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Stock code : 0325
(Incorporated in the Cayman Islands with limited liability)
BLOKS GROUP LIMITED
布魯可集團有限公司
GLOBAL OFFERING
Joint Sponsors, Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Lead Manager


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IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should obtain professional independent advice.
Bloks Group Limited
ʮ̡
(Incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the
Global Offering
: 24,120,300 Offer Shares (subject to the
Offer Size Adjustment Option and the
Over-allotment Option)
Number of Hong Kong Offer Shares : 2,412,300 Offer Shares (subject to
reallocation)
Number of International Offer Shares : 21,708,000 Offer Shares (subject to
reallocation, the Offer Size Adjustment
Option and the Over-allotment
Option)
Maximum Offer Price : HK$60.35 per Offer Share, plus
brokerage of 1.0%, SFC transaction
levy of 0.0027%, AFRC transaction
levy of 0.00015% and Stock Exchange
trading fee of 0.00565% (payable in
full on application in Hong Kong
dollars and subject to refund)
Nominal value : US$0.0001 per Share
Stock code : 0325
Joint Sponsors, Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Joint Lead Manager
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents
of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the
whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the section headed “Documents Delivered to the Registrar of Companies i n Hong Kong and Available on
Display” in Appendix V to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (W inding Up and Miscellaneous
Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Ko ng take no responsibility
as to the contents of this prospectus or any other documents referred to above.
The Offer Price is expected to be determined by agreement between the Overall Coordinators (on behalf of the Underwriters) and us on the Price Determin ation Date. The Price
Determination Date is expected to be on or before Wednesday, January 8, 2025 (Hong Kong time) and, in any event, not later than 12:00 noon on Wednesday, J anuary 8, 2025 (Hong Kong
time). The Offer Price will be not more than HK$60.35 per Offer Share and is currently expected to be not less than HK$55.65 per Offer Share. If, for any re ason, the Offer Price is not
agreed by 12:00 noon on Wednesday, January 8, 2025 (Hong Kong time) between the Overall Coordinators (on behalf of the Underwriters) and us, the Global Offering will not proceed
and will lapse.
Applicants for Hong Kong Offer Share may be required to pay, on application (subject to application channels), the maximum Offer Price of HK$60.35 for each Hong Kong Offer Share
together with brokerage fee of 1.0%, SFC transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and Stock Exchange trading fee of 0.00565%, su bject to refund if the Offer
Price as finally determined is less than HK$60.35.
The Overall Coordinators, for themselves and on behalf of the Underwriters, and with our consent may, where considered appropriate, reduce the numbe r of Hong Kong Offer Shares and/or
the indicative Offer Price range below that is stated in this prospectus (which is HK$55.65 to HK$60.35) at any time on or prior to the morning of the last day for lodging applications
under the Hong Kong Public Offering. In such a case, notices of the reduction in the number of Hong Kong Offer Shares and/or the indicative Offer Price ra nge will be published on the
website of our Company at https://www.bloks.com/ and on the website of the Stock Exchange at www.hkexnews.hk as soon as practicable following the decision to make such reduction,
and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth in “Structure of
the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, includin g but not limited to the risk factors set
out in the section headed “Risk Factors” in this prospectus.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Overall Coordinators (for themselves and on behalf of
the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. See “Underwriting — Underwriting arrangements and expens es — Hong Kong Public Offering
— Grounds for termination” of this prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offe red, sold, pledged or transferred
within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securitie s Act and applicable U.S. state securities
laws. The Offer Shares are being offered and sold (i) within the United States solely to “Qualified Institutional Buyers” as defined in Rule 144A pursu ant to an exemption from registration
under the U.S. Securities Act and (ii) outside the United States in offshore transactions in accordance with Regulation S under the U.S. Securities Ac t.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this prospectus to the p ublic in relation to the Hong
Kong Public Offering.
This prospectus is available at the websites of the Stock Exchange ( www.hkexnews.hk ) and our Company ( https://www.bloks.com/ ). If you require a printed copy of this prospectus,
you may download and print from the website addresses above.
IMPORTANT
December 31, 2024


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IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
The Company has adopted a fully electronic application process for the Hong
Kong Public Offering .
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing
Information ” section, and our website at https://www.bloks.com/.
The Company will not provide any physical channels to accept any application for
the Hong Kong Offer Shares by the public. The contents of the electronic version of this
prospectus are identical to the prospectus as registered with the Registrar of Companies
in Hong Kong pursuant to Section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the White Form eIPO service at www.eipo.com.hk ;o r
(2) apply electronically through the HKSCC EIPO channel and cause HKSCC
Nominees to apply on your behalf by instructing your broker or custodian
who is a HKSCC Participant to give electronic application instructions via
HKSCC’s FINI system to apply for the Hong Kong Offer Shares on your
behalf.
If you are an intermediary , broker or agent , please remind your customers, clients
or principals, as applicable, that this prospectus is available online at the website
addresses stated above.
See the section headed “How to Apply for Hong Kong Offer Shares” in this
prospectus for further details of the procedures through which you can apply for the
Hong Kong Offer Shares.
IMPORTANT
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Y our application through the White Form eIPO service or the HKSCC EIPO channel
must be for a minimum of 300 Hong Kong Offer Shares and in one of the numbers set out in
the table.
If you are applying through the White Form eIPO service, you may refer to the table
below for the amount payable for the number of Hong Kong Offer Shares you have selected.
Y ou must pay the respective amount payable on application in full upon application for Hong
Kong Offer Shares.
If you are applying through the HKSCC EIPO channel, you are required to pre-fund your
application based on the amount specified by your broker or custodian , as determined based
on the applicable laws and regulations in Hong Kong.
Bloks Group Limited
(HK$60.35 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED
FOR AND PAYMENTS
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
HK$ HK$ HK$ HK$
300 18,287.59 4,500 274,313.83 24,000 1,463,007.11 150,000 9,143,794.47
600 36,575.18 6,000 365,751.78 27,000 1,645,883.00 180,000 10,972,553.35
900 54,862.77 7,500 457,189.72 30,000 1,828,758.89 210,000 12,801,312.24
1,200 73,150.36 9,000 548,627.67 45,000 2,743,138.34 240,000 14,630,071.15
1,500 91,437.94 10,500 640,065.61 60,000 3,657,517.79 270,000 16,458,830.03
1,800 109,725.53 12,000 731,503.56 75,000 4,571,897.23 300,000 18,287,588.93
2,100 128,013.12 13,500 822,941.50 90,000 5,486,276.68 600,000 36,575,177.86
2,400 146,300.71 15,000 914,379.45 105,000 6,400,656.13 900,000 54,862,766.78
2,700 164,588.30 18,000 1,097,255.34 120,000 7,315,035.56 1,206,000
(1) 73,516,107.48
3,000 182,875.89 21,000 1,280,131.23 135,000 8,229,415.02
(1) Maximum number of Hong Kong Offer Share you may apply for.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants
(as defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock
Exchange on behalf of the SFC; and in the case of the AFRC transaction levy, collected by the Stock Exchange
on behalf of the AFRC).
No application for any other number of Hong Kong Offer Shares will be considered and
such an application is liable to be rejected.
IMPORTANT
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If there is any change in the following expected timetable of the Hong Kong Public
Offering, we will issue an announcement in Hong Kong to be published on the Company’ s
website at https://www.bloks.com/ and the website of the Stock Exchange at
www.hkexnews.hk .
Hong Kong Public Offering commences ...................... .9:00 a.m. on Tuesday,
December 31, 2024
Latest time for completing electronic
applications under the White Form eIPO
service through the designated website
at www.eipo.com.hk
(2) ................................. 1 1:30 a.m. on Tuesday,
January 7, 2025
Application lists open (3) .................................. 1 1:45 a.m. on Tuesday,
January 7, 2025
Latest time for (a) completing payment of White Form eIPO
applications by effecting internet banking transfer(s) or PPS
payment transfer(s) and (b) giving electronic application
instructions to HKSCC
(4) .............................. .12:00 noon on Tuesday,
January 7, 2025
If you are instructing your broker or custodian who is a HKSCC Participant will give
electronic application instructions on your behalf through HKSCC’s FINI system in
accordance with your instruction, you are advised to contact your broker or custodian for the
earliest and latest time for giving such instructions, as this may vary by broker or custodian .
Application lists close (3) ................................ .12:00 noon on Tuesday,
January 7, 2025
Expected Price Determination Date ...................... W ednesday, January 8, 2025
Announcement of the level of indications of interest
in the International Offering, the level of applications
in the Hong Kong Public Offering and the basis of allocation
of the Hong Kong Offer Shares to be published on
the website of the Stock Exchange at www.hkexnews.hk
and on the Company’s website at https://www.bloks.com/ (5)
at or before ......................................... 1 1:00 p.m. on Thursday,
January 9, 2025
EXPECTED TIMETABLE (1)
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The results of allocations in the Hong Kong Public Offering (with successful applicants’
identification document numbers, where appropriate) to be available through a variety of
channels, including:
 in the announcement to be posted on our website
and the website of the Stock Exchange at
https://www.bloks.com/ and www.hkexnews.hk ,
respectively ...................................... a to r before 11:00 p.m. on
Thursday, January 9, 2025
 from the designated results of allocations website at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment ) with a
“search by ID” function from .......................... 1 1:00 p.m. on Thursday,
January 9, 2025 to 12:00 midnight on
Wednesday, January 15, 2025
 from the allocation results telephone enquiry line
by calling +852 2862 8555 between 9:00 a.m.
and 6:00 p.m. from ................................ .Friday, January 10, 2025
to Wednesday, January 15, 2025
(except weekend and
public holiday in Hong Kong)
Share certificates in respect of wholly or partially successful
applications to be dispatched or deposited into CCASS
on or before
(6)(8) ................................... .Thursday, January 9, 2025
White Form e-Refund payment instructions/refund checks in
respect of (i) wholly or partially successful applications if the
final Offer Price is less than the price payable on application
(if applicable) and (ii) wholly or partially unsuccessful
application under the Hong Kong Public Offering to be
dispatched/collected on or before
(7)(8) .................... .Friday, January 10, 2025
Dealings in the Shares on the Stock Exchange expected to
commence at .......................................... .9:00 a.m. on Friday,
January 10, 2025
The application for the Hong Kong Offer Shares will commence on Tuesday,
December 31, 2024 through Tuesday, January 7, 2025, being longer than normal market
practice of three and a half days. Investors should be aware that the dealings in the
Shares on the Stock Exchange are expected to commence on Friday, January 10, 2025.
EXPECTED TIMETABLE (1)
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Notes:
(1) Unless otherwise stated, all times and dates refer to Hong Kong local times and dates.
(2) Y ou will not be permitted to submit your application under the White Form eIPO service through the
designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you
have already submitted your application and obtained an application reference number from the designated
website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment
of application monies) until 12:00 noon on the last day for submitting applications, when the application lists
close.
(3) If there is/are Severe Weather Signals (as defined in the paragraph headed “How to Apply for Hong Kong Offer
Shares — E. Severe Weather Arrangements” in this prospectus) in force in Hong Kong at any time between
9:00 a.m. and 12:00 noon on Tuesday, January 7, 2025, the application lists will not open or close on that day.
For details, please refer to the paragraph headed “How to Apply for Hong Kong Offer Shares — E. Severe
Weather Arrangements” in this prospectus.
(4) Applicants who apply for Hong Kong Offer Shares by instructing their broker or custodian to give electronic
application instructions to HKSCC via FINI should refer to the paragraph headed “How to Apply for Hong
Kong Offer Shares — A. Application for Hong Kong Offer Shares — 2. Application Channels” in this
prospectus.
(5) None of the websites or any of the information contained on the websites forms part of this prospectus.
(6) Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date provided that the
Global Offering has become unconditional and the right of termination described in “Underwriting —
Underwriting Arrangements and Expenses — Hong Kong Public Offering — Grounds for Termination” has not
been exercised. Investors who trade Shares on the basis of publicly available allocation details prior to the
receipt of Share certificates or prior to the Share certificates becoming valid evidence of title do so entirely
at their own risk.
(7) White Form e-Refund payment instructions/refund checks will be issued in respect of wholly or partially
unsuccessful applications pursuant to the Hong Kong Public Offering and also in respect of wholly or partially
successful applications in the event that the final Offer Price is less than the price payable per Offer Share on
application. Part of the applicant’s identification document number provided by the applicant(s) may be printed
on the refund check, if any. Such data would also be transferred to a third party for refund purposes. Banks
may require verification of an applicant’s identification document number before encashment of the refund
check. Inaccurate completion of an applicant’s identification document number may invalidate or delay
encashment of the refund check.
(8) Applicants being individuals who are eligible for personal collection may not authorize any other person to
collect on their behalf. If you are a corporate applicant which is eligible for personal collection, your
authorized representative must bear a letter of authorization from your corporation stamped with your
corporation’s chop. Both individuals and authorized representatives must produce evidence of identity
acceptable to our Hong Kong Share Registrar at the time of collection.
Applicants who have applied for Hong Kong Offer Shares through the HKSCC EIPO channel should refer to
the paragraph headed “How to Apply for Hong Kong Offer Shares — D. Despatch/Collection of Share
Certificates and Refund of Application Monies” in this prospectus for details.
Applicants who have applied through the White Form eIPO service and paid their applications monies
through single bank accounts may have refund monies (if any) dispatched to the bank account in the form of
White Form e-Refund payment instructions. Applicants who have applied through the White Form eIPO
service and paid their application monies through multiple bank accounts may have refund monies (if any)
dispatched to the address as specified in their application instructions in the form of refund checks in favour
of the applicant (or, in the case of joint applications, the first-named applicant) by ordinary post at their own
risk.
Any uncollected Share certificates and/or refund checks will be dispatched by ordinary post, at the applicants’
risk, to the addresses specified in the relevant applications.
EXPECTED TIMETABLE (1)
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Further information is set out in the paragraphs headed “How to Apply for the Hong Kong Offer Shares — D.
Despatch/Collection of Share Certificates and Refund of Application Monies”.
The above expected timetable is a summary only. For further details of the structure
of the Global Offering, including its conditions, and the procedures for applications for
Hong Kong Offer Shares, please see “Structure of the Global Offering” and “How to
Apply for Hong Kong Offer Shares” in this prospectus, respectively.
If the Global Offering does not become unconditional or is terminated in accordance
with its terms, the Global Offering will not proceed. In such case, the Company will make
an announcement as soon as practicable thereafter.
EXPECTED TIMETABLE (1)
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IMPORTANT NOTICE TO POTENTIAL INVESTORS
This prospectus is issued by the Company solely in connection with the Hong Kong
Public Offering and the Hong Kong Offer Shares and does not constitute an offer to sell
or a solicitation of an offer to buy any security other than the Hong Kong Offer Shares
offered by this document pursuant to the Hong Kong Public Offering. This prospectus
may not be used for the purpose of making, and does not constitute, an offer or invitation
in any other jurisdiction or in any other circumstances. No action has been taken to
permit a public offering of the Hong Kong Offer Shares in any jurisdiction other than
Hong Kong and no action has been taken to permit the distribution of this prospectus in
any jurisdiction other than Hong Kong. The distribution of this prospectus for purposes
of a public offering and the offering and sale of the Hong Kong Offer Shares in other
jurisdictions are subject to restrictions and may not be made except as permitted under
the applicable securities laws of such jurisdictions pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this prospectus to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this prospectus. We have not
authorized anyone to provide you with information that is different from what is
contained in this prospectus. Any information or representation not contained nor made
in this prospectus must not be relied on by you as having been authorized by the
Company, the Joint Sponsors, the Overall Coordinators, the Sponsor-OC, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the
Underwriters, any of their respective directors, officers, employees, agents or
representatives of any of them or any other parties involved in the Global Offering.
Page
Expected Timetable ................................................. i v
Contents ......................................................... viii
Summary ......................................................... 1
Definitions ........................................................ 2 7
Glossary of Technical Terms .......................................... 4 0
Forward-Looking Statements ......................................... 4 2
Risk Factors ...................................................... 4 4
Waivers from Strict Compliance with the Listing Rules .................... 7 8
CONTENTS
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Information about this Prospectus and the Global Offering ................ 8 2
Directors and Parties Involved in the Global Offering ..................... 8 6
Corporate Information .............................................. 9 1
Industry Overview ................................................. 9 3
Regulatory Overview ............................................... 1 1 0
History, Development and Reorganization ............................... 1 3 1
Business .......................................................... 1 6 1
Directors and Senior Management ..................................... 2 3 6
Relationship with the Controlling Shareholders .......................... 2 5 0
Share Capital ..................................................... 2 5 4
Substantial Shareholders ............................................ 2 5 8
Financial Information ............................................... 2 6 1
Cornerstone Investors ............................................... 3 1 8
Future Plans and Use of Proceeds ..................................... 3 2 6
Underwriting ...................................................... 3 3 0
Structure of the Global Offering ...................................... 3 4 4
How to Apply for Hong Kong Offer Shares ............................. 3 5 7
Appendix I — Accountants’ Report ............................... I - 1
Appendix II — Unaudited Pro Forma Financial Information ............ II-1
Appendix III — Summary of the Constitution of the Company and
Cayman Islands Company Law ..................... III-1
Appendix IV — Statutory and General Information ................... I V - 1
Appendix V — Documents Delivered to the Registrar of Companies in
Hong Kong and Available on Display ............... V - 1
CONTENTS
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This summary aims to give you an overview of the information contained in this
prospectus. As it is a summary, it does not contain all the information that may be
important to you and is qualified in its entirety by, and should be in conjunction with, the
full text of this prospectus. You should read the entire prospectus before you decide to
invest in the Offer Shares. There are risks associated with any investment. Some of the
particular risks in investing in the Offer Shares are set out in “Risk Factors” in this
prospectus. You should read that section carefully before you decide to invest in the Offer
Shares.
OVERVIEW
Who We Are
We are a leader of assembly character toys in China. Leveraging our portfolio of more
than 500 patents, in-house IP development capability and cooperative relationships with
approximately 50 renowned IP franchises on a non-exclusive basis, we are dedicated to
providing consumers with a wide range of quality-for-money assembly character toys and have
achieved rapid growth. Our assembly character toys recreate the essence of IP characters.
Through the combination of our product strength and supply chain capabilities, we are able to
maintain cost advantages and continuously expand product categories. We have established a
multi-channel sales network in China with a comprehensive and extensive consumer reach. We
pivoted to offline sales channel with a focus on distributors as we began to offer assembly
character toys in 2022. According to Frost & Sullivan, we are China’s largest and leading
player in the assembly character toy segment with a GMV of approximately RMB1.8 billion
in 2023. We are also a fast-growing toy company with a GMV growth of over 170% in 2023.
Our market share in China’s assembly character toy segment and China’s assembly toy market
in terms of GMV was 30.3% and 7.4% in 2023, respectively. China had an assembly character
toy market size of RMB5.8 billion in terms of GMV , representing 5.5%, 14.3% and 24.4% of
China’s toy market, characters toy market and assembly toy market in 2023, respectively.
Our Major Products
SUMMARY
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We generated a substantial portion of revenue from the sales of products based on the
Ultraman IP , which contributed to 63.5% and 57.4% of our revenue in 2023 and the six months
ended June 30, 2024, respectively. We entered into a license agreement with an IP licensor to
secure the rights to develop and sell products under the Ultraman IP in 2021, and has
maintained a positive relationship ever since. This can be evidenced by the fact that before the
expiration date, our Ultraman IP license in China was extended to 2027. We strive to continue
to maintain such positive relationship through active communication, and do not foresee any
material adverse changes to, or termination of, our relationship with the IP licensor of the
Ultraman IP as of the Latest Practicable Date. See “— Key IP Information.” However, there
can be no assurance that we will always be able to renew our licenses on favorable terms, if
at all. See “Risk Factors — We may fail to obtain, maintain or renew IP licenses on favorable
terms, and our IP proprietors or licensors may fail to maintain and protect their IPs.”
Evolution of Our Business
We have been dedicated to the design, development and sales of assembly toys since
2016. Starting from brick-based toys, we accumulated a wealth of knowledge in assembly toys
which served as a solid foundation for expanding our product offering. We then strategically
diversified our product offering to include assembly character toys. We started the research and
development of assembly character toys in 2019 and began to offer such products in 2022, as
we saw large growth potential driven by strong demand for toys that combine highly engaging
assembling process and popular IP characters with strong and loyal fan bases. According to
Frost & Sullivan, China’s assembly character toy market grew by a CAGR of 49.6% from
RMB1.2 billion in 2019 to RMB5.8 billion in 2023, and is expected to grow at a CAGR of
41.3% from RMB5.8 billion in 2023 to RMB32.5 billion in 2028.
Brick-based toys and assembly character toys, both being assembly toys, share many
similarities in product design and production. Both brick-based toys and assembly character
toys employ the concept of standard components, have components that are compatible across
various products, and involve assembling and connecting mechanism. On the other hand, the
primary differences between our brick-based toys and assembly character toys are (i) the size
of components, and (ii) that it is more difficult to recreate the essence of the IP characters with
bricks. In addition, the raw materials and production process for brick-based toys and assembly
toys are similar, which enabled us to leverage our expertise, knowledge and established
relationship in production and supply chain management. This can be further corroborated by
the fact that three of our partner factories have been working with us to produce brick-based
toys since 2017, 2018 and 2021, respectively, and continued to produce assembly character
toys for us afterwards.
SUMMARY
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Due to the abovementioned similarities, we are able to leverage our management and
other experiences from brick-based toys in diversifying our assembly toy offering to include
assembly character toys. Particularly, we have accumulated knowledge in product design
(including connection mechanism and materials) and production (including molding, injection
and painting). On the back of our experience in brick-based toys, we developed the Bloks
System specifically for our assembly character toys. See “Business — Overview — The Bloks
System.” Our assembly character toys quickly achieved success. We began to offer assembly
character toys in January 2022. The revenue from our assembly character toys increased by
553.5% from RMB117.7 million in 2022 to RMB769.0 million in 2023, and increased by
323.8% from RMB241.4 million in the six months ended June 30, 2023 to RMB1,023.1 million
in the six months ended June 30, 2024. In 2022, our assembly character toys achieved a gross
profit margin of 36.8%, similar to that of brick-based toys. The gross profit margin further
increased to 48.4% in 2023 and 53.3% in the six months ended June 30, 2024, exceeding that
of brick-based toys at 38.7% and 38.1% for the respective periods.
Prior to the launch of our assembly character toys, we sold our brick-based toys through
offline channels such as distributors and consignment sales as well as online channels. In 2021,
45.7% and 51.8% of our revenue were generated through offline channels and online channels,
respectively. We pivoted to offline sales channel with a focus on distributors as we began to
offer assembly character toys in 2022. This approach leveraged the local resources and market
intelligence of distributors, enabling us to effectively penetrate the market. More specifically,
offline distributorship allows our target consumers to conveniently experience and purchase
our products offline. By utilizing offline distributorship, we were able to expand presence and
drive our growth efficiently and effectively. In 2022, 2023 and the six months ended June 30,
2024, our offline distribution sales amounted to 48.2%, 83.6% and 91.6% of our total revenue,
respectively.
Our Product Approach
We adopt a product approach that offers consumers a new choice in the highly popular
character toys market. Through our product approach that employs an optimal combination of
standard and customized components, we produce character toys that recreate the essence of
the IP characters, and are fun to assemble and play with, and more accessible in terms of
pricing. Our product approach enables us to effectively commercialize our self-developed and
licensed IPs to strengthen and rapidly broaden our product offering. Surrounding our product
approach, we have built the Bloks System. See “Business — Our Product Approach.”
SUMMARY
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The architecture of our assembly character toys draws inspiration from human physique
to assimilate stability, mobility and appearance. Under this approach, we recreate characters
that can be assembled, posed and customized with details through the combination of standard
and customized components.
The Architecture of Our Assembly Character Toys
UltramanHero Infinity –
Guan Yu
(“ᜢԳ”)
Customized Components
(Appearance Layer)
Standard Components
(Structure and Joints)
Market Opportunities
Assembly character toy is the fastest-growing segment in the global toy market and has
significant growth potential. Due to the emergence of multiple product approaches and quality
supply, assembly character toys enjoy significant differentiated advantages over traditional
character toys, gradually becoming the preferred choices of consumers, with the penetration
rate in the global toy market expected to increase in the long run.
SUMMARY
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According to Frost & Sullivan, the global and China’s character toy market reached
RMB345.8 billion and RMB40.3 billion in 2023, and is expected to grow at a CAGR of 9.3%
and 17.7% to reach RMB540.7 billion and RMB91.1 billion in 2028, respectively. Within the
above markets, the global and China’s assembly character toy market reached RMB27.8 billion
and RMB5.8 billion in 2023, and is expected to grow at a CAGR of 29.0% and 41.3% to reach
RMB99.6 billion and RMB32.5 billion in 2028, respectively. The penetration rate of global and
China’s assembly character toys in the character toy market is expected to increase from 8.0%
and 14.3% in 2023 to 18.4% and 35.6% in 2028, respectively. Furthermore, the assembly
product approaches can also be applied to multiple categories of toys, including vehicle toys
and various scenery toys. In particular, the global and China’s vehicle toy market reached
RMB96.7 billion and RMB15.1 billion in 2023, and is expected to grow at a CAGR of 2.9%
and 6.3% to reach RMB111.6 billion and RMB20.5 billion in 2028, respectively.
Rich IP Portfolio
Our self-developed IPs and renowned licensed IPs form our rich IP portfolio. We have
successfully developed two IPs in-house, including the children-development-oriented Magic
Blocks ( ϵᜊ̺ኁ̙) and the Chinese culture-themed Hero Infinity (ࠢOur assembly
character toys efficiently commercialize IP at scale and position us as a preferred partner of
various proprietors of renowned IPs. As of the Latest Practicable Date, we had obtained
non-exclusive licenses for approximately 50 renowned IPs from IP proprietors or licensors,
including Ultraman, TRANSFORMERS, Naruto, Marvel’s Infinity Saga, Marvel’s Spidey and
His Amazing Friends, Minions, Pokémon, Kamen Rider, Detective Conan, Hatsune Miku, Saint
Seiya, EV ANGELION, Hello Kitty, Sesame Street, SUPER SENTAI, DC’s Superman, DC’s
Batman, Harry Potter and STAR W ARS. Our rich IP portfolio enables us to offer products to
reach consumers across different age groups and genders globally.
Comprehensive Product Offering
We capture the market opportunities and are committed to leveraging our Bloks System
that combines standardization and individuality elements to create highly popular and fun
assembly character toys, address global consumers’ widespread demand for toys that recreate
the essence of IP characters, and deliver the joy of assembling. Through a large number of
SKUs, a comprehensive price segment coverage and a rich IP portfolio, we have built an
expansive matrix-style product offering and continue to serve consumers, fans and BFCs with
a wide selection of products. As of June 30, 2024, we had a total of 431 SKUs available for
sale, including 116 SKUs designed primarily for children under the age of six, 295 SKUs
designed primarily for consumers between the ages of six and 16, and 20 SKUs designed
primarily for consumers over the age of 16.
SUMMARY
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Our products offer consumers various quality-for-money propositions, including
excellent experience, exquisite design and high quality.
 Fun experience. Our innovative and systemized assembling mechanism ensures our
products are easy to play with. Consumers’ involvement in the assembling process
promote individualistic expression. As such, our products have strong collectability
and can provide consumers with long-term companionship.
 High quality. Our products are high quality, safe, enduring and exquisitely-designed
with consistent assembling experience.
 Great value-for-money. Our product pricing strategy covers a comprehensive price
range, and our mainstream products’ suggested retail prices primarily range from
RMB9.9 to RMB399, with great value-for-money at each price segment. Our
best-selling products in the mass-market price segment are priced at RMB39 per
unit, while products in the value price segment that can reach a wider consumer
group are priced from RMB9.9 to RMB19.9 per unit.
Our Product Offering
SUMMARY
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Key IP Information
We generated substantially all of our revenue in 2023 and the six months ended June 30,
2024 from products based on three IPs. The table below sets out key information relating to our
top three IPs in 2023 and the six months ended June 30, 2024.
IP Name SKU Source of IP
Identity and
Background of our IP
Proprietor or Licensor Licensed Territories
Licensing
Expiration
Y ear
Ultraman 134 Non-exclusively
licensed from
IP licensor
Tsubaraya Productions
Co., Ltd. is the
proprietor of the
Ultraman IP , who
granted SCLA an
exclusive license of
certain Ultraman
characters in China
with several additional
distribution territories
China
(1) 2027
North America, Europe
and certain regions in
Asia
2025
TRANSFORMERS 64 Non-exclusively
licensed from
IP proprietor
Hasbro, a leading US-
based NASDAQ listed
toy and game company,
owner of the
TRANSFORMERS IP
with global operations
Over 50 countries
globally
2028
Hero Infinity 53 Self-developed N/A N/A N/A
Note:
(1) Including Hong Kong, Macau and Taiwan.
SUMMARY
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The table below sets out the SKU, sales volume and average selling price of the assembly
character toys under the top three IPs for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 (1) 2022 2023 2023 2024
SKU
Sales
volume
Average
selling
price (2) SKU
Sales
volume
Average
selling
price (2) SKU
Sales
volume
Average
selling
price (2) SKU
Sales
volume
Average
selling
price (2) SKU
Sales
volume
Average
selling
price (2)
(’000) (RMB) (’000) (RMB) (’000) (RMB) (’000) (RMB) (’000) (RMB)
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 95 5,932 19 188 26,629 21 142 9,342 22 134 29,470 20
TRANSFORMERS /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – – 36 5,387 23 10 254 18 64 8,845 22
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 6 89 21 30 3,240 20 12 712 26 53 14,500 12
Notes:
(1) We began to offer assembly character toys in January 2022.
(2) Average selling price is calculated through dividing revenue by the relevant sales volume during the same
year/period, which represented the average price at which our products were sold to our direct customers.
We strive to maintain positive relationship with our IP proprietors or licensors through
active communication. The sales we generated from products based on the licensed IPs also
provide a strong financial incentive for the IP proprietors or licensors to continue the
relationship with us. As a result, we have been successful in renewing or extending our major
licenses including Ultraman and TRANSFORMERS, without significant increase in the fee
rates. For the Ultraman IP , we have successfully extended our license for three times since
2021. Our license for the Ultraman IP in China has been extended to 2027 and we are actively
negotiating for license extensions for other countries that expires in 2025. For the
TRANSFORMERS IP , we have successfully extended our license once since 2023. The
Directors are of the view that there should be no foreseeable difficulties in obtaining extension
for such licenses due to the following reasons.
 Common industry practice : IP licensing is a well-established and prevalent business
cooperation model in the global toy industry. Continuous renewal of licensed IPs is
very common in this sector. According to Frost & Sullivan, the common practice for
IP licensing involves the IP proprietors or licensors granting licenses to partners for
one to three years at a time on average, with continuous authorization achieved
through renewals. Ongoing IP licensing is a crucial commercial strategy for IP
proprietors or licensors to secure a reasonable return on their intellectual property
investments and continuously expand the influence of their IPs. Additionally,
changing an existing IP licensing partner can disrupt the IP proprietor’s established
licensing network and consume significant resources in finding a replacement
partner that matches the existing partner in industry status, R&D capabilities,
SUMMARY
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reputation, corporate image, and development strategy, resulting in high
replacement costs. Therefore, IP owners would typically choose to renew
agreements with satisfactory partners.
 Our positive relationship with IP proprietors and licensors : We have been able to
maintain positive relationship with the relevant IP proprietors and licensors through
active communication. We hold meetings with the relevant IP proprietors and
licensors frequently to discuss the latest development on the relevant products and
marketing initiatives. In addition, we report the sales of relevant products to the
relevant IP proprietors and licensors every quarter. We strictly adhere to the
limitations on authorized rights as stipulated in the IP licensing agreement. As a
result, we have been highly recognized by IP proprietors and licensors, receiving
multiple awards from IP proprietors and licensors. Our successful renewal and
extension of IP agreements such as Ultraman and TRANSFORMERS, as well as the
increase in the number of licensed countries, also indicate strong willingness of IP
proprietors and licensors to continue their cooperation with us.
To mitigate our reliance on any single IP , we have been actively expanding our IP
portfolio. As of the Latest Practicable Date, we had approximately 50 licensed IPs in our
portfolio. As of the same date, we were negotiating IP licensing arrangements for more than
25 IPs. In addition, we have been dedicated to offering products under our self-developed IPs.
As of the Latest Practicable Date, we had two self-developed IPs. As we continue to roll out
new products under our expanding IP portfolio, we will be able to reduce reliance on any single
IP .
RESEARCH AND DEVELOPMENT
Research and development is a key component of the Bloks System and is crucial to our
success. We have established a dedicated research and development team consisting of 331
employees as of June 30, 2024. Our research and development team members possess deep
experience and understanding of toys, consumer goods and popular culture. We follow a
consumer-oriented research and development approach. Throughout the product design and
development process, we leverage our consumer insights from the collection of feedback and
consumer participation. See “Business — Research and Development.”
PRODUCTION
We collaborate with specialized third-party partner factories to produce our products. We
integrate our know-how in assembly character toy production and various patents to curate
proprietary production techniques and customized equipment to be applied in a network of toy
factories dedicated to the production of our products. For example, through a highly
standardized molding process, and an automated process of mold injection, UV printing and
painting, component sorting and box packaging, we have achieved efficient large-scale
production and cost advantages. Although all our products were produced by our partner
factories during the Track Record Period, we acquired production know-how and patents
SUMMARY
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through active involvement in the production process. We apply DFM principles and our
research and development team engages in conversations with production partners across all
production stages, addressing specific issues and tackling technical bottlenecks, which often
lead to the development of know-how and patents.
Working with our network of specialized partner factories enables us to focus our
resources on key stages of the product launch cycle, such as product design, research and
development, brand development and management, and sales and distribution. This strategy
also enables us to rationalize capital investment and facilitates us in focusing our resources to
effectively adjust our product offering in response to evolving market trends. As of June 30,
2024, we had six specialized partner factories in our network dedicated to the production of our
products. See “Business — Production.”
MARKETING
Assembly character toys are naturally suitable for content-driven marketing due to the
consumer connection from the assembling process, and the fact that IP characters are closely
associated with rich contents that can be widely disseminated. Leveraging such unique
characteristics of IP-based assembly character toys, we adopt a content-driven online
marketing strategy that enables us to effectively reach and maintain a broad base of consumers,
fans and BFCs, and collect feedback on our products. We use multiple communication
channels, including our official accounts and the accounts of KOLs, KOCs, fans and BFCs on
social media platforms. See “Business — Marketing and Consumer Engagement — Our
Content-Driven Online Marketing Strategy.”
SALES NETWORK
We sell our products through a multi-channel sales network, which consists of (i) offline
sales channels, including distributors and consignment sales, and (ii) online sales channels,
including various e-commerce platforms. See “Business — Sales Network.”
As of June 30, 2024, we had established a strong market position in offline sales channels
in China, including retail outlets and specialty outlets. Through over 450 distributors, our
products can effectively reach all first- and second-tier cities and over 80% of the third-tier
cities and below. Our products are also sold in large-scale supermarkets and specialty outlets
in China, including Toys“R”Us, Kidswant, Kulechaowan and Walmart. Our online channels in
China cover mainstream e-commerce platforms, including Tmall, JD.com, Douyin and
Pinduoduo, and our own Weixin mini-program. Meanwhile, our products are also sold through
online and offline channels including Amazon, Toys“R”Us, 7-Eleven and Walmart in overseas
markets including the United States, Southeast Asia and Europe.
SUMMARY
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OUR CUSTOMERS AND SUPPLIERS
Our direct customers primarily include the distributors, consignment sales partners,
e-commerce platforms and online consumers. All our five largest customers in each year or
period during the Track Record Period are our distributors, consignment sales partners and an
e-commerce platform. In 2021, 2022, 2023 and the six months ended June 30, 2024, revenue
from our five largest customers in each year or period during the Track Record Period
accounted for 26.6%, 22.5%, 15.3% and 12.1% of our total revenue for such year or period
during the Track Record Period. During the Track Record Period, we were not subject to any
material customer concentration risk. In 2021, 2022, 2023 and the six months ended June 30,
2024, revenue from our largest customer in each year or period during the Track Record Period
accounted for 12.2%, 9.0%, 4.2% and 3.3% of our total revenue for such year or period during
the Track Record Period. See “Business — Our Customers.”
Our suppliers primarily include specialized partner factories and IP proprietors and
licensors. Purchases from our partner factories accounted for the majority of our purchases
during the Track Record Period. See “Risk Factors — Risks Relating to Our Business and
Industry — The use of third-party partner factories to produce products presents risks to our
business” for the associated risks. In 2021, 2022 and 2023 and the six months ended June 30,
2024, purchases from our five largest suppliers in each year or period during the Track Record
Period accounted for 82.3%, 82.2%, 90.5% and 71.6% of our total purchases for such year or
period during the Track Record Period. In 2021, 2022, 2023 and the six months ended June 30,
2024, purchases from our largest supplier in each year or period during the Track Record
Period accounted for 46.4%, 40.6%, 34.4% and 30.4% of our total purchases for such year or
period during the Track Record Period. See “Business — Our Suppliers.”
COMPETITION
The global and China’s assembly character toy markets are highly concentrated. The top
two industry players in the global assembly character toy market are multinational companies
that are well-known in the toy industry, the combined market share of which was
approximately 75.4% in 2023, according to Frost & Sullivan. We ranked third in the global
assembly character toy market with a market share of 6.3% in 2023 in terms of GMV . The
combined market share of the top three industry players in China’s assembly character toy
market was approximately 65.1% in 2023, according to Frost & Sullivan. We ranked first in
China’s assembly character toy market in 2023 in terms of GMV . Some of our competitors may
have greater financial resources or stronger capability than us in one or many of these areas.
See “Business — Competition.”
OUR COMPETITIVE STRENGTHS
We believe the following competitive strengths have fueled our success and will continue
to drive our future growth:
 Hard-to-replicate combination of wide ranging patents and rich IP portfolio;
SUMMARY
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 Product strength underpinned by the full integration of R&D and production;
 Content-driven online marketing strategy facilitating the efficient buildout of
multi-channel sales network;
 Sustainable growth model with matrix-style product offering covering all
demographics, all price segments and global consumers; and
 Dedicated founder and management team with a track record of entrepreneurship
and innovation capabilities.
See “Business — Competitive Strengths.”
OUR STRATEGIES
We will continue to pursue the following strategies to drive further growth:
 Solidify our leadership position in assembly character toys by continuously
capturing growth opportunities across all demographics, all price segments and
global consumers;
 Expand product categories;
 Build a team of high quality global talents;
 Strategically pursue investment and acquisition opportunities; and
 Commitment to sustainability and social impact.
See “Business — Strategies.”
IMPACT OF COVID-19
Our sales were negatively affected by COVID-19 in 2022 due to certain delay in
production and deliveries particularly in late March and April of 2022. As a result, our total
revenue in 2021 and 2022 was RMB329.8 million and RMB325.6 million, respectively. The
Directors are of the view that the decrease in our sales attributable to COVID-19 did not
materially and adversely impact our operations and financial performance during the Track
Record Period and up to the Latest Practicable Date. Our revenue increased by 169.3% from
RMB325.6 million in 2022 to RMB876.7 million in 2023, and by 237.6% from RMB309.9
million in the six months ended June 30, 2023 to RMB1,046.2 million in the six months ended
June 30, 2024. As such, COVID-19 did not have any material lasting impact on our operations
and financial performance.
SUMMARY
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SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables sets forth summary financial data from our consolidated financial
information during the Track Record Period. The summary financial data set forth below
should be read together with, and is qualified in its entirety by reference to, the consolidated
financial statements as set out in the Accountants’ Report in Appendix I to this prospectus,
including the related notes. Our consolidated financial information was prepared in accordance
with IFRSs.
Results of Operations
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Cost of sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(206,371) (62.6)% (202,155) (62.1)% (461,764) (52.7)% (173,731) (56.1)% (492,467) (47.1)%
Gross profit /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9% 414,922 47.3% 136,208 43.9% 553,736 52.9%
Selling and distribution expenses /H1118/H1118(388,646) (117.9)% (232,885) (71.5)% (189,280) (21.6)% (86,401) (27.9)% (120,764) (11.5)%
Research and development
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(83,016) (25.2)% (98,444) (30.2)% (94,657) (10.8)% (41,953) (13.5)% (76,016) (7.3)%
Administrative expenses /H1118/H1118/H1118/H1118/H1118/H1118(58,287) (17.7)% (51,002) (15.7)% (49,230) (5.6)% (22,069) (7.1)% (403,946) (38.6)%
Other income, other gains and
losses, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11189,507 2.9% 12,416 3.8% 5,987 0.7% 2,499 0.8% 3,905 0.4%
Other expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(20,938) (6.3)% (17,896) (5.5)% (695) (0.1)% (221) (0.1)% (1,241) (0.1)%
Reversal of/(Provision for)
impairment losses on
financial assets, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118669 0.2% 226 0.1% (1,100) (0.1)% (389) (0.1)% (506) (0.0)%
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,323) (0.7)% (1,574) (0.5)% (1,654) (0.2)% (1,323) (0.4)% (891) (0.1)%
Fair value changes on convertible
redeemable preferred shares /H1118/H1118/H1118(144,201) (43.7)% (191,031) (58.7)% (274,132) (31.3)% (188,611) (60.9)% (157,033) (15.1)%
Loss before tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(563,834) (171.0)% (456,771) (140.3)% (189,839) (21.7)% (202,260) (65.3)% (202,756) (19.4)%
Income tax expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111856,981 17.3% 34,066 10.5% (17,642) (2.0)% (528) (0.1)% (52,135) (5.0)%
Loss for the year/period /H1118/H1118/H1118/H1118/H1118(506,853) (153.7)% (422,705) (129.8)% (207,481) (23.7)% (202,788) (65.4)% (254,891) (24.4)%
Attributable to
Owners of the parent /H1118/H1118/H1118/H1118/H1118/H1118/H1118(502,594) (152.4)% (419,886) (129.0)% (206,100) (23.5)% (201,866) (65.1)% (257,894) (24.7)%
Non-controlling interests /H1118/H1118/H1118/H1118/H1118(4,259) (1.3)% (2,819) (0.8)% (1,381) (0.2)% (922) (0.3)% 3,003 0.3%
SUMMARY
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Non-IFRS Measure
To supplement our consolidated financial statements that are presented in accordance
with IFRS, we also use adjusted profit/(loss) for the year/period (a non-IFRS measure) and
adjusted net margin (a non-IFRS measure), as additional financial measures, which are not
required by, or presented in accordance with IFRS. We believe that these non-IFRS measures
facilitate comparisons of operating performance from period to period by eliminating potential
impact of certain items. We believe that these measures provide useful information to investors
and others in understanding and evaluating our consolidated financial statements in the same
manner as they help our management. However, our presentation of adjusted profit/(loss) for
the year/period (a non-IFRS measure) and adjusted net margin (a non-IFRS measure) may not
be comparable to similar item measures presented by other companies. The use of these
non-IFRS measures has limitations as an analytical tool, and you should not consider them in
isolation from, or as substitute for analysis of, our consolidated financial statements or
financial condition as reported under IFRS. We define adjusted profit/(loss) for the year/period
(a non-IFRS measure) as profit/(loss) for the year/period adjusted for fair value changes on
convertible redeemable preferred shares (a non-cash item), listing expenses and share-based
compensations (a non-cash item). In particular, convertible redeemable preferred shares will be
reclassified from liabilities to equity as a result of the conversion of convertible redeemable
preferred shares into Ordinary Shares upon Listing. We define adjusted net margin (a non-IFRS
measure) as adjusted profit/(loss) for the year/period (a non-IFRS measure) as a percentage of
our total revenue.
Y ear Ended December 31,
Six Months Ended
June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Loss for the year/period /H1118/H1118/H1118(506,853) (422,705) (207,481) (202,788) (254,891)
Add:
Fair value changes on
convertible redeemable
preferred shares /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118144,201 191,031 274,132 188,611 157,033
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – 15,355
Share-based compensations /H1118 6,863 6,337 6,231 3,071 374,670
(1)
Adjusted profit/(loss) for
the year/period (a non-
IFRS measure) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(355,789) (225,337) 72,882 (11,106) 292,167
SUMMARY
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Y ear Ended December 31,
Six Months Ended
June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Adjusted net margin
(a non-IFRS measure) /H1118/H1118/H1118(107.9)% (69.2)% 8.3% (3.6)% 27.9%
Note:
(1) In April 2024, the Board granted share options to certain employees under the Share Incentive Scheme and the
vast majority of such share options were vested immediately after the grant. See note 32 to “Appendix I —
Accountants’ Report.”
We recorded adjusted loss for the year (a non-IFRS measure) of RMB355.8 million in
2021 and RMB225.3 million 2022, and managed to turn it into adjusted profit for the year (a
non-IFRS measure) of RMB72.9 million in 2023, primarily due to our continuous narrowing
of loss for the years from 2021 to 2023. We managed to turn adjusted loss for the period (a
non-IFRS measure) of RMB11.1 million in the six months ended June 30, 2023 into adjusted
profit for the period (a non-IFRS measure) of RMB292.2 million in the six months ended June
30, 2024, primarily due to an increase in our revenue and gross profit margin. Such changes
were primarily due to our successful strategic diversification of our product offering to include
assembly character toys. More specifically, we continued to scale up our business and execute
a content driven market strategy, which resulted in a gradual increase in our gross profit margin
and gradual decrease in our various operating expenses as percentage of our total revenue
starting from 2022.
See “Financial Information — Non-IFRS Measure.”
SUMMARY
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Revenue
The table below sets forth the breakdown of our total revenue by product type and IP
category for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Assembly character toys
Self-developed IP /H1118/H1118/H1118/H1118/H1118/H1118– – 1,865 0.6% 64,203 7.3% 18,494 6.0% 173,073 16.5%
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 1,865 0.6% 64,203 7.3% 18,494 6.0% 169,713 16.2%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – – – – 3,360 0.3%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 115,808 35.5% 704,835 80.4% 222,935 71.9% 850,009 81.3%
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 111,483 34.2% 556,720 63.5% 203,880 65.8% 600,681 57.4%
TRANSFORMERS /H1118/H1118/H1118/H1118/H1118– – – – 124,977 14.3% 4,553 1.5% 195,444 18.7%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 4,325 1.3% 23,138 2.6% 14,502 4.6% 53,884 5.2%
Subtotal /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 117,673 36.1% 769,038 87.7% 241,429 77.9% 1,023,082 97.8%
Brick-based toys
Self-developed IP and other
self-developed products /H1118/H1118301,286 91.4% 176,952 54.4% 91,711 10.5% 58,099 18.8% 22,434 2.1%
Magic Blocks /H1118/H1118/H1118/H1118/H1118/H1118142,228 43.1% 83,321 25.6% 51,195 5.8% 35,033 11.3% 9,574 0.9%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118159,058 48.3% 93,631 28.8% 40,516 4.7% 23,066 7.5% 12,860 1.2%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,377 6.1% 29,699 9.1% 14,571 1.6% 9,976 3.2% 531 0.1%
Subtotal /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118321,663 97.5% 206,651 63.5% 106,282 12.1% 68,075 22.0% 22,965 2.2%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,109 2.5% 1,250 0.4% 1,366 0.2% 435 0.1% 156 0.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Note:
(1) Others primarily include other non-toy revenue, such as certain revenue generated from advertisements shown
before, during or after the play of our animations on online platforms.
Our revenue increased by 169.3% from RMB325.6 million in 2022 to RMB876.7 million
in 2023, and by 237.6% from RMB309.9 million in the six months ended June 30, 2023 to
RMB1,046.2 million in the six months ended June 30, 2024. Such increase was primarily due
to an increase in revenue from assembly character toys. We began to offer assembly character
toys in January 2022 on the back of the Bloks System. Our successful commercialization of an
expanding and diversifying portfolio of self-developed and licensed IPs and the rapid
SUMMARY
–1 6–


