shareholders to perform obligations under Contractual Arrangements would have a material adverse effect on the business, as enforcement relies on Philippine law which is less developed.
• Lack of requisite approvals, licenses, or permits, or non-compliance with relevant laws and regulations, may have a material adverse effect.
• Adverse material changes to the Philippines market (economic recession, pandemic, infectious disease outbreak) could negatively affect business.
• Disruptions to production due to adverse weather conditions (rainfall, flood, typhoons) could cause damage and suspend operations.
• Potential conflicts of interest may regularly be encountered, and failure to address them could adversely affect the business and reputation.
• Political and social instability in the Philippines, including international conflicts (e.g., West Philippine Sea dispute) and terrorist activities, could unsettle the economy and affect operations.
• Inflation in the Philippines could negatively affect profitability and growth by increasing costs for materials, labor, and services, and creating foreign exchange risks.
• Customs restrictions for the importation and exportation of metals, including changes in regulations or trade restrictions, could impact sourcing efficiency and cost-effectiveness.
• Difficulty in enforcing U.S. judgments against the company, its directors, executive officers, or affiliates due to incorporation in the Cayman Islands and assets/personnel outside the U.S.
• Corporate actions will be substantially controlled by Ms. Caifen Yan, potentially depriving other shareholders of a premium for their shares and reducing investment value.
• As a foreign private issuer, the company is exempt from certain U.S. securities rules and Nasdaq corporate governance standards, which may afford less protection to shareholders.
• Risk of losing foreign private issuer status in the future, leading to significant additional costs and expenses.
• Potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. holders.
• An active trading market for Class A Ordinary Shares may not develop, affecting liquidity and trading price.
• Share price may fluctuate significantly, leading to potential loss of investment, and litigation may be brought against the company.
• Class A Ordinary Shares may trade under $5.00 per share, classifying them as 'penny stock' and subjecting them to trading restrictions.
• Uncertainty regarding future dividend payments, as the board has discretion and is subject to various factors and restrictions.
• Failure to meet applicable Nasdaq listing requirements could lead to delisting, reduced liquidity, and decreased ability to raise capital.
• Significant expenses and management time will be incurred as a public company, potentially negatively impacting financial performance.
• Failure to maintain an effective system of disclosure controls and internal controls over financial reporting could impair timely and accurate financial statements.
• As an emerging growth company, the company may take advantage of reduced reporting requirements, potentially limiting information available to investors.
• Broad discretion in the use of net proceeds from the offering, with potential for ineffective application of funds.

Future Outlook

The company's growth strategies for 2025 focus on geographical expansion into Southeast Asia and other international markets, establishing stable raw material sources from Japan and South Korea. It plans to recruit an international business development team to strengthen capabilities across Europe, America, and Asia. Future plans include extending production capabilities by advancing processing techniques to isolate precious metals, strengthening customer and sales agent partnerships, and reducing transportation costs by acquiring a bulk carrier terminal and building a new manufacturing facility nearby. The company also expects to set up an additional facility within three years specifically for lithium battery recycling, anticipating significant growth opportunities in this market.

Management Comments

• Management believes their environmentally friendly technology, particularly the in-house exhaust gas recirculation system, sets them apart from competitors by enhancing process efficiency and minimizing contamination.
• Management is actively monitoring inflation trends and has implemented strategies such as pricing adjustments, cost-saving measures, and evaluating foreign currency hedging to mitigate its impact.
• Management believes that their proprietary technologies and research and development capabilities help them develop products to satisfy customers and retain/develop business.
• Management expects to acquire new customers through participation in international exhibitions of renewable resources to mitigate customer concentration risk.
• Management expects to achieve profitability in Japan and Korea within two years through joint ventures focused on waste metal restoration and detoxification.

Industry Context

The company operates in the waste materials and scrap metal recycling industry, classified under SIC code 5093. This sector is driven by rapid urbanization and increasing awareness about sustainability, leading to growing demand for recycled metals in consumer goods, infrastructure, and the automotive industry. The global recycled non-ferrous metals market was valued at $150-$160 billion in 2024, with copper and aluminum production from scrap showing significant increases. The Philippines scrap metal recycling market is projected to grow at a CAGR of 3.9% (2020-2026), supported by government initiatives on waste management. The industry in the Philippines is highly diversified and competitive, with many small players and a low concentration of large enterprises. The company highlights its competitive advantage through environmentally friendly technology and government authorization to process hazardous wastes, differentiating itself from routine scrap metal processors.

