CONJUNCTION WITH THE SECTION HEADED WARNING ON THE … · Business, we primarily sell projectors to...

OVERVIEW

We are predominantly a B2B provider of projectors and IWB products primarily for the education

and business market in China. Founded in 2002, we had been the authorised wholesaler of projectors and

related AV and other accessories for several internationally renowned Japanese brands in China for over

18 years. We have been the sole wholesaler of 3LCD projectors under the HTHIY-MXWL Brand in

China, one of the world’s top-tier Japanese 3LCD projector brands, with authorised wholesale rights of

3LCD projectors in China for five consecutive years since 2015 and up to the Latest Practicable Date.

We are the second largest supplier of education and business projectors in terms of sales volume with

approximately 4.5% market share in FY2019 in China, according to the F&S Report.

Throughout almost two decades of operation, we have reached out and established a large base of

more than 11,000 customers strategically targeting end markets such as the education, business and large

venue sectors across China. Benefiting from our deep collaboration with leading international brand

companies and substantial experience accumulated from offering projectors with highly recognisable

international projector brands, we have created our proprietary brands, namely, for our projector

product category and primarily for our IWB product category. We have also created another

brand name for education laser projectors jointly with ALPD, our JV Technology Partner.

According to the F&S Report, our ‘‘Sonnoc’’ and ‘‘Propix’’ brands together ranked as the second best-

selling laser education projector brands in China in terms of sales volume, with a market share of

approximately 6.8% in FY2019; whereas our ‘‘Donview’’ brand is ranked as the fifth best-selling IWB

brand in China in terms of sales volume with a market share of approximately 4.0% in FY2019.

Our nation-wide B2B sales network is our valuable asset and cornerstone of our business which

has helped us maintain a competitive edge. As at 31 December 2019, with our headquarters in Beijing,

we operated our nation-wide sales network covering all provinces, municipalities and autonomous

regions in China through approximately 47 Sales Offices which has been geographically divided into

five sales regions covering substantially all cities in the areas with more developed economies and

higher density of enterprises, institutions and organisations in various sizes. We have the advantage of

our vast repertoire of valuable customers’ insights into all key aspects of customers’ choices,

preferences and budgets for projectors and IWB products. Leveraging these in-depth customer insights,

we believe our business creates immense value for brand companies, technology partners and our other

ecosystem business partners.

OUR COMPETITIVE STRENGTHS

Our Directors believe that the following competitive strengths have contributed to our success,

differentiated us from our competitors, and will continue to be the key drivers of our growth:

Leading laser education and business projector supplier having one of the best-selling laserprojector and IWB brands in the fast-growing education sector in China

Through almost two decades of operations, we have grown from the authorized wholesaler of

projectors and related AV and other accessories for several top international renowned Japanese

brands to the second largest supplier of education and business projectors in terms of sales volume

with approximately 4.5% market share in FY2019 in China in accordance with the F&S Report.

We have had a presence in the education and business projector market in China for nearly 18

years and have been well-recognised among our B2B customers widely. In the recent years, there

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have also been huge needs for virtual workplaces in China, providing work collaboration, sharing

ideas and information as well as getting work done across multiple devices remotely. Our Directors

believe that we are well positioned to take advantage of this market potential by continuously

developing new products and features and that upgrading our business model timely has helped us

differentiate ourselves from our competitors in China.

We have successfully penetrated the PRC education sector by introducing education

projectors for top-tier Japanese multinational brands throughout the years. According to the F&S

Report, we were the second best-selling laser education projector brand and fifth best-selling IWB

brand, respectively, in terms of sale volume in China in 2019. In recognition of our achievements,

some of our awards include (i) Projector Brand of the Year by TY360.com; (ii) Smart Education

Influential Brand Award by International Smart Education Exhibition Committee; and (iii)

Outstanding Brand of the Year awarded by PjTime.com. For a more detailed list of our awards

during the Track Record Period, please refer to the paragraph headed ‘‘Business — Our awards and

recognitions’’ in this document. Our Directors believe that our early entry into the PRC projector

and IWB market has enabled us to grow owing to the emergence of smart education in China and

as a consequence, our Directors consider that we are seen as an integral part of the education

digitalisation in China, which gives us a tangible advantage over new entrants to the PRC projector

and IWB market.

According to the F&S Report, the COVID-19 outbreak leading to the sudden increase in

staying or working from home presents an opportunity for projectors and IWBs products which

provide an adaptive, engaging, and user friendly experience, thereby gaining popularity among end

users nationwide. Furthermore, the market size of the projector and IWB for the education and

business market is projected to reach approximately 5.0 million units by sales volume in 2024 at a

CAGR of approximately 9.6%. As one of the leaders in the projector and IWB market in China, we

are well positioned to take advantage of the market potential and expect to continue on the growth

of these sectors.

Expansive B2B sales network with deep customers’ insights

We see our nation-wide sales network as an indispensable asset. Our nation-wide B2B sales

network covered all provinces, municipalities and autonomous regions in China with approximately

47 Sale Offices as at 31 December 2019 spanning substantially all cities in the areas with more

developed economy and higher density of workplaces and teaching spaces. During the Track

Record Period, we have maintained a large and diverse base of over 11,000 customers across a

wide range of industries and natures in various sizes spanning from SIs, IT and electronic

companies, EdTech and content providers, schools, government entities, private corporates, SMEs

and retailers to other end users among which approximately 76.0%, 82.6% and 62.1% of our

revenue were contributed by our repeated customers, respectively, for each year of the Track

Record Period, serving as a platform for us to cross selling or launching new products to boost our

revenue growth. Through our continuous, wide-reaching and direct interactions with consumers

across China, we have accumulated in-depth knowledge of varying consumer preferences across

China’s different tiers of cities and regional markets. Our market insights enable us to customise

our products and solutions to target specific groups of customers, thereby creating our own brands

of long-lasting value.

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Particularly in the PRC education industry, the government educational funding was

approximately 4.1% in 2018, lower than that of the developed economies such as the USA and

United Kingdom of approximately 5.0% and 5.5%, respectively, in 2018 which presents significant

opportunities for future growth. Coupled with the Education Informatisation Plan 2.0 promulgated

by the PRC government in 2018, the PRC education digitalisation has been further accelerated and

is expected to grow with a next wave of growth until 2022 when the full adoption of smart

education enabled by digital technologies and applications, such as cloud computing, big data and

AI, will be deployed in most of schools in the PRC. We believe our established sales network

gives us a broad nation-wide presence and a direct access to a large addressable market.

Swift response to the rapidly changing industry trends and technological advancement

We offer a comprehensive suite of projectors and IWB products for various models with a

broad range of options in terms of projection technologies and distance, brightness, light source

and resolutions to create visual experiences in a wide variety of scenarios and locations for key

aspects of education and business. We have also been able to identify technological development

and industry trends and in turn, successfully introduce and commercialise new products in the

China market. Since 2015, we have been one of a few suppliers in China of providing 3LCD

projectors that produce more extravagant and progressively exact colors. As a result of our

category-leading position in selling projectors in the PRC education sector, we entered into a

collaboration with ALPD and jointly introduced ‘‘Propix’’ branded education laser projectors using

ALPD Group technologies in 2016. According to the F&S Report, our ‘‘Sonnoc’’ and ‘‘Propix’’

brands are together the second best-selling education laser projector brand in terms of sale volume

in China in 2019. Our Directors believe that we have been able to capture business opportunities

arising from the rapidly changing technological advancement and industry trends.

We also pioneered the IWB category for education and business sector in the PRC, being one

of the largest and the fastest growing markets worldwide. We have consciously built our portfolio

of IWB product in education sector under the ‘‘Donview’’ brand that are designed and created to

be intuitive, easy to use and highly reliable and can seamlessly integrate with the products and

solutions of many third parties. Our Directors believe that our ‘‘Donview’’ brand is one of the most

recognised brand names in the IWB category. Our Directors are also of the view that word-of-

mouth recommendations from customers are key contributors to our strong brand and will help us

increase our sales.

Collaborative relationships with leading international brand companies and technologypartners

We are a strategic partner for a number of major international projector brands in the China

market. Having had a strategic partnership with HTHIY-MXWL for the last five years, we are

currently its largest 3LCD projectors wholesaler and customer in China projector market. Over the

almost two decades, we have provided continuous and stable support for the expansion of these

brand companies in the China market, resulting in the long-term business growth. Our Directors

believe that stable and solid relationship with leading international brand companies serves as entry

barriers and differentiate us from our competitors.

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We have built close collaboration and trust with industry leading technology partners.

Through these collaborative relationships, we are able to stay at the forefront of technological

development and market trends. We have also integrated our products with critical technical

knowhow from other manufacturers and technology partners. This ensures us to gain early access

to knowledge in emerging technologies and products and adapt our research and development

efforts in line with new trends. We further leverage such enhanced knowledge across our products

and further contribute to our strategic planning at the early stages of product development which

enable our products to meet the evolving product specifications.

Highly qualified, experienced and dedicated management team with a proven track record

Our management team is headed by our executive Director and Chairman, Mr. Zhou. He has

over 25 years of experience in the projectors and IWB industry in the PRC. Mr. Zhu, our executive

Director and chief executive officer, has over 20 years of experience in the projectors and IWB

industry. Mr. Xie, our executive Director, has over 15 years of experience in the projectors and

IWB industry. Mr. Mo, our executive Director, has over 18 years of experience in the educational

computer software industry. Our management team has an established proven track record in

identifying market opportunities, executing business strategies and guiding our business expansion.

Please refer to the section headed ‘‘Directors and senior management’’ in this document for further

details.

We have an experienced sales and marketing team that has built up significant local market

know-how and expertise, including an understanding of local customers’ preferences and

maintaining stable relationship with local sales channels. Our Directors believe that our

experienced senior management team has played a key role in leading the operation and

development strategies and in providing us with industry and operational knowledge, which have

been and will continue to be the key to our success in our future operations and profitability.

OUR BUSINESS STRATEGIES

Our mission is to become a leading Chinese brand owner of interactive display products and

solutions in the world. To achieve this, we aim to continue the growth and expansion of our Brand

Business through the following strategies:

Further expand our market presence in China by enriching our own brand product portfolio

Our success is built upon our ability to deliver a broad portfolio of innovative products and

solutions at attractive price. Our ‘‘Sonnoc’’ and ‘‘Donview’’ brands have been designed to possess

the qualities of innovation, functionality, quality and affordability. The uniqueness and

effectiveness of our projector and IWB products, together with our collaborative relationship with

some leading business ecosystem partners, have enabled us to enjoy strong word-of-mouth and

extensive brand coverage, which has provided us with strong momentum when launching new

products and deepening our market penetration. Going forward, we intend to introduce new and

innovative products and solutions under our own brands ‘‘Sonnoc’’ and ‘‘Donview’’ and increase

their adoptions in our target end markets.

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According to the F&S Report, the sales volume of projector and IWB market in China, is

approximately 3.6 million units in 2019 and is expected to grow rapidly at a CAGR of

approximately 9.6% from 2020 to 2024, reaching the sales volume of approximately 5.0 million

units by 2024. The market size of education and business DLP projectors in terms of sales volume

increased from 0.7 million units to 1.0 million units from 2015 to 2019, representing a CAGR of

approximately 11.3%. The market is expected to reach 1.5 million units by 2024 with a CAGR of

9.5%.

We are positioned favourably to take advantage of attractive growth strategies and intend to

further expand the breath of our Brand Business through enriching our branded product portfolio

with respect to the following aspects:

(i) Sonnoc branded laser projector product category

(a) Education sector: According to the F&S Report, the education projector market in

China will grow steadily at a CAGR of approximately 9.8% by 2024, with sales

volume reaching approximately 1.1 million units by 2024. Owing to the

integration of 3-D characters into e-learning courses to make classrooms

interactive and stimulative, and the increased implementation of game-based

learning, increasing adoption of DLP technologies that offer several benefits such

as high resolution, smooth pixels, better brightness and contrast, and rainbow

artefact reduction will be resulted. In order to keep pace with these technological

advancements, we intend to introduce an advanced model of DLP education

projectors by using 0.47’’ digital micromirror device chip to maximise their sleek,

compact profile for teaching spaces, delivering awe-inspiring clarity and crisply

defined details.

(b) Business sector: DLP laser projectors can provide high picture quality and

compatibility with several devices, enabling visual communication in a diverse

range of corporate meetings and events in modern business environment. We

intend to introduce long throw DLP laser projectors that are mainly designed for

large meeting rooms and conference rooms with a large number of audiences for

use in a wide range of presentation scenarios, from impromptu discussions to

major events and training sessions. This model allows a more convenient

widescreen viewing and integrates into local networks or connects with

Chromebook, PC, macOS®, iOS® and Android™ devices.

(c) Large venue sector: According to the F&S Report, exhibitions, conventional halls,

museums, auditorium and other large venues are trying to attract more audience by

providing vivid intercommunication and immersive and active entertainment

experience. Alongside with the increasing adoption of VR and AR technologies,

the large venue projector sector in China will grow steadily at a CAGR of

approximately 12.2% by 2024, with sales volume reaching approximately 0.6

million units by 2024. We intend to upgrade our existing model of large venue

projectors by using 3LCD technology that can deliver outstanding image quality

performance at affordable prices.

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(ii) Donview branded IWB product category

(a) Education sector: Demand for e-learning and interactive learning solutions drives

the growth of IWB market in China. According to the F&S Report, the education

IWB market in China will grow steadily at a CAGR of approximately 9.1% to

2024, with sales volume reaching approximately 1.6 million units by 2024.