--- page 27 ---
expansion of our sales network resulted in a significant increase in the sales volume and
revenue of assembly character toys from 2022 to 2023 and the six months ended June 30, 2023
to the six months ended June 30, 2024.
During the Track Record Period, some of our products were in the form of blind boxes,
which is a popular form in the toy industry according to Frost & Sullivan and is allowed
according to the relevant laws and regulations, including the Blind Boxes Guidelines. In
particular, the sales of our products in the form of blind boxes contributed to a majority of our
revenue in 2023, which amounted to RMB555.3 million, accounting for 63.3% of the total
revenue in the same year. See “Business — Our Product Offering — Assembly Character
Toys.”
Cost of Sales
Our cost of sales increased by 128.4% from RMB202.2 million in 2022 to RMB461.8
million in 2023, and by 183.5% from RMB173.7 million in the six months ended June 30, 2023
to RMB492.5 million in the six months ended June 30, 2024. Such increases were primarily
due to increases in cost of goods sold, which was mainly attributable to increases in sales
volume of our assembly character toys.
Gross Profit and Gross Profit Margin
The table below sets forth the breakdown of our gross profit and gross profit margin by
product type and IP category for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
(unaudited)
Assembly character toys
Self-developed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 768 41.2% 35,742 55.7% 8,985 48.6% 107,208 61.9%
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 768 41.2% 35,742 55.7% 8,985 48.6% 105,254 62.0%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – – – – 1,954 58.2%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 42,522 36.7% 336,647 47.8% 97,889 43.9% 437,624 51.5%
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 41,825 37.5% 262,118 47.1% 90,371 44.3% 302,695 50.4%
TRANSFORMERS /H1118/H1118/H1118/H1118/H1118/H1118– – – – 67,927 54.4% 2,309 50.7% 110,670 56.6%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 697 16.1% 6,602 28.5% 5,209 35.9% 24,259 45.0%
Subtotal/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 43,290 36.8% 372,389 48.4% 106,874 44.3% 544,832 53.3%
SUMMARY
–1 7–


--- page 28 ---
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
(unaudited)
Brick-based toys
Self-developed IP and other self-
developed products /H1118/H1118/H1118/H1118/H1118/H1118112,413 37.3% 69,637 39.4% 38,048 41.5% 25,347 43.6% 8,541 38.1%
Magic Blocks /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111859,116 41.6% 37,660 45.2% 23,687 46.3% 16,554 47.3% 4,329 45.2%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853,297 33.5% 31,977 34.2% 14,361 35.4% 8,793 38.1% 4,212 32.8%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,105 30.0% 9,242 31.1% 3,119 21.4% 3,552 35.6% 207 39.0%
Subtotal/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118118,518 36.8% 78,879 38.2% 41,167 38.7% 28,899 42.5% 8,748 38.1%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,883 60.2% 1,250 100.0% 1,366 100.0% 435 100.0% 156 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9% 414,922 47.3% 136,208 43.9% 553,736 52.9%
Note:
(1) Others primarily include other non-toy gross profit, such as certain gross profit generated from advertisements
shown before, during or after the play of our animations on online platforms, which is generally not directly
associated with any cost of sales.
Our gross profit increased by 236.2% from RMB123.4 million in 2022 to RMB414.9
million in 2023, and by 306.5% from RMB136.2 million in the six months ended June 30, 2023
to RMB553.7 million in the six months ended June 30, 2024. Such increases were primarily
due to an increase in gross profit from assembly character toy sales, which was mainly
attributable to an increase in sales volume of our assembly character toys. Our gross profit
margin increased from 37.9% in 2022 to 47.3% in 2023, and from 43.9% in the six months
ended June 30, 2023 to 52.9% in the six months ended June 30, 2024. Such increases were
primarily due to strong increases in revenue contribution and gross profit margin from
assembly character toy sales as we enjoyed stronger economies of scale along with our
business growth.
See “Financial Information — Period-to-Period Comparison of Results of Operations.”
SUMMARY
–1 8–


--- page 29 ---
Financial Position
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Total non-current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118254,207 282,156 330,400 310,536
Total current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,231,769 1,663,695 682,256 814,997
Total assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,485,976 1,945,851 1,012,656 1,125,533
Total non-current liabilities /H1118/H1118/H1118/H1118/H11181,407,345 1,584,949 1,890,061 1,846,873
Total current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,037,250 1,738,017 730,889 771,122
Total liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,444,595 3,322,966 2,620,950 2,617,995
Net current assets/(liabilities) /H1118/H1118194,519 (74,322) (48,633) 43,875
Net liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(958,619) (1,377,115) (1,608,294) (1,492,462)
Equity
Equity attributable to owners
of the parent
Share Capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 112 128 128
Deficits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(950,528) (1,366,317) (1,606,385) (1,492,590)
Non-controlling interests /H1118/H1118/H1118/H1118/H1118/H1118/H1118(8,091) (10,910) (2,037) –
Total equity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(958,619) (1,377,115) (1,608,294) (1,492,462)
Our net current assets of RMB194.5 million as of December 31, 2021 turned into net
current liabilities of RMB74.3 million as of December 31, 2022, primarily due to a decrease
in financial assets at fair value through profit or loss of RMB271.5 million, an increase in
amounts due to related parties of RMB26.0 million and an increase in trade and notes payables
of RMB25.7 million, partially offset by an increase in cash and cash equivalents of RMB112.8
million.
SUMMARY
–1 9–


--- page 30 ---
Our net current liabilities decreased from RMB74.3 million as of December 31, 2022 to
RMB48.6 million as of December 31, 2023, primarily due to increases in certain current assets
items, including an increase in cash and cash equivalents of RMB171.9 million, an increase in
trade and notes receivables of RMB23.0 million and an increase in inventories of RMB15.1
million, partially offset by increases in current liability items, including an increase in trade
and notes payables of RMB141.1 million and an increase in other payables and accruals of
RMB56.7 million.
Our net current liabilities of RMB48.6 million as of December 31, 2023 turned into net
current assets of RMB43.9 million as of June 30, 2024, primarily due to increases in certain
current assets items, including an increase in cash and cash equivalents of RMB193.3 million,
an increase in inventories of RMB75.0 million, an increase in trade and notes receivables of
RMB25.0 million and an increase in prepayments, other receivables and other assets of
RMB23.2 million, partially offset by an increase in trade and notes payables of RMB255.0
million.
The convertible redeemable preferred shares will be reclassified from liabilities to equity
as a result of the conversion of convertible redeemable preferred shares into Ordinary Shares
upon listing, resulting in a net assets position.
See “Financial Information — Selected Balance Sheet Items.”
Our net liabilities increased from RMB958.6 million as of December 31, 2021 to
RMB1,377.1 million as of December 31, 2022, which further increased to RMB1,608.3 million
as of December 31, 2023, primarily due to the comprehensive loss recorded in 2021, 2022 and
2023. Our net liabilities decreased from RMB1,608.3 million as of December 31, 2023 to
RMB1,492.5 million as of June 30, 2024 primarily due to our enhanced product profitability.
See “Consolidated Statements of Changes in Equity” in “Appendix I — Accountants’
Report.”
SUMMARY
–2 0–


--- page 31 ---
Cash Flows
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
(in RMB thousands)
Operating cash flows before
movements in working
capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(355,919) (208,964) 138,040 367,593
Changes in working capital /H1118/H1118 62,591 40,232 146,888 143,521
Income tax paid /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5) (5) (36) (3,082)
Net cash flows (used in)/from
operating activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118(293,333) (168,737) 284,892 508,032
Net cash flows (used in)/from
investing activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118(230,683) 250,662 (43,269) (41,217)
Net cash flows from/(used in)
financing activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118579,432 31,475 (70,146) (273,014)
Net increase in cash and
cash equivalents /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111855,416 113,400 171,477 193,801
Cash and cash equivalents at
beginning of the
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,813 76,153 188,972 360,837
Effects of foreign exchange
rate changes, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(76) (581) 388 (546)
Cash and cash equivalents
at end of the year/period /H1118 76,153 188,972 360,837 554,092
In 2021 and 2022, we recorded net cash flow used in operating activities primarily due
to our loss during the relevant years. However, we narrowed our net cash flows used in
operating activities from RMB293.3 million in 2021 to RMB168.7 million in 2022, and
managed to turn it into net cash flows from operating activities of RMB284.9 million in 2023,
primarily due to the fact that we continuously narrowed our loss during the relevant years. Our
net cash flows from operating activities increased from RMB60.9 million in the six months
ended June 30, 2023 to RMB508.0 million in the six months ended June 30, 2024, primarily
due to our successful business expansion.
See “Financial Information — Cash Flows.”
SUMMARY
–2 1–


--- page 32 ---
KEY FINANCIAL RATIOS
Y ear Ended/As of December 31,
Six
Months
Ended/
As of
June 30,
2021 2022 2023 2024
Gross profit margin (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111837.4% 37.9% 47.3% 52.9%
Adjusted net margin
(non-IFRS measure) (2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(107.9)% (69.2)% 8.3% 27.9%
Current ratio (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.1 1.0 0.9 1.1
Quick ratio (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.1 0.9 0.8 0.9
Notes:
(1) Gross profit margin equals gross profit for the year/period divided by revenue for the year/period and
multiplied by 100%.
(2) Adjusted profit/(loss) for the year/period (a non-IFRS measure) divided by revenue for the year/period and
multiplied by 100%, which is a non-IFRS measure. See “Financial Information — Non-IFRS Measure.”
(3) Current ratio is calculated based on the total current assets divided by the total current liabilities as at the end
of the respective year/period.
(4) Quick ratio is calculated as total current assets less inventories divided by the total current liabilities as at the
end of the respective year/period.
RISK FACTORS
We face risks including those set out in the section headed “Risk Factors.” As different
investors may have different interpretations and criteria when determining the significance of
a risk, you should read the “Risk Factors” section in its entirety before you decide to invest in
our Offer Shares. Some of the major risks that we face include:
 Demand for our products is affected by changing social and economic circumstances
and evolving consumer preferences, as well as our ability to design and develop
products to meet these preferences;
 We recorded net losses in the past and we might not be able to sustain our growth
or achieve profitability;
 The popularity of existing IPs in our IP portfolio may deteriorate, and we may not
be able to successfully source, develop or commercialize new IPs;
SUMMARY
–2 2–


--- page 33 ---
 We may fail to obtain, maintain or renew IP licenses on favorable terms, and our IP
proprietors or licensors may fail to maintain and protect their IPs;
 Our competitiveness in part depends on our ability to obtain, maintain and protect
our critical intellectual properties;
 We face challenges with regard to changes in existing laws, regulations, or policies
governing our industry and business, the imposition of new laws, regulations, or
policies, or new interpretations thereof, including the newly promulgated Blind
Boxes Guidelines.
OUR PRE-IPO INVESTORS
We have engaged in Pre-IPO Investments with our Pre-IPO Investors. From 2018 to 2024,
our Group has completed several rounds of Pre-IPO Investments at the onshore level in Bloks
Technology or at the offshore level in our Company. For further details of the identity and
background of the Pre-IPO Investors and the principal terms of the Pre-IPO Investments, see
“History, Development and Reorganization — Pre-IPO Investments.”
OUR CONTROLLING SHAREHOLDERS
Upon the completion of the Global Offering (assuming that the Offer Size Adjustment
Option and the Over-allotment Option are not exercised), Mr. Zhu, our chairman and executive
Director, will be interested in and control an aggregate of approximately 49.47% of our
enlarged issued share capital. Next Bloks, which owns 45.82% of our enlarged issued share
capital, is owned as to 99% by Wit Bright Limited under the Wise Global Trust and as to 1%
by Playcreation Holding Limited. Playcreation Holding Limited is wholly-owned by Mr. Zhu.
The Wise Global Trust is a discretionary trust established by Mr. Zhu (as the settlor) for the
benefit of Mr. Zhu and his family members. In addition, Smart Bloks, which owns 3.65% of
our enlarged issued share capital, is wholly-owned by Mr. Zhu. Therefore, Mr. Zhu will control
the exercise of the voting rights of the Shares held by Next Bloks and Smart Bloks in our
Company.
Mr. Zhu, Next Bloks, Smart Bloks, Wit Bright Limited and Playcreation Holding Limited
will be the Controlling Shareholders of our Company after Listing. See “Relationship with the
Controlling Shareholders — Overview.”
DIVIDEND POLICY
No dividends have been paid or declared by our Company during the Track Record
Period. Our Board has the discretion to pay interim dividends and to recommend to
Shareholders to pay final dividends. Any declaration and payment as well as the amount of
dividends will be subject to our Articles and the Cayman Companies Act. Under the Cayman
Islands law, our Company may pay a dividend out of either profit or share premium account,
provided that in no circumstances may a dividend be paid if this would result in our Company
being unable to pay its debts as they fall due in the ordinary course of business. As advised by
our Cayman Islands counsel, subject to the above, there is no restriction under the Cayman
Islands law for our Company to declare and pay a dividend despite our accumulated losses. We
do not have a pre-determined dividend payout ratio.
See “Financial Information — Dividend Policy.”
SUMMARY
–2 3–


--- page 34 ---
LISTING EXPENSES
Listing expenses represent professional fees, underwriting commission and fees incurred
in connection with the Listing and the Global Offering. Our listing expenses are estimated to
be approximately HK$105.2 million (including underwriting commission) accounting for 7.5%
of the gross proceeds of the Global Offering (assuming an Offer Price of HK$58.00 per Share,
being the mid-point of the Offer Price range stated in this prospectus, and no exercise of the
Offer Size Adjustment Option and Over-allotment Option). Among our listing expenses,
approximately HK$71.8 million is directly attributable to the issuance of Shares and will be
charged to equity upon completion of the Listing, and approximately HK$33.4 million has been
or will be charged to our consolidated statements of profit or loss. The listing expenses we
incurred in the Track Record Period and expect to incur would consist of approximately
HK$54.0 million underwriting related expenses and fees (including but not limited to
commissions and fees), approximately HK$33.4 million non-underwriting-related expenses
and fees of the Joint Sponsors, legal advisors and reporting accountant and approximately
HK$17.8 million for other non-underwriting-related fees and expenses. During the Track
Record Period, we incurred RMB23.7 million of listing expenses, among which, RMB8.3
million was included in prepayments, other receivables and other current assets and will be
subsequently charged to our equity upon completion of the Listing and RMB15.4 million was
charged to our consolidated statements of profit or loss.
The listing expenses above are the latest practicable estimate for reference only, and the
actual amount may differ from this estimate.
GLOBAL OFFERING STATISTICS
The statistics in the following table are based on the assumption that (i) the Global
Offering has been completed and 24,120,300 new Shares are issued in the Global Offering, (ii)
the Offer Size Adjustment Option and the Over-allotment Option are not exercised, and (iii)
241,472,245 Shares are issued and outstanding following the completion of the Global
Offering.
Based on an
Offer Price of
HK$55.65 per
Offer Share
Based on an
Offer Price of
HK$58.00 per
Offer Share
Based on an
Offer Price of
HK$60.35 per
Offer Share
Market Capitalization /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
HK$13,437.9
million
HK$14,005.4
million
HK$14,572.8
million
Unaudited pro forma adjusted
consolidated net tangible
assets attributable to owners
of the parent per share
(1) /H1118/H1118/H1118HK$6.61 HK$6.83 HK$7.06
Note:
(1) The unaudited pro forma adjusted consolidated net tangible assets per share is arrived at after
adjustments referred in “Appendix II — Unaudited Pro Forma Financial Information” in this prospectus
and on the basis of 241,472,245 Shares are in issue, assuming that the Offer Size Adjustment Option and
the Over-allotment Option are not exercised and that the conversion of Preferred Shares into the
ordinary shares and the Global Offering has been completed.
SUMMARY
–2 4–


--- page 35 ---
USE OF PROCEEDS
Assuming an Offer Price of HK$58.00 per Offer Share (being the midpoint of the range
of the Offer Price stated in this prospectus), we estimate that we will receive net proceeds of
approximately HK$1,294 million from the Global Offering after deducting the underwriting
commissions and other estimated expenses in connection with the Global Offering (assuming
the Offer Size Adjustment Option and the Over-allotment Option are not exercised). We intend
to use our proceeds for the purposes and in the amounts set forth below.
 Approximately 25%, or HK$323 million, will be used to enhance our research and
development capabilities in relation to product design and development;
 Approximately 25%, or HK$323 million, will be used to invest in core production
resources and our own scaled factories specializing in the production of assembly
character toys;
 Approximately 20%, or HK$259 million, will be used to further enrich our IP
portfolio;
 Approximately 20%, or HK$259 million, will be used for sales and marketing
efforts, especially content-driven marketing activities, to improve brand recognition
and product popularity; and
 Approximately 10%, or HK$129 million, will be used for working capital and other
general corporate purposes.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the granting of the listing of, and
permission to deal in, the Shares in issue and to be issued by us pursuant to the Global Offering
on the basis that, among other things, we satisfy the market capitalisation/revenue test under
Rule 8.05(3) of the Listing Rules with reference to: (i) our revenue for the year ended
December 31, 2023 exceeds HK$500 million, and (ii) our expected market capitalisation at the
time of Listing, which, based on the low end of the indicative Offer Price range, exceeds HK$4
billion.
RECENT DEVELOPMENT
Our products continued to be favored by consumers subsequent to the Track Record
Period. In the nine months ended September 30, 2024, our revenue amounted to RMB1,629.3
million, representing a 177.2% increase from RMB587.7 million for the nine months ended
September 30, 2023. The growth was primarily driven by significant increase in our product
sales volume. For the same period, we recorded gross profit of RMB866.8 million, representing
a 220.7% increase in gross profit of RMB270.3 million for the nine months ended September
30, 2023. Our gross profit margin increased from 46.0% for the nine months ended September
30, 2023 to 53.2% for the nine months ended September 30, 2024, primarily due to
continuously improved economies of scale.
SUMMARY
–2 5–


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Our growing IP portfolio is crucial to the expansion of our product offering. For example,
we launched products under the Kamen Rider IP in July 2024 for the first time and received
high popularity among consumers, as evidenced by a sales volume of 2.4 million units within
the first month of the launch. To further enrich our IP portfolio, we successfully entered into
new license agreements for the SUPER SENTAI IP in July 2024, Anime ULTRAMAN Series
in October 2024, as well as DC’s Superman, DC’s Batman, Harry Potter and STAR W ARS in
November 2024, which enabled us to develop, produce and sell assembly character toys under
those IPs in China, which are on comparable terms with our existing IP license agreements. We
also expanded our licensed territories for the Ultraman IP in regions such as North America,
Europe and Asia. Furthermore, we expanded our licensed territories for the Marvel: Infinity
Saga and Spidey and His Amazing Friends IPs to further include other eight countries in Asia
in addition to China. For the Minions IP , we expanded our licensed territories to cover more
than 150 countries globally.
To further expand the price segment coverage of our products, we launched the
TRANSFORMERS Galaxy V ersion Defender in the value price segment at a suggested retail
price of RMB9.9 per unit in November 2024.
Despite our business growth, we may experience a significant increase in net loss for the
year ending December 31, 2024, primarily due to fair value changes on convertible redeemable
preferred shares, which in turn was the result of higher valuation of our Company, and a
significant increase in share-based compensations.
The foregoing selected unaudited financial data in relation to our revenue in the nine
months ended September 30, 2024 is derived from our unaudited interim condensed
consolidated financial information for the nine months ended September 30, 2024. Our
unaudited interim condensed consolidated financial information for the nine months ended
September 30, 2024 has been reviewed by our Reporting Accountants in accordance with Hong
Kong Standard on Review Engagements 2410 “Review of Interim Financial Information
Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of
Certified Public Accountants.
NO MATERIAL ADVERSE CHANGE
Our Directors confirmed that, as of the date of this prospectus, there has been no material
adverse change in our financial position since June 30, 2024, and there has been no event since
June 30, 2024 that would materially affect the information as set out in the Accountants’ Report
in Appendix I to this prospectus.
SUMMARY
–2 6–


