F-1/A: Tong Ying Group Files for IPO on Nasdaq Capital Market, Aiming to Enhance Commodity Trading and Supply Chain Services

Tong Ying Group, a Cayman Islands-based holding company, is seeking to list its Ordinary Shares on the Nasdaq Capital Market to bolster its commodities trading and supply chain consulting services in Mainland China.

Summary

• Tong Ying Group, a Cayman Islands holding company, has filed an amendment to its F-1 registration statement for an initial public offering on the Nasdaq Capital Market under the ticker TYZ.
• The company operates through its subsidiaries, Shanghai Zhangyang Supply Chain Management Co., Ltd and Zhejiang Xinyu Trading Co., Ltd, focusing on commodities trading and supply chain consulting services in Mainland China.
• The IPO aims to raise capital for expanding the company's core business, developing an online integrated trading platform (CRMC Platform), and investing in a self-operated warehousing and logistics system.
• The company's revenue decreased by 24.2% from $784.8 million in 2023 to $594.8 million in 2024, primarily due to lower market demand.
• The company plans to establish an online platform for the supply chain of raw materials for chemical products (the CRMC Platform) to improve transaction efficiency and security.
• The company also plans to build company-owned warehouses to achieve the interconnection of the chemical supply chain and the IoT.
• The company plans to expand and independently establish a spot/futures chemical trading team to enter the field of chemical futures trading.
• The company faces various risks associated with operating in China, including regulatory uncertainties, economic conditions, and data security concerns.
• The company is required to submit the filing application to the China Securities Regulatory Commission (CSRC) within three business days after its submission of application for any overseas initial public offering and listing and complete the filing procedure before its overseas initial public offering and listing.
• The company is an emerging growth company and a foreign private issuer, which allows for reduced reporting requirements.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company is pursuing growth strategies and has certain competitive strengths, it also faces significant risks and challenges, particularly related to operating in China and regulatory uncertainties. The decrease in revenue and the potential for future losses contribute to a neutral to slightly negative outlook.

Positives

• The company has a strong relationship across the supply chain.
• The company has an experienced and highly educated management team.
• The company has good industry credit.
• The company has risk management capabilities.
• The company has diversified products with quality assurance.
• The company has strong industry demand.

Negatives

• The company's business is geographically concentrated.
• The company has a limited operating history.
• The company depends significantly on the procurement of finished products.
• The company's operations are dependent on the availability and price of materials.
• The company is reliant on suppliers to meet the growing demands of our customers.
• The company is reliant on suppliers for our supply of chemical products, non-ferrous metal products, and agricultural products.
• The company's business is subject to intense competition.
• The company may incur losses in the future.

Risks

• The company faces various legal and operational risks associated with its substantial operations in China.
• The PRC government has the right to regulate how a China-based company conducts its business, accepts foreign investments, or lists on a U.S. stock exchange in accordance with laws and regulations.
• The company faces risks associated with regulatory approvals of offshore offerings, anti-monopoly regulatory actions, cybersecurity and data privacy, as well as the lack of inspection from the PCAOB.
• The company may rely on dividends and other distributions on equity paid by the Operating Subsidiaries to fund any cash and financing requirements it may have.
• You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in Mainland China and/or Hong Kong against us or our management named in the prospectus based on foreign laws.
• The Hong Kong legal system embodies uncertainties which could limit the availability of legal protections.
• The company is a controlled company within the meaning of the Nasdaq listing standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.
• The Chinese regulatory authorities could disallow the company's operating structure, which would likely result in a material change in its operations and/or a material change in the value of its Ordinary Shares and could cause the value of its Ordinary Shares to significantly decline or become worthless.
• The company's Ordinary Shares will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, if it is later determined that the PCAOB is unable to inspect and investigate completely its auditor.
• If the company is unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of its financial reports and the market price of its ordinary shares may decline.

Future Outlook

The company plans to expand its core business, develop an online integrated trading platform, and invest in establishing a self-operated warehousing and logistics system. The company believes that there will continue to be a growing trend in demand.

Industry Context

The chemical raw materials industry in China is in high demand, with a large variety of products, substantial funding, numerous transactions, and stringent requirements for transaction safety. The supply chain industry in China attaches great importance to credit, and good credit is an essential reference factor for the sustainable development of enterprises.

Comparison to Industry Standards

• The document mentions a competitor (a Nasdaq-listed company) that has a business scope covering many regions in China and a product line that includes various chemical materials and agricultural products.
• The competitor's revenue from supply chain trading business decreased compared to June 30, 2022, primarily due to the reduction of the company's the chemical products supply chain business and its further focus on agricultural products supply chain trading and services.
• The document also mentions larger chemical enterprises that are both producers and suppliers/customers, which are in a leading position in product range, market size, business service scope, as well as electronic and information operations.
• One of the company's competitors based in Mainland China has had a solid customer distribution channel and strong industrial research capabilities since establishing its business department, and its operating products include PTA, methanol, ethylene glycol, polyvinyl chloride, and plastics.

Related Party Transactions

• The balances of related parties mainly consisted of consideration deemed in the share transfer agreement during the Reorganization process as discussed in Note 1 of the Notes to Consolidated Financial Statements, which amounted to $2,527,000 and $2,455,000 for the years ended 2022 and 2023.
• The consideration deemed in the share transfer agreement has been settled in cash on May 7, 2024.
• Other than the consideration deemed in the share transfer agreement, the amounts due to Mr. Yin Zhang were as working capital to support the Company's operations during the years ended December 31, 2022, 2023 and 2024.
• The balance was unsecured, interest-free and due upon demand.
• As of the date of this prospectus, there are no outstanding amounts due to Mr. Yin Zhang and Mr. Chenyu Wang.

Stakeholder Impact

• Shareholders face potential uncertainty from actions taken by the PRC government affecting the company's business.
• Shareholders may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in Mainland China and/or Hong Kong against the company or its management named in the prospectus based on foreign laws.
• Shareholders may not have the same protections afforded to shareholders of companies that are subject to all the corporate governance requirements of Nasdaq.
• Shareholders will experience immediate and substantial dilution.
• Shareholders may not realize a return on their investment in the company's Ordinary Shares and may even lose their entire investment in the company's Ordinary Shares.

Next Steps

• The company will submit materials as requested by and respond to questions from the CSRC on a timely basis, and expect to complete the filing procedure prior to its proposed initial public offering and listing on the Nasdaq.
• The company plans to initiate the establishment of the CRMC Platform independently developed by the Company by the end of 2025.
• The company expects the Companys CRMC Platform to operate maturely, with customer acceptance or usage rates exceeding 50% in 2026.
• The company plans to build its company-owned warehouses to achieve the interconnection of the chemical supply chain and the IoT in 2027.

Key Dates

Keywords

IPO, commodities trading, supply chain, China, Nasdaq, CRMC Platform, regulatory risks, financial results, emerging growth company, foreign private issuer