Innovative tools such as VR/AR technologies, virtual labs, AI, digital simulations

that mimic real life settings have been increasingly employed for teaching such as

virtual field trips, anatomy and scientific laboratories. Advanced technologies are

also beginning to emerge, including video-based artificial intelligence to evaluate

learner comprehension; voice-based AI platforms interfacing directly with

learners; and the use of robotics in classrooms to assist with science, technology,

engineering and mathematics (STEM). As education technology and teaching

methods evolve, we intend to introduce a new model of IWB panels and all-in-one

whiteboards with VR/AR AI functionality designed to help educators better

understand the responses of their students and monitor the ambient conditions of

the classroom. The planned new IWBs and all-in-one whiteboard are integrated

with pre-assembled touch overlay from size up to 105’’ inches and 170’’ inches

and track the interaction supported by the screen surface infrared, resistive

membrane, electromagnetic pen, capacitive and others. In addition, with an

intuitive interface, it allows quick access to vital collaboration tools such as screen

mirroring and real-time notation saving.

(b) Business sector: IWBs are rapidly emerging as one of the most successfultechnologies in business environments as they provide users with betterconvenience to print images, write on surfaces and save documents overnetworks. These IWBs can also create and display several types of files such asPPTs, PDFs and HTML which are widely used in business meetings, corporatepresentations, training and seminars. According to the F&S Report, the businessIWB market in China will grow steadily at a CAGR of approximately 30.0% by2024, with sales volume reaching approximately 0.3 million units by 2024.Therefore, we intend to introduce a new model of IWB panel with display screenof up to 98 inches in stunning 4K UHD resolution with notations and content thatis crisp and clear to bring collaborative ideas in office boardrooms to conferencerooms or training sessions.

We plan to collaborate with contract manufacturers to develop ideas for new products ontheir specifications, functionality and technical feasibilities. In most cases, products requiredevelopment of specialised mould such that the contract manufacturers craft customised designsand produce custom-made prototypes for production. The contract manufacturers executeproduction orders to commercialise novel products to the market upon our approval of theprototypes. We will also make filings of patents applications to safeguard the IPs of the newproducts.

In addition, we will continue to invest in increasing the awareness of our ‘‘Sonnoc’’ and‘‘Donview’’ brands by progressive and bespoke marketing initiatives as well as various promotioncampaigns for the launch of new products and solutions. In particular, launches and nationalrollouts of our abovementioned new products and solutions are expected to be commenced byphrases starting from the second half of 2020 till the first half of 2022. Based on the best estimate

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of our Directors in light of the current market conditions, the estimated total funding requirementsfor enriching our branded product portfolio would be approximately HK$[REDACTED](equ iva len t to approx imate ly RMB [REDACTED] ) , o f which ( i ) approx imate lyRMB[REDACTED] would be used for developing prototypes and mould for new product design;(ii) approximately RMB[REDACTED] would be used for marketing and promotion campaigns fornew product launches; and (iii) approximately RMB[REDACTED] would be used for trademarkregistration and other professional or services fees with respect to new products. To finance this,we expect to use the [REDACTED] of the [REDACTED]. Our implementation plan is expected asfollows:

From the[REDACTED] to

31 December2020 FY2021 FY2022 Total

RMB million RMB million RMB million RMB million(Approximately) (Approximately) (Approximately) (Approximately)

(1) Sonnoc branded laser projector product category(i) Prototypes development [REDACTED] [REDACTED] [REDACTED] [REDACTED](ii) Marketing and promotion [REDACTED] [REDACTED] [REDACTED] [REDACTED](iii) Trade registration and other fees [REDACTED] [REDACTED] [REDACTED] [REDACTED]

[REDACTED] [REDACTED] [REDACTED] [REDACTED]

(2) Donview branded IWB product category(i) Prototypes development [REDACTED] [REDACTED] [REDACTED] [REDACTED](ii) Marketing and promotion [REDACTED] [REDACTED] [REDACTED] [REDACTED](iii) Trade registration and other fees [REDACTED] [REDACTED] [REDACTED] [REDACTED]


Total: [REDACTED] [REDACTED] [REDACTED] [REDACTED]

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Accelerate our market position by increasing adoption of our solution offerings

Our success has been driven by the adoption of our products. We intend to turn our IWB

products into an integrated interactive solution in classrooms or workplaces with our solutions

including innovative software and apps. We believe that our expanding portfolio of software and

other solutions complements our IWB products which are tailored for our customers to meet their

specific requirements in communicating effectively with others as well as enhancing the quality of

interactions. We intend to offer software products for teaching spaces and workplaces to enable

interactive learning and collaboration.

(i) Education sector: In order to complement our VR/AR enabled IWB products, we intend

to develop integrated interactive solutions for analysis and management for smart

education, such as cloud based learning and training, teaching behaviour analysis,

education resource system, attendance sign-in-management and student location

management. Given the size of our customer base and satisfaction with our products,

our Directors believe that our existing customers in education sector would generally

prefer purchasing complementary products from us. Our Directors believe that these

additional solutions will also encourage our customers to purchase replacement IWBs

from us rather than our competitors. Our Directors also believe that our current market

leadership and strong portfolio of solutions position us to increase sales as more schools

introduce IWBs. Our Directors are of the view that many of our existing and future

solutions will continue to be well-suited to the education market and we intend to

increase our sales efforts in this sector and create additional monetisation opportunities

for us.

(ii) Business sector: Solutions are required for business meetings, training and marketing.

For meeting and conferencing purposes, video conferencing facilities allow instant

collaboration and sales of contents in audio and visual formats that would provide

added value to a meeting, whereas those conducting meetings by phones without the aid

of such solutions may have difficulty in explaining visual ideas and concepts. Video

conferencing and multimedia audiovisual solutions incorporating cloud-based

technology are expected to be one of the growth drivers for the industry in China. One

of the main advantages of cloud-based solutions is that it makes meetings through video

conferencing easily accessible to anyone and anywhere. End users can have meetings

through video conferencing in connection with our IWB products. This kind of new

technology can also come with a video recording function to archive past meetings.

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In addition, we will strive to further differentiate ourselves from our competitors by

expanding existing solutions and widening new solutions that exhibits huge customers’ demand

with high growth potential or high margin. This will enable us not only to acquire new customers

but also to retain existing customers.

We plan to expand our existing software development team in China by hiring a total of not

more than six staff which would include not more than five software developers with bachelor’s

degree or above and one testing engineer with college degree or above who have two years or

more of experience in the development and testing of software and apps and related fields. It is

planned to hire no more than two and four staff in late FY2020 and FY2021, respectively.

We intend to utilise approximately [REDACTED]% of our [REDACTED], or approximately

HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), from the [REDACTED],as well as our operating cash flow on this expansion plan. Among our [REDACTED],approximately [REDACTED]% or approximately HK$[REDACTED] (equivalent to

approximately RMB[REDACTED]) will be used for the development of solutions in the education

sector and approximately [REDACTED]% or approximately HK$[REDACTED] (equivalent to

approximately RMB[REDACTED]) will be used for the development of solutions in the business

sector.

Pursue strategic acquisitions and investments along our product value chain

We may selectively pursue strategic investments or acquisitions that complement our

business, represent a strategic fit and are consistent with our overall growth strategy. These

investments could include acquisitions along our product value chain, including suitable upstream

companies that manufacture critical hardware, software, solutions and components of our products.

These types of acquisitions could expand our technologies and know-how, which would allow us to

add new features and functionalities to our products and solutions and accelerate our pace of

innovation. They may also provide us with greater control over our supply chain in terms of

ensuring the continuity of supply for critical products and solutions, optimal quality control, on-

time delivery and fulfillment, and help us achieve potential cost savings. We may consider

acquiring additional companies, technology and patents to further enhance our competitive edge.

In pursuing acquisitions and investments, we are generally flexible in transactional structures.

We may acquire full ownership, a controlling interest or a minority interest in the targets. We may

also conduct acquisitions in stages. We plan to make one or two acquisitions of targets and each

deal size is expected to be not less than RMB15 million with an expected payback period not more

than five years. We expect that the time from identifying an acquisition target to completion of the

acquisition will normally take approximately 6 to 18 months. We will consider and pursue

acquisition opportunities by taking into account, among other things, the following factors:

. the strategic rationale of investing in the targets;

. the business prospect of the targets and its alignment with our overall business strategy;

. the investment returns and synergies that we expect to achieve from the acquisitions;

. valuation and accounting impact of the acquisitions;

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. findings from due diligence on the acquisition target; and

. challenges and expenses that could arise from integrating the businesses.

The timing of any potential acquisition will depend on the identification and availability of

targets. However, our Directors plan to commence inorganic growth of our Group once the

allocated portion of the [REDACTED] of the [REDACTED] becomes available. Our Directors

intend to complete such acquisition in the first half of FY2021 subject to the identification of

suitable acquisition targets and our evaluation of their worthiness and potential. As of the Latest

Practicable Date, we have not engaged in any negotiation or entered into any letter of intent,

memorandum of understanding or agreement for such acquisition nor identified any definite

acquisition or investment target.

We intend to utilise approximately [REDACTED]%, or approximately HK$[REDACTED](equivalent to approximately RMB[REDACTED]), of the [REDACTED] from the [REDACTED]to finance selective acquisitions and strategic investments to complement our business as well as

our operating cashflow and/or bank borrowings as appropriate.

Upgrade and enhance our R&D initiatives

Our Directors believe that our focus on creating easy-to-use products and an excellent user

experience at competitive price is central to our continued leadership in the projector and IWB

categories. We will seek to maintain our leadership position through continued investment in the

development of new products with a particular focus on optical technologies, which are core

technologies applied in all types of projectors and IWBs.

Aside from acquiring testing equipment and related software (including optical platform,

instrument platform, light source laboratory equipment, thermal simulation software, noise

measurement testing equipment and software etc.), in order to facilitate the development of our in-

house R&D capabilities, we plan to hire a total of not more than five new engineers, draftsmen and

supporting staff mainly in Japan who have bachelor’s degree or above and more than three years of

experience in mechanical engineering, mechatronics, optics technologies, electronics engineering,

related software development and related fields, among which four will be hired in late FY2020

and two will be hired in FY2021.

Based on the quotations obtained by and the best estimate of our Directors in light of the

current market conditions, the estimated total funding requirements for increasing our R&D

capabilities would be approximately [REDACTED]%, or approximately HK$[REDACTED](equ iva len t to approx imate ly RMB [REDACTED] ) , o f which ( i ) approx imate ly

RMB[REDACTED] would be used as working capital for recruiting additional workforce; and (ii)

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approximately RMB[REDACTED] would be used for acquiring new equipment. To finance this,

we expect to use the [REDACTED] of the [REDACTED]. Our implementation plan is expected as

follows:

From the[REDACTED] to

31 December 2020 FY2021 FY2022 TotalRMB million RMB million RMB million RMB million

(Approximately) (Approximately) (Approximately) (Approximately)

Recruiting additional workforce [REDACTED] [REDACTED] [REDACTED] [REDACTED]Acquiring new equipment [REDACTED] [REDACTED] [REDACTED] [REDACTED]


Increase our brand awareness and marketing initiatives

Our Directors believe that brand recognition is important for us to the further growth of our

business and to distinguish us from our competitors. Besides striving to increase customer

satisfaction and retention by offering a wide range of quality products and solutions, we intend to

focus on multi-channel brand promotion. During the Track Record Period, we have participated in

both domestic and international exhibitions and trade shows every year to showcase our upcoming

branded products to our existing and potential customers. We will continue to attend or sponsor

conferences, exhibitions, trade shows, workshops or seminars to further elevate our brand

recognition and awareness. We will further make use of e-commerce platform such as Tmall.com

and JD.com through online sales to extend the reach of our products, while gaining higher brand

awareness in the China market. We also plan to place advertisements on printed media, such as

newspapers and magazines. Our Directors believe that such continuous and systematic marketing

initiatives will further enhance our brand awareness, recognition and loyalty among our customers,

driving the increase in revenue from new business and repeated business.

We intend to utilise approximately [REDACTED]% of our [REDACTED], or approximately

HK$[REDACTED] (equivalent to approximately RMB[REDACTED]), from the [REDACTED],as well as our operating cash flow on this expansion plan.

Continue to recruit, develop and retain skilled employees

We actively pursue a strategy to recruit, develop and retain talented employees across all

aspects of our integrated operations, which our Directors believe is critical to our business success

and reputation. We plan to recruit additional IT professionals and high calibre personnel to expand

our client service team. In addition, we seek to retain our valuable and skilled employees by

aligning compensation and incentives with their performance and by providing them with a clear

career path with opportunities for additional responsibilities and promotions. We will continue to

strengthen our employees’ sense of belonging through our customer-centric culture and giving them

opportunities to maximise their potential. With this in mind, our Directors consider that the

[REDACTED] will enable our Company to [REDACTED] equity-based and [REDACTED]shares under the Share Option Scheme to our employees as incentive.

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We will continue to arrange tailored training programmes and instilling our client-oriented

culture. We will organise internal training courses and enroll in external courses offered by

training institutions for all of our staff to enhance their efficiency and productivity. For our

relationship managers, we plan to provide more systematic training on product knowledge and

marketing skills to enhance their productivity.

OUR BUSINESS

Our business can be broadly categorised into the following segments:

. Wholesale Business

We are principally engaged in wholesaling of projectors, and related AV and other

accessories primarily under international renowned Japanese brands in China. With our valuable

consumer knowledge and insight, brand companies can design and produce better products for the

China market, which in turn lead to our shared success. For certain brand companies, we have been

able to improve their entire China strategy, including brand positioning and marketing, product

design and retail pricing. Under our supply agreements with brand companies, we purchase

projectors and other products from them primarily for resale to B2B customers. We typically

wholesale brand companies’ projectors and other products on a non-exclusive basis in China.