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In this prospectus, unless the context otherwise requires, the following terms shall
have the following meanings. Certain technical terms are explained in the section headed
“Glossary of Technical Terms”.
“Accountants’ Report” the accountants’ report of our Company, the text of which
is set out in Appendix I to this prospectus
“affiliate(s)” with respect to any specified person, any other person,
directly or indirectly, controlling or controlled by or
under direct or indirect common control with such
specified person
“AFRC” Accounting and Financial Reporting Council of Hong
Kong
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Audit Committee” the audit committee of the Board
“Board” or “Board of Directors” the board of Directors of the Company
“Bloks Bricks” Shanghai Bloks Bricks Technology Co., Ltd. ( ɪऎ
ʮ̡), a limited liability company
established in the PRC on March 1, 2019 and a subsidiary
of our Company
“Bloks Culture” Shanghai Bloks Culture Communication Co., Ltd. ( ɪऎ
ʮ̡), a limited liability company
established in the PRC on December 30, 2015 and an
associate of Mr. Zhu
“Bloks Holding” Bloks Holding Limited, a limited liability company
incorporated under the laws of BVI on August 10, 2021
and a subsidiary of our Company
“Bloks Information” Shanghai Information Technology Co., Ltd. ( ɪऎ
ʮ̡), a limited liability company
established in the PRC on July 9, 2021 and an associate
of Mr. Zhu
DEFINITIONS
–2 7–


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“Bloks Technology” Shanghai Bloks T echnology Group Co., Ltd. ( ɪऎ
ʮ̡), a limited liability company
established in the PRC on December 24, 2014 and a
subsidiary of our Company
“Business Day” or “business
day”
a day on which banks in Hong Kong are generally open
for normal banking business to the public and which is
not a Saturday, Sunday or public holiday in Hong Kong
“BVI” the British Virgin Islands
“Capital Market Intermediaries”
or “CMI(s)”
the capital market intermediaries as named in “Directors
and Parties Involved in the Global Offering” in this
prospectus
“Cayman Companies Law” or
“Cayman Companies Act”
the Companies Act, Cap. 22 (Law 3 of 1961, as
consolidated and revised) of the Cayman Islands, as
amended, supplemented or otherwise modified from time
to time
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“Chairman” the chairman of the Board
“China” or “PRC” the People’s Republic of China, excluding, for the
purposes of this prospectus only, the regions of Hong
Kong, Macau and Taiwan of the People’s Republic of
China, except where the content or context requires
otherwise
“China Bloks” China Bloks Holding Limited (ʮ
̡), a limited company established in Hong Kong on
August 31, 2021 and a subsidiary of our Company
“Companies (Winding up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong
Kong), as amended, supplemented or otherwise modified
from time to time
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
DEFINITIONS
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“Company” or “our Company” Bloks Group Limited (ʮ̡), an
exempted company incorporated under the laws of
Cayman Islands with limited liability on July 28, 2021
“connected person(s)” has the meaning ascribed thereto under the Listing Rules
“connected transaction(s)” has the meaning ascribed thereto under the Listing Rules
“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules and
unless the context otherwise requires, shall mean Mr.
Zhu, Next Bloks, Smart Bloks, Wit Bright Limited and
Playcreation Holding Limited
“core connected person(s)” has the meaning ascribed thereto under the Listing Rules
“Corporate Governance Code” the Corporate Governance Code set out in Appendix C1
to the Listing Rules
“CSRC” China Securities Regulatory Commission ( ʕ਷ᗇՎ္ຖ
ึ)
“Director(s)” or “our Director(s)” director(s) of the Company
“Exchange Participant(s)” a person: (a) who, in accordance with the Hong Kong
Listing Rules, may trade on or through the Hong Kong
Stock Exchange; and (b) whose name is entered in a list,
register or roll kept by the Hong Kong Stock Exchange as
a person who may trade on or through the Hong Kong
Stock Exchange
“Extreme Conditions” any extreme conditions caused by a super typhoon as
announced by the government of Hong Kong or any
extreme conditions or events, the occurrence of which
will cause interruption to the ordinary course of business
operations in Hong Kong or that may affect the Listing
Date
“FINI” “Fast Interface for New Issuance”, the online platform
operated by HKSCC that is mandatory for admission to
trading and, where applicable, the collection and
processing of specified information on subscription in
and settlement for the Listing
DEFINITIONS
–2 9–


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“First Prosperity” or
“ESOP Platform”
First Prosperity Limited, a platform holding the
underlying incentive Shares under the Share Incentive
Scheme, which is wholly owned by Trident Trust
Company (HK) Limited (as trustee of the Bloks First
Trust, which was established by Company as the settlor
for the purposes of the Share Incentive Scheme)
“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a
market research and consulting company
“Frost & Sullivan Report” the industry report commissioned by us and prepared by
Frost & Sullivan, summary of which is set forth in
“Industry Overview” in this prospectus
“General Rules of HKSCC” the terms and conditions regulating the use of HKSCC’s
services, as may be amended or modified from time to
time and where the context so permits, shall include the
HKSCC Operational Procedures
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Grantee” means any participant who accepts an offer in accordance
with the terms of Share Incentive Scheme, or (where the
context so permits) any person who is entitled to any
option in consequence of the death of the original
Grantee
“Group”, “our Group” or “we” the Company and its subsidiaries (or the Company and
any one or more of its subsidiaries, as the content may
require), or where the context so requires, in respect of
the periods before the Company became the holding
company of its present subsidiaries, such subsidiaries as
if they were subsidiaries of the Company at the relevant
time
“HK$” or “HK dollars” Hong Kong dollars, the lawful currency of Hong Kong
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
DEFINITIONS
–3 0–


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“HKSCC EIPO ” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your designated
HKSCC Participant’s stock account through causing
HKSCC Nominees to apply on your behalf, including by
instructing your broker or custodian who is a HKSCC
Participant to give electronic application instructions
via HKSCC’s FINI system to apply for the Hong Kong
Offer Shares on your behalf
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“HKSCC Operational
Procedures”
the operational procedures of HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of CCASS, FINI or any other
platform, facility or system established, operated and/or
otherwise provided by or through HKSCC, as from time
to time in force
“HKSCC Participant” a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the
PRC
“Hong Kong Listing Rules” or
“Listing Rules”
the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“Hong Kong Offer Shares” the 2,412,300 Shares initially offered by the Company for
subscription at the Offer Price pursuant to the Hong Kong
Public Offering (subject to reallocation as described in
“Structure of the Global Offering” in this prospectus)
DEFINITIONS
–3 1–


--- page 42 ---
“Hong Kong Public Offering” the offering of the Hong Kong Offer Shares for
subscription by the public in Hong Kong (subject to
adjustment as described in “Structure of the Global
Offering”) at the Offer Price (plus brokerage, SFC
transaction levy, Stock Exchange trading fees and AFRC
transaction levy), on and subject to the terms and
conditions described as described in “Structure of the
Global Offering — Hong Kong Public Offering” in this
prospectus
“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited
“Hong Kong Stock Exchange”
or “Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed
in “Underwriting — Hong Kong Underwriters” in this
prospectus
“Hong Kong Underwriting
Agreement”
the underwriting agreement dated December 29, 2024
relating to the Hong Kong Public Offering entered into
by, among others, the Company, the Controlling
Shareholders, the Joint Sponsors, the Overall
Coordinators and the Hong Kong Underwriters, as further
described in “Underwriting — Underwriting
Arrangements and Expenses — Hong Kong Public
Offering” in this prospectus
“IFRS” International Financial Reporting Standards, which
include standards, amendments and interpretations
promulgated by the International Accounting Standards
Board
“Independent Third Party(ies)” party(ies) who are not connected persons of the Company
as far as the Directors are aware after having made all
reasonable enquiries
“International Offer Shares” the 21,708,000 Shares initially offered by the Company
pursuant to the International Offering together with,
where relevant, any additional Shares which may be
issued by our Company pursuant to the exercise of the
Offer Size Adjustment Option and/or the Over-allotment
Option, subject to reallocation as described in “Structure
of the Global Offering” in this prospectus
DEFINITIONS
–3 2–


--- page 43 ---
“International Offering” the offer of the International Offer Shares by the
International Underwriters at the Offer Price outside the
United States and in offshore transactions in accordance
with Regulation S under the U.S. Securities Act and in
the United States to QIBs only in reliance on Rule 144A
or any other available exemption from the registration
requirement under the U.S. Securities Act, in each case
on and subject to the terms and conditions of the
International Underwriting Agreement, as further
described in “Structure of the Global Offering” in this
prospectus
“International Underwriters” the underwriters of the International Offering listed in the
International Underwriting Agreement
“International Underwriting
Agreement”
the underwriting agreement expected to be entered into
on or around the Price Determination Date by, among
others, the Company, the Controlling Shareholders, the
Overall Coordinators and the International Underwriters
in respect of the International Offering, as further
described in “Underwriting — Underwriting
arrangements and expenses — International Offering” in
this prospectus
“IPCC” Intergovernmental Panel on Climate Change
“Joint Bookrunners” the joint bookrunners as named in “Directors and Parties
Involved in the Global Offering” in this prospectus
“Joint Global Coordinators” the joint global coordinators as named in “Directors and
Parties Involved in the Global Offering” in this
prospectus
“Joint Lead Managers” the joint lead managers as named in “Directors and
Parties Involved in the Global Offering” in this
prospectus
“Joint Sponsors” the joint sponsors as named in “Directors and Parties
Involved in the Global Offering” in this prospectus
“Latest Practicable Date” Sunday, December 22, 2024, being the latest practicable
date for the purpose of ascertaining certain information
contained in this prospectus prior to its publication
DEFINITIONS
–3 3–


--- page 44 ---
“Listing” listing of the Shares on the Main Board of the Hong Kong
Stock Exchange
“Listing Committee” the Listing Committee of the Hong Kong Stock Exchange
“Listing Date” the date expected to be on or about Friday, January 10,
2025, on which dealings in our Shares first commence on
the Hong Kong Stock Exchange
“Main Board” the stock market (excluding the option market) operated
by the Hong Kong Stock Exchange which is independent
from and operated in parallel with the GEM of the Hong
Kong Stock Exchange
“Memorandum and Articles of
Association”
the memorandum and articles of association of the
Company, conditionally approved and adopted on
December 18, 2024 and to become effective on the
Listing Date, as amended, supplemented or otherwise
modified from time to time, a summary of which is set
out in Appendix III to this prospectus
“Ministry of Finance” or “MOF” Ministry of Finance of the PRC (௅)
“Mr. Zhu” Mr. Zhu Weisong (ؒour founder, Chairman,
executive Director, chief executive officer and one of our
Controlling Shareholders
“Next Bloks” Next Bloks Limited, a limited liability company
incorporated under the laws of BVI on July 19, 2021 and
one of our Controlling Shareholders under control of Mr.
Zhu, holding approximately 45.82% of the issued share
capital of our Company immediately after the Global
Offering (assuming that the Offer Size Adjustment
Option and the Over-allotment Option is not exercised)
“Offer Price” the final offer price per Offer Share in Hong Kong dollars
(exclusive of a brokerage fee of 1.0%, a SFC transaction
levy of 0.0027%, a Stock Exchange trading fee of
0.00565% and AFRC transaction levy of 0.00015%) of
not more than HK$60.35 and expected to be not less than
HK$55.65, at which the Hong Kong Offer Shares are to
be subscribed for, to be determined in “Structure of the
Global Offering — Pricing and Allocation” in this
prospectus
DEFINITIONS
–3 4–


--- page 45 ---
“Offer Share(s)” Hong Kong Offer Shares and the International Offer
Shares, together with, where relevant, any additional
Shares which may be issued by the Company pursuant to
the exercise of the Offer Size Adjustment Option and/or
the Over-allotment Option
“Offer Size Adjustment Option” the option expected to be granted by our Company under
the International Underwriting Agreement to the
International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the
International Underwriters), pursuant to which our
Company may be required to allot and issue up to an
aggregate of 3,618,000 additional new Shares,
representing approximately 15% of the initial number of
Offer Shares offered under the Global Offering, at the
Offer Price to, among other things, cover any excess
demand (if any) in the International Offering, as
described in the section headed “Structure of the Global
Offering” in this prospectus
“Ordinary Share(s)” ordinary share(s) in the share capital our Company, of
nominal value US$0.0001 each
“Overall Coordinator(s)” the overall coordinators as named in “Directors and
Parties Involved in the Global Offering” in this
prospectus
“Over-allotment Option” the option to be granted by the Company to the
International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the
International Underwriters) pursuant to the International
Underwriting Agreement, pursuant to which our
Company may be required to allot and issue up to an
aggregate of 4,160,700 additional Shares (representing
approximately 15% of the Offer Shares initially being
offered under the Global Offering assuming the Offer
Size Adjustment Option is exercised in full) or up to an
aggregate of 3,618,000 additional Offer Shares
(representing in aggregate approximately 15% of the
Offer Shares being offered under the Global Offering
assuming the Offer Size Adjustment Option is not
exercised), at the Offer Price to, among other things,
cover over-allocations in the International Offering, if
any, further details of which are described in “Structure
of the Global Offering” in this prospectus
DEFINITIONS
–3 5–


--- page 46 ---
“PBOC” People’s Bank of China ( ʕ਷ɛ͏ვБ), the central bank
of the PRC
“PRC Legal Advisor” Jingtian & Gongcheng
“Preferred Shares” Series Angel Preferred Shares, Series Pre-A Preferred
Shares and Series A Preferred Shares in the capital of our
Company, which will be converted on a one-to-one basis
into the Ordinary Shares upon the Listing
“Pre-IPO Investments” the Pre-IPO investments in our Company undertaken by the
Pre-IPO Investors, details of which are set out in the section
headed “History, Development and Reorganization” in this
prospectus
“Pre-IPO Investors” the investors of the Pre-IPO Investments, details of which
are set out in the section headed “History, Development
and Reorganization” in this prospectus
“Price Determination Agreement” the agreement to be entered into by and the Overall
Coordinators (for themselves and on behalf of the
Underwriters) and our Company on the Price
Determination Date to record and fix the Offer Price
“Price Determination Date” the date, expected to be on or before Wednesday, January
8, 2025 (Hong Kong time) on which the Offer Price is
determined by the Overall Coordinators (for themselves
and on behalf of the Underwriters) and us, but in any
event no later than 12:00 noon, Wednesday, January 8,
2025
“prospectus” this prospectus being issued in connection with the Hong
Kong Public Offering
“province” a province or, where the context requires, a provincial
level autonomous region or municipality, under the direct
supervision of the central government of the PRC
“QIB” or “Qualified Institutional
Buyer”
a qualified institutional buyer within the meaning of Rule
144A
“Regulation S” Regulation S under the U.S. Securities Act
“Reporting Accountants” Ernst & Y oung
DEFINITIONS
–3 6–


--- page 47 ---
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“Rule 144A” Rule 144A under the U.S. Securities Act
“SAFE” State Administration of Foreign Exchange of the PRC ( ʕ
̮ි၍ଣ҅)
“SA T” State Administration of Taxation of the PRC ( ʕശɛ͏΍
೼ਕᐼ҅)
“SCLA” Shanghai Character License Administrative Co., Ltd. ( ɪ
ʮ̡)
“Securities and Futures
Ordinance” or “SFO”
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Securities Law” Securities Law of the People’s Republic of China ( ʕശɛ
جas amended, supplemented or
otherwise modified from time to time
“Series Angel Preferred Share(s)” series angel preferred share(s) of the Company, of
nominal or par value of US$0.0001 each
“Series A Preferred Share(s)” series A preferred shares of the Company, of nominal or
par value of US$0.0001 each
“Series Pre-A Preferred Share(s)” series pre-A preferred shares of the Company, of nominal
or par value of US$0.0001 each
“SFC” the Securities and Futures Commission of Hong Kong
“Share Incentive Scheme” the share incentive scheme adopted by the Company on
January 12, 2023 and amended and restated on March 29,
2024, the principal terms of which are set out in
“Appendix IV — Statutory and General Information —
E. The Share Incentive Scheme” to this prospectus
“Shareholder(s)” holder(s) of the Shares
“Share(s)” the Ordinary Shares, Series Angel Preferred Shares,
Series Pre-A Preferred Shares and Series A Preferred
Shares in the capital of our Company, as the context so
requires
DEFINITIONS
–3 7–


--- page 48 ---
“Smart Bloks” Smart Bloks Limited, a limited liability company
incorporated under the laws of BVI on July 15, 2021 and
one of our Controlling Shareholders wholly-owned by
Mr. Zhu, holding approximately 3.65% of the issued
share capital of our Company immediately after the
Global Offering (assuming that the Offer Size
Adjustment Option and the Over-allotment Option are
not exercised)
“Sponsor-OC” the sponsor-overall coordinators as named in “Directors
and Parties Involved in the Global Offering” in this
prospectus
“Stabilizing Manager” Goldman Sachs (Asia) L.L.C.
“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered
into between Smart Bloks and the Stabilizing Manager on
or about the Price Determination Date
“subsidiary(ies)” has the meaning ascribed to it in Schedule 1 of the
Companies Ordinance and the Listing Rules
“Track Record Period” the financial years ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2024
“U.S.” or “United States” the United States of America, its territories, its
possessions and all areas subject to its jurisdiction
“U.S. person” a U.S. person, as defined of Rule 902 of Regulation S
“U.S. Securities Act” the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated under it
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“US$” or “U.S. dollars” United States dollars, the lawful currency of the United
States
DEFINITIONS
–3 8–


--- page 49 ---
“V A T” value added tax
“White Form eIPO ” the application process for Hong Kong Offer Shares with
applications issued in applicant’s own name and submitted
online through the designated website of the White Form
eIPO Service Provider at www.eipo.com.hk
“White Form eIPO Service
Provider”
Computershare Hong Kong Investor Services Limited
“Wise Global Trust” a discretionary trust established by Mr. Zhu as the settlor
on June 16, 2022, for the benefit of Mr. Zhu and his
family members with Trident Trust Company (HK)
Limited as the trustee
“%” percent
For ease of reference, the names of the PRC established companies or entities, laws or
regulations have been included in this prospectus in both the Chinese and English languages;
in the event of any inconsistency, the Chinese versions shall prevail.
For the purpose of this prospectus, references to “provinces” of China include provinces,
municipalities under direct administration of the central government and provincial-level
autonomous regions.
Certain amounts and percentage figures included in this prospectus have been subject to
rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them. Any discrepancies in any table or chart between the
total shown and the sum of the amounts listed are due to rounding.
DEFINITIONS
–3 9–


--- page 50 ---
This glossary contains explanations of certain technical terms used in this
prospectus in connection with the Company and our business. Such terminology and
meanings may not correspond to standard industry meanings or usages of those terms.
“ABS” acrylonitrile butadiene styrene
“App” mobile application
“ASTM F963” U.S. consumer product safety standard for toys
“BFC” Blokees Figures Creator, person who re-creates our
products or produces creative content related to our
products, and shares such content
“CAGR” the compound annual growth rate, which means the
year-over-year growth rate over a specified period of time
“DFM” design for manufacturability, a product design
philosophy focusing on creating a better design at a lower
cost by optimizing the selection of materials and
manufacturing processes
“DTC” direct-to-customer
“EN71” European Union safety standard for toys
“ERP” enterprise resource planning
“ESG” environmental, social and corporate governance
“first- and second-tier cities” Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu,
Xi’an, Wuhan, Suzhou, Zhengzhou, Chongqing,
Hangzhou, Nanjing, Tianjin, Changsha, Dongguan,
Ningbo, Hefei, Kunming, Qingdao, Foshan, Shenyang,
Jinan, Wuxi, Xiamen, Fuzhou, Wenzhou, Jinhua, Harbin,
Dalian, Guiyang, Nanning, Quanzhou, Shijiazhuang,
Changchun, Nanchang, Huizhou, Changzhou, Jiaxing,
Xuzhou, Nantong, Taiyuan, Baoding, Zhuhai,
Zhongshan, Taizhou, Linyi, Weifang, Shaoxing and
Y antai
“GMV” gross merchandise value
GLOSSARY OF TECHNICAL TERMS
–4 0–


--- page 51 ---
“GB6675-2014” China national safety standards for toys
“IP” characters, films or other artistic works and their
underlying intellectual property rights
“ISO14000” an international standard that specifies requirements for
environmental management
“KOC” key opinion consumer
“KOL” key opinion leader
“R&D” research and development
“SKU(s)” stock keeping units, being the smallest unit of inventory
available for sale
“third-tier and cities and below” all the cities in China excluding first-tier cities and
second-tier cities
“UGC(s)” user-generated content(s)
“UV printing” a printing technique that utilizes ultraviolet light to dry or
cure ink
GLOSSARY OF TECHNICAL TERMS
–4 1–