Comparison to Industry Standards

• The document states that the Philippines scrap metal recycling market is projected to register a compound annual growth rate of 3.9% during the forecast period of 2020-2026. The global recycled metal market is projected to grow at a CAGR of 3.6%.
• The company's revenue growth of 29.54% from FY2023 to FY2024 significantly outpaces the general market growth rates mentioned for the Philippines and global recycled metal markets, indicating strong performance relative to industry averages.
• The document notes that 'most small scrap metal recycle enterprises have weak technical, financial, and research capabilities' and that 'larger scale enterprises are gradually highlighting their competitive advantages in the market with their large-scale processing capabilities and legal certificates and licenses.' The company positions itself as a larger-scale enterprise with advanced technology and full government authorization, suggesting it is well-positioned against smaller, less capable competitors.
• The company's in-house exhaust gas recirculation system is highlighted as a differentiator from 'competing technologies, such as table concentrators, [that] cannot prevent pollution during the final stages of processing,' implying a higher environmental standard than some industry peers.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this prospectus, the company, its subsidiary, nor the VIEs have been involved in any material legal or administrative litigation that may have a material adverse effect on the business, balance sheet, operating performance, and cash flow.
• The company is not, nor has it ever been, party to any legal proceedings.

Related Party Transactions

• The company has an amount owed to Mr. Huajun Yan, Chief Operating Officer and Director, for working capital advances. This amount was $980,833 as of December 31, 2024, and $897,638 as of December 31, 2023. These advances are non-interest bearing and without maturity.
• The Audit Committee will be tasked with the review and approval of all related party transactions upon the effectiveness of the registration statement.

Stakeholder Impact

• **Shareholders:** New investors will face immediate and substantial dilution in net tangible book value per share. Ms. Caifen Yan's significant voting control (91.75%) will limit the influence of other shareholders on corporate matters. The IPO aims to provide a public market for shares, potentially increasing liquidity.
• **Employees:** The company provides fully paid social insurance, including medical care and accident insurance. Workplace safety protocols are in place, and the company is committed to attracting, retaining, and developing skilled staff. Expansion plans could lead to job creation.
• **Customers:** The company aims to strengthen customer partnerships and expand into new markets, potentially offering more tailor-made products. However, high customer concentration poses a risk if relationships with key customers deteriorate.
• **Suppliers:** The company relies on a limited number of major suppliers, creating a concentration risk. Stable relationships are crucial for obtaining waste metal materials. Expansion plans may diversify sourcing.
• **Creditors:** The company currently has no interest-bearing debt, reducing immediate risk for creditors. However, the lack of commercial insurance coverage could expose the company to significant financial losses that might impact its ability to meet obligations in unforeseen circumstances.
• **Regulatory Bodies:** The company is subject to extensive Philippine environmental and business regulations and aims to comply fully. The VIE structure and foreign private issuer status involve specific regulatory considerations and potential future changes.

Next Steps

• Complete the initial public offering (IPO) and list Class A Ordinary Shares on the Nasdaq Global Market.
• Expand existing business by acquiring additional machinery and equipment.
• Expand real estate portfolio through the acquisition of additional land properties.
• Construct a new manufacturing facility.
• Geographically expand into Southeast Asia and other international markets.
• Establish stable sources of raw materials from Japan and South Korea.
• Recruit an international business development team with diverse language and cultural expertise.
• Commence operations in Japan and Korea by joint venture with local partners in the next fiscal year, focusing on waste metal restoration and detoxification.
• Acquire a bulk carrier terminal and set up a new manufacturing facility near it to reduce transportation costs.
• Set up an additional facility within three years specifically for lithium battery recycling.

Key Dates

Keywords

Metal Recycling, Scrap Metal, Electronic Waste, E-waste, Hazardous Waste, Copper Alloy Ingot, Aluminum Scraps, Plastic Beads, Philippines, Environmental Management Bureau (EMB), Basel Convention, IPO, Nasdaq, F-1/A, VIE Structure, Waste Management, Resource Recovery, Industrial Recycling, Sustainable Technology, Circular Economy