In addition, we engage in the sale and trading of AV and other accessories for our customers

at their requests from time to time. We also provide installation, warranty and after-sales services

for products we sold. For further details of our warranty and after-sales services, please refer to the

paragraph headed ‘‘Our brands and products portfolio — Solutions and support services’’ and ‘‘Our

suppliers and technology partners — Service contractors’’ in this section.

. Brand Business

As at 31 December 2019, we had two proprietary brands, namely: (i) ‘‘Sonnoc’’ brand for

projectors product category targeting at the end markets of education, business and large venue

sectors; (ii) ‘‘Donview’’ brand primarily for IWB product category; and (iii) one co-owned brand

‘‘Propix’’ for laser projectors targeting education sector, all of which are well recognised in the

education and business sectors.

Whilst providing assembly services for our ‘‘Donview’’ branded IWB products at our own

Shenzhen Facilities, we also procured projectors and IWBs from independent contract

manufacturers in China on a private label basis. We sold finished goods to our customers carrying

our brand names primarily in China and to a lesser extent to the USA and selected overseas

countries.

We also engaged in the design, research and development of our own brand products through

our in-house R&D capabilities in China and Japan or collaborations with leading contract

manufacturers and technology partners. In addition, we complemented our own brand products

with a range of modular components and solutions, including hardware, software and content

which can be used in conjunction with our projectors and IWB products.

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Set out below is the breakdown of our revenue by our business segments during the Track RecordPeriod:

Major business segments FY2017 FY2018 FY2019RMB’000 % RMB’000 % RMB’000 %

Wholesale Business 697,649 56.8 760,577 56.2 583,835 51.9Brand Business 529,614 43.2 591,599 43.8 540,019 48.1

1,227,263 100.0 1,352,176 100.0 1,123,854 100.0

Our end markets

Our strategic priorities are focused on the education and business market, being the fast-growingmarket of China. During the Track Record Period, projectors and IWB products that we sold can bedifferentiated by end markets: (i) education sector, including K-12 schools, universities, colleges,vocational training and/or other academic institutions; and (ii) business sector, including corporates,government entities and SMEs across a wide range of industries from finance, publication, EdTech,electronic, telecommunication to IT. Examples of renowned business customers that had transacted withus during the Track Record Period included one of the biggest state-owned insurance conglomerates, oneof the largest state-owned publishing and media distribution companies and one of the largest mobileand fixed-line telecommunication providers in China.

We also sold projectors in the large venue sector mainly for exhibitions, conventions and sportgames. Examples of high profile or notable large scale events we have served since our establishmentinclude Beijing Summer Olympics (北京夏季奧運會) in 2008 and the Expo Shanghai China (上海世博

會) in 2010 with a total of more than 120 stadiums and exhibition halls. During the Track RecordPeriod, we sold high performance laser projectors and display walls for large venue applications inmuseums, exhibitions and other public display areas such as the largest PRC science and technologymuseum in Beijing, an international horticultural exhibition held in Beijing, and a railway museum inXinjiang. According to the F&S Report, the upcoming Beijing Winter Olympic Games in 2022 isexpected to bring lots of large celebratory events, which will greatly stimulate the market growth. Givenour proven track record and experience in the large venue sector, we believe that we are positionedfavourably to capitalise on the booming market opportunities.

Set out below is the breakdown of our revenue by our major end market during the Track RecordPeriod:

Major end markets FY2017 FY2018 FY2019RMB’000 % RMB’000 % RMB’000 %

Education sector 593,331 48.4 676,813 50.0 579,356 51.6Business sector 180,530 14.7 187,454 13.9 124,463 11.1Large venue sector 223,467 18.2 198,219 14.7 197,015 17.5Others(Note) 229,935 18.7 289,690 21.4 223,020 19.8

1,227,263 100.0 1,352,176 100.0 1,123,854 100.0

Note: Others mainly represent certain AV and other accessories and solutions and support services, which are for generaluse.

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The following simplified diagram illustrates our business ecosystems along the value chain:

Logistics & delivery

Sales & marketing

Assembly

Product innovation & upgrades• Inhouse R&D capabilities • Technology partners

Suppliers

• Raw materials• Components

Contract manufacturers• OEMs• ODMs• Assembly services

Brand companies Wholesalers

• National• Regional• Local

B2B customers

• Schools• EdTech and content providers• SIs• IT & electronic companies• Public & private sectors • Retailers, etc.

End users

• Education (Students & educators, etc.)• Business (Workforce & business parties, etc.)• Large venue (Audiences, visitors, etc.)

Sale forecast/production

PlanningProcurementR&D

Eco

syst

emV

alue

chai

n O

pera

tion

alF

low

RR&D Productionroduction Brand rand Building uilding

Wholesalingholesaling SalesSales RetailingetailingSupplyupply

According to the F&S Report, among these end markets, projectors and IWBs in the education

sector held the largest market share and exhibited the fastest growth in China, when it grew at a CAGR

of approximately 18.3% from 2015 to RMB17.6 billion in 2019 and is expected to continue to rise at a

CAGR of approximately 9.4% from 2020 to RMB25.6 billion in 2024. The rising adoption of blended

learning models plays a critical role in spurring this sector’s growth over the next five years. The recent

preference for content digitisation and the high adoption of the BYOD among end-users from the

education sector will lead to the inclusion of new learning models such as gamification and social

learning, driving the increased demand for projectors and IWBs in China. Since the education sector is

particularly driven by government policies and spending, the Education Informatisation Plan 2.0

promulgated by the PRC government in 2018 has further accelerated education digitalisation in China.

As the workplace is transforming into a more agile, connected and flexible environment with the

BYOD trend, there will be a growing need for visual collaboration solutions in the corporate world.

IWBs are easy to use and capable of delivering a range of collaboration features from sharing screen

image, digital annotations to video conferencing with remote locations in real time. Alongside with the

popularity of IWBs for business use, the replacement of traditional instructor-based training programs

with blended learning solutions and substantial investments by SMEs in technological advancements are

anticipated to further propel the demand for IWBs. The market for projector and IWB sold in the

business sector is forecasted to grow at a CAGR of approximately 12.9% from 2020 to 2024 and reach

RMB12.5 billion by 2024, according to the F&S Report.

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With the recent global outbreak of COVID-19, there has been greater acceptance of working

through interactive and digital technologies and a shift in attitude towards work arrangements, with a

focus on flexibility and digital interconnectedness while working from home. This presents an

opportunity for projectors and IWBs to flourish as the sales are driven by this growing trend towards

interactivity and flexibility towards work in the business sector. The China market is highly fragmented

and is characterised by intense competition resulting from the presence of major multinational and

foreign players. With our leading position in the industry, our nation-wide B2B sales network and

powered by our in-depth customers’ insights, our Directors believe that we are well-positioned to

capitalise on emerging business opportunity in the China market.

OUR BRANDS AND PRODUCTS PORTFOLIO

We sold a wide spectrum of projectors and IWB products and solutions during the Track Record

Period which can be broadly categorised into: (i) projectors; (ii) IWBs; (iii) AV and other accessories;

and (iv) solutions and support services. Set out below is the breakdown of our revenue and gross margin

by our major product categories during the Track Record Period:

FY2017 FY2018 FY2019Revenue Revenue RevenueRMB’000 % RMB’000 % RMB’000 %

Projectors— Conventional 475,618 38.8 418,986 31.0 228,503 20.3

— Laser 260,239 21.2 326,452 24.1 368,241 32.8

Subtotal 735,857 60.0 745,438 55.1 596,744 53.1

IWBs— IWB panels 202,862 16.5 237,046 17.6 211,582 18.8

— Whiteboards 63,338 5.2 88,397 6.5 93,893 8.4

Subtotal 266,200 21.7 325,443 24.1 305,475 27.2

AV and other accessories 209,669 17.1 265,858 19.7 203,376 18.1

Solutions and support services 15,537 1.2 15,437 1.1 18,259 1.6

Total 1,227,263 100.0 1,352,176 100.0 1,123,854 100.0

(i) Projectors

As at 31 December 2019, we had more than 150 models of projectors. For our Wholesale

Business, we primarily sell projectors to the education, business and large venue sectors under the

third party HTHIY-MXWL Brand. For our Brand Business, we mainly sell projectors to (i)

education, business and large venue sectors under our self-owned brand ‘‘Sonnoc’’; and (ii) to

education sector under our co-owned brand ‘‘Propix’’.

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Laser projectors are one of our main projector products. Laser projectors produce more

extravagant and progressively exact colors and achieve high colour saturation and reproduces

natural colour. Laser projectors are widely recognised by its features of long life cycle and low

color aberration, which is far superior to conventional projectors using LEDs or light bulbs in

terms of brightness, service life, and convenience.

Laser projectors we sold during the Track Record Period are commonly used 3LCD

projection technology that delivers sophisticated, innovative technology that utilises 3 chips to

deliver vibrant, true-to-life and consistent images. To keep pace of the latest technological

advancement, we also offer DLP enabled projectors which provide precise readability and crisp

resolution for every single sub-pixel.

In order to satisfy the diverse needs of our customers, we offer a variety of options of short

throw, ultra short throw and standard throw ranging from approximately 1,500 lm to approximately

10,500 lm and display resolution from XGA, WXGA to WUXGA.

(ii) IWBs

Our IWB products are broadly divided into two categories: (a) IWB panels; and (b)

whiteboards, comprising basic whiteboards and all-in-one whiteboards primarily under the

‘‘Donview’’ brand.

. IWB panels: Our IWB panels are mainly made up of LCD display with screen size

ranging from 55 inches to 98 inches all of which will form the centre piece of even the

aesthetic spaces, while providing with an useful and engaging way to run lessons,

meetings, or presentations. Designed with multi-point touch and various types of

sensors, it can track the interaction on the screen surface, giving a smooth writing

experience with no script-lag or response delays. Our IWB panels include a vast array

of connectivity options, a wireless option and a built-in media player to play music,

videos, photos and images directly on screen from internal memory, or external devices

through USB ports or wireless connection.

. Whiteboards: An interactive whiteboard is a large interactive display which links to a

computer. Digital projector is used to display computer images onto a whiteboard. The

whiteboard can be controlled by using finger, stylus, pen or other device. This enables

the user to write the notes and transform it into text and save it. It consists various

types of sensing technologies to track the interaction on the screen surface. Projectors

are generally used in conjunction to project images onto the basic whiteboards and all-

in-one whiteboards.

— Basic whiteboards: Whiteboards with touch-screen function which require an

external processing unit such as a computer console.

— All-in-one whiteboards: Similar to a basic whiteboard, but with a built-in OPS and

audio amplifier.

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(iii) AV and other accessories

We offer audio-visual equipment and other modular accessories components and parts to our

customers that are complementary to our projectors and IWB products or at our customers’

requests, sold under third-party brands, or on a private label. These include audio amplifier,

microphone, speaker, display screens.

(iv) Solutions and support services

We provide solutions used in conjunction with our display products, including conferencing,

teaching and learning software and touch screen interaction apps which supports interactive

presentation of materials and content sharing. We also provide software which enables connections

and simultaneous control of multiple IWBs or display screens, thereby enhancing flexibility in the

usage of our display products to cater for more complex display environment and needs.

Apart from solutions, we also offer support services including installation, warranty,

technical support and other after-sales services. We have provided free installation services and

technical supports to assist our customers for installation of our products. Moreover, we have been

engaged by HTHIY-MXWL to carry out warranty services for its branded products to our

customers for repair and maintenance purpose and HTHIY-MXWL generally pays us for the in-

warranty repair services that we perform and the costs of the related spare parts that we use. For

further details, please refer to the paragraph headed ‘‘Our suppliers and technology partners —

brand companies’’ in this section.

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The following table sets forth certain details of our principal products and brands as at 31

December 2019:

Product category Key applications Key typical featuresNo. ofmodels(more than)

(A) Projectors 150

(A1) Laser

(A2) Conventional

Education sector— Generally applied in classrooms,

gyms and lecture halls— 3LCD/DLP— Short throw/ultra-short throw— XGA/WXGA/WUXGA— 1,500 to 5,300 lumens

Business sector— Generally applied in boardrooms,

meeting rooms and conferencerooms of corporates andgovernment entities and SMEsacross a wide range of industries

— 3LCD/DLP— Long throw— XGA/WXGA/WUXGA— 2,700 to 5,300 lumens

Large venue sector— Generally applied in exhibitions,

conventions, museums and large-scale sport games or culturalevents

— 3LCD/DLP— Long throw— XGA/WXGA/WUXGA— 5,000 to 10,500 lumens

Sample of projectors

Education ultra short throw Education short throw Business long throw Large venue long throw

Examples of our large venue projects

Largest PRC science and technologymuseum in Beijing

It contains five regular exhibitionhalls and a 4D cinema, located inBeijing National Olympic Park

A railway museum set up by theChinese Railway Bureau inXinjiang

It shows the development of therailway network in China, whichincludes a VR experience of thecockpit of a state-of-the-art highspeed train

An international horticulturalexhibition in Beijing

I t wa s one o f t h e l a r g e s tinternational expos ever tookplace in China, comprising over100 indoor and outdoor displaya r e a s w i t h m o r e t h a n 8 0participating countries

Multiple high-end ‘‘Sonnoc’’ and‘‘Propix’’ branded laser projectorswere applied in the ‘‘Explorationand Discovery’’ theme hall

Several ‘‘Sonnoc’’ branded high-end laser projectors were applied inmultiple display halls with totaldisplay area of approximately4,800 sq.m.