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This prospectus contains forward-looking statements. All statements other than
statements of historical fact contained in this prospectus, including, without limitation:
(a) the discussions of our business strategies, objectives and expectations regarding our
future operations, products, revenue, margins, profitability, liquidity and capital
resources;
(b) any statements concerning the future development of, and trends and conditions in,
the market and the general economy of the countries in which we operate or plan to
operate and where our products may be distributed and sold;
(c) any statements concerning our ability to control costs or expenses;
(d) any statements concerning the nature of, and potential for, the future development
of our business, including any potential business relationships and partnerships;
(e) any statements preceded by, followed by or that include words and expressions such
as “aim”, “aspire”, “expect”, “believe”, “plan”, “intend”, “estimate”, “forecast”,
“project”, “projection”, “target”, “schedules”, “outlook”, “vision”, “goal”, “going
forward”, “anticipate”, “seek”, “may”, “will”, “ought to”, “would”, “should” and
“could” or similar words or statements;
(f) any statements included in this prospectus that are not historical; and
(g) any factors beyond our control,
as they relate to us or the management, are forward-looking statements.
These statements are based on assumptions regarding our present and future business, our
business strategies and the environment in which we will operate. These forward-looking
statements reflect our current views as to future events and are not a guarantee of our future
performance. Forward-looking statements are subject to certain known and unknown risks,
uncertainties and assumptions, including the risk factors described in “Risk Factors” and
elsewhere in this prospectus. Important factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements include, among other
things, the following:
(a) developments in our business strategies and business plans;
(b) our ability to continue to launch new quality-for-money products on a timely,
cost-effective basis;
FORW ARD-LOOKING STATEMENTS
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(c) prevailing local, regional, national and international economic conditions and
consumer confidence in the markets where our products may be sold;
(d) general political, economic, legal and social conditions in our principal markets;
(e) developments of our competitors and other competitive pressures within the
industries in which we operate;
(f) changes in social and economic circumstances and consumer preferences, and
volatility in the prices of raw materials, commodities and energy;
(g) our ability to obtain the necessary funding for future capital or refinancing needs
and limitations on our ability to contain costs and expenses;
(h) financial risks, such as interest rate risk, foreign exchange rate risk, commodity risk,
asset price risk, equity market risk, counterparty risk, sovereign risk, liquidity risk,
inflation or deflation; and
(i) regulatory changes affecting, among other things, the industry and market,
accounting standards and taxes.
Subject to the requirements of applicable laws, rules and regulations, we do not have any
obligation, and undertakes no obligation, to update or otherwise revise the forward-looking
statements in this prospectus, whether as a result of new information, future events or
developments or otherwise. As a result of these and other risks, uncertainties and assumptions,
the forward-looking events and circumstances discussed in this prospectus might not occur in
the way we expect or at all. Accordingly, you should not place undue reliance on any
forward-looking information. All forward-looking statements contained in this prospectus are
qualified by reference to the cautionary statements set out in this section as well as the risks
and uncertainties discussed in “Risk Factors.”
In this prospectus, statements of or references to our intentions or that of any of the
Directors are made as at the date of this prospectus. Any of these intentions may change in light
of future developments.
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An investment in our Shares involves a high degree of risk. You should carefully
consider the following information about risks, together with the other information
contained in this prospectus, including our consolidated financial statements and related
notes, before you decide to buy our Shares. If any of the circumstances or events
described below actually arises or occurs, our future prospects, business, results of
operations and financial condition may suffer . In any such case, the market price of our
Shares could decline and you may lose all or part of your investment. This prospectus
also contains forward-looking information that involves risks and uncertainties. Our
actual results could differ materially from those anticipated in these forward-looking
statements as a result of many factors, including the risks described below.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Demand for our products is affected by changing social and economic circumstances and
evolving consumer preferences, as well as our ability to design and develop products to
meet these preferences.
During the Track Record Period, we generate substantially all of our revenue from sales
of toy products. The development of toy market is subject to uncertainties and may be impacted
by changing social and economic circumstances and evolving consumer preferences.
Particularly, toys compete with other entertainment options such as video games for consumer
attention and spending in general. Separately, toys are discretionary spending items, and
consumer spending patterns are affected by, among other factors, economic conditions,
demographic changes, social and cultural trends and uncertainties about future economic
prospects. Any decline in the global toy market as a whole could have a material and adverse
impact on our future prospects, business, results of operations and financial condition.
The popularity and consumer appeal of various types of toys, such as character toys and
assembly character toys, are also affected by evolving consumer preferences. More
specifically, as character toys are based on IPs, the character toy industry is also subject to risks
inherent with IPs. See “— The popularity of existing IPs in our IP portfolio may deteriorate,
and we may not be able to successfully source, develop or commercialize new IPs.” for further
details. These uncertainties may impact the growth and competitive landscape of character toy
market and have a material and adverse impact on our future prospects, business, results of
operations and financial condition.
Furthermore, the global assembly character toy market is highly concentrated, with the
top three players having 81.7% of the market share in terms of GMV in 2023. To prevail in the
competitive assembly character toy market, we must continue to innovate and launch products
that are popular among consumers and meet their needs, which in turn depends on our ability
to execute various aspects of our business including product innovations, IP-related
capabilities such as selection, development, operation and commercialization, product
craftsmanship and quality, production capacity of our partner factories, and the effectiveness
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of our sales and marketing efforts. Failure as to any of these aspects can negatively affect our
ability to sustain the popularity and market momentum of our product offering or continuously
adjust our product offering in response to changing consumer preferences, which could have
a material and adverse impact on our business, results of operations and financial condition.
We recorded net losses in the past and we might not be able to sustain our growth or
achieve profitability.
We experienced significant increase in our revenue during the Track Record Period.
However, investors should not view this as a reliable indicator of our future performance.
Furthermore, we recorded loss for the period in 2021, 2022, 2023 and the six months ended
June 30, 2023 and 2024 of RMB506.9 million, RMB422.7 million, RMB207.5 million,
RMB202.8 million and RMB254.9 million, respectively. We cannot assure you that we will be
able to maintain our growth or achieve profitability in the future. In addition to consumer
preferences and market dynamics, our ability to sustain growth and profitability depends on our
successful execution of our business strategy on various aspects, including:
 maintaining and enhancing the innovativeness and competitiveness of our Bloks
System;
 obtaining, expanding, maintaining and protecting our intellectual properties,
particularly our patents;
 developing or licensing new IPs to expand our IP portfolio;
 continuously and successfully launching new products;
 maintaining and enhancing brand recognition;
 maintaining and expanding our customer base, and nurturing a loyal and engaged
fan community;
 marketing and promoting our products;
 managing relationships with third-party partner factories;
 establishing and operating self-owned factories;
 expanding our market presence across existing and new sales channels;
 expanding our presence in China and overseas;
 maintaining and expanding profit margins through sales growth and efficiency
initiatives;
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 continuously enhancing productivity, hiring, training, and managing employees
while preserving our corporate culture;
 improving supply chain, financial and management controls, as well as reporting
processes; and
 managing debt, working capital and capital investments to sustain and enhance cash
flow generation.
Failure to execute any of the above could have a material and adverse impact on our
future prospects, business, results of operations and financial condition.
The popularity of existing IPs in our IP portfolio may deteriorate, and we may not be able
to successfully source, develop or commercialize new IPs.
The success of our assembly character toys is heavily reliant on the recognition and
popularity of the IPs within our IP portfolio. However, whether such IPs will remain popular
among the consumers is beyond our control. For instance, consumer preferences may shift
away from existing IPs, and unforeseen negative publicity surrounding these IPs may arise.
Any decline in the recognition or popularity of our IPs could significantly impact our sales
performance and reputation. In addition, we cannot assure you that we will always be
successful in developing or identifying IPs that resonate with consumers. Misinterpretation of
market trends and consumer preferences may result in a mismatch between our expectations
and the actual market reception of our new self-developed or licensed IPs. Our success in
developing IPs in-house also depends on our ability to identify and curate the theme, develop
captivating worldview and storylines, design the characters, and produce and disseminate
popular content. Furthermore, newly introduced IPs may lose popularity due to rapidly
evolving market dynamics and changing consumer preferences.
The ability to successfully commercialize our self-developed and licensed IPs is also
crucial to our business. Our efforts to commercialize IPs may not always yield the desired
outcomes. The economic benefits derived from new IPs may fall short of expectations or fail
to offset the licensing fees associated with licensed IPs or the research and development costs
linked to self-developed IPs. Any failure to commercialize our self-developed and licensed IPs
could have a material and adverse impact on our future prospects, business, results of
operations and financial condition.
We may fail to obtain, maintain or renew IP licenses on favorable terms, and our IP
proprietors or licensors may fail to maintain and protect their IPs.
In addition to self-developed IPs, we acquire IP licenses from third-party IP proprietors
or licensors to develop our products, including SCLA and Hasbro, which were our largest and
second largest IP licensor and proprietor during the Track Record Period. Sales of products
based on these licensed IPs contributed to the substantial majority of our revenue in 2023 and
the six months ended June 30, 2024. More specifically, products based on the Ultraman IP
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contributed to a majority of our revenue in 2023 and the six months ended June 30, 2024. In
2021, 2022, 2023 and the six months ended June 30, 2024, the revenue from products based
on IPs licensed from SCLA was nil, RMB111.5 million, RMB556.7 million and RMB600.7
million, amounting to nil, 34.2%, 63.5% and 57.4% of our total revenue in the corresponding
periods. Products based on the TRANSFORMERS IP also contributed a significant portion of
our revenue in 2023 and the six months ended June 30, 2024. In 2021, 2022, 2023 and the six
months ended June 30, 2024, the revenue from products based on IPs licensed from Hasbro was
RMB18.1 million, RMB23.5 million, RMB136.9 million and RMB195.6 million, amounting to
5.5%, 7.2%, 15.6% and 18.7% of our total revenue in the corresponding periods. If we fail to
maintain a positive relationship with the proprietors or licensors of such IPs, our operations,
business prospects and financial condition may be materially and adversely affected. While we
aim to expand our IP portfolio by collaborating with a broader spectrum of IP proprietors or
licensors, there remains risk that we may not secure licenses for IPs on favorable terms, if at
all. In particular, growing popularity of IP character toys may also intensify the competition for
renowned IP among toy companies, which may further adversely affect our ability to obtain
licenses from IP proprietors or licensors on favorable terms, if at all. Our license agreements
typically span from one to three years and are generally not automatically renewable. As such,
there is no assurance that we will always be successful in renewing or maintaining our license
agreements on similar terms, or at all. Furthermore, there is a risk that the IP proprietors or
licensors may be involved in disputes relating to their IP rights and may inadequately maintain
and protect their IP rights, potentially affecting our ability to utilize the licensed IPs. The
inability to secure licenses on favorable terms, termination or non-renewal of license
agreements, such as the Ultraman IP from SCLA and TRANSFORMERS IP from Hasbro, as
well as other IPs from other IP proprietors or licensors, or failure of the IP proprietors or
licensors to safeguard their IPs, could have a material and adverse impact on our business,
results of operations and financial condition.
Our competitiveness in part depends on our ability to obtain, maintain and protect our
critical intellectual properties.
As of the Latest Practicable Date, we had 590 patents registered or under application,
1,913 trademarks, 1,418 copyrights and 120 domain names in China. As of the same date, we
had 26 patents registered or under application and 158 trademarks overseas. See “Appendix IV
— Statutory and General Information — B. Further Information about the Business —
Intellectual Property.” We use our patent portfolio, trade secrets and proprietary know-hows to
maintain the competitiveness and innovativeness of our Blok System. To the extent possible,
we rely on a combination of patent, trademark, copyright and trade secret protection laws in
China and other jurisdictions, as well as internal policies, confidentiality procedures and
contractual provisions to protect our intellectual property rights. However, these laws, policies,
procedures and contractual provisions may provide only limited protection, and any of our
intellectual property rights may be challenged, invalidated, circumvented, infringed or
misappropriated, such as by producers of counterfeit products and knockoffs. The costs
associated with protecting our intellectual property rights may be significant. Also, we are in
the process of registering certain patents which have been applied in our business operations,
and there can be no assurance that these intellectual property rights applications could be
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approved in a timely manner, or at all. In addition, we cannot assure you that our partner
factories will not engage in practices that could infringe our intellectual property rights. Any
failure to obtain, maintain, and protect our patents, trademarks, copyrights and other
intellectual property rights could have a material and adverse impact on our business, results
of operations and financial condition.
We may face negative publicity, damage to our brand reputation, or unable to effectively
promote our brand.
The reputation of our Blokees (
̺ኁ̙) brand plays a crucial role in our consumers’
perception and the sales of our products. The reputation of our Blokees (̺ኁ̙) brand is also
essential in maintaining and expanding business relationships with key stakeholders such as IP
proprietors, distributors, suppliers and other business partners. Any damage to our brand
reputation could have a material and adverse impact on our prospects, business, results of
operations and financial condition.
More specifically, any negative publicity concerning our business, management,
products, licensed or self-developed IPs, partners, or industry could significantly undermine
our brand reputation. Addressing such adverse publicity may necessitate the launch of
defensive media campaigns or legal actions, leading to increased marketing and legal expenses
and diverting management’s focus from core operations. Any counterfeit products or knockoffs
may also infringe and undermine our brand reputation in general.
Our content-driven marketing strategy relies on third-party social media platforms. In
particular, our fans, BFCs and the KOLs and KOCs we work with may post contents relating
to our products from time to time. We may fail to detect and prevent illegal or inappropriate
content from being posted, which may incur regulatory investigations, legal liability, or
removal from social media platforms. In addition, unfavorable publicity or negative news
regarding us, our fans, BFCs, the KOLs and KOCs we work with, or our IP proprietors, or
negative review on our brands and products could adversely affect our reputation.
In addition, we may encounter challenges in effectively enhancing brand recognition.
Despite our efforts, there is no assurance that our brand promotion and marketing endeavors
will resonate with our target audience and drive consumer engagement as anticipated. These
challenges could have a material adverse impact on our future prospects, business, results of
operations and financial condition.
We may be unable to expand, manage, monitor and coordinate our multi-channel sales
network effectively.
We face risks associated with managing our multi-channel sales network consisting of
offline sales channels, including distributors and consignment sales and online sales channels,
including various e-commerce platforms. Our multiple sales channels might compete with each
other and result in cannibalization among different channels, which could have a material and
adverse impact on our business, results of operations and financial condition.
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More specifically, distributorship is an important component of our multi-channel sales
network. We had a total of 511 distributors as of June 30, 2024. Our offline distribution sales
amounted to RMB112.8 million, RMB157.0 million, RMB732.7 million, RMB238.1 million
and RMB957.9 million, accounting for 34.2%, 48.2%, 83.6%, 76.8% and 91.6% of our total
revenue in 2021, 2022, 2023 and the six months ended June 30, 2023 and 2024, respectively.
We face various risks in relation to distributorship, including:
 We have limited control over our distributors, who may not always comply with our
requirements and policies or adhere to agreements with us. This could lead to issues
such as misuse of our logo, violations of our guidelines, or inappropriate marketing
activities, all of which may negatively impact product sales, consumer experience
and brand recognition.
 Some distributors may sell our products to sub-distributors without our involvement
or oversight, making it difficult to control their sales activities.
 Our distributors or sub-distributors may violate our guidelines and sales strategies
and compete with each other for market share.
 Our distributors and sub-distributors may fail to sell our products in a timely manner
or deviate from our guidelines and strategies, it could result in price disparities,
decreased product sales and damage to our reputation.
 We may have limited control over the disorganized ordering and stockpiling by
distributors, making it challenging to make sales forecast and manage inventory
levels effectively.
 Distributors may violate our guidelines and sell our products to unauthorized
channels or regions. This may cause price erosion, brand dilution, conflicts with
authorized distributors and disruptions in pricing strategies across different channels
or regions. This can further exacerbate competition among distributors and
undermine our brand recognition.
Occurrence of any of these could have a material and adverse impact on our business,
results of operations and financial condition.
Additionally, our ability to maintain and expand our sales network significantly impacts
our success, but this is influenced by various factors, some of which are beyond our control.
For instance, if we encounter challenges in maintaining positive relationships with existing
partners within our sales channels, experience disputes with them, or struggle to expand our
sales network with new partners under favorable terms, our market presence across different
channels or regions may be compromised. Failure to effectively execute our development and
growth strategies, along with providing sufficient resources and operational support to our
online and offline sales channels, could have a material and adverse impact on our future
prospects, business, results of operations and financial condition.
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The use of third-party partner factories to produce products presents risks to our
business.
We rely on third-party partner factories to produce our products. In particular, our two
largest suppliers in 2023 and the six months ended June 30, 2024, both of which are our
partners factories, accounted for 66.7% and 51.0% of our total procurement in the such year
or period. As a result, the loss or unavailability of any of our major partner factories, even
temporarily, could have a negative impact on our business, results of operations and financial
condition. While we believe that we have the ability to replace our partner factories, if
necessary, any such move may be time-consuming and costly. More specifically, we integrate
our knowledge in assembly character toy production and various patents to curate industry-
leading proprietary production techniques and customized equipment to be applied in a
network of toy factories dedicated in the production of our products, making it more
time-consuming and costly to establish cooperation with alternative factories. In addition, we
may face challenges in establishing relationships with new partner factories on similar terms
with matching quality. We may also be required to seek out additional partner factories in
response to increased demand for our products, as our current partner factories may not have
sufficient production capacity. Furthermore, our partner factories are subject to various laws
and regulations in the PRC, including environmental protection, health and safety-related laws.
Any violation, non-compliances or issues in connection with these laws and regulations can
disrupt their production activities. Any failure of our partner factories to deliver a material
portion of the products ordered, or our failure to find alternative partner factories in time, could
have a material and adverse impact on our business, results of operations and financial
condition.
Product quality is crucial to our success. We require third-party partner factories to
produce our products according to our quality control procedures and instructions.
Nevertheless, we may not have effective control over whether our partner factories would
strictly follow our quality control procedures and instructions as to, for example, raw materials
to be used in the production of our products. Despite the various policies we design and
implement, there is always a risk that our third-party partner factories will not comply with our
requirements, and that we may not be able to discover such non-compliance immediately, or
at all. Any illegal or policy-violating activities of third-party partner factories may expose us
to product liability claims, administrative penalties, confiscation or destruction of certain
products, revocation of business license, or other legal consequences, among others. If
defective products are produced and sold, it could result in damage to our brand reputation,
product recalls, consumer litigation and others, which in turn could have a material and adverse
impact on our business, results of operations and financial condition.
Our investment and future operations in self-operated factories may not be successful.
In addition to the collaboration with our partner factories, we plan to invest in our own
scaled factories specializing in the production of assembly character toys. We expect to
complete the self-operated factory by or around the end of 2026 with a designed capacity of
approximately nine million units per months. See “Business — Production — Plan for
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Self-operated Factories” and “Future Plan and Use of Proceeds.” Execution of such plan would
impose significant responsibilities on our senior management and require commitment of
resources and time, for example in identifying, maintaining and integrating additional
employees and procuring additional equipment. Self-operated factories will also lead to
significant amount of capital expenditure. In addition, the successful execution of such plan
requires the self-operated factories to obtain various approvals, permits, licenses and
certificates and complete relevant inspections by competent government authorities.
Difficulties in effectively managing the budgeting, financing, operational and compliance
issues presented by such plan could adversely affect our business, prospects, results of
operations and financial condition. There is no assurance that we will be able to execute our
plan for self-operated factories as expected or at all.
Even if we manage to establish our self-operated factories, there is no assurance that we
could effectively operate or manage our self-operated factories. Historically, all our products
were produced by our partner factories. As such, we may be short of experience in operating
factories on our own. For example, we may not be able to effectively allocate our production
capacity or produce our products with satisfying quality in a timely and cost-effective manner.
Furthermore, such self-operated factories can incur significant overhead and support costs,
resulting in more operating expenses, which may adversely affect our results of operations and
financial condition. There is no assurance that we will be able to recover our investment in such
self-operated factories in a timely manner or at all. If we fail to recover the investment in such
self-operated factories, our prospects, results of operations and financial conditions could be
materially and adversely affected.
We may be unable to conduct our marketing activities effectively.
To promote our brand recognition and increase our brand value as well as to sell our
products, we invested, and plan to continue to invest in marketing activities. In 2021, 2022,
2023 and the six months ended June 30, 2023 and 2024, the selling and distribution expenses
amounted to RMB388.6 million, RMB232.9 million, RMB189.3 million, RMB86.4 million and
RMB120.8 million, respectively. We utilize various social media platforms as part of our
content-driven online marketing strategy. As social media evolves rapidly, we must continue to
maintain a presence on these platforms and establish presence on new or emerging popular
social media platforms. Some of these marketing or promotional results may not be as effective
as we expected. For example, our KOL and KOC collaborations may not achieve the expected
results. If we are unable to cost-effectively use social media platforms as marketing tools, we
may not be able to maintain and grow our consumer base and ultimately increase our sales.
Furthermore, failure to provide adequate support to our sales partners through effective
marketing efforts may result in our business being adversely affected. Materialization of any
of the foregoing risks could have a material and adverse impact on our future prospects,
business, results of operations and financial condition.
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We may be unable to maintain our attractive pricing and our quality-for-money
proposition.
Attractive pricing is crucial in maintaining our quality-for-money proposition. Many
factors beyond our control may impact the pricing of our products. For example, we may need
to increase the price of our products due to factors such as rising licensing fees from IP licensor
or proprietors, production costs from our partner factories due to higher labor cost or
otherwise, and costs for raw materials that meet our quality requirement. We may also incur
higher than expected expenses on our sales and marketing efforts or make capital expenditure
to strengthen our production resources. Any of these factors could result in lower profitability
unless we increase the retail prices of our products, or our distributors are willing to absorb the
increase in the price at which we sell our products to them so that we can maintain the same
level of retail prices. Any such increases in retail prices could damage our quality-for-money
proposition, diminish our appeal to consumers and weaken our competitiveness in the market,
which in turn could have a material and adverse impact on our future prospects, business,
results of operations and financial condition.
We may face shortages, price fluctuations or quality issues relating to raw materials or
disruptions in the supply of raw materials.
The raw materials used in the production and packaging of our products primarily include
ABS and paper materials. Raw materials are of vital importance as it can directly affect the
quality, appearance and texture of our products. We adopted strict criteria for evaluating the
qualifications of our raw material suppliers. We take into account their qualification as well as
the quality, price and stable supply of the relevant raw materials when selecting our raw
material suppliers. The supplies of our raw material may be subject to risks associated with
factors beyond our control, such as labor shortages and natural disasters. Any shortages, price
fluctuations, or disruption of supply of raw materials used in the production of our products
may cause a disruption to production and result in our inability to provide adequate products
to meet market demand for our products that subsequently leads to loss of sales.
In addition, we cannot guarantee that raw materials from suppliers will be free from
quality issues. Any quality issue of raw materials used in our production may result in defects
in our products and subject us to potential liabilities, product recalls, and claims. While we
typically require indemnification for our losses caused by raw materials that do not meet our
requirements, potential liabilities and claims related to defects in our product may impair our
brand reputation and could have a material and adverse impact on our business, results of
operations and financial condition.
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We may encounter product quality issues.
Product quality is crucial to our success. However, we cannot assure you that we will not
encounter any product quality issues and meet all industry related quality standards. Quality
issues may arise from various causes such as: (i) product design defects; (ii) defect raw
materials used in production; (iii) errors in production and final product inspection processes;
or (iv) improper handling of our products during the storage and transportation processes. Any
quality issue may expose us to product liabilities, product recalls, claims or legal
consequences, which may negatively affect our brand recognition and could have a material
and adverse impact on our business, results of operations and financial condition.
We face risks related to counterfeit products and knockoffs.
We may encounter situations where unauthorized third parties sell products under our
brand name or trademark, or under similar brand names or trademarks, without obtaining the
necessary license or authorization from us. Legal action to address such infringements,
counterfeit products and knockoffs could be costly and may divert management’s focus and
resources away from our core business activities. The presence of unauthorized products in the
market may also tarnish our reputation, as consumers may struggle to distinguish between
authentic and counterfeit products or knockoffs, which may result in consumer complaints or
disputes. In addition, presence of counterfeit products or knockoffs based on licensed IP in the
market may also result in disputes with the IP proprietors. Any inadequate detection and
handling of counterfeit products and knockoffs could harm our reputation and have a material
and adverse impact on our business, results of operations and financial condition.
We face challenges in expanding into overseas markets.
We may face various challenges in relation to our overseas expansion plans, such as our
ability to identify suitable markets, secure favorable terms with overseas sales partners, the
popularity of our products in the markets we wish to penetrate, the relevant logistics and
warehousing arrangement in overseas arrangement and our ability to meet the legal and other
requirements of the local market. More specifically, different markets have their unique social
and economic circumstances and consumer preferences, which presents challenges for us to
introduce our products in these markets. Different legal and other requirements, such as
product safety standards, may also lead to additional compliance costs and divert the attention
of our management and our resources. Furthermore, operations in certain countries may be
negatively affected by deterioration in political and economic relations among countries,
sanctions and export controls, international trade regulations and trade protection measures,
and may be subject to other geopolitical challenges, economic and labor conditions, increased
duties, taxes and other costs and political instability. In addition, our international expansion
plan is also subject to challenges in localizing our business and competing against competitors
with more local resources in the overseas market. As a result, we cannot guarantee that our
expansion plan into overseas markets can be successfully implemented. Failure to execute our
overseas expansion plan could have a material and adverse impact on our future prospects,
business, results of operations and financial condition.
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During the Track Record Period, the revenue contribution from overseas markets in any
given period was below 3%. Different overseas market may impose different import tariff rates
to our products, which are subject to changes from time to time. In particular, our products are
not subject to import tariff to the United States
(1), while our products sales in Europe were
subject to import tariff up to approximately 5%, during the Track Record Period and up to the
Latest Practicable Date. In view of the recent political environment in the United States, there
can be no assurance that an import tariff will not be imposed on the import of our products to
the United States in the near future. To the extent any country starts to impose or increase the
rate of import tariff applicable to our products, our sales in those markets can be adversely
affected.
We are exposed to inventory management risks and may face inventory excess,
obsolescence, impairment or shortage.
Our inventories mainly include finished goods, raw materials and goods in transit. As of
December 31, 2021, 2022, 2023 and June 30, 2024, we had inventories of RMB69.8 million,
RMB61.2 million, RMB76.3 million and RMB151.3 million respectively. Our inventory
turnover days for 2021, 2022, 2023 and the six months ended June 30, 2024 were 137 days,
130 days, 62 days and 46 days, respectively. See “Financial Information — Selected Balance
Sheet Items — Inventories.” We are required to maintain sufficient inventory levels to ensure
our product demand can be met, while avoiding excess inventory. Failure to forecast consumer
demand or respond to any unexpected event negatively affecting the sales of our products could
expose us to inventory obsolescence or result in a decline in inventory value or inventory
write-downs. On the other hand, inaccurate sales forecast or insufficient production capacity
at our partner factories may lead to inventory shortage and result in our inability to meet
market demand for our products and satisfy orders from our sales partners. Failure in managing
our inventory could have a material and adverse impact on our business, results of operations
and financial condition.
Note:
(1) Based on Harmonized Tariff Schedule of the United States (“ HTS”), our products are categorized under code
9503, which cover various types of toys. Products under code 9503 originated from China are currently duty
free under the HTS.
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We are exposed to risks relating to warehousing and third-party logistics service
providers.
A significant disruption to the operation of the warehouses, whether as a result of natural
disasters, public health incidents, labor shortages, fires or other causes, or any unexpected and
adverse changes in the storage conditions of the warehouses, could disrupt our operations,
which may cause delay in product deliveries or even destroy our products. Though we maintain
insurance to cover our inventory loss and damages, the coverage may not be sufficient and any
delay in delivery may not be recoverable. Prolonged disruptions in warehousing could also
result in a loss of sales. Furthermore, we may fail to secure the lease agreement of our
warehouses on favorable terms, or at all. Any of these events could have a material and adverse
impact on our business, results of operations and financial condition.
During the Track Record Period, we engaged independent third-party logistics service
providers to transport our products from partner factories to our warehouses and/or customers.
Our dependence on third-party logistics providers could expose us to potential service
disruptions or inefficiencies. If these providers fail to meet their service obligations due to
operational issues, financial difficulties, or other unforeseen circumstances, our ability to
deliver products to customers in a timely and cost-effective manner may be impacted, which
could cause a decline in product sales and loss of revenue. In addition, improper handling of
our products by the logistics service providers could also result in product damage, which
could lead to product liabilities or claims and negatively impact our brand image and
reputation. Any of these events could have a material and adverse impact on our business,
results of operations and financial condition.
Our success depends on our ability to operate our business without infringing,
misappropriating or otherwise violating the patents, trademarks, copyrights, trade secret,
know-how and other proprietary rights of third parties.
We cannot assure you that our business practices do not and will not infringe,
misappropriate or otherwise violate any patents, trademarks, copyrights, trade secrets,
know-how and other proprietary rights of third parties, given the uncertainties inherent in the
scope of certain patents, trademarks, copyrights, trade secrets, know-how and other proprietary
rights. Intellectual property related litigation is usually complex and the results of such
litigation are unpredictable. As we gain greater visibility and market exposure as a public
company, we may also be at greater risk of being the subject of intellectual property related
litigation. Third parties may claim that our products or activities infringe, misappropriate or
otherwise violate their patents, trademarks, copyrights, trade secrets, know-how or other
proprietary rights. Defending against these allegations and lawsuits could be costly, take a
significant amount of time, distract management from our business operations and delay our
product launch. In addition, if we are found to have infringed, misappropriated or otherwise
violated a third party’s patents, trademarks, copyrights, trade secrets, know-how or other
proprietary rights, we may be required to pay substantial damages or be subject to orders,
judgments or administrative penalties that prohibit us from selling certain products or impose
other liabilities on us. In addition, any allegation of infringement of the intellectual property
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rights of others, even if unfounded, could damage our reputation and tarnish our brand image.
Furthermore, our use of the disputed intellectual properties may be restricted, which could
disrupt our operations. Occurrence of any of these incidents could have a material and adverse
impact on our business, results of operations and financial condition.
We face challenges with regard to changes in existing laws, regulations, or policies
governing our industry and business, the imposition of new laws, regulations, or policies,
or new interpretations thereof.
We are subject to laws, regulations and policies governing the toy industry in countries
where we have operations. The regulatory regime for the industry has been evolving, with new
laws, regulations and other regulatory measures being introduced from time to time, such as the
Product Quality Law of the People’s Republic of China (2018͍)(ሯ
ج2018͍)‘). See “Regulatory Overview — Regulations On Assembly Character Toys
— Regulations on Products Quality and Liability.” Such laws and regulations may become
more comprehensive and stringent in the future. While we closely monitor changes in the
relevant laws and regulations and have implemented measures to ensure our ongoing
compliance, changes in the regulatory regime may materially and adversely impact our
business. For example: (i) we may incur higher compliance costs on our business and face
challenges in launching new products; (ii) we may encounter greater difficulties in obtaining
relevant regulatory approvals; and (iii) our sales and marketing activities may be restricted in
scope, content, format and other aspects. Any non-compliance with applicable laws and
regulations may expose us to liability. In case of any non-compliance, we may have to incur
significant expenses and divert management’s attention and substantial resources to resolving
deficiencies. More specifically, on June 8, 2023, the SAMR promulgated the Blind Boxes
Guidelines. The interpretation and enforcement of this newly promulgated guidelines can be
evolving, which could lead to a material and adverse impact on our prospects, business, results
of operations and financial conditions.
Furthermore, we cannot assure you that our customers and other business partners will
always be able to comply with the laws and regulations in a timely manner, or at all. We may
have to terminate our collaboration with customers and other business partners that fail to do
so, which could have a material and adverse impact on our business, results of operations and
financial condition.
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We are subject to environmental protection, health, and safety-related laws and
regulations. Changes in these laws and regulations may cause us to incur additional
compliance costs, and any non-compliance with these laws and regulations could lead to
imposition of fines and penalties and harm our business.
Our operations, particularly our products, raw materials and warehousing, are subject to
laws and regulations in relation to environmental protection, health and safety. In particular, we
are required to adhere to applicable fire safety requirement for our warehouses. We may incur
ongoing compliance costs and incur additional compliance costs for changes in these laws and
regulations. Failure to comply with any existing and future environmental protection, health
and safety-related laws and regulations could subject us to liabilities, such as monetary
damages and fines. Our cost of complying with relevant current and future regulations, and
liabilities which may potentially arise, or any non-compliance thereof, could have a material
and adverse impact on our business, results of operations and financial condition.
Furthermore, with the increasing awareness on environmental protection, there has been
an increasing public scrutiny in reducing the use of plastics and other non-recyclable materials
in various industries. In response, we may need to devote substantial resources in developing
or identifying alternative raw materials, and our research or development expenses or costs of
our raw materials may increase, which in turn could have a material and adverse impact on our
business, results of operations and financial condition. On the other hand, failure to respond to
the increasing awareness on environmental protection and public scrutiny on the raw materials
we use may damage our brand perception. This may result in our brands and products being
less appealing to consumers, which in turn could have a material and adverse impact on our
future prospects, business, results of operations and financial condition. Any environmental
protection, health and safety issues at our partner factories may also damage our reputation in
addition to disruption of production activities as discussed in “— The use of third-party partner
factories to produce products presents risks to our business.”
We face risks in relation to inability to obtain and maintain the approvals, licenses and
permits required for our operations.
We are required to maintain various approvals, licenses and permits in order to operate
our business. These approvals, licenses and permits are granted upon satisfactory compliance
with, among other things, the applicable laws and regulations. Also, they may be valid only for
a fixed period of time and subject to renewal and accreditation.
We may experience difficulties, delays, or failures in obtaining the necessary approvals,
licenses and permits for our businesses. In addition, there can be no assurance that we will be
able to obtain or renew all of the approvals, licenses and permits required for our existing
business operations in a timely manner, or at all. If we fail to obtain and/or maintain required
approvals, licenses, or permits, our ongoing business could be interrupted, and our expansion
plan may be delayed.
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Complying with government regulations may require substantial expenses, and any
non-compliance may expose us to liability. In case of any non-compliance, we may have to
incur significant expenses, and divert substantial management time and resources to resolving
any deficiencies. We may also experience negative publicity arising from such deficiencies,
which could have a material and adverse impact on our business, results of operations and
financial condition.
Our information systems may experience system failures, interruptions or security
breaches.
Our business operations rely on our information systems for various functions. These
systems are critical for maintaining operational efficiency, data accuracy and timely decision-
making. However, our information systems are subject to various risks, including system
failures, cyber-attacks, data breaches and other security incidents. Any such event could disrupt
our operations, compromise our data, and result in significant remediation costs, legal
liabilities and reputational damage. Furthermore, our information systems need to be regularly
updated and upgraded to keep pace with technological advancements and changing business
needs. These updates and upgrades require significant investment and may cause system
disruptions or compatibility issues.
We also engage certain third-party service providers for the development, upgrade and
maintenance of certain information systems. Any failure of these third-party service providers
to meet their service obligations could affect the performance of our information systems.
Furthermore, any breach of contract or termination of services by these third-party service
providers could result in disruptions to the operation of our information systems and we may
incur additional costs and experience delays to find alternative service providers.
We had net current liabilities, net liabilities and negative operating cash flow in the past,
which we may continue to experience in the future.
We had net current liabilities of RMB74.3 million and RMB48.6 million as of December
31, 2022 and 2023, respectively. Moreover, we had net liabilities of RMB958.6 million,
RMB1,377.1 million, RMB1,608.3 million and RMB1,492.5 million as of December 31, 2021,
2022 and 2023 and the six months ended June 30, 2024, respectively. We had net operating cash
outflow of RMB293.3 million and RMB168.7 million in 2021 and 2022, respectively. As of
June 30, 2024, we had net current assets of RMB43.9 million, and we had a net operating cash
inflow of RMB284.9 million and RMB508.0 million in 2023 and the six months ended June 30,
2024, respectively. However, we cannot assure you that we will not experience liquidity
problems in the future. If we fail to maintain sufficient cash and financing, we may not have
adequate cash flows to fund our business, operations and capital expenditures, which could
have a material and adverse impact on our business, results of operations and financial
condition.
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Our deferred tax assets may not be recovered.
Our deferred tax assets may not be recovered. As of June 30, 2024, our deferred tax assets
amounted to RMB160.9 million, representing approximately 14.3% of our total assets. We
periodically assess the probability of the realization of deferred tax assets, using accounting
judgments and estimates with respect to, among other things, historical operating results,
expectations of future earnings and tax planning. In particular, these deferred tax assets can
only be recognized to the extent that it is probable that future taxable profits will be available,
against which the deferred tax assets can be utilized. However, we cannot assure you that our
expectation of future earnings will materialize, due to factors discussed in this section, some
of which beyond our control. In such case, we may not be able to recover our deferred tax
assets, which in turn could have a material and adverse impact on our results of operations and
financial condition.
We may not be able to honor our obligations in respect of our contract liabilities.
Our contract liabilities, which represent (i) advances received from our customers, (ii)
sales rebates granted to our distributors for satisfaction of sales target as set out in the
distribution agreements, and (iii) customer loyalty program credits granted to our registered
members which could be used to offset future purchase price of our products subject to certain
terms and conditions, amounted to RMB29.6 million, RMB30.6 million, RMB66.3 million and
RMB84.1 million as of December 31, 2021, 2022, 2023 and June 30, 2024. See “Financial
Information — Selected Balance Sheet Items — Contract Liabilities.” There is no assurance
that we will be able to fulfill our obligations in respect of contract liabilities as the fulfillment
of our performance obligations is subject to various factors discussed in this section, some of
which are beyond our control. If we are not able to fulfill our obligations with respect to our
contract liabilities, the amount of contract liabilities will not be recognized as revenue or may
result in additional payment obligations for us. Any failure to fulfill our obligations with
respect to our contract liabilities may have a material and adverse impact on our results of
operations and financial condition.
Any failure to make adequate contributions to various employee benefit plans as required
by PRC regulations can result in penalties.
Companies operating in the PRC are required to participate in various employee benefit
plans, including pension insurance, unemployment insurance, medical insurance, work-related
injury insurance, maternity insurance and housing provident fund and contribute to the
amounts equal to certain percentage of salaries, including bonuses and allowances, of their
employees up to a maximum amount specified by the local government from time to time at
locations where they operate their business.
As advised by our PRC Legal Advisor, we were in compliance with applicable laws and
regulations related to social insurance and housing provident funds in material aspects during
the Track Record Period. However, we cannot assure you that any existing and new laws and
regulations will not require us to pay any additional amount, which in turn could have a
material and adverse impact on our results of operations and financial condition.
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Failure to register our lease agreements can result in penalties.
We currently lease several premises in China. Under the PRC laws and regulations, lease
agreements in general are required to be registered with the local land and real estate
administration bureau. The lease agreements for some of our leased properties in China have
not been registered with the relevant PRC government authorities. Although failure to do so
does not in itself invalidate the leases, we may be subject to fines if we fail to rectify such
non-compliance within the prescribed time frame after receiving notice from the relevant PRC
government authorities. The penalty ranges from RMB1,000 to RMB10,000 for each
unregistered lease, at the discretion of the relevant authority. As of the Latest Practicable Date,
we had not registered two lease agreements. If we receive notice from the relevant PRC
government authorities requiring us to complete the registration within the prescribed time
frame and if we fail to do so, the maximum aggregate amount of potential administrative
penalties we would be subject to is RMB20,000. In the event that any fine is imposed on us
for our failure to register our lease agreements, we may not be able to recover such losses from
the lessors.
Our insurance coverage may be insufficient to cover all of our potential losses.
We maintain insurance coverage over our daily operations. We cannot assure you that our
insurance will provide adequate coverage for all the risks in connection with our business
operations. If we were to incur substantial losses and liabilities that are not covered by our
