F-1/A: Tungray Technologies Inc. Files Amendment for Proposed Nasdaq IPO

Tungray Technologies Inc., a Cayman Islands-based holding company with operations in Singapore and China, has filed an amendment to its registration statement for a proposed initial public offering of 1,250,000 Class A Ordinary Shares on the Nasdaq Capital Market.

Summary

• Tungray Technologies Inc., a Cayman Islands holding company, is planning an initial public offering of 1,250,000 Class A Ordinary Shares.
• The company expects the IPO price to be between $4.00 and $6.00 per share.
• Tungray intends to list its Class A Ordinary Shares on the Nasdaq Capital Market under the ticker symbol TRSG.
• Approximately 65% of Tungray's revenue is generated in Singapore, and 35% in mainland China.
• The company voluntarily submitted filing application documents to the CSRC on July 26, 2023, and the CSRC published the notification on our completion of the required filing procedures on November 14, 2023 for this offering.
• The company's subsidiaries, Tungray Singapore and Tung Resource, declared dividends in November 2022 in the amounts of SGD 2,500,000 (approximately $1.8 million) and SGD 3,500,000 (approximately $2.6 million), respectively.
• The company estimates net proceeds of approximately US$3.2 million from the offering, or approximately US$4.1 million if the underwriter exercises the over-allotment option in full.
• The company plans to use the net proceeds for research and development, strategic acquisitions, sales and marketing, and general corporate purposes.
• US Tiger Securities, Inc. is acting as the underwriter for the offering.
• Mr. Wanjun Yao, the Chairman and CEO, will hold approximately 92.20% of the total voting power after the offering, making Tungray a controlled company under Nasdaq rules.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is pursuing an IPO and has growth strategies, there are also concerns about declining financial performance, regulatory risks, and competition.

Positives

• The company has a strong customer base in Singapore and China.
• The company has patented technologies used in its products.
• The company has established engineering capabilities.
• The company has high-cost effectiveness.
• The company has short lead times.

Negatives

• The company is subject to the complex and rapidly evolving laws and regulations in China.
• The company is subject to the risk of uncertainty of any future actions of the PRC government.
• The company may be subject to penalties and sanctions imposed by the PRC regulatory agencies.
• The company is dependent on a concentrated customer base.
• The company does not have long-term purchase commitments from its customers.
• The company is exposed to potential volatility in its turnover.
• The company has substantial fixed costs.
• The company may be involved in litigations that may materially adversely affect it.
• The company could be negatively impacted by stakeholder and market focus on environmental, social and corporate governance (ESG) matters.
• The company is subject to risks relating to its leased properties.

Risks

• The company's operations are subject to significant oversight and discretion by the PRC government.
• The company's future offerings will be contingent upon the completion of filing procedures with the CSRC.
• The company's securities may be prohibited from trading on U.S. exchanges if its auditor is not inspected by the PCAOB.
• The company's ability to transfer funds between Tungray and its subsidiaries is subject to restrictions.
• The company's business is subject to the complex and rapidly evolving laws and regulations in China.
• The company is dependent on a concentrated customer base.
• The company does not have long-term purchase commitments from its customers.
• The company is exposed to potential volatility in its turnover.
• The company has substantial fixed costs.
• The company may be involved in litigations that may materially adversely affect it.
• The company could be negatively impacted by stakeholder and market focus on environmental, social and corporate governance (ESG) matters.
• The company is subject to risks relating to its leased properties.
• The company may experience extreme stock price volatility unrelated to its actual or expected operating performance, financial condition or prospects.
• The company may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of its Class A Ordinary Shares.
• The company may need additional capital and may sell additional Class A Ordinary Shares or other equity securities or incur indebtedness, which could result in additional dilution to its shareholders or increase its debt service obligations.
• If the company fails to implement and maintain an effective system of internal controls, it may be unable to accurately report its results of operations, meet its reporting obligations or prevent fraud, and investor confidence and the market price of its shares may be materially and adversely affected.
• The company's dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of its Class A Ordinary Shares may view as beneficial.
• The company's dual-class voting structure may render its Class A Ordinary Shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of its Class A Ordinary Shares.

Future Outlook

The company aims to increase its market share and product offerings by leveraging the geographical and technological advantage of its Singapore headquarters, expanding sales in ASEAN countries, continuing to invest in R&D and technology innovations, developing and recruiting employees, growing sales volume from current customers, and pursuing strategic acquisitions.

Industry Context

The smart manufacturing market is forecasted to grow at a CAGR of about 13% from 2022 to 2029, reaching a market worth of about USD 658 billion globally. The demand for global linear motors is expected to register a CAGR of about 6% till 2031. Globally, the welding equipment market is forecasted to increase at a CAGR of about 7.17% between 2022 to 2026.

Comparison to Industry Standards

• Sigma Design & Engineering Pte Ltd is identified as a main competitor in the ETO industrial manufacturing solutions market.
• Qingdao Zhihe Precision Technology Co., Ltd. and Yokokawa Robotics (Shenzhen) Co., Ltd. are identified as competitors in the direct drive and linear DC motors market.
• Xiamen Inker Induction Co., Ltd. and Xinchang Kechuang Automation Equipment Co., Ltd. are identified as competitors in the induction welding equipment market.

Related Party Transactions

• The company has engaged in various transactions with related parties, including loans, sales, and lease agreements.
• On January 9, 2024 and March 6, 2024, Tungray Singapore, the Company's wholly-owned subsidiary, acquired 20% and 13% of the equity interests, respectively, in Xian Tongri Intelligent Industrial Technology Co., Ltd. (Xian Tongri), a wholly foreign owned enterprise established under the laws of the PRC on June 25, 2023, from Weilai (Singapore) Pte. Ltd., an entity owned by the wife of Wanjun Yao, the Company's Chairman and Chief Executive Officer.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares in the IPO.
• Shareholders may face difficulties in protecting their interests due to the company's incorporation in the Cayman Islands and the dual-class voting structure.
• Customers may benefit from the company's continued investment in R&D and its expansion into new markets.
• Employees may benefit from the company's plans to develop and recruit talent.

Next Steps

• The company plans to have its Class A Ordinary Shares approved for listing on the Nasdaq Capital Market.
• The company intends to use the net proceeds from the offering for research and development, strategic acquisitions, sales and marketing, and general corporate purposes.

Key Dates

Keywords

IPO, Tungray Technologies, Class A Ordinary Shares, Nasdaq, Manufacturing Solutions, Singapore, China, CSRC, US Tiger Securities, PCAOB, Dual-Class Structure, Emerging Growth Company