More than 70 ‘‘Sonnoc’’ brandedhigh-end laser projectors wereinstalled in the China ExhibitionHall with an area of approximately15,000,sq.m.

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Product categories Key applications Key typical featuresNo. ofmodels(more than)

(B) IWBs 80

(B1) IWB panels Education sector— Generally applied in classrooms,

gyms and lecture halls

— 55 to 98 inches— Multi-point touch— Wireless connection to Internet

and external devices

Business sector— Generally applied in boardrooms,

meeting rooms and conferencerooms of corporates governmententities and SMEs across a widerange of industries

— 65 to 98 inches— Usually equipped with screen

which can be switched on forlonger hours and a fasterprocessing unit

— Built-in software for office uses

(B2) Whiteboards— Basic

whiteboards

Education sector— Generally applied in classrooms,

gyms and lecture halls— 75 to 145 inches— Two-way transmission between

whiteboard and externalcomputer console

— All-in-onewhiteboards

— 82 to 170 inches— Built-in Android and computer

system— Integrate input, output, storage,

display and audio functions— With visualiser, wireless

internet connection, audioamplifier

Sample of IWBs

75 inches basicwhiteboard

86 inches IWB panel 170 inches all-in-one whiteboard Education projector installedwith all-in-one whiteboard

Product categories Key applications Key typical featuresNo. ofmodels(more than)

(C) AV and otheraccessories

Generally used in connection withprojectors or IWBs

— Audio equipment which includewireless speakers, audio receiversand microphones

— Visual equipment which includedisplay panels, and video cameras

N/A

— Accessories which includesupporting frame

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The typical product life cycle of our projectors and IWB product categories range from

approximately five years to 10 years. Notwithstanding the above, our Directors are of the view that the

expected life cycle of these product categories for most customers is generally around three to five

years, based on our experience, our products aged more than three to five years may not be compatible

with prevailing technology due to technological advancement.

OUR SALES NETWORK AND CUSTOMERS

Our sales network

We sell products mostly on B2B channels primarily in China, and to a lesser extent to the USA

and other overseas countries in continental Europe, South East Asia and Middle East. As at the Latest

Practicable Date, our sales, marketing and customer service team was consisted of approximately 450

employees for the Chinese and the USA markets.

As at 31 December 2019, we had an extensive sales network covering all provinces, municipalities

and autonomous regions in China through approximately 47 Sales Offices which has been geographically

divided into five sales regions covering substantially all cities in the areas with more developed

economies and higher density of enterprises, institutions and organisations in various sizes. Our Sales

Offices are responsible for the overall strategy planning as well as sales and marketing activities,

contract negotiation and our customers’ tender process of large projects, and the provision of technical

support in the implementation phase. Our sales personnel regularly visit our customers to understand

their preference and budgets, and identify potential projects and their requirements. At the beginning of

each year, we work closely with and obtain indicative demand and delivery schedules from customers,

and will update the relevant data on a monthly basis based on actual sales and other prevailing market

factors.

To solicit business opportunities for overseas markets, we approach our existing and potential

customers directly or through our business contacts, and meet with these customers at trade fairs in

China or overseas, or places where these customers are based. During the Track Record Period, some of

our overseas sales were made on an OEM basis to overseas regional wholesalers and overseas OEM

manufacturers.

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The following map shows the geographical locations of our sales network as at 31 December 2019:

(1) Xinjiang

Qinghai

TokyoCalifornia

Tibet

Gansu

(3) Sichuan

(2) Yunnan (1) Guangxi

Hainan

(1) Guizhou

Fujian

(2) Zhejiang

(1) Anhui

(1) Hubei

(2) Henan

Shanxi

Hebei

(1) Inner Mongolia

Liaoning

(1) Jilin

(1) Heilongjiang

(5) Guangdong

Shenzhen

Guangzhou

Ningxia(1)

Chongqing(1)

Shanghai (2)

Jiangsu(1)

Tianjin (1)

Beijing

(2)

(1)

Shannxi(2)

(1)

(1)

(1)

Shandong(1)

(4)

Jiangxi(5)

Hunan

(1)

CHINA

JAPANUSA

Our headquarter in BeijingOur 47 Sales Offices in China and one Sales Office in the USAOur R&D centreOur Shenzhen Facilities

Domestic sales of five sales regions in China: Eastern region Western region Southern region Northern region Central region

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The following table shows breakdown of our revenue by geographic locations of operation of our

customers during the Track Record Period:

For the year ended 31 December2017 2018 2019

RMB’000

% of total

revenue RMB’000

% of total

revenue RMB’000

% of total

revenue

China 1,214,698 99.0 1,339,122 99.0 1,096,176 97.5

Overseas (Note) 12,565 1.0 13,054 1.0 27,678 2.5

Total 1,227,263 100.0 1,352,176 100.0 1,123,854 100.0

Note: During the Track Record Period, the revenue attributable to the overseas sales covering the USA, continentalEurope, South East Asia and the Middle East.

The table below sets forth the movement of our Sales Offices during the Track Record Period:

FY2017 FY2018 FY2019

ChinaAs at the beginning of the year 17 40 44

Addition 26 8 4

Cessation (3) (4) (1)

As at the end of the year 40 44 47

USA 1 1 1

Total 41 45 48

Our customers

Our customers primarily consist of various ecosystems partners within the value chain of the end

markets that we serve, including customers which can be broadly divided into: (i) SIs, IT and electronic

companies; (ii) EdTech and content providers; (iii) schools and government entities covering K-12

schools, universities, colleges, vocational training and other academic institutions; and (iv) end users

including private corporates, SMEs and retailers to other end-users.

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Set out below is the breakdown of our revenue by our major customer type during the Track

Record Period:

Major customers type FY2017 FY2018 FY2019RMB’000 % RMB’000 % RMB’000 %

SIs, IT and electronic companies 731,861 59.6 846,647 62.6 690,495 61.4

EdTech and content providers 349,590 28.5 386,835 28.6 343,887 30.6

Schools and government entities 93,870 7.7 87,285 6.5 45,894 4.1

Other(Note) 51,942 4.2 31,409 2.3 43,578 3.9

1,227,263 100.0 1,352,176 100.0 1,123,854 100.0

Note: Others included private corporate, SMEs, retailers and other end-users.

Since our establishment in 2002, we have established a large and solid customer base with more

than 11,000 customers among which repeated customers contributed approximately 76.0%, 82.6% and

62.1% of our revenue for the each of the Track Record Period, respectively. We have no reliance on our

customers as no revenue derived from any single customer accounted for more than approximately 5%

of our total revenue for each of the Track Record Period. Further, our five largest customer’s revenue is

less than 30% for each of the Track Record Period.

We generally do not enter into any long-term agreement with our customers. Transactions with

them are generally made on a project-by-project basis pursuant to their own needs. The following is a

summary of salient terms of a typical sales transaction with our customers:

Product description: Brand, model and specification of each product.

Order details: The quantity, unit price and total amount.

Payment method: Generally settled either by bank transfer or bank acceptance note.

Credit terms: We normally require payment in advance or provide our customers

credit period of 30 to 90 days from the effective date of invoice.

Delivery details: We are usually responsible for the transportation of our products which

will be delivered to the address as stipulated.

Other terms: We generally do not impose a minimum purchase requirement.

Due to the nature of our business and the structure of our sales channels, during the Track Record

Period, there have been occasions where our suppliers have also purchased products from us, making

them our customers as well. Likewise, there have also been occasions where our customers have also

sold products to us, making them also our suppliers.

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Pricing, payment and credit terms

We generally set prices of our products on a cost-plus basis after taking into account various

factors, among other things, the types of products, the cost of finished goods, electronic components and

raw materials, order volume, the timing of delivery, market trends, and prices of similar products offered

in the market and our expected margins.

Our customers are allowed to pay by bank acceptance notes, electronic payment or bank transfer,

depending on the value of the products ordered and the usual practice of the relevant sales channels.

Payments are mainly settled in RMB. The credit terms offered to our customers are in accordance with

specific payment schedules agreed with various customers and generally range from 30 to 90 days

depending upon their cooperation relationship with us and credit history. Each customer has a maximum

credit limit. For new customers, payment in advance is normally required.

Product returns and warranties

For our third-party branded products, if any defective products are returned by customers, brand

companies are ultimately responsible for product returns and warranties. However, we may provide

assistance with the handling of these cases by returning the returned products to brand companies for

repair and maintenance on its own. HTHIY-MXWL has outsourced warranty, repair and maintenance

services to us for its branded projectors in China and makes reimbursement to us on costs of defective

parts and components and other charges on a monthly basis. For further details, please refer to the

paragraph headed ‘‘Our suppliers and technology partners — brand companies’’ above. During the Track

Record Period and up to the Latest Practicable Date, we did not record any material incident of product

returns from our customers.

For our own brand products, customers’ requests for product returns are generally not accepted

unless the products are defective or damaged on delivery. We are responsible for the return of defective

products directly and bear the costs incurred accordingly. If any defective or damaged products returned

to us are procured from contract manufacturers, we will make claims back from them for the same. We

offer standard warranty generally ranging from one to three years for our own brand products which are

in line with PRC regulatory requirements. During such warranty periods, free repair and maintenance

services under normal usage are provided to customers. We may claim back from contract manufacturers

for any loss and costs for repair and maintenance of products directly procured from them if the

warranty period of such products is still valid. Following the expiry of the warranty period, we provide

parts replacement service to the customers and charge the customers for the repair and maintenance

services based on costs of the defective parts and components to be replaced, staff costs, transportation

and other fees. Such service does not cover improper use on the part of the end-users, but subject to

relevant PRC regulatory requirements. For further details, please refer to the section headed ‘‘Financial

information — warranty provision’’ in this document.

Seasonality

There are seasonal fluctuations in our sales during the year. During the Track Record Period,

approximately 74.6%, 67.9% and 65.0% of our revenue was generated in the second half of the

respective financial years, whereas approximately 25.4%, 32.1% and 35.0% of our revenue was

generated in the first half of the respective financial years. As education sector is our largest end market,

education expenditure is generally made at schools prior to the beginning of each of academic year. The

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academic year of schools in China is generally from September to August of the following year. Schools

tend to carry out refurbishment or installation of educational equipment during the summer holidays.

Our Directors believe this resulted in greater demand during the second half of the year for each of the

Track Record Period.

OUR MARKETING AND PROMOTION

Our marketing team is responsible for our marketing activities and formulating our overall sales

strategies, collecting and analysing market data and updating marking information and trends. During the

Track Record Period, we implemented the following major advertising and marketing strategies:

Product launches

Our projector and IWB product launch can be broadly categorised as three phases: (i) the

initial rollout phase, where our marketing team will elaborate with selected Sales Offices in certain

regions to host product launch information sessions for our customers. Our Directors believe that

customers who are interested in our new products and attend these launch events are vital to the

product penetration amongst early adaptors; (ii) the national rollout phase, when the remaining

Sales Offices will roll out the new products, with a view to penetrate regional markets across

China through events and information sessions; and (iii) on-going marketing phase, where we will

continue our marketing efforts to maintain our new products’ awareness and penetration on a

nationwide scale.

Exhibitions and trade shows

We actively participate in trade shows, industry exhibitions and large-scale events at national

and international levels in the education and business sectors. For instance in 2019, we joined

education exhibitions such as the Higher Education Expo China, The 76th China Educational

Equipment Exhibition and the China International Education Equipment (Shanghai) Expo 2019.

For the business sector, we took part in the InfoComm 2019 held in Orlando, the USA, Beijing

International Radio, TV & Film Exhibition 2019 and 2019 China Modern Office Industry Expo. In

these events, we showcased our products to potential customers and may receive orders from them.

Our Directors believe that participating in these large-scale exhibitions and events gave

opportunities for us to build up our brand image, stimulate our sales and penetrate into more

markets.

Field visits and trainings

As part of our continuous marketing effort, we launched an initiative programme in 2019 to

encourage our sales and marketing members reaching out to meet more local dealers, finding new

customers and promoting our products at a local level. We also organise trainings to our sales and

marketing members from time to time at different Sales Office, updating them with the key

features and selling points of our latest offerings to keep them in line with our latest marketing

strategies and enable them to promote our products in a more effective way.

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Online promotion and e-commerce platforms

We have set up a WeChat public account (微信公眾號) in 2016, which allows us to share our

latest news such as product launches and recent events to our customers and the general public. To

a lesser extent, we promote and sell our products to our customers who are accustomed to shopping

online on third party e-commerce platforms such as Tmall.com and JD.com. We settle with these

customers through the third-party e-commerce platform. Our sales and marketing team gathers

information and feedback on consumer preference through these e-commerce platforms and we

believe the pursuance of e-commerce platforms allow us to promote sales through broadening our

reach to potential customers.

OUR SUPPLIERS AND TECHNOLOGY PARTNERS

We have established a network of more than 1,000 suppliers. Our principal suppliers consisted of

(i) leading international brand companies, including HTHIY-MXWL; (ii) leading technology partners,

including ALPD and PRC Optic Group; (iii) contract manufacturers, including ODMs and OEMs; (iv)

suppliers of raw materials such as modules, components and parts; and (v) suppliers of AV equipment

and related accessories. Our suppliers were predominantly located in the PRC. There has been no

material shortage or delay in supply during the Track Record Period and up to the Latest Practicable

Date.