insurance policies, we may be required to bear our losses to the extent that our insurance
coverage is insufficient. As a result, we could suffer significant costs and diversion of our
resources, which could have a material and adverse impact on our business, results of
operations and financial condition.
We may fail to comply with the laws and regulations relating to cybersecurity and data
privacy and protection may subject us to legal or administrative proceedings.
We have access to and collect transactional information from certain consumers through
online channels. Accordingly, our business operations are subject to various cybersecurity and
data privacy and protection laws, such as the Revised Cybersecurity Review Measures ( ၣ
‘), Administration Regulations on Cyber Data Security ( ၣഖᅰኽτΌ၍ଣ
ૢԷ‘) (the “ Data Security Regulations ”), the Data Security Law of the PRC ( ʕശɛ͏
‘) (the “ Data Security Law ”), the Provisions on Promoting and Regulating
Cross-Border Data Flow (‘), Provisions for the cyber
protection of children’s personal information (‘) and the
Personal Information Protection Law (‘). See “Regulatory Overview —
Regulations on Online Business and Data Compliance — Regulations on Cybersecurity and
Data Privacy and Protection.” There might be changes from time to time regarding the
interpretation and application of the laws and regulations regarding cybersecurity and data
privacy and protection as they are generally complex and evolving. In addition, we may be
subject to additional regulatory requirements regarding cybersecurity and data privacy and
protection, which may necessitate adjustments to our data framework and incur additional
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costs. Any failure or perceived failure of us to comply with cybersecurity and data privacy and
protection laws, or other concerns about our practices or policies with respect to the collection,
use, storage, retention, transfer, disclosure and other processing of data and cybersecurity,
could subject us to potential liabilities and reputational damage. In addition, the regulatory
regime for cybersecurity and data privacy and protection is complex and constantly evolving,
which could increase our compliance costs and operational complexity. Any failure to closely
monitor the relevant regulatory development could subject us to potential liabilities, and have
a material and adverse impact on our business, results of operations and financial condition.
On December 28, 2021, the Cyberspace Administration of China (the “ CAC”), together
with other relevant administrative departments, jointly promulgated the Revised Cybersecurity
Review Measures with effect from February 15, 2022, according to which an online platform
operator who possesses personal information of over one million users and intends for listing
in a foreign country must be subject to the cybersecurity review. In the meantime, the Revised
Cybersecurity Review Measures grant the governmental authorities the discretion to initiate a
cybersecurity review on any data processing activity if they deem such activity affects or may
affect national security. On September 24, 2024, the State Council promulgated the Data
Security Regulations, which reiterate that the data processors which may possibly affect
national security shall apply for cybersecurity review. As of the Latest Practicable Date, we
have not received any notice from the CAC of a cybersecurity review on us under the Revised
Cybersecurity Review Measures. Based on the phone consultation on April 1, 2024 with the
China Cybersecurity Review, Certification and Market Regulation Big Data Center ( ၣഖτΌ
Ⴉᗇձ̹ఙ္၍ɽᅰኽʕː), our PRC Legal Advisor is of the view that we are not
required to file an application for cybersecurity review under the Revised Cybersecurity
Review Measures. However, given the fact that we process personal data information of more
than one million users, we cannot rule out the possibility that we will trigger the cybersecurity
review in the future. If we are subject to cybersecurity review, we may incur significant costs
and face challenges, both in the review process and in making enhancements to our
cybersecurity measures that may be required.
PRC regulatory authorities have also enhanced the supervision and regulation of
cross-border data transmission. The Data Security Law which took effect in September 2021
prohibits entities and individuals in China from providing any foreign judicial or law
enforcement authority with any data stored in China without approval from competent PRC
authority, and sets forth the legal liabilities of entities and individuals found to be in violation
of their data protection obligations, including rectification order, warning, fines, suspension of
relevant business, and revocation of business permits or licenses. Moreover, the Provisions on
Promoting and Regulating Cross-Border Data Flow and the Guidelines for Application for
Security Assessment of Outbound Data Transfer (Second Edition) promulgated by the CAC
came into effect on March 22, 2024. According to the provisions and the guidelines, data
processors are subject to security assessments conducted by the CAC prior to any cross-border
transfers of important data and personal information, if falling under any of the following
circumstances: (i) where the critical information infrastructure operator intends to provide
important data or personal information overseas; (ii) where the data processor other than
critical information infrastructure operators intends to provide important data overseas; (iii)
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where the data processor other than critical information infrastructure operators, who has
provided personal information (excluding sensitive personal information) of at least one
million individuals or sensitive personal information of at least 10,000 individuals to overseas
recipients accumulatively since January 1 of any given calendar year, intends to provide
personal information overseas; and (iv) other circumstances where the security assessment of
cross-border data transfer is required as prescribed by the CAC. See “Regulatory Overview —
Regulations on Online Business and Data Compliance — Regulations on Cybersecurity and
Data Privacy and Protection.” We have implemented control procedures to comply with the
new requirements. Complying with PRC laws and regulations relating to cross-border data
transmission increases our compliance costs and could affect our ability to transfer data across
borders. As of the Latest Practicable Date, we have not been subject to the security assessments
conducted by the CAC. Our PRC Legal Advisor is of the view that we are not subject to the
security assessments based on the fact that we are not involved in any cross-border transfers
of important data and personal information which may fall under the aforementioned
circumstances.
We face risks associated with the misconduct of our employees, business partners and
their employees and other related individuals.
Our business operations and reputation are significantly influenced by the conduct of our
employees, business partners, their employees and other related individuals. Despite our efforts
to implement stringent oversight mechanisms and ethical guidelines, it may not always be
possible to prevent or detect misconduct by these individuals. The misconduct by these parties,
including fraudulent activities, non-compliance with laws and regulations, unethical business
practices or any other actions that are inconsistent with our corporate policies and values, may
subject us to potential liabilities and damage our reputation, leading to loss of consumers,
decreased market share and potential difficulties in attracting and retaining business partners.
Our business depends on the continuing efforts of our key personnel performing vital
functions.
Our business operations depend on the continuing efforts of our management, particularly
the members of our senior management team. If one or more members of our management are
unable or unwilling to continue their employment with us, we may not be able to replace them
in a timely manner, or at all. We may incur additional expenses to recruit and retain qualified
replacements. In addition, members of our management may join a competitor or form a
competing company. There can be no assurance that we will be able to successfully enforce our
contractual rights included in employment agreements with our management. As a result, our
business may suffer the loss of services of one or more members of our management, which
in turn could have a material and adverse impact on our future prospects, business, results of
operations and financial condition.
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We may from time to time become a party to litigation, other legal and contractual
disputes, claims and administrative proceedings.
We may from time to time be subject to various litigation, legal or contractual disputes,
claims, or administrative proceedings in the ordinary course of our business, including, but not
limited to, various disputes with or claims from our consumers, suppliers, customers, business
partners and other third parties. Ongoing or threatened litigation, legal or contractual disputes,
claims or administrative proceedings may divert our management’s attention and other
resources. Furthermore, any litigation, legal or contractual disputes, claims or administrative
proceedings which are initially not of material importance may escalate and become important
to us, due to a variety of factors such as the subject matter of the disputes, the likelihood of
loss, the monetary amount at stake and the parties involved. If any adverse verdict, judgment
or award is rendered against us or if we settle with any third parties, we may be required to
pay significant monetary damages or assume other liabilities. In addition, negative publicity
arising from litigation, legal or contractual disputes, claims or administrative proceedings may
damage our reputation and have a material and adverse impact on our business, results of
operations and financial condition.
We may make acquisitions, establish joint ventures and conduct other strategic
investments, which may not be successful.
To further expand our business and strengthen our market-leading position, we may form
strategic cooperation or make strategic investments and acquisitions to fuel business growth.
Acquisitions involve numerous risks, including difficulties in integrating the operations and
personnel of the acquired companies, distraction of management from overseeing our existing
operations, difficulties in executing new business initiatives, entering markets or lines of
business in which we have no or limited direct prior experience, the possible loss of key
employees and customers and difficulties in achieving the synergies we anticipated or levels
of revenue, profitability, productivity or other benefits we expected. These transactions may
also cause us to (i) significantly increase our interest expense, leverage and debt service
requirements if we incur additional debt to pay for an acquisition or investment, (ii) issue
Shares that would dilute our current Shareholders’ percentage ownership, or (iii) incur asset
write-offs and restructuring costs and other related expenses. Acquisitions, joint ventures and
strategic investments involve numerous other risks, including potential exposure to unknown
liabilities of acquired or investee companies and restrictions under regulations relating to
anti-monopoly. There can be no assurance that our acquisitions, joint ventures and other
strategic investments will be successful and will not have a material and adverse impact on our
business, results of operations and financial condition.
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We are subject to the risks associated with force majeure events, natural disasters, public
health incidents, acts of war, terrorism, or other factors beyond our control.
Force majeure events, natural disasters, public health incidents, acts of war, terrorism, or
other factors beyond our control could adversely affect the economies, infrastructure and lives
of people in the regions in which we operate. Our operations may be subject to the threat of
floods, earthquakes, dust storms, snowstorms, fires or droughts, power, water or fuel shortages,
malfunctions, breakdowns and failures of information systems, unexpected maintenance or
technical problems, or be vulnerable to potential war or terrorist attacks. Severe natural
disasters could result in loss of life, injury, destruction of assets and disruption to our business
and operations. Acts of war or terrorism could also injure our employees, cause loss of life,
disrupt our business operations and impair our markets. Any of these factors, as well as other
factors beyond our control, could materially and adversely affect the overall business sentiment
and environment, lead to uncertainty in the regions in which we operate, cause our business to
suffer losses that we cannot predict and have a material and adverse impact on our business,
results of operations and financial condition.
We have awarded and may continue to award equity instruments under equity incentive
plans, which may cause shareholding dilution to our Shareholders and result in increased
share-based compensations.
We adopted the Share Incentive Scheme on January 12, 2023, which was amended and
restated on March 29, 2024. The Share Incentive Scheme was mirroring and the continuation
of the then share incentive scheme adopted on December 4, 2020 by Bloks Technology, our
main operating entity in the PRC. See “Appendix IV — Statutory and General Information —
E. The Share Incentive Scheme.” In 2021, 2022, 2023 and the six months ended June 30, 2023
and 2024 we recorded share-based compensations of RMB6.9 million, RMB6.3 million,
RMB6.2 million, RMB3.1 million and RMB374.7 million, respectively. To further incentivize
our employees, we may adopt other equity incentive plans and award additional equity
incentives in the future. Issuance of Shares with respect to our equity incentive plan may dilute
the shareholding of our existing Shareholders and incur substantial share-based compensations
that could have a material and adverse impact on our results of operations.
Fluctuations in exchange rates may adversely affect our results of operations.
The value of RMB against the Hong Kong dollar, the U.S. dollar and other currencies
fluctuates, is subject to changes resulting from the PRC government’s policies and depends to
a large extent on domestic and international economic and political developments as well as
supply and demand in the local market. It is difficult to predict how market forces or
government policies may impact the exchange rate between the RMB and the Hong Kong
dollar, the U.S. dollar or other currencies in the future.
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The proceeds from the Global Offering will be received in Hong Kong dollars and we
expect a substantial portion of which to be spent in RMB. As a result, any appreciation of the
RMB against the Hong Kong dollar may result in the decrease in the value of our proceeds
from the Global Offering. Conversely, any depreciation of the RMB against the Hong Kong
dollars may adversely affect the value of, and any dividends payable on, the Shares in foreign
currency. In addition, there are limited instruments available for us to reduce our foreign
currency risk exposure at reasonable costs. All of these factors could have a material and
adverse impact on our business, results of operations and financial condition.
RISKS RELATING TO DOING BUSINESS IN CHINA
Changes in economic, political and social conditions could have a material and adverse
impact on our future prospects, business, results of operations and financial condition.
Substantially all of our revenue is derived from our businesses in the PRC during the
Track Record Period. Accordingly, our future prospects, business, results of operations, and
financial condition are, to a material extent, subject to economic, political and legal
developments in the PRC. If the macroeconomic condition in China experiences significant
adverse changes, demand for our products and our ability to maintain our operations may
suffer, which could consequently lead to a material and adverse impact on our business, results
of operations and financial condition. Moreover, if foreign governments implement laws or
regulations restricting investment in Chinese entities and we are deemed to be subject to such
restrictions, the investment and transactions in our Shares, our business prospects, results of
operations, financial conditions and future capital raising may be adversely affected.
China’s economy has experienced significant growth over the past decades since the
implementation of reform and opening-up policy. In recent years, the PRC government has
implemented measures emphasizing the utilization of market forces in economic reform and
the establishment of sound corporate governance practices in business enterprises. These
economic reform measures may be adaptively adjusted from industry to industry or across
different regions of the country. Changes in China’s business environment could have a
material and adverse impact on our business, results of operations and financial condition.
Y ou may have difficulties in effecting service of legal process or enforcing foreign
judgments against us, our Directors and our senior management.
Most of our assets are located in the PRC. In addition, most of our Directors and senior
management reside in the PRC. The assets of these Directors and executive officers are also
mostly located within the PRC. As a result, it may be difficult and time-consuming to effect
service of process upon those persons residing in the PRC or to enforce against us or them in
the PRC any judgments obtained from non-PRC courts. The PRC does not have treaties
providing for the reciprocal recognition and enforcement of judgments of courts of certain
other jurisdictions. As a result, recognition and enforcement in the PRC of judgments of a court
in any of these jurisdictions outside the PRC may be difficult.
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On July 14, 2006, the Supreme People’s Court of the PRC and the Government of
the Hong Kong Special Administrative Region of the PRC signed an Arrangement on
Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters ( ௰
΁к
τર‘) (the “ Arrangement ”). Under the Arrangement, a party with an enforceable final
court judgment rendered by any designated People’s Court of mainland China or any
designated Hong Kong Court requiring payment of money in a civil and commercial case
according to a written choice of court agreement, may apply for recognition and enforcement
of the judgment in the relevant People’s Court of mainland China or Hong Kong Court. A
written choice of court agreement is defined as any agreement in writing entered into between
parties after the effective date of the Arrangement in which a court of mainland China or a
Hong Kong court is expressly designated as the court having sole jurisdiction for the dispute.
Therefore, it may not be possible to enforce a judgment rendered by a Hong Kong court in
mainland China if the parties in the dispute did not agree to enter into a choice of court
agreement in writing. As a result, it may be difficult or impossible for you to effect service of
process against us in order to seek recognition and enforcement of foreign judgments in
mainland China.
On January 18, 2019, the Supreme People’s Court of the PRC and the Government of
Hong Kong Special Administrative Region of the PRC entered into an agreement regarding the
scope of judgments which may be enforced between mainland China and Hong Kong
(τર‘) (the “ New
Arrangement ”). The New Arrangement broadens the scope of judgments that may be enforced
between mainland China and Hong Kong under the Arrangement. Whereas a choice of
jurisdiction needs to be agreed in writing in the form of an agreement between the parties for
the selected jurisdiction to have exclusive jurisdiction over a matter under the Arrangement, the
New Arrangement provides that the court where the judgment was sought could apply
jurisdiction in accordance with the certain rules without the parties’ agreement. The New
Arrangement became effective on January 29, 2024, both in mainland China and in Hong Kong
and replaced the Arrangement. Under the New Arrangement, any party concerned may apply
to the relevant court of mainland China or Hong Kong for recognition and enforcement of the
effective judgments in civil and commercial cases subject to the conditions set forth in the New
Arrangement. Although the New Arrangement has become effective, the outcome and
effectiveness of any action brought under the New Arrangement may still be uncertain. We
cannot assure you that an effective judgment that complies with the New Arrangement can be
recognized and enforced in a mainland China court.
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If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes,
such classification could result in unfavorable tax consequences to us and our non-PRC
Shareholders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise
established outside the PRC with its “de facto management body” within the PRC is considered
a “resident enterprise” and will be subject to the enterprise income tax on its global income at
the rate of 25%. The implementation rules define the term “de facto management body” as the
body that exercises full and substantial control and overall management over the business,
productions, personnel, accounts and properties of an enterprise. The SA T issued the Notice
Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as
People’s Republic of China Tax Resident Enterprises on the Basis of De Facto Management
Bodies (ஷ
‘)( “ SAT Circular 82 ”) on April 22, 2009, and most recently amended on December 29,
2017. SA T Circular 82 provides certain specific criteria for determining whether the “de facto
management body” of an offshore incorporated enterprise controlled by a PRC enterprise or a
PRC enterprise group is located in China. Although this circular only applies to offshore
enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by
PRC individuals or foreigners, the criteria set forth in the circular may reflect the SA T’s
general position on how the “de facto management body” text should be applied in determining
the tax resident status of all offshore enterprises. According to SA T Circular 82, an offshore
incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be
regarded as a PRC tax resident by virtue of having its “de facto management body” in China,
and will be subject to PRC enterprise income tax on its global income only if all of the
following conditions are met (i) the primary location of the day-to-day operational
management is in the PRC; (ii) decisions relating to the enterprise’s financial and human
resource matters are made or are subject to approval by organizations or personnel in the PRC;
(iii) the enterprise’s primary assets, accounting books, and records, company seals, and board
and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of
voting board members or senior executives habitually reside in the PRC.
We believe our Company is not a PRC resident enterprise for PRC tax purposes. However,
the tax resident status of an enterprise is subject to determination by the PRC tax authorities
and uncertainties remain with respect to the interpretation of the term “de facto management
body.” If the PRC tax authorities determine that our Company or any of our offshore
subsidiaries is a PRC resident enterprise for enterprise income tax purposes, our Company or
the relevant offshore subsidiaries will be subject to PRC enterprise income on its worldwide
income at the rate of 25%. Furthermore, if we are treated as a PRC tax resident enterprise, we
will be required to withhold a 10% tax from dividends we pay to our Shareholders that are
non-resident enterprises. In addition, non-resident enterprise Shareholders may be subject to
PRC tax at a rate of 10% on gains realized on the sale or other disposition of Shares, if such
gain is treated as derived from a PRC source. Furthermore, if we are deemed to be a PRC
resident enterprise, dividends paid to our non-PRC individual Shareholders and any gain
realized on the transfer of Shares by such Shareholders may be subject to PRC tax at a rate of
20% (which, in the case of dividends, may be withheld at source by us). These rates may be
RISK FACTORS
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reduced by an applicable tax treaty, but it is unclear whether our non-PRC Shareholders would,
in practice, be able to obtain the benefits of any tax treaties between their country of tax
residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such
tax may reduce the returns on your investment in our Shares.
We may be subject to additional regulatory requirements under new laws and regulations
on overseas offerings and listings issued by PRC government authorities.
On July 6, 2021, the relevant PRC government authorities issued the Opinions on Strictly
Cracking Down Illegal Securities Activities in Accordance with the Law (੽ᘌ͂Ꮨ
จԈ‘). These opinions emphasized the need to strengthen the administration
over illegal securities activities and the supervision on overseas listings by China-based
companies and proposed to take effective measures, such as promoting the construction of
relevant regulatory systems to deal with the risks and incidents faced by China-based
overseas-listed companies.
On February 24, 2023, the CSRC, the MOF, the National Administration of State Secrets
Protection of China, and the National Archives Administration of China published the
Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies (̋੶ྤʫΆุྤ̮೯БᗇՎձ
‘) (the “ Archives Rules ”), which came into effect on
March 31, 2023. The Archives Rules require that, in relation to the overseas securities offering
and listing activities of domestic enterprises, either in direct or indirect form, such domestic
enterprises, as well as securities companies and securities service institutions providing
relevant securities services, are required to strictly comply with relevant requirements on
confidentiality and archives management, establish a sound confidentiality and archives
system, and take necessary measures to implement their confidentiality and archives
management responsibilities.
Given that the Archive Rules were recently promulgated, their interpretation, application
and enforcement are still evolving and subject to change. Failure to comply with them could
have a material and adverse impact on our business, results of operation and financial
condition.
We may be subject to the approval, filing, or other requirements of the CSRC or other
PRC governmental authorities in connection with future capital raising activities or
business expansion.
We cannot assure you that any new rules or regulations promulgated in the future will not
impose additional requirements or restrictions on us or our financing activities. Our business
expansions may be subject to foreign investment restrictions and require regulatory approval
or other procedures. If it is determined in the future that approval from or filing with the CSRC
or other regulatory authorities or other procedures are required, we may fail to obtain such
approval, perform such filing procedures or meet such other requirements in a timely manner
or at all. We may face sanctions by the CSRC or other PRC regulatory authorities for failure
RISK FACTORS
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to seek CSRC approval or other government authorization, or perform filing procedures, for
this Global Offering, our future financing activities or business expansion, and these regulatory
authorities may impose fines and penalties on us, limit our operating activities in the PRC,
limit our ability to pay dividends outside the PRC, delay or restrict the repatriation of the
proceeds from the Global Offering into the PRC or take other actions to restrict our financing
activities or business expansion, which could have a material and adverse impact on our future
prospects, business, results of operations and financial condition.
We are subject to the currency exchange regulatory system.
Substantially all of our revenue is derived from our business in the PRC in Renminbi. The
Renminbi is currently convertible under the “current account,” which includes dividends, trade
and service-related foreign exchange transactions, but requires approval from or registration
with appropriate government authorities or designated banks under the “capital account,”
which includes foreign direct investment and loans. Currently, our PRC subsidiaries, that are
foreign invested enterprises, may purchase foreign currency for settlement of “current account
transactions,” including payment of dividends to us, without the approval of SAFE by
complying with certain procedural requirements. However, the relevant PRC governmental
authorities may limit or eliminate our ability to purchase foreign currencies in the future for
current account transactions.
Any insufficiency of foreign exchange may restrict our ability to pay dividends to our
Shareholders or to satisfy any other foreign exchange requirements, capitalize our capital
expenditure plans, and could ultimately have a material and adverse impact on our future
prospects, business, results of operations and financial condition.
Our operations are subject to PRC tax laws and regulations.
We are subject to periodic examinations on fulfillment of our tax obligation under the
PRC tax laws and regulations by PRC tax authorities. The PRC tax laws and regulations might
be subject to interpretations and adjustments by relevant authorities from time to time.
Although we believe that in the past, we have acted in compliance with the requirements under
the relevant PRC tax laws and regulations in all material aspects and established effective
internal control measures in relation to accounting regularities, we cannot assure you that
future examinations by PRC tax authorities would not result in fines, other penalties or actions
that could have a material and adverse impact on our future prospects, business, results of
operations and financial condition.
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PRC regulations establish related procedures for some acquisitions of Chinese companies
by foreign investors, which could make it complicated for us to pursue growth through
acquisitions in China.
Among other things, the Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (‘) (the “ M&A
Rules ”), adopted by six PRC regulatory agencies in 2006 and amended in 2009, established
specific procedures and requirements for merger and acquisition activities by foreign investors.
Such regulation requires, among other things, that MOFCOM be notified in advance of any
change of control transaction in which a foreign investor takes control of a PRC domestic
enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that
have or may have impact on the national economic security, or (iii) such transaction will lead
to a change in control of a domestic enterprise which holds a famous trademark or PRC
time-honored brand. Moreover, the Anti-Monopoly Law (‘)
promulgated by the Standing Committee of the NPC which became effective in 2008 and
subsequently amended in 2022 requires that transactions which are deemed concentrations and
involve parties with specified turnover thresholds must be cleared by the relevant anti-
monopoly authority before they can be completed. We may pursue potential strategic
acquisitions that are complementary to our business and operations. Complying with the
requirements of these regulations to complete such transactions could be costly, and any
required approval processes, including obtaining approval or clearance from the competent
governmental authority, may delay or inhibit our ability to complete such transactions, which
could affect our ability to expand our business or maintain our market share.
Any failure to comply with relevant regulations regarding the registration requirements
for employee stock incentive plans may subject our plan participants or us to fines and
other legal or administrative sanctions when we adopt equity incentive plans in the future.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign
Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly Listed Company (ᛆዧ
‘), replacing earlier rules promulgated in 2007. Pursuant to
these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of
not less than one year who participate in any stock incentive plan of an overseas publicly listed
company, subject to a few exceptions, are required to register with SAFE through a domestic
qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and
complete certain other procedures. In addition, an overseas-entrusted institution must be
retained to handle matters in connection with the exercise or sale of stock options and the
purchase or sale of shares and interests. We and our executive officers and other employees (i)
who are PRC citizens or who reside in the PRC for a continuous period of not less than one
year, and (ii) who have been or will be granted incentive shares or options, are or will be
subject to these regulations. Failure to complete the SAFE registrations may subject us and
them to fines and legal sanctions, and there may be additional restrictions on their ability to
exercise their stock options or remit proceeds gained from the sale of their stock into the PRC.
RISK FACTORS
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We also face regulatory uncertainties that could restrict our ability to adopt additional equity
incentive plans for our Directors, executive officers and employees. See “Regulatory Overview
— Regulations on Foreign Investment — Regulations on Foreign Exchange.”
The indirect transfers of equity interests in PRC resident enterprises through transfers
made by our Shareholders or our non-PRC holding companies are subject to
uncertainties.
On February 3, 2015, the SA T issued the Public Notice Regarding Certain Corporate
Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises ( ᗫ
ʮѓ‘)( “ SAT Circular 7 ”), which came
into effect on February 3, 2015. SA T Circular 7 provides comprehensive guidelines relating to,
and heightens the Chinese tax authorities’ scrutiny on, indirect transfers by a non-resident
enterprise of assets (including equity interests) of a PRC resident enterprise (the “PRC Taxable
Assets”). For example, when a non-resident enterprise transfers equity interests in an overseas
holding company that directly or indirectly holds certain PRC Taxable Assets and if the transfer
is deemed by the Chinese tax authorities to have no reasonable commercial purpose other than
to evade enterprise income tax, SA T Circular 7 allows the Chinese tax authorities to reclassify
this indirect transfer of PRC Taxable Assets into a direct transfer and impose on the
non-resident enterprise a 10% rate of PRC enterprise income tax. SA T Circular 7 exempts this
tax, for a number of grounds, including: (i) where a non-resident enterprise derives income
from an indirect transfer of PRC Taxable Assets by acquiring and selling shares of a listed
overseas holding company in the public market, and (ii) where a non-resident enterprise
transfers PRC Taxable Assets that it directly holds and an applicable tax treaty or arrangement
exempts this transfer from PRC enterprise income tax. It remains unclear whether any
exemptions under SA T Circular 7 will be applicable to transfers of our Shares by our
Shareholders. If the Chinese tax authorities impose PRC enterprise income taxes on these
activities, the value of your investment in our Shares may be adversely affected.
On October 17, 2017, the SA T issued the Announcement of the State Administration of
Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at
Source (ʮѓ‘)( “ SAT Circular 37 ”), which
came into effect on December 1, 2017. SA T Circular 37 further clarifies the practice and
procedure of the withholding of non-resident enterprise income tax.
We face uncertainties as to the reporting and other implications of future transactions
where PRC Taxable Assets are involved, such as offshore restructuring, sale of the shares in
our offshore subsidiaries and investments. As a result, we may be required to expend valuable
resources to comply with SA T Circular 7 and/or SA T Circular 37 or to request the relevant
transferors from whom we purchase taxable assets to comply with these circulars, or to
establish that we should not be taxed under these circulars, which could have a material and
adverse impact on our business, results of operations and financial condition.
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We are subject to PRC regulation of loans to and direct investment in PRC entities by
offshore holding companies and governmental regulations of currency conversion when
we use the proceeds of this Global Offering to make loans or additional capital
contributions to our PRC subsidiaries.
We are an offshore holding company conducting our operations in China through our PRC
subsidiaries. If we are to make available any of our offshore funds to our PRC subsidiaries, we
may (i) make loans to our PRC subsidiaries, subject to the approval from governmental
authorities and limitation of amount, or (ii) make additional capital contributions to our PRC
subsidiaries in China. Any loans to our PRC subsidiaries, which are treated as foreign-invested
enterprises under PRC law, are subject to PRC regulations and foreign exchange loan
registrations. For example, loans by us to our PRC subsidiaries to finance their activities
cannot exceed statutory limits and must be registered with the local counterpart of SAFE. In
addition, a foreign invested enterprise shall use its capital pursuant to the principle of
authenticity and self-use within its business scope. The capital of a foreign invested enterprise
shall not be used for the following purposes (i) directly or indirectly used for payment beyond
the business scope of the enterprises or the payment prohibited by relevant laws and
regulations; (ii) directly or indirectly used for investment in securities investments other than
banks’ principal-protected products unless otherwise permitted by relevant laws and
regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly
permitted in the business license; and (iv) paying the expenses related to the purchase of real
estate that is not for self-use (except for the foreign-invested real estate enterprises).
In light of the various requirements imposed by PRC regulations on loans to and direct
investment in PRC entities by offshore holding companies, we cannot assure you that we will
be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or
future capital contributions by us to our wholly foreign-owned subsidiaries in China. As a
result, uncertainties exist as to our ability to provide prompt financial support to our PRC
subsidiaries when needed, including making the proceeds available to our PRC subsidiaries in
accordance with our intended usage disclosed in “Future Plans and Use of Proceeds.” If we fail
to complete such registrations or obtain such approvals, our ability to use the proceeds we
expect to receive from this Global Offering and to capitalize or otherwise fund our PRC
operations may be negatively affected, which could materially and adversely affect our
liquidity and our ability to fund and expand our business.
We principally rely on dividends and other distributions on equity paid by our PRC
subsidiaries to fund any cash and financing requirements we may have.
We are a Cayman Islands holding company and we rely principally on dividends and other
distributions on equity from our PRC subsidiaries for our cash requirements, including for
services of any debt we may incur.
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Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable
earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their
respective shareholders only out of their accumulated profits, if any, determined in accordance
with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is
required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory
reserve until such reserve reaches 50% of each of their registered capitals. These reserves are
not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in
the future, the instruments governing the debt may restrict their ability to pay dividends or
make other payments to us. Separately, in recent years, the PBOC and SAFE have implemented
a series of capital control measures, including stricter vetting procedures for PRC-based
companies to remit foreign currency for dividend payments. See “— We are subject to the
currency exchange regulatory system.” Any limitation on the ability of our PRC subsidiaries
to distribute dividends or other payments to their respective shareholders could materially and
adversely limit our ability to grow, make investments or acquisitions that could be beneficial
to our businesses, pay dividends or otherwise fund and conduct our business.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a
withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies
to non-PRC-resident enterprises unless reduced under treaties or arrangements between the
PRC central government and governments of other countries or regions where the non-PRC
resident enterprises are tax resident. Pursuant to the tax agreement between mainland China
and the Hong Kong Special Administrative Region of the PRC, the withholding tax rate with
respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be
reduced to 5% from a standard rate of 10% if the Hong Kong enterprise (i) directly holds at
least 25% of the PRC enterprise, (ii) is a tax resident in Hong Kong and (iii) could be
recognized as a beneficial owner of the dividend from PRC tax perspective. Under the Notice
of the State Administration of Taxation on Certain Issues with Respect to the Enforcement of
Dividend Provisions in Tax Treaties (ٙ
‘)( “ SAT Circular 81 ”), promulgated and took effect on February 20, 2009 by the SA T,
a Hong Kong resident enterprise must meet the following conditions, among others, in order
to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own
the required percentage of equity interests and voting rights in the PRC resident enterprise; and
(iii) it must have directly owned such required percentage in the PRC resident enterprise
throughout the 12 months prior to receiving the dividends. Pursuant to the Announcement of
the SA T on Issuing the Measures for the Administration of Treaty Benefits for Nonresident
Taxpayers (೯б<ج>ʮѓ‘),
published in October 2019 and effective in January 2020, nonresident enterprises are not
required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced
withholding tax. Instead, nonresident enterprises and their withholding agents may, by
self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits
are met, directly apply the reduced withholding tax rate, and file necessary forms and
supporting documents when performing tax filings, which will be subject to post-tax filing
examinations by the relevant tax authorities. Accordingly, our Hong Kong subsidiary may be
able to benefit from the 5% withholding tax rate for the dividends it receives from our PRC
subsidiaries, if it satisfies the conditions prescribed under SA T Circular 81 and other relevant
RISK FACTORS
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tax rules and regulations. However, if the relevant tax authorities consider the transactions or
arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the
relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly,
there is no assurance that the reduced 5% will apply to dividends received by our Hong Kong
subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of
dividends we may receive from our PRC subsidiaries.
If the preferential tax treatments granted by the PRC government become unavailable,
our results of operations and financial condition may be adversely affected.
Our PRC subsidiaries are subject to the PRC corporate income tax at a standard rate of
25% on their taxable income, but one of our PRC subsidiaries was accredited as “High and
New Technology Enterprises,” and is entitled to a preferential income tax rate of 15%. We
cannot assure you that the PRC policies on preferential tax treatments will not change or that
the current preferential tax treatments we enjoy or will be entitled to enjoy will not be
canceled. Moreover, we cannot assure you that our PRC subsidiaries will be able to renew the
same preferential tax treatments upon expiration. If any such change, cancelation or
discontinuation of preferential tax treatment occurs, the relevant PRC subsidiary will be
subject to the PRC enterprise income tax, at a rate of 25% on taxable income. As a result, the
increase in our tax charge could lead to a material and adverse impact on our results of
operations and financial condition.
RISKS RELATING TO THE GLOBAL OFFERING AND OUR SHARES
There has been no prior public market for our Shares and the liquidity and market price
of our Shares may be volatile.
Prior to the completion of the Global Offering, there has been no public market for our
Shares. There can be no guarantee that an active trading market for our Shares will develop or
be sustained after the completion of the Global Offering. The Offer Price is the result of
negotiations between our Company and the Overall Coordinators (for themselves and on behalf
of the Underwriters), which may not be indicative of the price at which our Shares will be
traded following the completion of the Global Offering. The market price of our Shares may
drop below the Offer Price at any time after completion of the Global Offering.
The trading price of our Shares may be volatile, which could result in substantial losses
to you.
The trading price of our Shares may be volatile and could fluctuate widely in response to
factors beyond our control. In particular, the performance and fluctuation of the market prices
of other companies with business operations located mainly in mainland China that have listed
their securities in Hong Kong may affect the volatility in the price of and trading volumes for
our Shares. A number of mainland China-based companies have listed their securities, and
some are in the process of preparing for listing their securities, in Hong Kong. The share price
of some of these companies have experienced significant volatility, including significant price
RISK FACTORS
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declines after their initial public offerings. The trading performances of the securities of these
companies at the time of or after their offerings may affect the overall investor sentiment
toward mainland China-based companies listed in Hong Kong and consequently may impact
the trading performance of our Shares. These factors may significantly affect the market price
and volatility of our Shares, regardless of our actual operating performance.
Future sales or perceived sales of substantial amounts of our Shares in the public market
could negatively affect the price of our Shares and our ability to raise additional capital
in the future.
The market price of our Shares could decline as a result of future sales of a substantial
number of our Shares or other securities relating to our Shares in the public market, the
issuance of new shares or other securities, or the perception that such sales or issuances may
occur. Future sales, or perceived sales, of substantial amounts of our securities, including any
future offerings, could also materially and adversely affect our ability to raise capital at a
specific time and on terms favorable to us. Equity-linked securities issued by us may also
confer rights and privileges that take priority over those conferred by the Shares.
Y ou will incur immediate and substantial dilution and may experience further dilution if
we issue additional Shares in the future.
The Offer Price of the Offer Shares is higher than the net tangible asset value per Share
immediately prior to the Global Offering. Therefore, purchasers of the Offer Shares in the
Global Offering will experience an immediate dilution in pro forma consolidated net tangible
asset value. To expand our business, we may consider offering and issuing additional Shares
in the future. Purchasers of the Offer Shares may experience dilution in the net tangible asset
value per Share of their Shares if we issue additional Shares in the future at a price that is lower
than the net tangible asset value per Share at that time.
Mr. Zhu has significant influence over us and his interests may not always be aligned with
the interest of our other Shareholders.
Upon the completion of the Global Offering (assuming that the Offer Size Adjustment
Option and the Over-allotment Option are not exercised), Mr. Zhu, our chairman and executive
Director, will be interested in and control an aggregate of approximately 49.47% of our
enlarged issued share capital. Mr. Zhu will, through his voting power at the Shareholders’
meetings and his delegates or positions on the Board, have significant influence over our
business and affairs, including decisions in respect of mergers or other business combinations,
acquisition or disposition of assets, issuance of additional Shares or other equity securities,
timing and amount of dividend payments, and our management. Mr. Zhu may not act in the best
interests of our minority Shareholders. In addition, without the approval of Mr. Zhu, we could
be prevented from entering into transactions that could be beneficial to us. This concentration
of ownership may also discourage, delay or prevent a change in control of our Company, which
could deprive our Shareholders of an opportunity to receive a premium for the Shares as a part
of a sale of our Company and may significantly reduce the price of our Shares.
RISK FACTORS
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There can be no assurance that we will declare and distribute any amount of dividends in
the future.
No dividends have been paid or declared by our Company during the Track Record
Period, and there can be no assurance that we will declare and distribute any amount of
dividends in the future. The declaration, payment, and amount of any future dividends are
subject to the discretion of our Directors, after taking into account our results of operations,
financial condition, cash requirements and availability, and other factors as they may deem
relevant, and subject to the approval at a Shareholders’ meeting. We may not have sufficient
or any profits to enable us to distribute dividends to our Shareholders in the future, even if our
financial statements indicate that our operations have been profitable.
Investors may experience difficulties in enforcing Shareholder rights.
We are an exempted company incorporated in the Cayman Islands with limited liability,
and the laws of the Cayman Islands differ in some respects from those of Hong Kong or other
jurisdictions where investors may be located. The rights of our Shareholders to take legal
actions against us and/or our Directors, actions by minority Shareholders and the fiduciary
duties of our Directors to us under Cayman Islands law are to a large extent governed by the
common law of the Cayman Islands. The common law of the Cayman Islands is derived in part
from comparatively limited judicial precedents in the Cayman Islands, and from English
common law, which has persuasive but not binding authority on a court in the Cayman Islands.
The rights of our Shareholders and the fiduciary responsibilities of our Directors under the
Cayman Islands law may not be as clearly established as they would be under statutes or
judicial precedents in Hong Kong, the United States or other jurisdictions where investors may
reside. In particular, the Cayman Islands has a less developed body of securities law. As a result
of all the above, our Shareholders may have more difficulty in exercising their rights in the face
of actions taken by our executive officers, Directors or Controlling Shareholders than they
would as shareholders of a Hong Kong company, a United States company or companies
incorporated in other jurisdictions.
Certain statistics contained in this prospectus are derived from publicly available official
sources.
This prospectus, particularly the section headed “Industry Overview,” contains
information and statistics relating to the toy industry in China and internationally. Such
information and statistics have been derived from various official governments and other
publications. We believe that the sources of such information are appropriate, and we have
taken reasonable care in extracting and reproducing such information. We have no reason to
believe that such information is false or misleading in any material respect or that any fact has
been omitted that would render such information false or misleading in any material respect.
The information and statistics from official government sources have not been independently
verified by the Company, the Joint Sponsors, the Overall Coordinators, the Sponsor-OC, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters,
any of our or their respective Directors, executive officers or representatives or any other
RISK FACTORS
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person involved in the Global Offering and no representation is given as to their accuracy. Y ou
should therefore not place undue reliance on such information. In addition, we cannot assure
you that such information is stated or compiled on the same basis or with the same degree of
accuracy as or consistent with similar statistics presented elsewhere, and such information may
not be complete or up-to-date. In any event, you should consider carefully the importance
placed on such information or statistics.
Y ou should read the entire prospectus carefully and should not rely on any information
contained in press articles or other media regarding us and the Global Offering.
There may have been, prior to the publication of this prospectus, and there may be,
subsequent to the date of this prospectus but prior to the completion of the Global Offering,
press and media coverage regarding us, our business, our industry and the Global Offering.
Such press and media coverage may include references to certain information that does not
appear in this prospectus, including certain operating and financial information and
projections, valuations and other information. None of us, the Joint Sponsors, the Overall
Coordinators, the Sponsor-OC, the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Underwriters or any other person involved in the Global Offering has
authorized the disclosure of any such information in the press or media coverage, or accepts
any responsibility for any such press or media coverage or the accuracy or completeness of any
such information or publication.
Accordingly, prospective investors should not rely on any such information or publication
in making their decision whether to invest in our Shares. Prospective investors are reminded
that, in making their investment decisions as to whether to purchase our Shares, they should
rely only on the financial, operational, and other information included in this prospectus. By
applying to purchase our Shares in the Global Offering, you will be deemed to have agreed that
you will not rely on any information other than that contained in this prospectus.
RISK FACTORS
–7 7–


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In preparation of the Global Offering, the Company has sought the following waivers
from strict compliance with the relevant provisions of the Listing Rules:
MANAGEMENT PRESENCE IN HONG KONG
Rule 8.12 of the Listing Rules provides that a new applicant for listing on the Stock
Exchange must have a sufficient management presence in Hong Kong and, under normal
circumstances, at least two of the new applicant’s executive directors must be ordinarily
resident in Hong Kong.
The Company’s business operations are primarily located outside Hong Kong and most
of the Company’s assets are located outside Hong Kong. All of the executive Directors and all
members of the senior management of the Company currently reside outside Hong Kong as the
Board believes it would be more effective and efficient for its executive Directors to be based
in a location where the Company’s operations are located. As such, the Company does not and,
in the foreseeable future, will not be able to comply with the requirements of Rule 8.12 of the
Listing Rules for sufficient management presence in Hong Kong.
Accordingly, the Company has applied to the Stock Exchange for, and the Stock
Exchange has granted, a waiver from strict compliance with the requirements under Rule 8.12
of the Listing Rules, provided that the Company implements the following arrangements:
(i) the Company has appointed Mr. Sheng Xiaofeng and Mr. Zhu Y uancheng as the
authorized representatives of the Company (the “ Authorized Representatives ”) for
the purpose of Rule 3.05 of the Listing Rules. The Authorized Representatives will
serve as the Company’s principal channel of communication with the Stock
Exchange. They can be readily contactable by phone, facsimile and email to deal
promptly with enquiries from the Stock Exchange and will also be available to meet
with the Stock Exchange to discuss any matters on short notice. The contact details
of the Authorized Representatives have been provided to the Stock Exchange.
(ii) all the Directors who are not ordinarily resident in Hong Kong possess or can apply
for valid travel documents to visit Hong Kong and can meet with the Stock
Exchange within a reasonable period. In addition, each Director has provided his/her
contact details, including office phone numbers (if any), mobile phone numbers,
email addresses and fax numbers (if any), to the Authorized Representatives and to
the Stock Exchange, so that each of the Authorized Representatives and the Stock
Exchange would be able contact all the Directors (including the independent
non-executive Directors) promptly at all times if and when the Stock Exchange
wishes to contact the Directors.
(iii) the Company has appointed Gram Capital Limited as its compliance adviser for the
period commencing on the Listing Date and ending on the date on which the
Company complies with Rule 13.46 of the Listing Rules in respect of the Company’s
financial results for the first full financial year commencing after the Listing Date.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–7 8–