Brand companies

During the Track Record Period, we procured third-party branded of projectors, AV and other

accessories products primarily internationally renowned Japanese brand companies mainly for our

Wholesale Business. Since our Group’s inception in 2002, we have been approached by internationally

renowned brand companies who seek a one-stop wholesaler who has a successful track record in

developing brands, the geographic representation and expansive sales network to complete national roll-

outs of their products across the PRC. We may also directly approach brand owners with potential new

product offerings for their existing brands.

Set out below are the major salient terms of the supply agreement with the relevant parties during

the Track Record Period:

Salient terms Particulars

Duration One year

Exclusivity If applicable, the exclusive models will be set out in the supply

agreement.

Target purchase amount An annual minimum purchase amount and an annual target purchase

amount for projectors may be prescribed. The annual agreement may

be terminated if we cannot meet the minimum purchase amount.

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Salient terms ParticularsPricing Prices are determined by mutual agreement between both parties,

taking into account the market price of projectors in the PRC and

international markets. There is no recommended selling price and we

determine the reasonable price for our onward sale.

Payment and credit term Payment settled in RMB in advance or within 30 days upon delivery

by telegraphic transfer or bank acceptance note.

Termination The non-defaulting party is entitled to seek compensation from the

party in breach in relation to the specified events.

Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date,

there was no material breach of the terms of the supply agreement entered into between our brand

companies suppliers and us.

Brand companies usually offer us with a three year warranty for their branded products supplied.

During the warranty period, free replacement services under normal usage are provided by these brand

companies. The brand companies would reimburse us for the cost of parts and components that we use

for maintenance and repair purposes after reviewing whether the costs incurred have been complied with

the warranty policies of brand companies.

During the Track Record Period, we have been an authorised wholesaler of projectors procured

from HTHIY-MXWL, who approached us in 2014 given our successful track record in developing

brands and our geographical representation and channel network for product sales. We were engaged as

HTHIY-MXWL’s authorised wholesaler of 3LCD projectors for business and large venue end market in

China since 2015. In 2017, due to the adjusted product distribution channel system of HTHIY-MXWL

Brand projectors, we were also engaged as the authorised wholesaler of 3LCD projectors for education

end market. Save for DLP industrial projectors which were wholesaled by another PRC agent, all other

HTHIY-MXWL projector products were exclusively sold by us in China. From 2017 and up to the

Latest Practicable Date, we were the sole wholesaler of 3LCD projectors from HTHIY-MXWL in China.

We generally entered into formal supply agreements on a yearly basis and placed purchase orders.

HTHIY-MXWL, our largest supplier for the Track Record Period, is one of the top tier

manufacturers in China’s projector market according to the F&S Report. It is principally engaged in

manufacture of consumer electronics, including batteries, wireless charging products, storage devices,

laser projectors and functional materials. HTHIY-MXWL acquired all HTHIY Brand projector business

operation in 2013 and resumed responsibility for all this operation in later 2019. HTHIY-MXWL

rebranded its projector products into MXWL brand since 2019. HTHIY-MXWL has been listed on the

Tokyo Stock Exchange since 2014. Based on its annual report for the year ended 31 March 2019,

HTHIY-MXWL recorded total revenue of approximately JPY9,480.6 billion. As at 31 March 2020, the

market capitalisation of HTHIY- MXWL was approximately JPY3.0 trillion.

We entered into the supply agreement with HTHIY-MXWL on a non-exclusive and annual basis

which is common among internationally-renowned Japanese projector brands according to the F&S

Report. Our Directors believe maintaining a close and long-term relationship between HTHIY-MXWL

and us is mutually beneficial due to the following reasons: (i) we have been a strategic partner of

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HTHIY-MXWL in China for the last five years, in particular, we are the sole wholesaler of HTHIY-

MXWL brand 3LCD projectors in China and currently its largest wholesaler and customer in the China

projector market; (ii) we have provided continuous and stable support for the expansion of HTHIY-

MXWL in the China market resulting in its long-term business growth in China; (iii) HTHIY-MXWL

relies on our nation-wide sales network and sizable sales forces to promote its products across all the

areas of China; (iv) maintaining the current business relationship with us is vital for HTHIY-MXWL to

guarantee its sales of projectors and avoid any unforeseen disruption to its operations; and (v) HTHIY-

MXWL is subject to risks and costs for switching to other wholesalers in China. During the Track

Record Period, we continued to renew the supply arrangements with HTHIY-MXWL on an annual basis.

For certain risks relating to our business dealings with HTHIY-MXWL, please refer to the section

headed ‘‘Risk factors’’ — ‘‘The framework supply agreements with our major suppliers were entered

into on a non-exclusive annual basis’’ and ‘‘We are exposed to concentration risk with HTHIY-MXWL

for our Wholesale Business’’ in this document.

Our contract manufacturers and technology partners suppliers

Realising the benefits of outsourcing R&D and manufacturing tasks which enhances our costs and

production efficiency, for the Track Record Period we procured finished goods of projectors and a

limited amount of IWB products from a number of contract manufacturers mainly include OEM and

ODM in China on a private label basis and then for onward sales to our customers carrying our

‘‘Sonnoc’’, ‘‘Propix’’ and ‘‘Donview’’ brand.

We consider a number of factors in evaluating our existing and prospective contract manufacturers,

including but not limited to their respective reputation and recognition, product quality, production

scale, product design capabilities with advanced technologies. We entered into framework agreements

with contact manufacturers and placed purchase orders with them on an order-by-order basis. These

contract manufacturers were commissioned to provide the products in accordance with, among other

things, the models and specifications mutually agreed between us and them. We also engage some

contract manufacturers to offer ODM services covering R&D, product design and validation. In some

instances, these contact manufacturers craft customised designs and produce custom-made prototypes

based on our or mutually agreed technical requirements and product specifications, and may also

develop specialised moulds used for mass production. For further details, please refer to the paragraph

headed ‘‘Research and development’’ in this section.

Set out below are the typical salient terms of the formal framework agreements which we entered

into with the major contract manufacturer of own brand projectors and IWB panels for the business

applications:


Duration It varies from one year to continuing in effect until termination.

Target purchase amount An annual target purchase amount may be stipulated in some of our

agreements.

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Pricing The price of products is either specified in the framework agreement

or agreed separately in the purchase orders with reference to market

conditions. With respect to certain manufacturing process, such as

mould development, the pricing may be specified in the agreement.

Payment and credit term The payment methods of products include telegraphic transfer and

bank acceptance note, and shall be paid upon confirmation of

purchase order, before delivery or 30 to 45 days upon delivery.

Certain components, i.e. Mould, are paid upon passing our quality

testing.

Termination Parties may terminate the agreement by prior written notice of one

month.

The contract manufacturers usually provide us with a warranty ranging from one to three years.

During the warranty period, free replacement services under normal usage are provided by these contract

manufacturers. The contract manufacturers would reimburse us for the costs of parts and components

that we use for maintenance and repair purposes after reviewing whether the costs incurred have been

complied with the reimbursement policies as agreed between us. We also have rights to return any

defected or damaged products to the contract manufacturers or make claims against such damages from

them.

Our raw materials and components suppliers

We sourced and procured raw materials such as modules, electronic components and parts from

suppliers in the PRC mainly for the production of IWB products at our Shenzhen Facilities. The

principal types of electronic components include LED panels, structural components such as

whiteboards, frames, tempered glasses, and electronic components such as plug-in computing modules,

control boards, power supply boards, connectors and wires.

We consider a number of factors in evaluating our existing and prospective suppliers including but

not limited to background, operation scale, product quality, financial conditions and market reputation.

We may conduct on-site visit to assess its production technique, scale and product quality, and require

sample goods for testing. We entered into standard framework purchase agreements with our raw

material suppliers.

Set out below are the typical salient terms of the standard purchase agreements which we entered

into with the major electronic components and other materials suppliers during the Track Record Period:


Duration Generally one to three years

Purchase amount We shall provide forecast order to the suppliers and place actual

order by purchase orders which may deviate from the forecast order.

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Pricing The purchase price is stated in the purchase order and includes

transportation and insurance costs.

Payment and credit term 30 to 60 days after month end by telegraphic transfer or bank

acceptance note

Termination The agreement shall be terminated by certain events such as

liquidation and inability to perform the contract due to government

orders.

Our five largest suppliers

We purchases from our five largest suppliers during the Track Record Period amounted to

approximately RMB637.4 million, RMB681.1 million and RMB494.2 million, respectively, representing

approximately 68.1%, 66.5% and 61.1%, respectively, of our total cost of goods sold. Our purchases

from our largest supplier during the Track Record Period in aggregate amounted to approximately

RMB314.8 million, RMB309.8 million and RMB246.0 million, respectively, representing approximately

33.6%, 30.3% and 30.4%, respectively, of our total cost of goods sold. Approximately 13.8%, 13.8% and

9.1% of the total cost of goods sold were attributable to ALPD Group for the same period. For the Track

Record Period and up to the Latest Practicable Date, we have established business relationship for over

2 to 16 years with our five largest suppliers.

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The following table sets out our top five suppliers during the Track Record Period:

FY2019

Rank Supplier BackgroundMajor productssupplied to us

Commencementyear of business

relationship

Total purchaseRMB’000

(Approximately)

% of totalcost of

goods sold Credit period

1. HTHIY-MXWL Note (1) Finished goods of

HTHIY-MXWL

Brand projectors

2015 245,985 30.4 Payment

in advance

2. Supplier A Note (2) Finished goods of

projectors

2015 77,333 9.6 30 days upon

delivery with a

credit limit

3. ALPD Group Note (3) Finished goods of

projectors

2015 73,940 9.1 Payment

in advance for

ALPD; revolving

credit limit for

Propix JV

4. Supplier B Note (4) LED panels 2015 65,205 8.1 30 days after

month end

5. PRC Optic Group Note (5) Finished goods of

projectors

2017 31,754 3.9 45 to 90 days

upon delivery

494,217 61.1

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FY2018

Rank Supplier BackgroundMajor productssupplied


relationshipwith us


(Approximately)

% of totalcost of



HTHIY-MXWL

Brand projectors

2015 309,760 30.3 Payment

in advance


projectors

2015 141,667 13.8 Payment

in advance for

ALPD; revolving

credit limit for

Propix JV


month end


projectors

2015 74,265 7.3 Payment in

advance

5. Supplier C Note (6) Finished goods of

projectors

2017 74,161 7.2 90 days

upon delivery

681,075 66.5

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FY2017

Rank Supplier BackgroundMajor productssupplied


relationshipwith us


(Approximately)

% of totalcost of



HTHIY-MXWL

Brand projectors

2015 314,830 33.6 Payment

in advance


projectors

2015 129,017 13.8 Payment

in advance for

ALPD; revolving

credit limit for

Propix JV


month end

4. Supplier D Note (7) Finished goods of

AV and other

accessories

2003 58,211 6.2 30 days upon

delivery


projectors

2015 54,051 5.8 Payment

in advance

637,444 68.1

Notes:

(1) HTHIY-MXWL represents top-tier multinational consumer electronics brand owners of HTHIY and MXWL which are listedon the Tokyo Stock Exchange and their respective PRC subsidiaries, collectively, our supplier of projectors during theTrack Record Period. MXWL recorded net sales of approximately JPY150.6 billion and net assets of approximatelyJPY125.5 billion for the year ended 31 March 2019. As at 31 March 2020, the market capitalisation of MXWL wasapproximately JPY56.4 billion. HTHIY recorded revenue of approximately JPY9,480.6 billion and net assets ofapproximately JPY4,414.4 billion for the year ended 31 March 2019. As at 31 March 2020, the market capitalisation ofHTHIY was approximately JPY3.0 trillion.

(2) Supplier A comprises of two subsidiaries of a manufacturer in Taiwan whose shares were listed on the Taiwan StockExchange and engaging in the manufacture of projectors, monitors and display panels. For the year ended 31 December2019, It recorded revenue of approximately NTD48.7 billion and net assets of approximately NTD23.6 billion. As at 31March 2020, its market capitalisation was approximately NTD12.2 billion.

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(3) ALPD Group principally engaged in the production of laser projectors in the PRC whose shares were listed on the STARMarket. ALPD recorded revenue of approximately RMB2.0 billion and net assets of approximately RMB2.1 billion for theyear ended 31 December 2019. As at 31 March 2020, its market capitalisation was approximately RMB10.6 billion.

(4) Supplier B is principally engaged in the production of television and display devices in the PRC whose shares were listedon the Shenzhen Stock Exchange. It recorded revenue of approximately RMB3.5 billion and net assets of approximatelyRMB514.3 million for the year ended 31 December 2019. As at 31 March 2020, its market capitalisation was approximatelyRMB1.4 billion.

(5) The PRC Optic Group is a subsidiary of an internationally renowned PRC state-owned listed enterprise group established in1995 principally engaged in the research and manufacture of optical components. The group recorded revenue ofapproximately RMB2.6 billion and net assets of approximately RMB1.4 billion for the year ended 31 December 2019. As at31 March 2020, its market capitalisation was approximately RMB4.4 billion.

(6) Supplier C is a subsidiary of a PRC state-owned enterprise group established in 1993 engaging in the production ofconsumer electronics and smart cities solutions. The group recorded revenue of approximately RMB4.9 billion and netassets of approximately RMB4.3 billion for the year ended 31 December 2019. As at 31 March 2020, its marketcapitalisation was approximately RMB8.9 billion.

(7) Supplier D is a PRC subsidiary of an internationally renowned Japanese electronic appliances manufacturer listed on theTokyo Stock Exchange and engaging in the production of electrical appliances, which recorded net sales of approximatelyJPY7,490.6 billion and net assets of approximately JPY2,155.9 billion for the year ended 31 March 2020. As at 31 March2020, its market capitalisation was approximately JPY2.0 trillion.