--- page 89 ---
The Company’s compliance adviser will act as the Company’s additional and
alternative channel of communication with the Stock Exchange, and its
representatives will be readily available to answer enquiries from the Stock
Exchange.
(iv) the Company has appointed designated staff members as the responsible
communication officers at our headquarters to oversee regular communication with
the Authorized Representatives and the Company’s professional advisors in Hong
Kong, including our legal advisors and the compliance adviser, keep abreast of any
correspondence and/or inquiries from the Stock Exchange and report to the
executive Directors, streamlining communication between the Exchange and the
Company following the Listing.
W AIVER IN RESPECT OF JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary must be an
individual who, by virtue of his or her academic or professional qualifications or relevant
experiences, is, in the opinion of the Stock Exchange, capable of discharging the functions of
the company secretary. Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock
Exchange considers the following academic or professional qualifications to be acceptable:
(i) a member of The Hong Kong Chartered Governance Institute;
(ii) a solicitor or barrister (as defined in the Legal Practitioners Ordinance); and
(iii) a certified public accountant (as defined in the Professional Accountants
Ordinance).
Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience,”
the Stock Exchange will consider the individual’s:
(i) length of employment with the issuer and other issuers and the roles he played;
(ii) familiarity with the Listing Rules and other relevant law and regulations including
the Securities and Futures Ordinance, Companies Ordinance, Companies (Winding
Up and Miscellaneous Provisions) Ordinance, and the Takeovers Code;
(iii) relevant training taken and/or to be taken in addition to the minimum requirement
under Rule 3.29 of the Listing Rules; and
(iv) professional qualifications in other jurisdictions.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–7 9–


--- page 90 ---
The Company has appointed Mr. Zhu Y uancheng ( ϡʩϓ) as one of the joint company
secretaries of the Company. Mr. Zhu Y uancheng joined the Group in December 2020. He
currently also holds the position of the Board secretary of the Company. See “Directors and
Senior Management” for further biographical details of Mr. Zhu Y uancheng. Although Mr. Zhu
Y uancheng does not possess the qualifications set out in Rule 3.28 of the Listing Rules, the
Company believes that it would be in the best interests of the Company and the corporate
governance of the Group to have Mr. Zhu Y uancheng as its joint company secretary who is
familiar with the Group’s internal operation and management and possesses professional
knowledge and experience in handling corporate governance and compliance, legal affairs and
public relationship related matters. The Company has also appointed Ms. Y u Wing Sze ( Я൘
་) to act as the other joint company secretary to assist Mr. Zhu Y uancheng in discharging the
duties of a company secretary of the Company. Ms. Y u Wing Sze is an associate member of
both The Hong Kong Chartered Governance Institute and The Chartered Governance Institute
in the United Kingdom and is therefore qualified under Rule 3.28 of the Listing Rules to act
as a joint company secretary of the Company. See “Directors and Senior Management” for
further biographical details of Ms. Y u Wing Sze.
Since Mr. Zhu Y uancheng does not possess the formal qualifications required of a
company secretary under Rule 3.28 of the Listing Rules, the Company has applied to the Stock
Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with the
requirements under Rules 3.28 and 8.17 of the Listing Rules for a period of three years since
the Listing Date on the following conditions: (i) Mr. Zhu Y uancheng must be assisted by Ms.
Y u Wing Sze who possesses the qualifications or experience as required under Rule 3.28 of the
Listing Rules and is appointed as joint company secretary throughout the waiver period; and
(ii) the waiver can be revoked in the event of a material breach of the Listing Rules by the
Company.
In support of the waiver application, the Company has adopted, or will adopt the
following arrangements:
(i) In preparation of the application of the Listing, Mr. Zhu Y uancheng has attended
training on the respective obligations of the Directors, senior managements and the
Company under the relevant Hong Kong laws and the Listing Rules organised by the
Hong Kong legal advisors to the Company.
(ii) Ms. Y u Wing Sze will work closely with Mr. Zhu Y uancheng to jointly discharge the
duties and responsibilities as the joint company secretaries of the Company and to
assist Mr. Zhu Y uancheng to acquire the relevant experience as required under the
Listing Rules for an initial period of three years from the Listing Date, a period
which should be sufficient for Mr. Zhu Y uancheng to acquire the relevant experience
as required under the Listing Rules.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 0–


--- page 91 ---
(iii) The Company will ensure that Mr. Zhu Y uancheng continues to have access to the
relevant training and support in relation to the Listing Rules and the duties required
for a company secretary of an issuer listed on the Stock Exchange. Furthermore,
both Mr. Zhu Y uancheng and Ms. Y u Wing Sze will seek advice from the Company’s
Hong Kong legal and other professional advisers as and when required. Mr. Zhu
Y uancheng also undertakes to take no less than 15 hours of relevant professional
training in each financial year of the Company.
(iv) At the end of the three-year period, the qualifications and experience of Mr. Zhu
Y uancheng and the need for on-going assistance of Ms. Y u Wing Sze will be further
evaluated by the Company. The Company will then endeavour to demonstrate to the
Stock Exchange’s satisfaction that Mr. Zhu Y uancheng, having had the benefit of the
assistance of Ms. Y u Wing Sze for the immediately preceding three years, has
acquired the relevant experience (within the meaning of Note 2 to Rule 3.28 of the
Listing Rules) such that a further waiver from Rules 3.28 and 8.17 of the Listing
Rules will not be necessary. The Company understands that the Stock Exchange may
revoke the waiver if Ms. Y u Wing Sze ceases to provide assistance to Mr. Zhu
Y uancheng during the three-year period.
Prior to the expiry of the three-year period, the Company will liaise with the Stock
Exchange to enable it to assess whether Mr. Zhu Y uancheng has acquired the relevant
experience within the meaning of Note 2 to Rule 3.28 of the Listing Rules.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 1–


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DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed Director who is named
as such in this prospectus) collectively and individually accept full responsibility, includes
particulars given in compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules and the Listing
Rules for the purpose of giving information to the public with regard to the Group. Our
Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge
and belief, the information contained in this prospectus is accurate and complete in all material
respects and not misleading or deceptive, and there are no other matters the omission of which
would make any statement in this prospectus misleading.
UNDERWRITING AND INFORMATION ON THE GLOBAL OFFERING
This prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. The Global Offering comprises the Hong Kong Public
Offering of initially 2,412,300 Offer Shares and the International Offering of initially
21,708,000 Offer Shares (subject to reallocation on the basis referred to under the section
headed “Structure of the Global Offering” in this prospectus and, in case of the International
Offering, to any exercise of the Offer Size Adjustment Option and the Over-allotment Option).
The listing of our Shares on the Stock Exchange is sponsored by the Joint Sponsors and
the Global Offering is managed by the Overall Coordinators. The Hong Kong Public Offering
is fully underwritten by the Hong Kong Underwriters pursuant to the Hong Kong Underwriting
Agreement. The International Underwriting Agreement relating to the International Offering is
expected to be entered into on Wednesday, January 8, 2025. Further information regarding the
Underwriters and the Underwriting Agreements are set out in the section headed
“Underwriting” in this prospectus.
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this prospectus and on the terms and subject to the conditions set
out herein and therein. No person is authorized to give any information in connection with the
Global Offering or to make any representation not contained in this prospectus, and any
information or representation not contained herein and therein must not be relied upon as
having been authorized by the Company, the Joint Sponsors, the Overall Coordinators, the
Sponsor-OC, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Underwriters, any of their respective directors, officers, employees, partners, agents, or
advisers or any other party involved in the Global Offering.
Neither the delivery of this prospectus nor any subscription or acquisition made under it
shall, under any circumstances, constitute a representation that there has been no change or
development reasonably likely to involve a change in our affairs since the date of this
prospectus or imply that the information contained in this prospectus is correct as of any date
subsequent to the date of this prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 2–


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Further information regarding the structure of the Global Offering, including its
conditions, are set out in the section headed “Structure of the Global Offering” and the
procedures for applying for our Hong Kong Offer Shares are set out in the section headed “How
to Apply for Hong Kong Offer Shares” in this prospectus.
RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his/her acquisition of the Hong Kong Offer Shares to,
confirm that he/she is aware of the restrictions on offers and sales of the Shares described in
this prospectus.
No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than Hong Kong, and no action has been taken to permit the distribution of
this prospectus in any jurisdiction other than Hong Kong. Accordingly, without limitation to
the following, this prospectus may not be used for the purpose of, and does not constitute, an
offer or invitation in any jurisdiction or in any circumstances in which such an offer or
invitation is not authorized or to any person to whom it is unlawful to make such an offer or
invitation. The distribution of this prospectus and the offering and sales of the Offer Shares in
other jurisdictions are subject to restrictions and may not be made except as permitted under
the applicable securities laws of such jurisdictions pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom. In
particular, the Hong Kong Offer Shares have not been publicly offered or sold, directly or
indirectly, in the PRC or the United States.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the granting of the listing of, and
permission to deal in, the Shares in issue and to be issued by us pursuant to the Global Offering
(including any Shares which may be issued pursuant to the exercise of the Offer Size
Adjustment Option and the Over-allotment Option).
Dealings in the Shares on the Stock Exchange are expected to commence on Friday,
January 10, 2025. No part of our Shares or loan capital is listed or dealt in on any other stock
exchange and no such listing or permission to list is being or proposed to be sought on any
other stock exchange as of the date of this prospectus. All the Offer Shares will be registered
on the Hong Kong register of members of the Company in order to enable them to be traded
on the Stock Exchange.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of,
and permission to deal in, our Shares on the Stock Exchange is refused before the expiration
of three weeks from the date of the closing of the application lists, or such longer period (not
exceeding six weeks) as may, within the said three weeks, be notified to the Company by or
on behalf of the Stock Exchange.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 3–


--- page 94 ---
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisers as to the taxation implications of subscribing for, purchasing, holding or disposal of,
and/or dealing in the Offer Shares or exercising rights attached to them. None of us, the Joint
Sponsors, the Sponsor-OC, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, any of their respective directors,
officers, employees, partners, agents, advisers or representatives or any other person or party
involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of,
any person resulting from the subscription, purchasing, holding, disposition of, or dealing in,
the Offer Shares or exercising any rights attached to them.
OFFER SIZE ADJUSTMENT OPTION, OVER-ALLOTMENT OPTION AND
STABILIZATION
Details of the arrangements relating to the Offer Size Adjustment Option, the Over-
allotment Option and stabilization are set out under the sections headed “Underwriting” and
“Structure of the Global Offering” in this prospectus.
HONG KONG REGISTER OF MEMBERS AND HONG KONG STAMP DUTY
Our Company’s principal register of members will be maintained by its principal share
registrar, Campbells Corporate Services Limited, in the Cayman Islands. All of the Offer
Shares issued pursuant to the Global Offering will be registered on the Company’s Hong Kong
share register to be maintained in Hong Kong by its Hong Kong Share Registrar,
Computershare Hong Kong Investor Services Limited. Dealings in the Shares registered in the
Company’s Hong Kong share register will be subject to Hong Kong stamp duty.
Unless determined otherwise by the Company, dividends payable in Hong Kong dollars
in respect of Shares will be paid to the Shareholders listed on the Hong Kong share register of
the Company, by ordinary post, at the Shareholders’ risk, to the registered address of each
Shareholder.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the Shares on the Stock
Exchange and compliance with the stock admission requirements of HKSCC, the Shares will
be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS
with effect from the date of commencement of dealings in the Shares on the Stock Exchange
or on any other date as determined by HKSCC. Settlement of transactions between participants
of the Stock Exchange is required to take place in CCASS on the second settlement day after
any trading day. All activities under CCASS are subject to the General Rules of HKSCC and
HKSCC Operational Procedures in effect from time to time.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 4–


--- page 95 ---
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS. Investors should seek the advice of their stockbrokers or other professional advisers
for details of the settlement arrangements as such arrangements may affect their rights and
interests.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The procedures for applying for Hong Kong Offer Shares are set out in the section headed
“How to Apply for Hong Kong Offer Shares” in this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set out in the
section headed “Structure of the Global Offering” in this prospectus.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations among certain amounts
denominated in Renminbi, Hong Kong dollars and U.S. dollars. No representation is made that
the amounts denominated in one currency could actually be converted into the amounts
denominated in another currency at the rates indicated or at all. Unless indicated otherwise, (i)
the translations between Renminbi and U.S. dollars were made at the rate of RMB7.19010 to
US$1.00, (ii) the translations between U.S. dollars and Hong Kong dollars were made at the
rate of HK$7.76930 to US$1.00, and (iii) the translation between Hong Kong dollars and
Renminbi were made at the rate of HK$1.00 to RMB0.92545. Any discrepancies in any table
between totals and sums of amounts listed therein are due to rounding.
LANGUAGE
If there is any inconsistency between this prospectus and the Chinese translation of this
prospectus, the English version shall prevail. However, the English names of the PRC
nationals, entities, departments, facilities, certificates, titles, laws, regulations and the like are
translations of their Chinese names and are included for identification purposes only. If there
is any inconsistency, the Chinese name prevails.
ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments, or have been rounded to one or two decimal places. Any discrepancies
in any table, chart or elsewhere between totals and sums of amounts listed therein are due to
rounding.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 5–


--- page 96 ---
DIRECTORS
Name Address Nationality
Executive Directors
Mr. Zhu Weisong (ؒRoom 1102, No.6, Lane 908, Ruining
Road, Xuhui District, Shanghai, PRC
Chinese
Mr. Sheng Xiaofeng (ࢤ10D, No. 7, Lane 37,
Panyu Road, Changning District
Shanghai, PRC
Chinese
Non-executive Directors
Mr. Chang Kaisi ( ੬௱౶) 706, 7th Floor, Building 2, No. 12
Xinwenhua Street, Xicheng District,
Beijing, PRC
Chinese
Mr. Chen Rui ( ௓๿) 18F, Building 6, Donghai Garden,
Futian District, Shenzhen,
Guangdong Province, PRC
Chinese
Independent Non-executive Directors
Mr. Gao Pingyang ( ৷̻ජ) Flat 13A, Block 1, Tam Towers, 25
Sha Wan Drive, Hong Kong Island,
Hong Kong
Chinese
Ms. Huang Rong ( රႂ) No. 65, Lane 377, Zhuxin Road,
Minhang District, Shanghai, PRC
American
Mr. Shang Jian (਄) 7-3001, Lane 1299, Dingxiang Road,
Pudong New District, Shanghai, PRC
Chinese
For further details, see “Directors and Senior Management”.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–8 6–


--- page 97 ---
PARTIES INVOLVED
Joint Sponsors, Overall Coordinators
and Sponsor-OC
Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Joint Global Coordinators Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Joint Bookrunners Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–8 7–


--- page 98 ---
Joint Lead Managers Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Futu Securities International (Hong
Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
Capital Market Intermediaries Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Futu Securities International (Hong
Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–8 8–


--- page 99 ---
Legal Advisors to the Company As to Hong Kong and U.S. law:
Freshfields
55th Floor, One Island East
Taikoo Place
Quarry Bay
Hong Kong
As to PRC law:
Jingtian & Gongcheng
34/F, Tower 3
China Central Place
77 Jianguo Road
Chaoyang District
Beijing, PRC
As to Cayman Islands law:
Campbells
3002-04
30/F Gloucester Tower The Landmark
15 Queen’s Road Central
Hong Kong
Legal Advisors to the Joint Sponsors
and the Underwriters
As to Hong Kong and U.S. law:
Clifford Chance
27/F, Jardine House
One Connaught Place
Central
Hong Kong
As to PRC law:
King & Wood Mallesons
18th Floor, East Tower
World Financial Center
No.1 Dongsanhuan Zhonglu
Chaoyang District
Beijing, PRC
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–8 9–


--- page 100 ---
Auditor and Reporting Accountants Ernst & Y oung
Certified Public Accountants
Registered Public Interest Entity Auditor
27/F, One Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
Industry Consultant Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
2504 Wheelock Square
1717 Nanjing West Road
Shanghai, PRC
Receiving Bank Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 0–


--- page 101 ---
Registered Office Floor 4, Willow House
Cricket Square
Grand Cayman KYl-9010
Cayman Islands
Headquarters and Principal Place of
Business in the PRC
Building 10, 1016 Tianlin Road
Minhang District, Shanghai, PRC
Place of Business in Hong Kong
Registered under Part 16 of the
Companies Ordinance
31/F, Tower Two
Times Square
1 Matheson Street
Causeway Bay
Hong Kong
Joint Company Secretaries Mr. Zhu Yuancheng ( ϡʩϓ)
Building 10, 1016 Tianlin Road
Minhang District, Shanghai, PRC
Ms. Yu Wing Sze ( Я൘་)
(an associate member of both The Hong
Kong Chartered Governance Institute and
The Chartered Governance Institute in the
United Kingdom)
31/F, Tower Two
Times Square
1 Matheson Street
Causeway Bay
Hong Kong
Authorised Representatives Mr. Sheng Xiaofeng (ࢤ)
Mr. Zhu Y uancheng ( ϡʩϓ)
Audit Committee Mr. Gao Pingyang ( ৷̻ජ) (Chairman)
Ms. Huang Rong ( රႂ)
Mr. Shang Jian (਄)
Nomination Committee Mr. Zhu Weisong (ؒ)Chairman)
Mr. Gao Pingyang ( ৷̻ජ)
Mr. Shang Jian (਄)
Remuneration Committee Mr. Shang Jian (਄) (Chairman)
Ms. Huang Rong ( රႂ)
Mr. Zhu Weisong (ؒ)
CORPORATE INFORMATION
–9 1–


--- page 102 ---
Compliance Adviser Gram Capital Limited
Room 1209
12/F, Nan Fung Tower
88 Connaught Road Central/
173 Des V oeux Road Central
Central
Hong Kong
Cayman Islands Principal Share Registrar Campbells Corporate Services Limited
Floor 4, Willow House
Cricket Square
Grand Cayman KY1-9010
Cayman Islands
Hong Kong Share Registrar Computershare Hong Kong Investor
Services Limited
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Principal Banks Shanghai Pudong Development Bank
Co., Ltd.
Jinshan Sub-branch
153-159, Weiqing West Road
Jinshan District
Shanghai, PRC
China Merchants Bank Co., Ltd.
Tianlin Branch
105 Tianlin Road
Xuhui District
Shanghai, PRC
Company’s Website https://www.bloks.com/
(A copy of this prospectus is available on
the Company’ s website. Except for the
information contained in this prospectus,
none of the other information contained on
the Company’ s website forms part of this
prospectus)
CORPORATE INFORMATION
–9 2–