Save as disclosed, during the Track Record Period, none of our Directors, their respective close

associates or any of the Shareholders (whom to the best knowledge of our Directors owned more than

5% of the issued share capital of our Company as at the Latest Practicable Date) had any interest in any

of our five largest suppliers. All of our five largest suppliers during the Track Record Period are

Independent Third Parties.

Our overlapping major-suppliers and customers

Due to cross-selling our different categories or models of our products, three of our five largest

suppliers were also our customers (‘‘Major Overlapping Suppliers’’) for the Track Record Period.

Supplier B was one of our five largest suppliers for each of the Track Record Period. During the

Track Record Period, we purchased LED panels from Supplier B which amounted to approximately

RMB81.3 million, RMB81.2 million and RMB65.2 million, representing approximately 8.7%, 7.9% and

8.1% of our cost of goods sold, respectively. In FY2019, we primarily sold other accessories to Supplier

B which amounted approximately RMB0.3 million, representing approximately 0.03% of our revenue.

PRC Optic Group was one of our five largest suppliers in FY2019. In FY2018 and FY2019, we

purchased the finished projector products from PRC Optic Group which amounted to approximately

RMB4.0 million and RMB31.8 million, representing approximately 0.4% and 3.9% of our cost of goods

sold, respectively. For the same periods, we primarily sold our IWB products and offered support service

to PRC Optic Group which amounted approximately RMB0.2 million and RMB0.3 million, representing

approximately 0.02% and 0.03% of our revenue, respectively.

Supplier C was one of our five largest suppliers in FY2018. During the Track Record Period, we

purchased the finished projectors of HTHIY-MXWL Brand from Supplier C in respect of several

contracts for supply of HTHIY-MXWL Brand projectors by us that were agreed with the brand company

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which amounted to approximately RMB49.8 million, RMB74.2 million and RMB20.9 million,

representing approximately 5.0%, 7.2% and 2.6% of our cost of goods sold, respectively. For the same

periods, we primarily sold our projector products with different brands to Supplier C which amounted

approximately RMB6.6 million, RMB5.5 million and RMB0.2 million, representing approximately 0.5%,

0.4% and 0.02% of our revenue, respectively.

Other than our five largest suppliers for the Track Record Period, there were approximately other

282, 271 and 234 suppliers (‘‘Other Overlapping Suppliers’’) who were also our customers during the

Track Record Period. During the Track Record Period, an aggregate amount of purchase from Other

Overlapping Suppliers amounted to approximately RMB95.9 million, RMB86.6 million and RMB42.0

million respectively, representing approximately 10.2%, 8.5% and 5.2% of our total cost of goods sold

respectively. While an aggregate amount of revenue attributable from Other Overlapping Suppliers

amounted to approximately RMB296.3 million, RMB258.0 million and RMB180.5 million respectively,

representing approximately 24.1%, 19.1% and 16.1% of our total revenue respectively.

According to the F&S Report, the structure of projectors and IWBs sales channel is very dispersed

and complicated with different types and scales of ecosystem business partners, mainly including

wholesalers and resellers such as IT and electronics companies, SIs and retailers, etc. Brand companies

usually have their authorised wholesalers, like our Group, and such wholesalers make sales directly to

resellers who onward sell products to end users. According to the F&S Report, in projector and display

industry, it is common that ecosystem business partners will trade with each other. Here are some

scenarios:

. In view of an urgent and large order from customers to a wholesaler, there may be a

temporary shortage in supply in the normal supply chain when the wholesaler and brand

companies both run out of buffer stock. It may take up to several weeks for a new batch of

products to be manufactured. Thus, the wholesaler may seek for buffer stock from other

resellers and facilitate a trade between the wholesalers and the resellers.

. When a particular order from a customer is relatively small in quantity, the wholesaler may

choose to ride on a bigger purchase order from a reseller to the brand companies and/or other

wholesaler.

. When a customer requests a certain product from a reseller, as the reseller is not an

authorised wholesaler of that product, the reseller will need to purchase such products from

the authorised wholesaler.

. Some customers, such as schools, government entities, large corporates, only maintain a

relationship with a manageable number of wholesalers and resellers. Wholesalers and

resellers who are not pre-approved by these customers will not be allowed to supply products

to them. In case the customer needs to source products from a non-approved reseller currently

the products will need to be sold to the approved wholesaler and then sold to the customer.

Our Directors confirm that negotiations of the terms of all our sales to and purchases from our

Major Overlapping Suppliers and Other Overlapping Suppliers were conducted on individual basis and

the sales and purchases were neither inter-connected nor inter-conditional with each other. Our Directors

further confirmed that, to the best knowledge and brief of our Directors, our Major Overlapping

Suppliers and Other Overlapping Suppliers are Independent Third Parties and none of our customers-

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suppliers has any past or present relationships with us, our Shareholders, Directors, senior management,

employees or their respective associates during the Track Record Period and up to the Latest Practicable

Date.

Our Directors have confirmed that all of our transactions with our Major Overlapping Suppliers

and Other Overlapping Suppliers during the Track Record Period were (i) entered into after due

consideration taking into account the prevailing purchase and selling prices at the relevant times; (ii)

conducted in the ordinary course of business under normal commercial terms and on arm’s length basis;

(iii) at prices that are no less favourable than from other independent third parties who are not Major

Overlapping Suppliers and Other Overlapping Suppliers.

Service contractors

To add value, we offered free installation services and technical support including equipment

testing, adjustment and calibration advice upon our customers’ requests during the Track Record Period.

As our customers were widespread across different cities of the PRC, we contracted part of our

installation services to local independent service contractors who are located in close proximity to our

customers and can make quick response to customers’ requests in a timely manner. We generally enter

into service agreements with our service contractors on a project-by-project basis. We have engaged

over 200 service contractors during the Track Record Period. We evaluate these service contractors

taking into account of their track records, service quality and pricing. We bore all fees paid to these

service contractors and other related costs during the Track Record Period, amounted to approximately

RMB31.8 million, RMB45.5 million and RMB26.4 million respectively. In order to focus on higher

margin business and services, we decided not to carry out installation services to customers on a free of

charge basis under normal circumstances. For further details, please refer to the section headed

‘‘Financial information — selling expenses’’ in this document. Our Directors have confirmed that, to

their best knowledge and belief, all of our service contractors are Independent Third Parties and none of

them has any past or present relationships with us, our Shareholders, Directors, senior management,

employees or their respective associates during the Track Record Period and up to the Latest Practicable

Date.

OUR INVENTORY MANAGEMENT

Our inventory mainly comprises raw materials, work-in-progress and finished goods. We are

dedicated to maintaining an optimal inventory level that can satisfy the demand from customers and

avoid overstocking which would consume our working capital. We have an inventory management

policy in place to monitor our inventory levels and to minimise obsolete inventory. We generally

estimate demand for our products ahead of procurement and production and the actual time of sale

according to the historical data in our daily inventory reports, observation of market trend and

customers’ demand, and keep approximately three months of inventories readily available.

Our ERP system connects our offices in the PRC. Sales and delivery of our products are

correspondingly updated in the record of product inventory. Through this system, our head office in

Beijing closely monitors the status of the stocks available in our warehouses and we are able to maintain

a stable supply of our products and raw materials and components to support our manufacturing and

sales in the PRC. Our procurement decisions are generally based on the forecast sales order. In respect

of our projectors and displays business, our commercial department consolidates the predicted sales

order and procures the requested projectors and displays. As for our production business, our

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commercial department passes the predicted sales order to the materials department, which then liaises

with the production department to prepare the production plan. The materials department examines the

existing inventory level of raw materials and places purchase orders for raw materials in case of

deficiencies. During the Track Record Period, our inventory turnover days were approximately 78 days,

87 days and 106 days, respectively. In addition, we perform stock takes on a monthly, semi-annual and

annual basis at our warehouses in which are performed by our warehouse finance and quality control

staff to keep track of incoming and outgoing inventories and to monitor our inventory levels.

Our warehouses are located in Beijing, Fuzhou and Shenzhen. We have engaged an Independent

Third Party for warehousing services, for a monthly service fee of approximately RMB30,000 for the

storage area of approximately 1,000 square metres from 1 January 2020 to 31 December 2020.

OUR TRANSPORTATION AND DELIVERY

For our Wholesale Business, we are usually responsible for the delivery of products from our

suppliers to our customers and bear such costs. For products procured from our contract manufacturers

under our Brand Business, these manufacturers are responsible for the delivery of products to a

designated point and bear such costs. For products manufactured by us under our Brand Business, we are

responsible for the delivery of products to our customers and bear such costs. We engage external

logistic companies to undertake delivery work where we are responsible for delivering products to our

warehouses or our customers. Our freight and transportation costs amounted to approximately RMB18.7

million, RMB16.2 million and RMB11.7 million respectively during the Track Record Period.

OUR PRODUCTION FACILITIES

Our Shenzhen Facilities mainly involve in the assembly of our IWB products and are located in

Shenzhen Facilities occupying five floors and three floors of two blocks, with an aggregate floor area of

approximately 18,939 square metres. For further details, please refer to the paragraph headed

‘‘Properties’’ in this section.

Our production process

The following simiplified flow chart illustrates the production process of our IWB products:

Productionforecasts

and planning

Procurement of raw materials and

components

Assembly and calibration of

semi-finished goods

Quality checks and

function test

Packaging andwarehousing

Around 15−30 daysMonthly Around 0.7 to 3.5 hours per product

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Production capacity and utilisation for major production lines

As at 31 December 2019, we had three production lines solely for IWBs at our Shenzhen Facilities,

among which two production lines are currently in active uses for manufacturing IWB panels and all-in-

one whiteboards, respectively. The following table sets forth the theoretical production capacities and

utilisation rate for our two major production lines during the Track Record Period:

FY2017 FY2018 FY2019(Approximately) (Approximately) (Approximately)

IWB panels production lineTheoretical production capacity (pieces) (1) 17,500 25,000(3) 25,000

Utilisation rate (2) 99.1% 82.7% 70.3%

All-in-one whiteboards production lineTheoretical production capacity (pieces) (1) 6,000 17,400(4) 23,000(4)

Utilisation rate (2) 42.7% 54.7% 59.2%

Notes:

(1) The theoretical production capacity is calculated based on the bottleneck of our production process operated underthe standard operating hours of eight hours per day and 250 working days per year.

(2) Utilisation rate is calculated by dividing the actual production volume for the year by the theoretical productioncapacity for the year.

(3) The theoretical production capacity increased as the bottleneck of our production process was reconfigured in late2017.

(4) The theoretical production capacity increased in FY2018 and FY2019 as a new assembly line was officially operated,and additional equipment were acquired.

As disclosed in the paragraph headed ‘‘Seasonality’’ in this section, our utilisation rate during the

peak season (i.e. the second half) for the Track Record Period were approximately 131.7%, 104.1% and

77.9% for IWB panels production lines, respectively, and approximately 49.5%, 60.6% and 84.3% for

all-in-one whiteboards production lines, both of which were invariably higher than the corresponding

full-year utilisation rates. In order to satisfy the demand in the peak season, we have to build sufficient

production capacity in anticipation of such operational needs resulting in an overall lower utilisation rate

in full year. In January 2020, a new production line for whiteboards with a designed yearly production

capacity of approximately 10,000 pieces has commenced operation.

Our machinery and equipment

Our Shenzhen Facilities are equipped with various machinery and equipment which are owned by

us. The major machinery and equipment used include the assembly lines of whiteboards and IWB panels

for assembling whiteboards and IWB panels. We have a Class 10,000 Cleanroom which is used in the

IWB panels assembly process for cleaning LED panels. We also use various equipment for testing

product reliability and functions. The estimated useful lives of our major machinery and equipment are

approximately five to ten years.

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Our production safety and environmental management

Our Shenzhen Facilities have been awarded (i) GB/T 28001-2011/OHSAS 18001:2007 certification

for occupational health and safety management system; (ii) GB/T 19001-2016/ISO 9001:2015

certification for quality management system (iii) IECQ QC 080000:2017 certification for hazardous

substance process management system; and (iv) GB/T 24001-2016/ISO 14001:2015 certificate for

environmental management system in 2019. For further details relating to our work safety and

environmental matters, please refer to paragraph headed ‘‘Occupational health, work safety and

environmental matters’’ in this section.

OUR RESEARCH AND DEVELOPMENT

We believe our R&D capabilities allow us to provide our branded products that incorporate the

latest technologies. Our R&D capabilities cover many aspects of new product development and existing

product upgrades. In general, upon receiving technical requirements and product specifications collected

by our sales team, our R&D team commences evaluation of the technical and commercial feasibilities of

new projects based on the level of technical development in the field, product development costs and

market prospects. We then finalise and commence our product design by developing the output source

code and user interface of software products, or determining the specifications and electronic circuit of

hardware products. Upon the finalisation of our prototypes, we proceed to the production trial. Mass

production will commence once we are satisfied with the results production trial.

We undertake various R&D projects in our three research centres in Shenzhen and Guangzhou of

the PRC and in Tokyo, Japan. The Shenzhen and Guangzhou research centre primarily focuses on the

research, design and development of IWB hardware and software products for the educational sector.

Our research centre in Tokyo, Japan focuses on the optical projection technologies used for projection

lenses and optical engines which are the most critical components of projectors. As at the Latest

Practicable Date, we had 83 R&D staff based in the PRC and five R&D staff based in Tokyo. Most of

our R&D staff possess undergraduate degree or above in relevant science disciplines with work

experience in technical positions. During the Track Record Period, we have engaged in various R&D

projects on IWB product hardware and software. We have developed new IWB products with different

interaction technologies, such as the optical, capacitive and infrared models. Product models of large

sizes were introduced. Further, we have been improving our existing products with new series of

educational IWB panels with thinner frames and improved image quality. During the Track Record

Period, our Tokyo research centre staff has engaged in the development of proprietary technologies for

the production of core projector components, such as projection lenses and the innovation of light

splitting and combining technologies. Our Directors believe that our research efforts will further

consolidate our leadership in the industry.

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In addition to our internal R&D, we also engage in research cooperation on specific subjects or

form strategic partnership with leading and technology partners, including brand companies and contract

manufacturers with robust technical competence. Set out below is a summary of such collaboration

undertaken by us with our technology partners during the Track Record Period:

Date ofagreement

Technology partnerscooperated withour Group Subject matter Role of our Group

Date ofcompletion/

delivery

February 2015 ALPD Group Development of DLP laser projectors under

our co-owned brand name ‘‘Propix’’ for

education sector

Commercialisation

and sale of end

products

Completed in

2015

September 2017 ALPD Development of 3LCD laser projectors

for education sector

Commercialisation

and sale of end

products

Completed in

2017

PRC Optic Group Development of DLP laser projectors


Commercialisation

and sale of end

products

Completed in

2018

March 2018 PRC Optic Group Development of DLP laser projectors


Commercialisation

and sale of end

products

Completed in

2019

October 2019 ALPD Development of DLP laser projectors


Commercialisation

and sale of end

products

Expected in

2nd half 2020/

1st half 2021

PRC Optic Group Development of DLP laser projectors

for business sector

Commercialisation

and sale of end

products

Expected in

2nd half 2020/

1st half 2021

March 2020 HTHIY-MXWL Development of 3LCD laser projectors

for large venue sector

Commercialisation

and sale of end

products

Expected in

2nd half 2020/

1st half 2021

We believe our collaboration with contract manufacturers and technology parties will provide basis

for our growth in the future. For instance, we intend on collaborating with our contract manufacturers to

develop new ideas for new products and we intend to apply certain development such as DLP laser

projection technologies as part of our future business strategy, for more details, please refer to the

paragraph headed ‘‘Our business strategies’’ in this section.

During the Track Record Period, we have contracted with several third-party developers to develop

customised software which supports wireless projection of different input sources on the whiteboard, a

remote monitoring software platform to monitor the operating status of multiple projectors and a

keystone correction software which optimises the image captured by the whiteboard camera.

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QUALITY CONTROL

We maintain quality control procedures for the finished goods and materials and components

procured from our suppliers. Upon receipt of the materials and components for production of

whiteboards and IWB panels, we conduct spot check for each batch of raw materials and also carry out

specific tests on wear-resistance and corrosion-resistance. In the production process, workers at each

production stage inspect the semi-finished products from the preceding stage. Semi-finished products

that fail to meet the quality standards will be removed from the production process, returned to the

relevant production station for reworking, reprocessing or disposal. Upon completion of the production

and assembly, a final inspection on all the products will be undertaken to assess product safety,

structural integrity and conformity. If quality defects are found in the products, the quality control team

will submit a report to the production department for follow up actions including reworking and

reprocessing. For own brand products, we have a shipment inspection standard which our suppliers have

to adhere to including product appearance, electronic and optical functions, image quality and

packaging. We generally inspect the packaging, quantity, model of the products. There is a stipulated

defective on arrival rate in the quality assurance agreements with some of our suppliers.

As at the Latest Practicable Date, we had 46 staff in our quality control department. Our quality

control department is responsible for monitoring the quality control system and ensuring that the quality

of our products meets our standards and our customers’ requirements. We generally communicate with

our suppliers regarding production and delivery schedules in order to ensure that the products supplied

to us can be delivered or produced in accordance with our requirements.

During the Track Record Period and up to the Latest Practicable Date, our Directors haveconfirmed that we did not receive any material claims or complaints by our customers in respect of thequality of our products and there was no incident of failure of our quality control procedures which hada material and adverse impact on our business operations.

COMPETITION

With respect to the projector market in the PRC, according to the F&S Report, major foreignbrands appoint local suppliers to be in charge of sales, appointing a few general suppliers, thenrecruiting several suppliers in each provinces or cities in China. Thus, there are a huge number ofsuppliers working for both foreign and domestic projector brands to help them build a sales network. Asa result, the top five education and business projector suppliers in the PRC accounted for approximately19.5% of the market share in terms of sales volume in 2019 with us being the second largest with amarket share of approximately 4.5% in terms of sales volume in 2019. Further, according to the F&SReport, the IWB market is highly concentrated, with top ten IWB brands making up approximately82.0% of the total market in terms of sales volume as of 2019. Among the IWB brands, we ranked fifthwith a market share of approximately 4.0% in China in terms of sales volume in 2019. Our Directorsbelieve that our competitive strengths, details of which are set out in the paragraph headed ‘‘CompetitiveStrengths’’ in this section, helps to distinguish us from our competitors.

Please refer to the section headed ‘‘Industry Overview’’ in this document for further details of thecompetitive landscape.

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OUR INFORMATION TECHNOLOGY

We recognise the importance of effective and efficient management across our operations. To thisend, we have implemented an ERP system, which allows us to manage our sales and purchasesactivities, inventory control, staff information and real-time integration with our finance system. Thesystem facilitates the exchange of information among our functional business units and promotesoperational efficiency.

OUR INSURANCE

During the Track Record Period, we maintained a number of insurance policies, which include (1)employees’ compensation insurance; (2) life and/or medical insurance for some of our senior staffmembers; and (3) public liability insurance for our office premises and warehouse.

Our Directors believe that the current insurance policies taken out by us are adequate for ouroperation and are in line with industry practice. During the Track Record Period and up to the LatestPracticable Date, we have not made, or been the subject of, any material insurance claim.

OUR OCCUPATIONAL HEALTH, WORK SAFETY AND ENVIRONMENTAL MATTERS

Our operations in the PRC are governed by laws and regulations on production safety. We haveimplemented various measures in our Shenzhen Facilities in relation to fire prevention and productionsafety, in order to promote occupational health and safety of our workers and staff and compliance withapplicable laws and regulations. We maintain a high standard of occupational safety by undergoingchecks on our fire safety facilities, production tools and electric network regularly and holding trainingseminars to our staff to bolster their awareness. The occupational health and safety management systemat Shenzhen Electronic Technology has received accreditation in 2019.

As confirmed by our PRC Legal Advisers, we were subject to various national and local

production safety laws and regulations in respect of Shenzhen Electronic Technology during the Track

Record Period, and the relevant PRC production safety authority had not imposed any sanctions or

penalty on Shenzhen Electronic Technology in relation to non-compliance of the applicable production

safety laws or regulations in the PRC. As confirmed by our U.S. Legal Advisers, our U.S. subsidiary has

obtained all necessary approvals and filings in respect to fire prevention for our leased warehouse during

the Track Record Period. As confirmed by our Japan Legal Advisers, our Japan Subsidiary is not subject

to any Japanese laws and regulations in relation to health and safety during the Track Record Period,

because our business and operation in Japan did not deal with any waste, toxic or hazardous materials.

We have adopted environmental friendly measures in our manufacturing operations. Shenzhen

Donview has developed and implemented hazardous substance process management procedures which

have been assessed to comply with standards set by the International Electrotechnical Commission

Quality Assessment System for Electronic Components (IECQ). We require our raw materials and

components suppliers to submit tests reports on the concentration level of chemicals in the materials

supplied to us and to give an undertaking as to their compliance with the Restriction of Hazardous

Substance Directive (RoHS). The environmental management system at Shenzhen Electronic Technology

has received accreditation in 2019.

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During the Track Record Period, we have not experienced any material breach of or non-

compliance with the applicable laws and regulations related to environmental protection nor had we been

subject to any environmental complaint or administrative penalties with respect to environmental

violations which would have material adverse impact on our business operations.

OUR INTELLECTUAL PROPERTY

We are the proprietary owner of a number of intellectual properties which are essential to the

protection of our brand product designs, technologies and know-how, against possible claims or

infringement of third parties. The principal brands, i.e. ‘‘Sonnoc’’ and ‘‘Donview’’, are registered as

trademarks in the PRC. The educational resources and software developed by us are protected by

copyrights. Our patents relating to whiteboards and IWB panels protect the exterior and structural design

of these products.

As at the Latest Practicable Date, we had not less than 20 trademarks, 30 patents and 100

copyrights in the PRC. Our PRC Legal Advisers confirmed that we are the legal owner of the

intellectual properties in the PRC and possesses the right of use, transfer and granting rights of use to

third parties. Please refer to ‘‘Statutory and General Information — Further Information about our Group

— 9. Intellectual property rights of our Group in Appendix IV to this document for further details of our

material intellectual property rights. As advised by our PRC Legal Adviser, the Propix JV is the legal

owner of trademarks relating to our co-brand ‘‘Propix’’ and possesses the right of use, transfer and

granting rights of use. In Japan, three patents are currently registered and nine patents applications are in

progress as at the Latest Practicable Date. Our Japan Legal Advisers confirmed that all the patents have

been duly applied and all the registered patents are valid and enforceable under the laws of Japan. We

are also the registered owner of nine domain names.

During the Track Record Period and up to the Latest Practicable Date, we were not aware of any

material infringement of any of our intellectual property rights which had an adverse effect on our

business nor were we aware of any pending or threatened litigation or legal proceedings against us

relating to the infringement of any intellectual property rights owned by third parties.

BUSINESS

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OUR EMPLOYEES

As at 31 December 2017, 2018 and 2019 and the Latest Practicable Date, we had a total of 1,097,

1,334, 1,064 and 924 full-time employees located in the PRC, Japan and the USA. The following table

sets out the number of our full-time employees by functions and by geographic locations as at the Latest

Practicable Date:

PRC Overseas Total

Management 13 — 13

Sales, marketing and customer service 450 1 451

Accounting and finance 72 — 72

Human resources, administrative and legal 129 1 130

Production and quality control 125 — 125

Procurement and logistics 45 — 45

Research and development 83 5 88

Total: 917 7 924

We offer attractive remuneration packages to our employees, which include basic salary and

commissions. We generally recruit our employees from open markets and determines the salary of our

employees mainly based on their qualifications, relevant work experience, position and seniority. We

seek to motivate our sales staff by performance-based commission in addition to their basic salary.

During the Track Record Period, our sales staff received discretionary bonus based on their duties

and responsibilities and by reference to our performance. Our Directors believe that these staff benefits

are in line with the industry level. Our staff’s performance will be reviewed periodically and the results

of which are used as a reference to determine any salary adjustments and promotions.

We have made contributions to the social insurance (including pension plans, medical insurance,

work-related injury insurance, unemployment insurance and maternity insurance) and housing provident

fund for our employees in the PRC during the Track Record Period. As advised by the PRC Legal

Advisers, we had certain non-compliances with respect to the relevant laws and regulations in the PRC

relating to the contributions to social insurance and housing provident fund during the Track Record

Period and up to the Latest Practicable Date. For further details, please refer to the paragraph headed

‘‘Regulatory Compliance’’ in this section.

As at the Latest Practicable Date, we had one labour union with respect to our Shenzhen Facilities.

Our Directors consider that our relationship with our employees has generally been amicable and is

expected to remain so in the future. Our Directors confirm that we have not experienced any significant

problems with our employees or material disruption to our operations due to labour disputes. Further,

our employees did not experience any material accidents nor have we experienced any difficulties in

retention of experienced staff or skilled personnel during the Track Record Period.

BUSINESS

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OUR PROPERTIES

Our leased properties

As at the Latest Practicable Date, we did not own any properties and leased (i) 86 properties in the

PRC with an aggregate gross floor area of at least approximately 38,613 sq.m. for our office space,

warehouse, staff quarter and our Shenzhen Facilities; (ii) one property in Japan of approximately 56

sq.m. for R&D office; and (iii) one property in the USA of approximately 174 sq.m. for sales office.

Our leases generally have a term ranging from 1 year to 10 years. During the Track Record Period,

our Directors have confirmed that we did not experience any material difficulties in renewing the leases.

Save and except for the properties subject to the PRC Tenancy Agreements which were leased from

connected persons of our Company, all of our leases were entered into with lessors who are Independent

Third Parties. Please refer to the paragraph headed ‘‘Connected Transactions’’ in this document for

further details.

The following table sets out a summary of the leases of our head offices, Shenzhen Facilities, the

R&D centres in Shenzhen, Guangzhou and Tokyo, and the warehouses in Beijing, Fuzhou and Shenzhen

which our Directors consider are material to our business operation as at the Latest Practicable Date.

Premises Location

Gross floor areain aggregate

(approximately)(sq.m.) Lease term Monthly rent (approximately)

Office of DonviewTechnology

Room 709, Block 5, 26 Huangsi Street,Desheng Street Office, XichengDistrict, Beijing, the PRC(中國北京市西城區德勝街道辦事處

黃寺大街26號院5號樓709室)

93 1 May 2019 to30 April 2021

RMB12,000.00

Office of DonviewEducation



101 1 June 2018 to31 May 2020

RMB12,166.67

Office of JiuruiTechnology



200 1 June 2018 to31 May 2020

RMB23,666.67

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Premises Location

Gross floor areain aggregate

(approximately)(sq.m.) Lease term Monthly rent (approximately)

Shenzhen Facilities,R&D centre andwarehouse

(1) 4th to 8th Floor, Block A;

(2) 1st Floor, Block B; and

(3) 3rd to 4th Floor, Block B;

of Te Fa Industrial Park, No. 38Zhenxing Road, Liyue RiverIndustrial Area, Lou CunCommunity Area, Xinhu StreetOffice, Guangming District,Shenzhen, the PRC(中國深圳市光明區新湖街道樓村社區

鯉魚河工業區振興路38號特發產業園)

(1) 11,139

(2) 2,600

(3) 5,200

(1) 1 December 2019 to31 March 2023

(2) 1 September 2019 to31 March 2023

(3) 1 September 2019 to31 March 2023

(1) From 1 December 2019 to30 November 2021:RMB260,000

From 1 December 2021 to31 March 2023: RMB280,800

(2) From 1 September 2019 to31 August 2021: RMB72,800

From 1 September 2021 to31 March 2023: RMB78,624

(3) From 1 September 2019 to31 August 2021: RMB104,000

From 1 September 2021 to31 March 2023: RMB112,320

Guangzhou R&Dcentre

Rooms 05–06, 24th Floor, 439 ZhongshanMiddle Road, Tianhe District,Guangzhou, the PRC(中國廣州市天河區中山大道中路439號24樓05–06房)

191 26 October 2018 to25 October 2023

Ranging from RMB22,440.20 toRMB27,825.85 from1 November 2019 to25 October 2023

Tokyo R&D centre 2-11-16, Shiba-daimon, Minato-ku, Tokyo,Japan

56 1 July 2017 to30 June 2021

JPY635,236

Beijing warehouses Warehouse 2, West 49A Tujing Road,Haidian District, Beijing City,the PRC(中國北京市海澱區土井路甲49號西側院2號庫房)

1,000 15 December 2019 to 14December 2020

RMB34,067

Warehouse 3, West 49A Tujing Road,Haidian District, Beijing City,the PRC(中國北京市海澱區土井路甲49號西側院3號庫房)

1,000 15 December 2019 to 14December 2020

RMB34,067

Warehouse 4, West 49A Tujing Road,Haidian District, Beijing City,the PRC(中國北京市海澱區土井路甲49號西側院4號庫房)

843 15 December 2019 to 14December 2020

RMB28,718

Fuzhou warehouse Unit 208, Block 1, Longda Yuan,89 Qunzhong East Road, TaijiangDistrict, Fuzhou, the PRC(中國福州市台江區群眾東路89號隆達苑1號樓208單元)

142 1 July 2017 to 30 June2020

RMB6,500

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Non-registration of lease agreements

As at the Latest Practicable Date, our lease agreements for certain Sales Offices and our Shenzhen

Facilities had not been registered by the relevant landlords/lessors with relevant PRC authorities.

As advised by our PRC Legal Advisers, the non-registration of the lease agreements will not affect

the validity of such lease agreements. However, the landlords and we as tenant may be subject to a risk

of being imposed with administrative penalties ranging from RMB1,000 to RMB10,000 for each

unregistered lease agreement if such lease agreement was not registered within a specified timeframe

upon request by the relevant municipal land and real estate administration bureau. As at the Latest

Practicable Date, we had not received any such request. Further, some of our leases may be deemed

invalid due to the absence of valid title or proper authorisation from the landlords, and we may be

subject to the risk of cessation of use. In the case of us having to cease our operations, our Directors do

not anticipate any material difficulty in identifying comparable alternative premises to run for our

operation. With respect to the Shenzhen Facilities which are mainly used for assembly services, we shall

consider relocating to a backup site located in the same district and estimate the costs of the relocation

(including capital expenditures, logistic and other expenses for refurbishing the backup site) would be

approximately RMB2.8 million. Therefore, our Directors believe that there would not have any material

adverse impact on our business operations and financial conditions even if the relocation is requested.

LEGAL PROCEEDINGS

During the Track Record Period and as at the Latest Practicable Date, no member of our Group

was engaged in any litigation, claim or arbitration of material importance and no litigation, claim or

arbitration is known to our Directors to be pending or threatened against any member of our Group

which would have a material adverse effect on our financial position or results of operations.

REGULATORY COMPLIANCE

The table below sets forth a summary of certain incidents of historical non-compliance with the

applicable laws and regulations during the Track Record Period. Our Directors believe that these

incidents of non-compliance are not expected to have a material operational or financial impact on us.

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Non-compliance incidentRectification actions andpotential impact on our Group

During the Track Record Period, certain of our subsidiaries hadfailed to make social security insurance contributions and/orhousing provident fund contributions in adequate amount forsome of our employees as required by the relevant PRC lawsand regulations.

These non-compliance incidents happened primarily because ourstaff who were in charge of this matter did not fully understandthe relevant PRC laws and regulations.

According to the relevant PRC laws and regulations and asadvised by our PRC Legal Advisers, if we failed to make socialsecurity insurance in full amount in a timely manner under therelevant PRC laws and regulations, we may be ordered to paythe unpaid social security insurance in arrears within a certainperiod of time, and for the unpaid amount after 1 July 2011, besubject to an overdue penalty calculated at a daily rate of 0.05%of the total unpaid amount of social security insurancecontributions from the date on which the payment is overdue. Ifwe fail to pay any of the unpaid social security insurancecontributions and overdue penalty within the prescribed timelimit, we may be subject to a fine ranging between one to threetimes of the total amount of the unpaid social security insurancecontributions.

According to the relevant PRC laws and regulations and asadvised by our PRC Legal Advisers, in respect of housingprovident fund contributions, the relevant government authoritymay require us to pay the housing provident fund in aprescribed time limit. If we do not pay the housing providentfund within the prescribed time limit, the relevant governmentauthority may apply to the court for mandatory enforcement.

During the Track Record Period and up to the Latest PracticableDate, we had not received any notification from the relevantgovernment authorities that any of our subsidiaries was requiredto pay the social security insurance or the housing providentfund in arrears within a certain period of time or is subject toany administrative penalties.

We have started arranging the payment of social insurance andhousing provident fund contributions for our employees inaccordance to local practice and policies as at 31 December2019. As at the Latest Practicable Date, (i) 11 of oursubsidiaries failed to make social security insurancecontributions; and (ii) 19 of our subsidiaries failed to makehousing provident fund contributions, according to the requiredpayment base. These subsidiaries expect to complete theadjustment of the payment base of social security insurance andhousing provident fund for their employees in accordance withrelevant laws and regulations before the end of July 2020subject to the stuation and development of COVID-19, as thePRC local authorities only allow us to adjust the payment baseat a specified time each year. We will continue to make socialsecurity insurance and housing provident fund contributions inaccordance with the applicable PRC laws and regulations in thefuture.

We made provisions of approximately RMB6.5 million,RMB6.6 million and nil in respect of the underpaid amount ofsocial insurance and housing provident fund for the TrackRecord Period, respectively.

Our PRC Legal Advisers are of the view that, based on theabove and if the relevant PRC subsidiaries are able to makeretrospective payments or shortfall to the social insurance andhousing provident fund within a specified time in the event thatthey are ordered to do so, there is remote risk that the relevantPRC subsidiaries will be penalised.

Our Controlling Shareholders have undertaken to indemnify usfor any unpaid amount of and penalty incurred as a result of ourfailure to make the social security insurance and housingprovident fund contributions.

We have implemented a policy on managing social insuranceand housing provident fund for our employees. We have alsodesignated experienced human resources staff to process mattersrelating to social insurance and housing provident fundcontribution matters including all filing of documents, paymentof contributions and updating the relevant government policiesand regulations, including the applicable bases for calculation ofthe social insurance and housing provident fund contributions,in our internal guidelines.

Based on the above, our Directors are of the view that the non-compliance incidents of these PRC subsidiaries in respect of thesocial insurance and housing provident fund contributions willnot have a material adverse impact on our operations andfinancial conditions.

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Non-compliance incidentRectification actions andpotential impact on our Group

As at the Latest Practicable Date, we engaged third party humanresources agencies to pay social insurance and housingprovident funds for the employees of five of our subsidiaries.

Such arrangements are not in strict compliance with relevantPRC laws and regulations since the obligation to make socialcontributions to social insurance and housing provident fundsrests on us and should not be delegated to third-party agents.

These non-compliance incidents were primarily because theemployees of our relevant PRC subsidiaries were workingoutside of the locations of those PRC subsidiaries, as such thosePRC subsidiaries entered into payment arrangements with thirdparty human resources agencies in order to enable theiremployees to enjoy the social insurance and housing providentfunds in the location where they work.

During the Track Record Period and up to the Latest PracticableDate, we had not been imposed with any administrative penaltyfor our arrangements with the human resources agencies.

As confirmed by the government agencies in charge of socialinsurance and housing provident fund supervision in thelocation of the relevant companies, they did not prohibit therelevant entities’ arrangements with the human resourcesagencies, and the government agency would not impose anypenalty on us.

Based on the above, our PRC Legal Advisers are of the viewthat the risk of administrative penalty that relevant governmentauthorities may impose on us is low.

Based on the above, our Directors are of the view that the non-compliance incidents of these PRC subsidiaries in respect of thearrangements with third party human resources agencies will nothave a material adverse impact on our operations and financialconditions.

Save as disclosed above, as confirmed by our Directors, as at the Latest Practicable Date, we had

complied in all material respects with the applicable laws and regulations in the PRC, during the Track

Record Period and did not receive any notices for any fines or penalties for any non-compliance that is

considered as either material or systemic.

Indemnity given by our Controlling Shareholders

Our Controlling Shareholders, collectively as the covenantors, have entered into the Deed of

Indemnity in favour of our Company, under which the covenantors jointly and severally covenant and

undertake with our Company to indemnify us against losses, liabilities, damages, costs, claims and

expenses incurred by us in relation to these non-compliance matters on or before the [REDACTED]. Fordetails, please refer to the paragraph headed ‘‘Statutory and general information — Other information —

15. Estate duty, tax and other indemnities’’ in Appendix IV to this document.

OUR LICENCES, PERMIT AND APPROVALS

To the best knowledge and belief of our Directors, there is no specific licencing requirement for

conducting our business in the PRC (except for customs declaration and those which are applicable to all

body corporates conducting business in the PRC).

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During the Track Record Period, we had obtained all necessary licences, permits, consents,

qualifications, approvals and registrations which are required to carry out our business activities in the

PRC.

OUR AWARDS AND RECOGNITIONS

The table below sets forth some of our major awards and recognitions as at the Latest Practicable

Date:

Year of award Awards/Recognitions Issuing authority

2019 Projector Brand of the Year — Sonnoc

(年度投影機品牌大獎 — 索諾克)

TY360.com

（中國視聽行業協會 —

中國投影網）

2019 Smart Education Influential Brand Award —

Donview Technology

(智慧教育影響力品牌 —

北京東方中原科技發展有限公司)

International Smart Education

Exhibition Committee

（國際智慧教育展組委會）

2017 to 2019 Outstanding Brand of the Year — Sonnoc

(年度優秀品牌獎 — 索諾克)

PjTime.com (投影時代網)

2017 and 2019 Outstanding Brand of the Year — Donview

(年度優秀品牌獎 — 東方中原)

PjTime.com (投影時代網)

2018 Outstanding Service Integrator of the Year —

Donview (年度優秀集成商獎 — 東方中原)

PjTime.com

(投影時代網)

2018 Smart Educational Projector Brand of the Year —

Sonnoc and Propix (智慧教育投影機品牌 — 索

諾克及派克斯)

HC Group

(慧聰集團)

2018 (National Product and Service of Trusted Quality

Model Enterprise — Jiurui Technology)

全國產品和服務質量誠信示範企業 —

北京東方久瑞科技股份有限公司)

China Association for Quality

Inspection

(中國質量檢驗協會)

2017 Best Educational Projector Brand of the Year —

Propix JV (年度最佳教育投影機品牌獎 — 北京

東方光峰科技股份有限公司)

TY360.com

(中國視聽行業協會 —

中國投影網)

2017 Smart School Projector Influential Brand of the

Year — Sonnoc and Propix (年度智慧校園投影

機影響力品牌 — 索諾克及派克斯)

HC360.com (慧聰網)

OUR RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

Our Directors are responsible for the formulation of and overseeing the implementation of our

internal control measures and the effectiveness of our risk management system. We have adopted, or

expects to adopt upon the [REDACTED], a series of internal control policies and procedures designed

to provide reasonable assurance for achieving objectives including effective and efficient operations,

compliance with financial reporting requirements and applicable laws and regulations.

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OUR INTERNAL CONTROL

We have engaged an independent external consulting firm as our internal control adviser (the

‘‘Internal Control Adviser’’) in March 2019 to perform a detailed assessment of our internal control

system including the areas of financial, operation, compliance and risk management with an aim to,

among other matters, improve our corporate governance.

Our Internal Control Adviser provides internal control review services, and has been previously

engaged in internal control review projects for a number of companies listed on the Stock Exchange and

companies preparing for listing in Hong Kong. Our Internal Control Adviser has completed the first

review of our internal control system in August 2019. As at the Latest Practicable Date, we have

adopted the internal control measures and rectified the weakness in the internal control system as

recommended by our Internal Control Adviser.

Our Internal Control Adviser has completed follow up reviews on the enhanced internal control

measures in May 2020 and confirmed that all weaknesses had been rectified. Taking into account the

facts that (i) there were no findings of material weakness or materials insufficiency in our enhanced

internal control system after the follow up reviews by our Internal Control Adviser; and (ii) we have

properly implemented the enhanced internal control measures recommended by our Internal Control

Adviser, our Directors are of the view that the enhanced internal control measures are adequate and

effective for our operations.

BUSINESS

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CONJUNCTION WITH THE SECTION HEADED WARNING ON THE … · Business, we primarily sell projectors to...

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