--- page 103 ---
The information and statistics presented in this section and other sections of this
prospectus, unless otherwise indicated, were extracted from different official government
publications and other publications, and from the independent industry report prepared
by Frost and Sullivan, an independent market research and consulting company that was
commissioned by us, in connection with this Global Offering. The information from
official government sources has not been independently verified by us, Joint Sponsors, the
Overall Coordinators, the Sponsor-OC, the Joint Global Coordinators, Joint
Bookrunners, Joint Lead Managers, any of the Underwriters, any of their respective
directors and advisers, or any other persons or parties involved in the Global Offering,
and no representation is given as to its accuracy. Accordingly, the information from
official government sources contained herein may not be accurate and should not be
unduly relied upon.
GLOBAL AND CHINA’S TOY MARKET
The global toy market is massive and is expected to experience steady growth in the
future. In terms of GMV , the global toy market grew at a CAGR of 5.2% from RMB631.2
billion in 2019 to RMB773.1 billion in 2023, and is expected to further grow at a CAGR of
5.1% to reach RMB993.7 billion in 2028.
Geographically, North America, Europe and Asia Pacific are the top three toy markets,
with a market size of RMB243.3 billion, RMB214.0 billion and RMB213.6 billion in 2023,
respectively. China is the largest producer and one of the largest markets by consumption scale
globally, producing the majority of the toy products in the world by volume. In recent years,
while China’s per capita toy consumption experienced strong growth, China’s toy market size
remains smaller than that of major toy markets such as the United States and Europe. As such,
China’s toy market has large growth potential in the future. More specifically, the growth of
China’s toy market is expected to accelerate, driven by an expanding consumer base and
consumers’ increasing preference for IP toys, coupled with industry players’ continued
improvement in their research and development capabilities, product quality and IP
commercialization capabilities and emergence of new toy categories in recent years on the
supply side. In particular, China’s toy market is expected to grow at a CAGR of 9.5% from
RMB104.9 billion in 2023 to RMB165.5 billion in 2028, accounting for approximately
one-sixth of the global toy market.
INDUSTRY OVERVIEW
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Toy Market Size in terms of GMV by Geography, Global, 2019-2028E
0.0
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
400.0
800.0
1,200.0
China 5.6%
4.7%
5.0%
5.9%
4.1%
5.2%
9.5%
CAGR
(2019-2023)
CAGR
(2023-2028E)
4.9%
4.2%
4.5%
4.0%
5.1%
Asia Pacific
(Excluding China)
Europe
North America
Rest of the World
Global
1,600.0
84.5 86.5 94.1 95.9 104.9 116.1 127.6 139.6 152.2 165.590.6 88.8 100.2 96.3 108.7 112.7 119.2 125.6 131.7 137.8176.0 187.1 204.4 192.9 214.0 221.6 231.6 242.3 252.7 263.0193.1 207.8 226.5 235.6 243.3 250.4 261.5 274.0 287.5 302.7
806.9
631.2
83((ORROUT
660.2 721.5 719.8 773.1
850.9 897.2 944.4 993.7
106.1
87.0 90.1 96.2 99.0 102.3
111.0 115.7 120.4 124.7
Source: Frost & Sullivan, International Monetary Fund (IMF), National Bureau of Statistics of China (NBS)
IP toy segment is a major component of the global toy market with a market size of
RMB521.3 billion in 2023, accounting for 67.4% of the global toy market. In the same year,
the IP toy market in China was RMB67.6 billion, accounting for 64.4% of the China’s toy
market. IP toys are toy products designed and produced based on intellectual property rights
associated with storyline characters, brands, art and culture, etc. The popularity of IP toys is
driven by renowned IPs’ high recognition as well as their narrative nature combined with rich
contents, leading to easy consumption decisions by consumers. In addition, the broad fan base
of IPs and the long-term emotional connection between fans and IPs further expand the
consumer base. With the popularity of various types of IPs such as characters in films,
television shows and animes around the world, and the growing IP commercialization
capabilities in the toy industry, the global and China’s IP toy market as a percentage of the toy
market is expected to grow further and reach 73.8% and 74.5%, respectively, in 2028.
The global and China’s toy market can be categorized by form into character and
non-character toys. Character toys refer to toys with human-like or animal-like appearances,
such as dolls, plush toys and toys based on human or non-human characters in movies and
television shows. Many character toys are directly associated with specific IPs and have easily
recognizable appearances, features and distinctive cultural elements. In addition to character
toys, other forms of toys include vehicle toys and scenery toys, which usually do not resemble
human or animal.
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GLOBAL AND CHINA’S CHARACTER TOY MARKET
Character toy market is the largest segment of the global toy market by form, and has a
market size of RMB345.8 billion in 2023 that accounted for 44.7% of the global toy market.
The popularity of character toys is firstly attributable to the fact that character toys feature both
fun and individuality given they are often based on images resonating with the public. In
addition, character toys provide emotional engagement and vibrant experience that non-
character toys cannot deliver. Furthermore, character toys are increasingly combined with
renowned IPs to gain high recognition. Enabled by the rich IP contents, character toys cover
a diverse range of toy categories, reach a wide consumer demographics, and possess
collectability. As a result, the market size of character toys is expected to grow at a CAGR of
9.3% from 2023 to 2028, much higher than the 1.2% CAGR of non-character toys segment
during the same period. The market size of the global character toys is expected to reach
RMB540.7 billion in 2028, accounting for 54.4% of the global toy market. China’s character
toy market is expected to grow at a CAGR of 17.7% from RMB40.3 billion in 2023 to
RMB91.1 billion in 2028. Compared to the global market, the fast growth rate of China’s
character toy segment is primarily due to factors such as a vast and expanding consumer base,
the increasing presence of IP toys and more quality toy supply.
GLOBAL AND CHINA’S NON-CHARACTER TOY MARKET
The global non-character toy market consists of several segments, among which vehicle
and architectural toys are the second and third largest segments by form in the global toy
market, with a market size of RMB96.7 billion and RMB90.3 billion in 2023, respectively,
accounting for 12.5% and 11.7% of the global toy market. V ehicle toys are toys that take the
form of passenger- or cargo-carrying vehicles, such as cars, trains, ships, airplanes, spacecrafts
and rockets. Architectural toys are toys that take the form of buildings or scenic landscapes,
such as houses, skyscrapers, castles, bridges, harbors and streets. The design of vehicle and
architectural toys poses high requirements for physical structure, spatial perception and
balanced proportions. The toys can be either finished products or assembly kits. As a result,
vehicle and architectural toys provide consumers the flexibility to unleash their imagination
and creativity in addition to recreating the form of a subject. V ehicle and architectural toys can
be played with independently or together with other toy categories to expand thematic scenes
and enhance play experience. From 2023 to 2028, markets for vehicle and architectural toys are
expected to grow at a CAGR of 2.9% and 2.0%, respectively, to reach RMB111.6 billion and
RMB99.5 billion. In addition, from 2023 to 2028, markets for vehicle and architectural toys in
China are expected to grow at a CAGR of 6.3% and 5.3% to reach RMB20.5 billion and
RMB18.2 billion, respectively.
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Toy Market Size in terms of GMV by Form, Global, 2019-2028E
0.0
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
400.0
800.0
1,200.0
7.7%
4.4%
2.1%
3.5%
5.2%
9.3%
CAGR
(2019-2023)
CAGR
(2023-2028E)
2.9%
2.0%
0.1%
5.1%Total
1,600.0
256.8 271.8 306.4 315.2 345.8 376.2 413.2 453.1 495.2 540.781.5 85.4 92.2 90.6 96.7 99.4 102.8 106.0 108.9 111.6
83.2 88.1 90.9 89.5 90.3 92.2 94.3 96.2 98.0 99.5
209.7 215.0 232.1 224.5 240.2 239.1 240.7 241.9 242.4 241.8806.9
631.2
83((ORROUT
660.2
721.5 719.8 773.1
850.9 897.2 944.4 993.7
Other Non-Character Toys
Architectural Toys
Vehicle Toys
Character Toys
Source: Frost & Sullivan, International Monetary Fund (IMF)
Toy Market Size in terms of GMV by Form, China, 2019-2028E
83((ORROUT
0.0
30.0
60.0
90.0
120.0
150.0
180.0
210.0
12.8
12.5
25.7
2019
31.7
13.3
12.9
28.6
2020
33.8
13.6
13.8
32.8
2021
32.3
13.7
13.9
36.0
2022
35.4
14.1
15.1
40.3
2023
36.1
15.1
16.3
48.6
2024E
36.4
16.0
17.4
57.8
2025E
36.5
16.8
18.5
67.9
2026E
36.3
17.5
19.5
78.9
33.4
35.7
18.2
20.5
91.1
2028E
84.5 86.5
2027E
95.9 104.9
116.1
127.6
139.6
152.2
165.5
94.1
CAGR
(2019-2023)
CAGR
(2023-2028E)
Character Toys 11.9% 17.7%
Vehicle Toys 4.7% 6.3%
Architectural Toys 2.4% 5.3%
Other Non-Character Toys 1.4% 0.2%
Total 5.5% 9.5%
Source: Frost & Sullivan, International Monetary Fund (IMF), National Bureau of Statistics of China (NBS)
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GLOBAL AND CHINA’S ASSEMBLY TOY MARKET
Assembly toys represent a fast-growing segment within the global toy market. Assembly
toys generally require consumers to invest time in assembling various components of different
shapes, sizes and functions into finished toys resembling different subjects such as characters,
vehicles and buildings.
Assembly toys can be assembled into a predetermined structure following the product
design or can be assembled based on individual consumer’s creativity and preferences. This
makes assembly toys more fun to play with and intellectually stimulating. In addition, the
components used in assembly toys generally contain certain proportion of standard
components, which can be compatible among different products. This brings about stronger
consumer engagement and brand loyalty and enables better control over quality and cost by the
producers. The global market size of assembly toys was RMB176.5 billion in 2023. Although
this segment only accounted for 22.8% of the global toy market in 2023, it grew at a CAGR
of 11.1% from 2019 to 2023, and is expected to grow at a CAGR of 15.0% from 2023 to 2028,
far outpacing the growth rate of non-assembly toys.
Driven by similar factors that drive the growth of China’s toy market and character toy
market, China’s assembly toy market is expected to grow at a CAGR of 22.1% from RMB23.7
billion in 2023 to RMB64.0 billion in 2028. Within China’s assembly toy market, the assembly
character toy segment is expected to lead this growth. The market size is projected to grow at
a CAGR of 41.3%, from RMB5.8 billion in 2023 to RMB32.5 billion in 2028. The assembly
vehicle toy market is expected to be the second fastest-growing segment, with its market size
increasing from RMB3.3 billion in 2023 to RMB7.3 billion in 2028, representing a CAGR of
17.2%. Additionally, the assembly architectural toy market is anticipated to grow at a CAGR
of 8.5%, expanding from RMB13.0 billion in 2023 to RMB19.5 billion in 2028.
Toy Market Size in terms of GMV:
Assembly Toys and Non-assembly Toys, Global, 2019 – 2028E
0.0
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
400.0
800.0
1,200.0
11.1%
3.7%
5.2%
15.0%
CAGR
(2019-2023)
CAGR
(2023-2028E)
1.4%
5.1%Total
1,600.0
115.9 129.1 149.1 156.2 176.5 204.6 237.3 273.5 312.4 354.6
515.3 531.1 572.4 563.6 596.6 602.3 613.6 623.6 632.1 639.0
806.9
631.2
RMB Billion
660.2
721.5 719.8 773.1
850.9 897.2 944.4 993.7
Non-assembly Toys
Assembly Toys
Source: Frost & Sullivan, International Monetary Fund (IMF)
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Toy Market Size in terms of GMV:
Assembly Toys, Global, 2019-2028E
83((ORROUT
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
71.8
17.0
13.9
2019
15.5
77.7
20.7
15.2
2020
18.6
80.2
31.9
18.5
2021
22.4
79.4
34.2
20.3
2022
27.8
80.4
44.2
24.1
2023
40.4
83.2
51.7
29.3
2024E
56.5
85.5
59.7
35.7
2025E
71.5
88.1
70.7
43.2
2026E
85.8
90.6
84.2
51.8
13.2
99.6
94.4
98.8
61.8
2028E
115.9 129.1
2027E
156.2
176.5
204.6
237.3
273.5
312.4
354.6
149.1
CAGR
(2019-2023)
CAGR
(2023-2028E)
Assembly Character Toys 20.5% 29.0%
Assembly Architectural Toys 2.9% 3.3%
Assembly Vehicle Toys 27.0% 17.5%
Other Assembly Toys 14.7% 20.7%
Total 11.1% 15.0%
Source: Frost & Sullivan, International Monetary Fund (IMF), National Bureau of Statistics of China (NBS)
Toy Market Size in terms of GMV: Assembly Toys and
Non-assembly Toys, China, 2019-2028E
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
12.7%
3.9%
5.6%
22.1%
CAGR
(2019-2023)
CAGR
(2023-2028E)
4.5%
9.5%Total
14.7 16.1 18.8 20.3 23.7 28.7 36.0 44.2 53.5
64.0
69.8 70.4 75.3 75.6 81.3
87.4
91.6
95.4
98.7
101.5
116.1
84.5 86.5
94.1 95.9
105.0
127.6
139.6
152.2
165.5
Non-assembly Toys
Assembly Toys
0.0
30.0
60.0
90.0
120.0
150.0
180.0
210.0
83((ORROUT
Source: Frost & Sullivan, International Monetary Fund (IMF), National Bureau of Statistics of China (NBS)
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Toy Market Size in terms of GMV:
Assembly Toys, China, 2019-2028E
83((ORROUT
0.0
20.0
40.0
60.0
80.0
10.2
2.31.0
2019
1.4
11.0
2.61.2
2020
1.9
12.5
3.01.4
2021
3.0
12.7
3.11.5
2022
5.8
13.0
3.31.6
2023
9.6
13.5
3.71.9
2024E
15.1
14.2
4.2
2.5
2025E
20.7
15.4
5.0
3.1
2026E
26.5
17.1
6.1
3.9
1.2
32.5
19.5
7.3
4.7
2028E
14.7 16.1
2027E
20.3
23.7
28.7
36.0
44.2
53.5
64.0
18.8
CAGR
(2019-2023)
CAGR
(2023-2028E)
Assembly Character Toys 49.6% 41.3%
Assembly Architectural Toys 6.3% 8.5%
Assembly Vehicle Toys 9.5% 17.2%
Other Assembly Toys 11.2% 24.5%
Total 12.7% 22.1%
Source: Frost & Sullivan, International Monetary Fund (IMF), National Bureau of Statistics of China (NBS)
CHALLENGES IN THE GLOBAL AND CHINA’S CHARACTER TOY MARKET
There are three major challenges for the global and China’s character toy market:
Consumer end. There is significant room for improvement in efficiently meeting consumer
demand for products that combine assembling experience, consistent quality and great value-for-
money. Character toys, such as dolls and plush toys, are mostly sold as finished products which are
ready to play straight out of box, making the ways for consumers can play with them simple and
limited. Meanwhile, many character toys are offered as individual products rather than in series,
which lack collectability. In terms of quality, the diverse range of character toys and varying
operational scales and production techniques of industry players result in inconsistent product
quality, such as finishing, texture and appearance. In terms of pricing, a large amount of labor input
in the production of many traditional character toys results in relatively high prices that do not meet
the widespread consumer demand for value-for-money products.
Supply end. Product design, research and development and production for many traditional
character toys are not highly standardized, which leads to room for improvement in efficiently
meeting consumer demand for quality-for-money products. Since establishing a standardized system
requires heavy investment including time, labor and production resources (such as production lines
and molds), continuous and large-scale toy orders are a prerequisite for systemic standardization.
Currently, many industry players primarily operate on the basis of scattered orders for non-
standardized products, make limited investment in standardization, and employ a substantial
proportion of labor in their supply chain, resulting in a low degree of standardization. Some
large-scale industry players focus more on the scale of SKU number rather than systemized and
compatible product offering, and therefore have lower need on a highly standardized system of
product design, research and development and production. The overall low degree of standardization
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in the character toy market leads to varying quality at the same price level, and many companies have
difficulties in quickly launching new products in response to the evolving consumer preferences. For
example, even products licensed by the same IP proprietor may vary significantly in quality due to
differences in production resources, techniques and geographical location among different toy
companies, which in turn leads to inconsistent consumer experience.
Industrial ecosystem end. IP proprietors wish to quickly commercialize their IPs through
toy categories that effectively represent their IPs and cover wide demographics, price segments
and global markets. Although many character toy categories can recreate the IP character
relatively well, it remains difficult for these categories to achieve full coverage across different
demographics, price segments and geographical markets. Specifically, many character toys
have limited target audience due to constraints in their categories (such as dolls and plush toys)
and mechanism, making it challenging to achieve penetration into a larger population. In
addition, since many industry players offer products within a narrow price range, they are
unable to fully reach consumers across different price segments, including value (unit retail
price below RMB20), mass-market (unit retail price RMB20 to below RMB50), mid-end (unit
retail price RMB50 to below RMB100) and high-end (unit retail price RMB100 and above).
Finally, the potential for global expansion of many character toys is relatively limited due to
the fact that their mechanism cannot meet the universal demand of global consumers for toys
that are easy to play with. As a result, there are few character toy categories that can meet the
demand of IP proprietors to commercialize their IPs efficiently at scale, and to cover all
demographics, all price segments and global consumers.
GLOBAL AND CHINA’S ASSEMBLY CHARACTER TOY MARKET
Over the past few years, assembly character toys, which combine the advantages of
assembling mechanism and character toys, have experienced rapid growth along with the
development of the global and China’s character toy market. Industry players typically design
and produce assembly character toys using two forms: block kits and model kits, both offering
better play experience than traditional character toys. Block kits use block components to
recreate the IP characters and simulate their poses, and are highly standardized and easy to play
with. Model kits, on the other hand, involve the assembly of components and prioritize on high
degree of recreation of IP characters using a large proportion of customized components, which
determines the price tag of products and difficulty in assembling.
With a different product approach, a new category of assembly character toys were
developed and offered consumers a new choice. For example, our assembly character toys
leverage the advantages of character toys and assembling mechanism and improve thereupon,
and can effectively meet consumer demand for products that are fun with consistent quality and
great value-for-money, enjoying significant differentiated advantages over traditional character
toys. Our assembly character toys combine the high degree of standardization and ease-of-play
and features of high degree of recreation of IP characters and individuality. In addition, by
establishing an integrated standardized system of design, research and development and
production on the supply end, we have achieved cost advantages and solid quality control.
These factors lead to better value-for-money for assembly character toys.
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Value Comparison of Our Assembly Character Toys, Block Kit Assembly Character
Toys, Model Kit Assembly Character Toys and Non-assembly Character Toys
Our Assembly
Character Toys
Recreation of IP
Characters(1)
Engagement(2) Ease-of-play(3) Cost Control(4)
Block Kit Assembly
Character Toys
Model Kit Assembly
Character Toys
Non-assembly
Character Toys
Source: Frost & Sullivan
Notes:
(1) Recreation of IP characters: It refers to the degree to which the toy recreates the appearance, features, and
essence of the IP characters.
(2) Engagement: It refers to the extent to which the toy can hold the attention and interest of the consumer.
(3) Ease-of-play: It refers to how easily a consumer, regardless of age or skill level, can play with or assemble the
toy, if applicable, without the need for tools, or extensive prior knowledge or training.
(4) Cost control: It refers to a toy company’s ability to control the toy manufacturing cost.
The Company’s assembly character toys recreate the essence of the IP characters with a
combination of standard and customized components, but precise recreation of the IP
characters is not the main purpose. Meanwhile, consumers can enjoy the Company’s assembly
character toys by assembling the IP character, posing the completed IP character and
performing re-touch, meaning painting the character toys in different or additional color
themes. As such, the Company’s assembly character toys offer strong engagement. The
combination of standard and customized components and patented connection mechanisms
make the Company’s assembly character toys easy to assemble. The use of standard
components and standardized design, research and development and production also facilitate
cost control.
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Block kit assembly character toys involve the use of blocks in geometric shapes to
recreate the IP characters, which makes it challenging to recreate either the essence or precise
details of the IP characters as compared with the Company’s assembly character toys and
model kit assembly character toys. Meanwhile, while block kit assembly character toys also
allow for the joy of assembling, it offers less flexibility in posing and performing re-touch.
Similar to the Company’s assembly character toys, the assembling of block kits does not
require experience or tools and therefore is easy to play with. Block kits contain mostly
standard components, which facilitate cost control.
Model kit assembly character toys typically involve the use of various components to
precisely recreate the IP characters in miniature scale. Model kit assembly character toys offer
a similar level of engagement with the Company’s assembly character toys as consumers can
also assemble, pose and perform re-touch on the toys. However, precise recreation of the IP
characters can involve the use of a large quantity of customized components, thereby making
the model kit assembly character toys more complex and therefore more difficult to assemble
without experience or tools. Prioritizing in the high degree of recreation of the IP characters
through the extensive use of customized components also poses potential difficulty on cost
control.
Non-assembly character toys may recreate the IP characters precisely, but do not offer any
engagement that comes from assembling and performing re-touch. There is virtually no
difficulty to play with a non-assembly character toy. Lastly, the low degree of standardization
and manual labor involved in the production of non-assembly character toys pose potential
difficulty on cost-control.
Market Size and Growth Rate
The assembly character toy market is the fastest growing and highly promising segment
in the global toy market. The global market size of assembly character toys grew at a CAGR
of 20.5% from RMB13.2 billion in 2019 to RMB27.8 billion in 2023, with a penetration rate
of 8.0% in the global character toy market. Assembly character toys combine the advantages
of assembling mechanism and character toys, and their shares within the character toy market
are expected to expand. The assembly character toy market is expected to grow at a CAGR of
29.0% from 2023 to 2028 to reach RMB99.6 billion in size with a penetration rate of 18.4%
in the global character toy market in 2028. Within China’s character toy market, assembly
character toy is the fastest-growing segment, which is expected to grow at a CAGR of 41.3%
from RMB5.8 billion in 2023 to RMB32.5 billion in 2028. China’s assembly character toy
segment as a percentage of China’s character toy market is expected to increase from 14.3%
in 2023 to 35.6% in 2028.
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Market Size and Penetration Rate of Assembly Character Toy Market in terms of
GMV , Global, 2019 – 2028E
5.1%
1.4 1.9 3.0 5.8 9.6 15.1 20.7 26.5 32.5
12.1
13.2 15.5 18.6 22.4 27.8
40.4
56.5
71.5
85.8
99.6
14.0 16.7 19.4 22.1
30.7
41.4
50.8
59.3
67.1
5.7% 6.1%
18.4%
17.3%
15.8%
13.7%
10.7%
8.0%
7.1%
1.2
2019 2020 2021 2028E 2027E2026E2025E2024E20232022
China 49.6% 41.3%
Rest of the World
Total
Penetration Rate (Market Share of Global Assembly Character
Toy Market in Global Character Toy Market)
16.3% 24.9%
20.5% 29.0%
CAGR
(2019-2023)
CAGR
(2023-2028E)
RMB Billion
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0.0
40.0
80.0
120.0
160.0
Source: Frost & Sullivan, International Monetary Fund (IMF), National Bureau of Statistics of China (NBS)
Key Growth Drivers for the Global and China’s Assembly Character Toy Market
Demand for high-quality experiences and individualized products . In the global and
China’s context where the toy product categories continue to expand and the product quality
improves, consumption based on experience and individuality has become the mainstream.
Assembly character toys meet this consumer trend. On the one hand, the assembling
mechanism is widely popular among different consumer groups because it meets consumers’
need for fun products that involve creativity, imagination and spatial perception. Combined
with character toys, assembling mechanism not only provides character toys that are fun to play
with, but also expands the category and extends the life cycle of toys. In addition, consumers
are eager to achieve self-expression and establish a connection with toys through the
assembling process. The growing consumer demand for high-quality experiences and products
with individuality elements is expected to drive the sustained growth of the assembly character
toy market.
Expansion of the consumer base . Assembly character toys offer a diverse range of
features, including intellectually stimulating, parent-child bonding, association with IPs and
collectability, which can effectively meet the demands of toy consumers across all age groups,
thus promoting the continuous expansion of the consumer base. The intellectually stimulating
and parent-child bonding features of assembling mechanism have increasingly attracted
families who used to buy brick-based toys and traditional character toys for children to switch
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to assembly character toys. In addition, there is a growing demand for assembly characters toys
among young consumers, as a lot of assembly character toys are based on IP characters with
existing fan bases. Due to the IP attributes and collectability of assembly character toys, adults
with higher disposable incomes and stronger spending power are becoming an important group
of consumers for assembly character toys. The diverse features of assembly character toys also
meet the evolving preference of consumers as they grow older, and therefore have a longer user
life cycle. With the global dissemination of various IPs based on movie, television and anime
characters, the consumer base for assembly character toys has also expanded both globally and
in China.
V alue-for-money consumption trend . Driven by the global and China’s trend of
value-for-money consumption, consumers are becoming more sensitive to both price and
quality of the products. As such, quality-for-money toys have a strong appeal and large market
potential. With the emergence of great value-for-money products and the expansion of sales
channels, consumers in lower-tier cities can also experience high-quality products, which in
turn drives the consumption growth in these markets.
Emergence of high-quality supply . Growing market demand for assembly character toys,
which combine the advantages of assembling mechanism and character toys, has increasingly
attracted high-quality supply into the segment. In particular, in recent years, innovative toy
companies have emerged in the market, further increasing the high-quality supply. Such toy
companies have established factory systems specializing in the production of assembly
character toys, achieving efficient output, consistent quality and cost advantages to meet
rapidly growing consumer demand. Leading industry players have spearheaded the industry
progression and expanded the supply, forming a virtuous cycle and promoting the long-term
development of the assembly character toy market.
Wide application of IP . With the consumers’ increasing demand for cultural products, the
expansion of IP categories and the diversification of IP creation and distribution, IP proprietors
actively explore ways of expanding the influence and commercialization of their IPs beyond
animes and movies. IP proprietors are increasingly attracted to the assembly character toy
category that can efficiently commercialize the IPs with products covering wide demographics,
price segments and global consumers. From toy companies’ perspective, increasing use of
renowned IPs in assembly character toys has elevated consumer awareness of the category and
attracted purchases from more IP fans. Leading assembly character toy companies build a rich
IP portfolio through self-developed and licensed IPs and launch diverse product offering based
on the varying attributes of IPs matching different audiences, so as to better satisfy consumers’
demand and drive the market development.
Distinctive consumer ecosystem for the category . Due to the nature of the assembling
process and the deep integration with IPs, assembly character toy category has a distinctive
consumer ecosystem. Consumer’s emotion and interests are crucial factors driving the
consumption of assembly character toys. Assembling mechanism can stimulate the fans’ and
creators’ creativity and desire to share their UGCs. Furthermore, renowned IP characters
typically have loyal fan bases and can resonate with these fans. Based on the product theme
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and IP influence, fans and creators create and disseminate rich and high-quality UGCs, which
drive consumer awareness and more purchases. The positive feedback from consumers on the
UGCs from fans and creators further stimulates the enthusiasm for self-creation in the
ecosystem, thus forming a virtuous cycle. The expansion of the ecosystem increases the loyalty
and repeat purchases of consumers and fans.
Key Success Factors in the Global and China’s Assembly Character Toy Market
Leading innovation capability . A differentiated approach to address existing issues in the
character toy industry is the key for an industry player to succeed in the market. The core of
innovation lies in an industry player’s ability to build on the strengths of the industry and
elevate further. Such product approach should not only achieve a high degree of
standardization to balance quality and cost, but also provide consumers with individualized
way of playing, so that the products can reach a wide range of consumers across different age
groups, genders and spending powers. Only the leading industry players that have developed
a product approach that effectively combines standardization and individuality elements are
capable of offering global leading assembly character toys to satisfy the widespread consumer
demand for high-quality experiences and recreation of the essence of IP characters.
Extensive patent portfolio . Extensive patent portfolio is essential for protecting the
originality of assembly character toys. An extensive patent portfolio also creates barriers for
other industry players to replicate the system. In addition, patents related to technology and
production techniques enable the leading industry players to establish a factory system
specializing in the production of assembly character toys to achieve large-scale and efficient
production of assembly character toys, better control the product quality and improve
consumer experience.
Diverse IP portfolio . The high recognition, rich content and extensive fan base associated
with IPs enhance the competitiveness of toy products. Industry players can satisfy the diverse
demands of consumers and fans and reach global consumers across different age groups
through in-house IP development and extensive cooperation with proprietors of renowned IPs.
However, developing IPs requires the accumulation of long-term consumer insights and
excellent development capabilities, which many industry players do not possess. In addition,
the requirements for licensing renowned IPs are generally high, which typically involves the
partner having a systematic IP operation system and leading IP commercialization and
management capabilities. Meanwhile, renowned IPs are usually only licensed to a handful of
toy companies in specific product categories and regions. Therefore, it is difficult for most
industry players to develop their own IPs or obtain a wide range of IP licenses. A few leading
industry players have established competitive advantages through a rich IP portfolio
comprising self-developed IPs and renowned IPs licensed from their proprietors.
Product strength . Excellent product strength is one of the key elements that determine
whether an industry player can stand out in the assembly character toy market. Product strength
is mainly reflected in the quality and pricing, the product launch and the IP’s product life cycle.
First of all, quality-for-money toys satisfy the widespread demand of global and China’s
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consumers, and an industry player will only be competitive if the products enjoy high qualities
such as safety, endurability, exquisite design and consistent experience while providing
value-for-money. Secondly, consumer preference is constantly and rapidly evolving, so
industry players need to launch new products frequently and take into account the number of
new products and the success rates in order to gain a competitive edge. Thirdly, extending the
IP’s product life cycle is crucial for the sustained growth of industry players. Successful
industry players can continue to launch new products based on each individual IP while
extending such IP’s product life cycle through continuous iterations.
High efficiency, large-scale production and cost advantages . The efficiency, economies
of scale and cost advantages of the production largely determine whether an industry player can
fully meet the consumer need for quality-for-money products. By effectively exploring and
customizing high-quality and cost-effective production resources, leading industry players
systematically manage the production of assembly character toys, so as to create a technically
advanced production system to strengthen the differentiated advantages on the production end.
In addition, a highly standardized system covering design, research and development and
production enables leading industry players to improve the scale and efficiency of product
launch, the consistency of product quality, and cost advantages.
Excellent marketing capabilities . Assembly character toys are naturally suitable for
content-driven marketing due to the consumer connection from the assembling process, and the
fact that IP characters are closely associated with rich contents that can be widely
disseminated. Effective marketing methods can efficiently reach and maintain a broad base of
consumers and fans, promote the formation of a consumer ecosystem, and increase the
stickiness and repeat purchases of consumers and fans. Therefore, leading industry players
fully leverage the popularity and influence of IPs, utilizing multiple communication channels
(such as official accounts and accounts of KOLs, KOCs and fans) on social media platforms
to systematically disseminate product related contents. This enhances brand recognition and
consumer awareness of products, improves efficiency for promotion and product launch
success rates, and generates synergies and network effects across different sales channels.
Key Raw Material Price Trends for Producing Assembly Character Toys
The key raw materials for assembly character toys are ABS and corrugated cardboard.
Over the past five years, the price of ABS in China has generally shown a fluctuating
trend. The price of ABS experienced a substantial decline and hit the lowest level of
RMB54,000 per ton in the second and third quarter of 2020 primarily due to the impact of
COVID-19. Since then, the price of ABS gradually recovered and peaked in the first half of
2022 at RMB101,000 per ton, nearly doubled the lowest price in the second half of 2020. By
2023, the prices of ABS stabilized, maintaining at a range between RMB80,000 per ton and
RMB85,000 per ton.
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Average Price of ABS, China, 2019Q1 – 2023Q4
8.3
8.6 8.7
9.8
8.4
7.3
5.45.4
6.2
7.5
2019Q1
2020Q1
2020Q2
2022Q1
2022Q2
2022Q3
2022Q4
2023Q1
2023Q2
2023Q3
2023Q4
2021Q4
2021Q3
2021Q2
2021Q1
2020Q4
2020Q3
ABSThousand RMB/Ton
9.1 8.6 9.1
10.1
9.4
8.2 8.4 8.0
8.6 8.5
2019Q2
2019Q3
2019Q4
0.0
3.0
6.0
9.0
12.0
Source: Frost & Sullivan
In terms of corrugated cardboard prices in China, there was a steady upward trend from
2019 to 2021, rising from RMB3,800 per ton to RMB4,600 per ton. However, in 2022,
corrugated cardboard prices started to decline. By the fourth quarter of 2023, corrugated
cardboard prices had dropped to RMB2,800 per ton, hitting the lowest level in five years. This
was mainly affected by demand and cost side factors. On the demand side, the overall market
demand for corrugated cardboard was lower than expected, presenting a market trend of
oversupply. On the cost side, the price of waste paper, the main raw material for corrugated
cardboard, has been continuously declining in recent years.
Average Price of Corrugated Cardboard, China,
2019Q1 – 2023Q4
0
1.0
2.0
3.0
4.0
5.0
2019Q1
2020Q1
2020Q2
2022Q1
2022Q2
2022Q3
2022Q4
2023Q1
2023Q2
2023Q3
2023Q4
2021Q4
2021Q3
2021Q2
2021Q1
2020Q4
2020Q3
2019Q2
2019Q3
2019Q4
Corrugated Cardboard
3.8
3.4 3.3 3.4
3.6
3.3
3.7 3.7
4.1 4.0
4.2
4.6
3.9
3.7
3.4 3.3 3.1
2.8 2.8 2.9
Thousand RMB/Ton
Source: Frost & Sullivan
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Competitive Landscape
In the global assembly character toy market, the Group is the third largest assembly
character toy company in the world in terms of GMV in 2023. Leading industry players in the
assembly character toy market besides the Group are mainly multinational companies that are
well known in the toy industry. The global assembly character toy market is highly
concentrated, with the top five players accounting for 87.1% of the total market share in terms
of GMV in 2023, and two renowned multinational toy companies holding a large market share.
Ranking of Assembly Character Toy Industry Players in terms of GMV
(1),
Global, 2023
Ranking Company Main Business GMV (1)
Market
Share
(RMB
Billion) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company A (2) Games, toys, IP production, etc. 11.0 39.5%
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company B (3) Brick toys 10.0 35.9%
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118The Group Mainly assembly character toys 1.8 6.3%
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company C (4) Dolls, vehicle toys, toys for infant,
toddler and pre-school children
0.9 3.2%
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company D (5) Assembly toys 0.6 2.2%
Source: Frost & Sullivan
Notes:
(1) GMV only includes the retail sales generated from sales of assembly character toys.
(2) Company A is a publicly listed multinational entertainment and toy company headquartered in Tokyo, Japan.
(3) Company B is a privately held multinational toy company headquartered in Billund, Denmark.
(4) Company C is a publicly listed multinational toy and family entertainment company headquartered in El
Segundo, United States.
(5) Company D is a privately held assembly toy company headquartered in Shantou, China.
In terms of GMV in 2023, China’s assembly character toy market is highly concentrated,
with the top five market players accounted for a total market share of 76.9%. The Group, as
the largest player in the assembly character toy market in China, has a market share of 30.3%.
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Ranking of Assembly Character Toy Industry Players in terms of GMV (1), China, 2023
Ranking Company Main Business GMV (1)
Market
Share
(RMB
Billion) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118The Group Mainly assembly character toys 1.7 30.3%
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company A Games, toys, IP production, etc. 1.2 20.0%
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company B Brick toys 0.9 14.8%
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company D (2) Assembly toys 0.6 10.4%
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Company E (3) IP toys 0.1 1.4%
Source: Frost & Sullivan
Notes:
(1) GMV only includes the retail sales generated from sales of assembly character toys through official channels
in China.
(2) Company D is a privately held assembly toy company headquartered in Shantou, China.
(3) Company E is an IP toy company and is a subsidiary of a publicly listed retailer of lifestyle products
headquartered in Guangzhou, China.
SOURCE OF INFORMATION
In connection with the Global Offering, we engaged Frost & Sullivan, an independent
market research consultant, to conduct an analysis of, and to prepare the Frost & Sullivan
Report about, the assembly character toy market. Frost & Sullivan is an independent global
consulting firm founded in 1961 in New Y ork and its services include, among others, industry
consulting, market strategic consulting and corporate training. In connection with the market
research services provided, we have paid a fee of RMB550,000 to Frost & Sullivan, which we
believe to be consistent with market rates.
In compiling and preparing the Frost & Sullivan Report, Frost & Sullivan conducted (i)
primary research, which involved discussing the status of the industry with certain leading
industry participants, and interviews with industry experts on a best-effort basis to collect
information in aiding in-depth analysis; and (ii) secondary research, which involved reviewing
company reports, independent research reports and data based on its own research database.
The market projections in the Frost & Sullivan Report are based on the following key
assumptions during the forecast period: (i) the social, economic and political conditions
currently discussed will remain stable during the forecast period; and (ii) the relevant policies
on the toy industry will remain unchanged in material aspects during the forecast period.
Except as otherwise noted, all the data and forecasts contained in this section are derived
from the Frost & Sullivan Report. The commissioned report has been prepared by Frost &
Sullivan independently without the influence from the Company or other interested parties.
Our Directors confirm that, to the best of their knowledge, after making reasonable inquiries,
there is no material and adverse change in the market information since the date of the Frost
& Sullivan Report, which may qualify, contradict or have an impact on the information in this
section.
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REGULATIONS ON ASSEMBLY CHARACTER TOYS
Regulations on Consumer Protection
Pursuant to the Law of the People’s Republic of China on the Protection of Consumer
Rights and Interests (2013 Amendment) (the “ PRC Consumer Protection Law ”, ʕശɛ͏
‘(2013͍)), promulgated by the Standing Committee of the
National People’s Congress (the “ SCNPC ”,ึ) on October 31,
1993, and last amended on October 25, 2013, and became effective on March 15, 2014,
Business Operators shall provide consumers with truthful and full information concerning the
quality, performance, purpose and term of validity of the goods or services they provide and
shall not make any false or misleading statements. Business Operators shall:
1. ensure that goods and services provided to consumers comply with relevant laws and
regulations, including requirements regarding personal safety and protection of
property;
2. issue vouchers for goods or services to consumers in accordance with relevant
national regulations or business practices or upon the request of a consumer;
3. ensure the quality, functionality, application and duration of use of the goods or
services under normal use and ensure that the actual quality of the goods or services
are consistent with that displayed in advertising materials, product descriptions,
sample apparel or any other manners;
4. properly perform its responsibilities for guaranteed repair, replacement, return or
other liability in accordance with national regulations or any agreement with
consumers;
5. not set unreasonable or unfair terms for consumers or excluding itself from civil
liability for undermining the legal rights and interests of consumers by means of
standard contracts, circulars, announcements, shop notices and the like;
6. listen to the consumers’ opinions on the commodities and services they supply and
accept consumers’ supervision;
7. not insult or slander consumers, may not search the body of consumers or the
articles they carry with them, and may not violate the personal freedom of
consumers.
Violations of the PRC Consumer Protection Law may result in the imposition of fines. In
addition, the relevant Business Operator will be ordered to suspend its operations and its
business licence will be revoked. Criminal liability may be incurred if the Business Operator
constitutes crime. According to the PRC Consumer Protection Law, a consumer whose legal
rights and interests are prejudiced during the purchase or use of goods may demand
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compensation from the seller. Where the responsibility lies with the manufacturer or another
seller that provides the goods to the seller, the seller shall, after settling the claim, have the
right to recover such claim from that manufacturer or that other seller. Consumers or parties
who suffer injuries or property losses due to product defects in commodities may demand
compensation from the manufacturer as well as the seller. Where the responsibility lies with the
manufacturer, the seller shall, after settling the claim, have the right to recover such claim from
the manufacturer, and vice versa.
Regulations on Products Quality and Liability
The principal legal provisions governing product liability are set out in the Product
Quality Law of the People’s Republic of China (2018 Amendment) (the “ PRC Product
Quality Law ”,‘(2018͍)), which was promulgated by the
SCNPC on February 22, 1993, became effective on September 1, 1993 and was last amended
and became effective on December 29, 2018. The PRC Product Quality Law is applicable to
all activities of production and sale of any product within the territory of the PRC, and the
manufacturers and sellers shall be liable for product quality in accordance with the PRC
Product Quality Law. In the event of a violation of any legal provisions of the PRC Product
Quality Law, manufacturers and sellers may be fined, suspended of operation, confiscated of
any products illegally manufactured or sold and the proceeds gained therefrom or stripped of
business licenses, and where the circumstances are serious, criminal liability shall be pursued.
Consumers or other victims suffering personal injuries or property damage resulting from
defects in commodities may demand compensations either from the sellers or from the
manufacturers. If the liability lies with the manufacturers, the sellers shall have the right to
recover the compensations from the manufacturers after paying the compensations, or vice
versa.
According to the Civil Code of the People’s Republic of China (the “ PRC Civil Code ”
Պ‘), which was adopted by the National People’s Congress of the
PRC (the “ NPC”,ɽึ) and promulgated accordingly by the President Order
No. 45 on May 28, 2020 and became effective on January 1, 2021, a manufacturer or a
commercial seller is subject to liability for harm to persons or property caused by the product
defects. The infringed may seek compensation from the manufacturer or the commercial seller.
Where the infringed seeks compensation from the commercial seller, the commercial seller
shall have the right to make a claim against the liable manufacturer after it has made
compensation. Where any harm is caused to another person by a defective product and the
defect is caused by the fault of a third party such as carrier or warehouseman, the manufacturer
or seller of the product that has paid the compensation shall be entitled to be reimbursed by the
third party. Where any defect of a product is discovered after the product is put into circulation,
the manufacturer or seller shall take such remedial measures as warning and recall in a timely
manner, otherwise any failure to react timely or sufficiently that concurrently causes damages
shall subject such manufacturer or seller to tort liabilities. However, where a manufacturer or
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seller is aware of any defect of a product but knowingly refuses to terminate its operation
activities, severely jeopardizing the life and health of any another person, such person or its
successor suffering such tort shall be entitled to punitive damages or other indemnifications to
the extent permitted by laws.
Regulations on Pricing
According to the Pricing Law of the People’s Republic of China (ࣸ
‘), promulgated by the SCNPC on December 29, 1997, and became effective on May 1,
1998, Business Operators shall follow the principles of fairness, lawfulness and good faith in
fixing prices. Business Operators shall not commit any illegitimate price acts: colluding with
others to manipulate the market price, thus harming the lawful rights and interests of other
Operators or consumers; besides the disposal of perishable, seasonal and overstocked
commodities at reduced prices in accordance with the law, dumping commodities at prices
lower than the cost in order to drive out rivals or monopolize the market, thus disrupting the
normal production and operation order and impairing the interests of the State or the lawful
rights and interests of other Operators; fabricating and spreading information about price hikes
and forcing up prices, thus stimulating excessive commodity price hikes; using false or
misleading means in terms of price to deceive consumers or other Operators into trading with
them; employing price discrimination against other Operators with equal transaction conditions
while providing the same commodities or services; forcing up or forcing down prices in
disguised form by raising or lowering grades when purchasing or selling commodities or
providing services; making exorbitant profits in violation of the provisions of laws and
regulations; or other illegitimate price acts prohibited by laws and administrative regulations.
Where a Business Operator commits any illegitimate price acts, such Operator shall be ordered
to make correction, and the illegal gains thereof shall be confiscated, a fine not more than five
times the illegal gains may be imposed on such Operator; if there are no illegal gains, such
Operator shall be given a warning and may also be fined; if the circumstances are serious, such
Operator shall be ordered to suspend the business for rectification, or have the business license
thereof revoked by the administrative department for industry and commerce, or should such
illegitimate price acts be otherwise subject to any penalties or punitive orders under other
relevant PRC applicable laws, such laws shall also apply and business operators shall abide by
such laws.
Regulations on Unfair Competition
The Anti-Unfair Competition Law of the People’s Republic of China (2019 Amendment)
(the “ PRC Anti-Unfair Competition Law ”,‘(2019ࡌ
͍)), which was promulgated by the SCNPC on September 2, 1993, and last amended and
became effective on April 23, 2019, prohibits Business Operators from performing unfair
competitions. According to the PRC Anti-Unfair Competition Law, Business Operators shall
not perform any confusing acts that will enable people to mistake its products for another
business’s products or believe certain relations exist between its products and any business’s
products, such as unauthorized use of a mark that is identical or similar to the name, packaging
or decoration of another business’s commodity, which has influence to a certain extent;
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unauthorized use of another business’s corporate name (including its shortened name, trade
name, etc.), the name of a social group (including its shortened name, etc.), or the name of an
individual (including his/her pen name, stage name, translated name, etc.), which has influence
to a certain extent; unauthorized use of the main domain name, website name or webpage,
which has influence to a certain extent; and other confusing acts that are sufficient to enable
people to mistake its products for another business’s products or believe certain relations exist
between its products and any business’s products. Where a Business Operator performs any
confusing act, the supervision and inspection authority shall order it to cease the offense, and
confiscate its illicit commodities. If the illicit turnover exceeds RMB50,000, it shall be fined
up to five times the illicit turnover. If there is no illicit turnover or the illicit turnover is less
than RMB50,000, it shall be fined up to RMB250,000; where the circumstance is serious, its
business license shall be revoked.
Business Operators shall not conduct commercial promotions for the performance,
function, quality, sales status, user evaluation, honor received concerning its products in a false
or misleading manner, attempting to cheat or mislead consumers. Where a Business Operator
conducts commercial promotions for its commodities in a false or misleading manner, or assists
other Business Operators with commercial promotions in a false or misleading manner by way
of organizing false transactions or by other means, the competent supervision and inspection
authority shall order the Business Operator to cease its violations and impose on it a fine of
between RMB200,000 and RMB1,000,000; where the circumstance is serious, it shall be fined
between RMB1,000,000 and RMB2,000,000, and its business license may be revoked. Where
a Business Operator constitutes the releasing of a false advertisement, it shall be punished
according to the Advertising Law of the People’s Republic of China.
Regulations on Advertising
According to the Advertising Law of the People’s Republic of China (2021 Amendment)
(‘(2021͍)), promulgated by the SCNPC on October 27, 1994,
and last amended and became effective on April 29, 2021, no advertisement shall contain any
false or misleading information, and shall not deceive or mislead consumers. Where a false
advertisement is published, the advertisers shall be ordered to cease publishing the
advertisements, minimize and eliminate any adverse effects to a corresponding extent, and a
fine of not less than three times and not more than five times the advertising fees shall be
imposed, and where the advertising fees cannot be calculated or are significantly low, a fine
of not less than RMB200,000 and not more than RMB1,000,000 shall be imposed; where the
illegal activities have been committed more than three times within two years or there are other
serious circumstances, a fine of not less than five times and not more than ten times the
advertising fees shall be imposed, and where the advertising fees cannot be calculated or are
significantly low, a fine of not less than RMB1,000,000 and not more than RMB2,000,000 shall
be imposed; the business licenses may be revoked, and the approval documents for the
advertisement may be revoked and void, and any applications by such advertisers for
advertisement review may be no more accepted within the following one (1) year. With regard
to publishing false advertisements that deceive or mislead consumers, causing damage to the
legitimate rights and interests of consumers who have purchased the products or used the
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services so advertised, the advertisers shall bear civil responsibilities in accordance with the
law. Where an advertising agent or advertisement publisher fails to provide the true name,
address and valid contact information of the advertiser(s), the consumers may require the
advertising agent or advertisement publisher to make advance compensation. In case that the
advertising agents, advertisement publishers or advertisement endorsers for such
advertisements design, produce, provide agency, publish or make endorsements or testimonials
for the advertisements even though they know or should know the advertisements are false,
they shall bear joint and several liabilities with the advertisers concerned.
Regulations on Purchase Contract
Pursuant to the PRC Civil Code, where the purpose of a contract cannot be achieved
because the quality of the subject matter does not comply with the quality requirements, the
buyer may refuse to accept the subject matter or terminate the contract. Where the buyer
requests to return the subject matter or terminate the contract in accordance with PRC
applicable laws, the seller shall bear the risk of return of the payment to buyer and liquidation
damages to the subject matter. The seller shall deliver the subject matter according to the
agreed quality requirements. In case that the seller provides the quality specifications
concerning the subject matter, the delivered subject matter shall comply with the quality
requirements in such specifications. If the terms in relation to quality are not met, the liability
for breach of contract shall be borne by the seller in accordance with the agreement between
the parties.
Regulations on Import and Export of Toys
The Foreign Trade Law of the People’s Republic of China (2022 Amendment) (the “ PRC
Foreign Trade Law ”,‘(2022͍)) was promulgated by the
SCNPC on May 12, 1994, and last amended on December 30, 2022 and came into effective on
the same date. Pursuant to the PRC Foreign Trade Law, the State allows free import and export
of goods and technologies, unless it is otherwise provided under the laws and administrative
regulations. According to the provisions of the PRC Foreign Trade Law, the State may restrict
or prohibit the import or export of relevant goods or technologies for certain reasons. Import
and export of goods that are banned or restricted for import and export without permission shall
be handled and punished by the Customs in accordance with the provisions of laws and
administrative rules; if crime is constituted, the criminal liabilities shall be ascertained.
According to the Customs Law of the PRC (2021 Amendment) ( ʕശɛ͏΍ձ਷ऎᗫ
‘(2021͍)) promulgated by the SCNPC on January 22, 1987 and last amended on
April 29, 2021 and became effective on the same date, where an enterprise engages in import
or export of goods which goes through customs declaration formalities, it shall be subject to
registration by customs or shall authorise customs clearing enterprise to handle customs
declaration formalities.
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Measures for the Inspection, Supervision and Administration of Import and Export Toys
(2018 Revision) (‘(2018ࠈࡌwas promulgated by the
General Administration of Quality Supervision, Inspection and Quarantine of the PRC ( ʕശɛ
ᐼ҅) on March 2, 2009, and amended by the General
Administration of Customs ( ऎᗫᐼ໇) and became effective on April 28, 2018, May 29, 2018
and November 23, 2018. Imported toys shall be inspected in accordance with the mandatory
requirements of the national technical specifications of China. Exported toys shall be inspected
according to the technical regulations and standards of the importing country or region. If the
technical requirements agreed by the two parties are higher than the technical regulations and
standards, the inspection shall be carried out in accordance with the agreed requirements. If the
technical regulations and standards of the importing country or region are not clearly defined,
the inspection shall be carried out in accordance with the mandatory requirements of the
national technical specifications of China. Where an intergovernmental treaty is made in place,
the inspection shall be carried out in accordance with the requirements stipulated therein. When
exported toys are inspected, in addition to the relevant materials in accordance with the
Provisions on Entry and Exit Inspection and Quarantine, the product quality and safety
compliance statement shall be provided at the same time. When the exported toy is first
inspected, the test report issued by the toy laboratory and other materials as stipulated by the
General Administration of Customs shall be provided.
Regulations on Lease of Property
Pursuant to the Administrative Measures for Commodity Housing Tenancy (܊גۜ
‘) issued by the Ministry of Housing and Urban-Rural Development (۬
ண௅) on December 1, 2010 and came into effect on February 1, 2011, the parties
concerned to a housing tenancy shall go through the housing tenancy registration and filing
formalities with the competent construction (real-estate) departments of the People’s
Government of the municipalities, cities and counties where the housing is located within
30 days after the housing tenancy contract is signed. Where the content of the housing tenancy
registration is altered, or the housing tenancy contract is renewed or terminated, the parties
concerned shall, within 30 days, go through housing tenancy registration amendment, renewal
or termination formalities at the department which originally registered the housing tenancy.
The competent construction (real estate) departments of the People’s Government of the
municipalities, cities and counties shall urge those who do not register on time hereof to make
corrections within a specified time limit, and shall impose a fine below RMB1,000 on
individuals who fail to make corrections within the specified time limit, and a fine between
RMB1,000 and RMB10,000 on institutions which fail to make corrections within the specified
time limit, though such lease is valid and binding according to Provisions of the Supreme
People’s Court on Certain Issues Related to the Application of Law in the Trial of Civil Cases
Involving Disputes on Housing Lease in Cities and Suburban Areas (2020 Amendment) ( ௰
༆ᙑ‘(2020͍)).
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Regulations on Toys
Assembly character toys products are currently regulated by the Announcement on
Matters Relating to the Implementation of National Standards on Toy Safety Series (ྼ
ʮѓ‘) issued and implemented on December 31, 2015,
which establishes a series of national safety standards for toy products.
Regulations on Blind Boxes
The Compliance Guidelines for Blind Box Business Activities (for Trial Implementation)
(the “ Blind Boxes Guidelines ”,ˏ(༊Б)‘) was promulgated and
effective by the SAMR on June 8, 2023. According to the Blind Boxes Guidelines, blind box
business operators shall set fair prices for blind boxes, avoiding unmarked fees, overpricing,
or price fraud. Blind box business operators are prohibited from indirectly induce consumption
through arbitrarily adjusting the probabilities for a specific model being selected from a given
blind box against the publicly disclosed probabilities, and altering the relevant selection
outcome of a specific blind box. Blind box business operators shall not sell blind boxes to the
minors under the age of eight. Where blind boxes are sold to the minors aged eight or above,
the blind box business operators shall ensure the relevant guardians has agreed to the purchase.
Blind box business operators shall publicize the key product details of the blind boxes to
consumers, including product names, product categories, product specifications, the products
potentially contained in a given box and the relevant price range, product selection rules which
may set out the format of participation such as via online or offline method and probabilities
for a specific model being selected, as well as the quantity of limited-edition products. Blind
box business operators are encouraged to promise not hoarding, hyping, or entering the
secondary market. In addition, for blind boxes sold via non-instant methods such as offline
stores where the consumers will not know the selection outcomes until opening the blind box,
blind box business operators must retain the records of selection rules and probabilities and
establish a corresponding sampling inspection mechanism. For blind boxes sold through instant
online methods, through which the consumers will know the selection outcome instantly,
operators must retain the records of selection rules and probabilities and complete records of
selection outcome. The relevant record retention time is generally not less than three years.
REGULATIONS ON INTELLECTUAL PROPERTY RIGHTS
Patent
In accordance with the Patent Law of the People’s Republic of China (2020 Amendment)
(‘(2020͍)) which was promulgated by the SCNPC on March 12,
1984 and latest amended on October 17, 2020, with the latest revision effective on June 1,
2021, the Implementation Regulations for the Patent Law of the People’s Republic of China
(2023 Revision) (‘(2023ࠈࡌwhich was promulgated by
the State Council on December 21, 1992 and latest amended on December 11, 2023, with the
latest revision effective on January 20, 2024, and the Public Announcement on Measures on
Filing of Patent Licensing Contracts (‘) which was
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promulgated by the State Intellectual Property Office on June 27, 2011 and came into effect on
August 1, 2011, patent in PRC shall be categorized as invention, utility model and design. The
duration of patent rights for an invention shall be 20 years, the duration of patent rights for a
utility model shall be 10 years and the duration of patent rights for a design shall be 15 years,
commencing from the filing date. Any organization or individual proposing to implement the
patent of others shall enter into a licensing contract with the patentee for implementation and
pay royalties to the patentee. And the State Intellectual Property Office shall be responsible for
filing of patent licensing contracts nationwide. The parties concerned shall complete filing
formalities within three months from the effective date of a patent licensing contract.
Trademark
In accordance with the Trademark Law of the People’s Republic of China (2019
Amendment) (‘(2019͍)) which was promulgated by SCNPC on
August 23, 1982, and was latest amended on April 23, 2019, with the latest revision effective
on November 1, 2019, and the Implementation Regulations for the Trademark Law of the
People’s Republic of China (2014 Revision) (ૢԷ‘(2014ࠈࡌ))
which was promulgated by the State Council on August 3, 2002 and was latest amended on
April 29, 2014, with the latest revision effective on May 1, 2014, trademarks approved and
registered by the trademark bureau are registered trademarks, including commodity
trademarks, service marks and collective trademarks, certification marks; trademark registrants
are entitled to exclusive rights to use trademark and are protected by the law. A registered
trademark shall be valid for 10 years, commencing from the date of registration. Use of a
trademark identical or similar to a registered trademark on the same type of commodities
without licensing by the trademark registrant shall be deemed as infringement of exclusive
rights to use registered trademarks.
Domain Name
In accordance with the Administrative Measures on Internet Domain Names ( ʝᑌၣਹ
‘) which was promulgated by the Ministry of Industry and Information
Technology (the “ MIIT ”,ʷ௅) on August 24, 2017 and came into effect on
November 1, 2017, the Implementing Rules for the Registration of National Top-level Domain
Names (‘) and Procedural Rules for Resolution of Disputes
over National Top-level Domain Names (‘) which were
promulgated by China Internet Network Information Center on June 18, 2019 and came into
effect on the same date, the domain name registration services shall in principle implement
“first apply first register”; where the corresponding detailed rules for domain name registration
stipulate otherwise, such provisions shall prevail. The domain name disputes shall be accepted
and solved by a domain name dispute resolution body as recognized by the China Internet
Network Information Center.
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In accordance with the Notice of the Ministry of Industry and Information Technology on
Regulating the Use of Domain Names in Providing Internet-based Information Services ( ʈ
‘) (hereinafter referred to as
“Notice ”), which was promulgated by the MIIT on November 27, 2017 and came into effect
on January 1, 2018, the Internet access service provider concerned shall check the real identity
information of the domain name registrant via the Record-filing System, and shall not provide
access services if the Internet-based information service provider fails to provide real identity
information or the identity information provided is inaccurate or incomplete, with the
exception of domain names that have been filed for record with the Record-filing System prior
to the effectiveness of this Notice.
Copyright and Computer Software
In accordance with the Copyright Law of the People’s Republic China (2020 Amendment)
(‘(2020͍)) which was promulgated by the SCNPC on
September 7, 1990 and latest amended on November 11, 2020, with latest revision effective on
June 1, 2021, Chinese citizens, legal persons or organizations without legal personality enjoy
copyright over their works, whether published or not, including written works; oral works;
musical, dramatic, opera, dance, acrobatic artistic works; fine arts, architectural works;
photographic works; audio-visual works; graphic works and model works, such as engineering
design plan, product design plan, map, schematic diagram, etc.; computer software and any
other intellectual achievements which comply with the characteristics of the works. Copyright
shall include the following personal rights and property rights: publication right, right of
authorship, right of revision, right to preserve the integrity of work, reproduction right,
distribution right, rental right, exhibition right, performance right, screening right,
broadcasting right, information network transmission right, filming right, adaptation right,
translation right, compilation right, and any other rights enjoyed by a copyright holder.
The Regulations on Computer Software Protection (2013 Revision) (ᚐૢ
Է‘(2013ࠈࡌwhich was promulgated on June 4, 1991, amended on January 30, 2013 and
became effective on March 1, 2013 by the State Council, stipulates that Chinese residents, legal
entities or other organizations enjoy copyright in the software which they have developed,
whether published or not, and a software copyright owner may register it with the software
registration institution recognized by the copyright administration department of the State
Council. The Measures for the Registration of Computer Software Copyright (ၑዚழ΁ഹ
‘), promulgated by the National Copyright Administration on February 20, 2002
with immediate effect, regulates registration of software copyright, exclusive licensing
contracts for software copyright and transfer contracts. The Copyright Protection Center of
China (the “ CPCC ”) is the designated software registration authority. The CPCC grants
registration certificates to computer software copyright applicants which conform to the
provisions of both the Regulations on Computer Software Protection and the Measures for the
Registration of Computer Software Copyright.
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Trade Secrets
The PRC Anti-Unfair Competition Law also sets up regulations to protect Trade Secrets.
Business Operators shall not engage in any infringements of trade secrets, such as obtaining an
obligee’s trade secrets by theft, bribery, fraud, intimidation, electronic intrusion or other
improper means; disclosing, using, or allowing others to use an obligee’s trade secrets obtained
by the means mentioned in the preceding paragraph; disclosing, using or allowing others to use
an obligee’s trade secrets in violation of confidentiality obligations or the obligee’s
requirements on keeping such trade secrets confidential; or obtaining, disclosing, using or
allowing any other party to use an obligee’s trade secrets by instigating, tempting or helping
any other party to violate the confidentiality obligations or the obligee’s requirements on
keeping such trade secrets confidential. Where a Business Operator infringes any trade secret,
the supervision and inspection authority shall order it to cease the illegal act, confiscate the
illegal gains and impose on it a fine of between RMB100,000 and RMB1 million; where the
circumstance is serious, the fine shall be between RMB500,000 and RMB5 million.
REGULATIONS ON ONLINE BUSINESS AND DATA COMPLIANCE
Regulations on Online Trading and E-Commerce
In accordance with the Measures for the Supervision and Administration of Online
Transactions (the “ Measures for Online Transaction ”,‘), which
was promulgated by the State Administration for Market Regulation (the “ SAMR ”) on March
15, 2021, which came into effect on May 1, 2021, any business activity of selling goods or
providing services through the Internet within the PRC shall abide by the laws and regulations
of the PRC and the provisions of the Measures for Online Transaction. Measures for Online
Transaction reinforce the operation requirements as provided under the PRC E-Commerce Law
and the principles of legality, rationality and necessity in the collection and use of the users’
information and disclosure of the rules, purposes, methods and scopes of collection and use of
user information specified in the Cyber Security Law of the PRC. Measures for Online
Transaction also provide that the business operator through online platform (i) shall not use
false transactions, fabricated user review to conduct false or misleading business promotion, so
as to defraud or mislead consumers; (ii) shall not eliminate or restrict competition, damage or
ruin the competitor’s reputation; (iii) shall not force consumers to agree with the collection and
use of their personal information that is not directly related to such operator’s business
activities by means of general authorization, default authorization, bundling with other
authorization, termination of installation and use.
The SCNPC enacted the E-Commerce Law of the People’s Republic of China (the “ PRC
E-Commerce Law ”,‘) on August 31, 2018, which became
effective on January 1, 2019. Under the PRC E-Commerce Law, e-commerce refers to
operating activities of selling goods or providing services through the internet or other
information networks. The PRC E-Commerce Law generally applies to: (i) Platform Operators,
which refer to legal persons or unincorporated organizations that provide network places of
business, transaction matching, information release and other services to enable the transaction
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parties to carry out independent transaction activities; (ii) Operators on the platform, which
refer to e-commerce Operators that sell goods or provide services to customers through
e-commerce platforms; and (iii) other e-commerce Operators that sell goods or provide
services through self-established websites or other network services. The PRC E-commerce
Law also provides rules in relation to e-commerce contracts, dispute settlements, e-commerce
development as well as legal liabilities involved in e-commerce. An e-commerce Business
Operator shall make market participant registration and obtain relevant administrative
licensing according to the law.
Regulations on Mobile Internet Applications Information Services
In addition to the Telecommunications Regulations and other regulations above, mobile
internet applications (the “ Apps ”) as well as the internet application store are specially
regulated by the Administrative Provisions on Mobile Internet Applications Information
Services (2022 Amendment) (the “ APP Provisions ”,ਕ၍ଣ஝
‘(2022͍)), which were promulgated by the Cyberspace Administration of China (the
“CAC”,܃on June 28, 2016, and last amended in June 14, 2022, and
became effective on August 1, 2022. APP Provisions regulates that, the Apps information
service providers shall satisfy relevant qualifications required by laws and regulations, strictly
carry out the information security management responsibilities and fulfill their obligations in
various aspects relating to the real-name system, protection of users’ information and the
examination and management of information content. Furthermore, on December 16, 2016, the
MIIT promulgated the Interim Measures on the Administration of Pre-Installation and
Distribution of Applications for Mobile Smart Terminals (the “ Mobile Application Interim
Measures ”,‘), which took effect on July
1, 2017. The Mobile Application Interim Measures require, among others, that internet
information service providers shall ensure that a mobile application, as well as its ancillary
resource files, configuration files and user data can be uninstalled by a user on a convenient
basis, unless it is a basic function software, which refers to a software that supports the normal
functioning of hardware and operating system of a mobile smart device.
Regulations on Cybersecurity and Data Privacy and Protection
The Cybersecurity Law of the People’s Republic of China (the “ Cybersecurity Law ”,
‘), which was promulgated on November 7, 2016 and came into
effect on June 1, 2017, requires that when constructing and operating a network, or providing
services through a network, technical measures and other necessary measures shall be taken in
accordance with laws, administrative regulations and the compulsory requirements set forth in
national standards to ensure the secure and stable operation of the network, to effectively cope
with cybersecurity incidents, to prevent criminal activities committed on the network, and to
maintain the integrity, confidentiality and availability of network data. The Cybersecurity Law
emphasizes that any individuals and organizations that use networks must not endanger
cybersecurity or use networks to engage in activities endangering national security, economic
order and social order or infringing the reputation, privacy, intellectual property rights and
other lawful rights and interests of others. The Cybersecurity Law also reiterates certain basic
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principles and requirements on personal information protection previously specified in other
existing laws and regulations. Any violation of the provisions and requirements under the
Cybersecurity Law may subject an internet service provider to rectifications, warnings, fines,
confiscation of illegal gains, revocation of business permits, cancellation of business license,
closedown of websites or even criminal liabilities.
The Data Security Law of the People’s Republic of China (the “ Data Security Law ”,ʕ
‘) was passed on June 10, 2021 and came into effect on September
1, 2021. The Data Security Law requires a data processor to establish and improve a
whole-process data security management system, organize data security education and training,
and take corresponding technical measures and other necessary measures to safeguard data
security. In conducting data processing activities using the Internet or any other information
networks, a data processor shall perform the above data security protection obligations on the
basis of the hierarchical cybersecurity protection system. Any violation of the provisions and
requirements under the Data Security Law may subject a data processor to rectifications,
warnings, fines, suspension of the related business, revocation of business permits or even
criminal liabilities.
The Personal Information Protection Law of the PRC (the “ Personal Information
Protection Law ”,‘) was promulgated on August 20, 2021
and came into effect on November 1, 2021. Instead of relying solely on “notification and
consent” as established in the Cybersecurity Law, the Personal Information Protection Law
reiterates the circumstances under which a personal information processor could process
personal information and the requirements for such circumstances, such as when (i) the
individual’s consent has been obtained; (ii) the processing is necessary for the conclusion or
performance of a contract to which the individual is a party; (iii) the processing is necessary
to fulfill statutory duties and statutory obligations; (iv) the processing is necessary to respond
to public health emergencies or protect a natural person’s life, health and property safety under
emergency circumstances; (v) the personal information that has been made public is processed
within a reasonable scope in accordance with this Law; (vi) personal information is processed
within a reasonable scope to conduct news reporting, public opinion-based supervision and
other activities in the public interest; or (vii) under any other circumstance as provided by any
law or regulation. It also stipulates the obligations of a personal information processor. Any
violation of the provisions and requirements under the Personal Information Protection Law
may subject a personal information processor to rectifications, warnings, fines, suspension of
the related business, revocation of licenses, inclusion in relevant credit record, or even criminal
liabilities.
In addition, on September 24, 2024, the State Council promulgated the Data Security
Regulations which will come into force on January 1, 2025. The Data Security Regulations
reiterate that the data processors which may possibly affect national security shall apply for
cybersecurity review. Meanwhile, this regulation further clarifies the general provisions on
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network data security management, and also further supplements and refines the specific
requirements on personal information protection, important data security management,
cross-border security management of network data, and obligations of network platform
service providers.
On March 22, 2024, the CAC issued the Provisions on Promoting and Regulating
Cross-border Data Flow (‘). According to the provisions,
data processors are subject to security assessments conducted by the CAC prior to any
cross-border transfers of important data and personal information, if falling under any of the
following circumstances: (i) where the critical information infrastructure operator intends to
provide important data or personal information overseas; (ii) where the data processor other
than critical information infrastructure operators intends to provide important data overseas;
(iii) where the data processor other than critical information infrastructure operators, who has
provided personal information (excluding sensitive personal information) of at least one
million individuals or sensitive personal information of at least 10,000 individuals to overseas
recipients accumulatively since January 1 of any given calendar year, intends to provide
personal information overseas; and (iv) other circumstances where the security assessment of
cross-border data transfer is required as prescribed by the CAC.
On January 23, 2019, the CAC, the MIIT, the Ministry of Public Security, and the SAMR
jointly issued the Notice on Special Governance of Illegal Collection and Use of Personal
Information via Apps (࢝Appʮѓ‘), which
restates the requirement of legal collection and use of personal information, encourages App
operators to conduct security certifications, and encourages search engines and App stores to
clearly mark and recommend those certified Apps.
On November 28, 2019, the CAC, MIIT, the Ministry of Public Security and SAMR
jointly issued the Measures to Identify Illegal Collection and Usage of Personal Information by
Apps ( App‘), which came into effect on the same
day and lists six types of illegal collection and usage of personal information, including
“non-disclosure of collection and use rules,” “failure to expressly state the purpose, method
and scope of collecting and using personal information,” “collection or use of personal
information without the consent of users,” “collection of personal information unrelated to the
services they provide in violation of the principle of necessity,” “provision of personal
information without consent,” “failure to provide the function of deleting or correcting
personal information in accordance with the law” and “failure to disclose the information such
as ways of filing complaints and whistleblowing reports.”
On July 22, 2020, the MIIT issued the Notice of Ministry of Industry and Information
Technology on Carrying out Special Rectification Actions in Depth against the Infringement
upon Users’ Rights and Interests by Apps (ᐽଉપආAPP͜˒
‘), which lists four types of illegal collection and usage of personal
information, including “illegally processing personal information of users by the App and the
SDK,” “setting up obstacles and frequently harassing users,” “cheating and misleading users”
and “inadequate implementation of application distribution platforms’ responsibilities.”
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On August 22, 2019, the CAC issued the Provisions on the Cyber Protection of Children’s
Personal Information (‘), which became effective on October 1,
2019 and applies to the collection, storage, use, transfer and disclosure of the personal
information of the minors under the age of 14, i.e. the children, via the internet. Where a
personal information processor collects or uses a child’s personal information, it shall
formulate special personal information processing rules and obtain the consent of the child’s
parents or other guardians.
REGULATIONS ON FOREIGN INVESTMENT
Restrictions on Foreign Investment
Pursuant to the Catalogue of Industries for Encouraged Foreign Investment (2022
Edition) (the “ Catalogue ”,ོᎸ̮ਠҳ༟ପุͦ፽‘(2022وand the Special
Administrative Measures for Access of Foreign Investment (Negative List) (2021 Edition) (the
“Negative List ”,݄(૶ఊ) (2021و)‘), both promulgated
jointly by the Ministry of Commerce (the “ MOFCOM ”, ʕശɛ͏΍ձ਷ਠਕ௅) and the
National Development and Reform Commission (the “ NDRC ”,ึ) and
became effective on January 1, 2023, and January 1, 2022, respectively, design, production and
retail of pan-entertainment are permitted on foreign investment.
The PRC Foreign Investment Law
On March 15, 2019, the SCNPC approved the Foreign Investment Law of the PRC ( ʕ
‘), and on December 26, 2019, the State Council promulgated the
Implementing Rules of the Foreign Investment Law (ૢ
Է‘), or the Implementing Rules, to further clarify and elaborate the relevant provisions of the
Foreign Investment Law. The Foreign Investment Law and the Implementing Rules both took
effect on January 1, 2020 and replaced three previous major laws on foreign investments in
China, namely, the Sino-foreign Equity Joint V enture Law ( ʕശɛ͏΍ձ਷ʕ̮Υ༟຾ᐄΆ
‘), the Sino-foreign Cooperative Joint V enture Law ( ʕശɛ͏΍ձ਷ʕ̮ΥЪ຾ᐄΆ
‘) and the Wholly Foreign-owned Enterprise Law (‘),
together with their respective implementing rules. Pursuant to the Foreign Investment Law,
“foreign investments” refer to investment activities conducted by foreign investors (including
foreign natural persons, foreign enterprises or other foreign organizations) directly or
indirectly in the PRC, which include any of the following circumstances: (i) foreign investors
setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii)
foreign investors obtaining shares, equity interests, property portions or other similar rights
and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in
the PRC solely or jointly with other investors, and (iv) investment of other methods as
specified in laws, administrative regulations, or as stipulated by the State Council. The
Implementing Rules introduce a see-through principle and further provide that foreign-invested
enterprises that invest in the PRC shall also be governed by the Foreign Investment Law and
the Implementing Rules.
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Regulations on M&A and Overseas Listings
Pursuant to the Regulations on Mergers and Acquisitions of Domestic Enterprises by
Foreign Investors (2009 Revision) (the “ M&A Rules ”,஝
‘(2009ࠈࡌwhich was promulgated by the MOFCOM on August 8, 2006 and became
effective on September 8, 2006, and was last amended and became effective on June 22, 2009,
Foreign Investors must comply with the M&A Rules when they purchase equity interests of a
domestic company or subscribe the increased capital of a domestic company and thus changing
the nature of the domestic company into a foreign invested enterprise; or when the foreign
investors establish a foreign invested enterprise in China, purchase the assets of a domestic
company and operate the asset; or when the foreign investors purchase the asset of a domestic
company, establish a foreign invested enterprise by injecting such assets and operate the assets.
The M&A Rules requires companies with special purpose of overseas listing through
acquisitions of PRC domestic companies, which are controlled directly or indirectly by PRC
companies or individuals, to obtain the approval of the CSRC prior to publicly listing and
trading of such securities on an overseas stock exchange.
The Trial Administrative Measures of Overseas Securities Offering and Listing by
Domestic Companies and five supporting guidelines (the “ Overseas Listing Trial Measures ”,
ˏ) promulgated by the CSRC
on February 17, 2023 and became effective on March 31, 2023. The Overseas Listing Trial
Measures require, among others, that PRC domestic companies that seek to initially offer and
list securities in overseas markets, either directly or indirectly, file the required documents with
the CSRC after its application for overseas listing is submitted.
On February 24, 2023, the CSRC released the Provisions on Strengthening
Confidentiality and Archives Administration in Respect of Overseas Issuance and Listing of
Securities by Domestic Enterprises (the “ Confidentiality Provisions ”,̋੶ྤʫΆุྤ
‘), which became effective on March 31,
2023. Pursuant to the Confidentiality Provisions, domestic joint-stock enterprises listed in
overseas markets via direct offering and domestic operational entities of enterprises listed in
overseas markets via indirect offering must obtain approval and complete filing or other
requirements before they publicly disclose any documents and materials that contain state
secrets or government work secrets or that, if divulged, will jeopardize China’s national
security or public interest, or before they provide such documents or materials to entities or
individuals such as securities companies, securities service providers and overseas regulators.
Regulations on Foreign Exchange
According to the Foreign Currency Administration Rules of the People’s Republic of
China (2008 Revision) ( ʕശɛ͏΍ձ਷̮ි၍ଣૢԷ‘(2008ࠈࡌpromulgated by the
State Council on January 29, 1996 and last amended and became effective on August 5, 2008
and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment
(‘), which was promulgated by the People’s Bank of China on
June 20, 1996 and became effective on July 1, 1996, RMB is convertible into other currencies
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through their foreign exchange bank account for the purpose of current account items, such as
trade related receipts and payments, payment of interest and dividends. The conversion of
RMB into other currencies and remittance of the converted foreign currency outside the PRC
for the purpose of capital account items, such as direct equity investments, loans and
repatriation of investment, requires the prior approval from the State Administration of Foreign
Exchange (the “ SAFE ”,̮ි၍ଣ҅) or its local counterparts. For foreign exchange
proceeds under the capital accounts, approval from the SAFE is required for its retention or
sale to a financial institution engaging in settlement and sale of foreign exchange, except where
such approval is not required under the relevant rules and regulations of China. Generally,
foreign invested enterprises may convert RMB into foreign currencies and remit them out of
the PRC without the prior approval of the SAFE under the two following circumstances: (a)
when an enterprise needs to settle current account items in foreign currencies; and (b) when an
enterprise needs to distribute dividends to its foreign shareholders.
In accordance with the Circular of SAFE on Further Improving and Adjusting Foreign
Exchange Administration Policies for Direct Investment (ආɓӉҷආձ
‘) (hereinafter referred to as “ Circular 59 ”) which was
promulgated by SAFE on November 19, 2012, became effective on December 17, 2012, and
was last amended on December 30, 2019, approval is not required for the opening of an account
entry in foreign exchange accounts under direct investment. Circular 59 also simplifies the
capital verification and confirmation formalities for foreign invested enterprises (the “ FIEs ”)
and the foreign capital and foreign exchange registration formalities required for the foreign
investors to acquire equities from Chinese party, and it further improve the administration on
exchange settlement of FIEs.
According to the Notice of the SAFE on Further Simplifying and Improving the Foreign
Exchange Management Policies for Direct Investment (ආɓӉᔊʷձ
‘) (hereinafter referred to as “ Circular 13 ”), which was
promulgated by the SAFE on February 13, 2015 and came into effect on June 1, 2015, and was
amended on December 30, 2019, the foreign exchange registration under domestic direct
investment and the foreign exchange registration under overseas direct investment are directly
reviewed and handled by banks in accordance with the Circular 13. The SAFE and its branches
shall perform indirect regulation over the foreign exchange registration via banks.
According to the Circular on Relevant Issues Relating to Domestic Resident’s
Investment and Financing and Round-trip Investment through Special Purpose V ehicles ( ਷
ஷ
‘) (hereinafter referred to as “ Circular 37 ”), which was promulgated on July 4, 2014 and
came into effect on the same day, states that (i) a PRC resident, including a PRC resident
natural person or a PRC legal person, shall register with the local branch of the SAFE before
it contributes the assets of or its equity interests into a special purpose vehicle for the purpose
of investment and financing; and (ii) when the special purpose vehicle undergoes changes of
basic information, such as changes in PRC resident natural person shareholder, name or
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operating period, or occurrence of a material event, share capital of a PRC resident natural
person, performance of merger or split, the PRC resident shall register such changes with the
local branch of the SAFE in a timely manner.
The Notice of the State Administration of Foreign Exchange on Reforming the
Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises
(‘) (hereinafter
referred to as “ Circular 19 ”) was promulgated by SAFE on March 30, 2015, came into effect
on June 1, 2015 partially repealed on December 30, 2019 and partially amended by the Notice
of the State Administration of Foreign Exchange of Policies for Reforming and Regulating the
Control over Foreign Exchange Settlement under the Capital Account (׵
‘) promulgated by SAFE on June 9, 2016. Circular
19 superseded the Notice from the State Administration of Foreign Exchange on Reforming the
Administration Method of Settlement of Foreign Exchange Capitals of Foreign-invested
Enterprises (‘)
(hereinafter referred to as “ Circular 142 ”) from the effective date. Circular 19 specifies that
foreign exchange settlement by foreign-invested enterprise is subject to supervision under
foreign exchange settlement policies, and cancels certain foreign exchange restrictions under
Circular 142. However, Circular 19 restates that the use of capital of foreign invested
enterprises should follow the principle of truthfulness and self-use within the business scope
of an enterprise.
In accordance with the Notice from the State Administration of Foreign Exchange on
Reforming and Regulating the Policies of Administration of Foreign Exchange
Settlement for Capital Items (ஷ
‘) (hereinafter referred to as “ Circular 16 ”) which was promulgated by the State
Administration of Foreign Exchange on June 9, 2016 and came into effect on the same date,
an enterprise registered in China may, at its sole discretion, convert its foreign debts in a
foreign currency to RMB. Circular 16 provides a unified standard for foreign exchange under
capital items (including but not limited to foreign currency capital and foreign debt) which may
be convertible at the sole discretion of the enterprise. Such standard is applicable to all
enterprises registered in the PRC. In addition, Circular 16 restates that, unless otherwise
specified, an enterprise shall not directly or indirectly use RMB funds obtained as a result of
conversion of foreign currency funds, for purposes outside the business scope, or for securities
investment and investments wealth management other than capital protected products of banks
in China. Moreover, except within the business scope, RMB funds obtained as a result of
conversion shall not be used as loans to non-related companies; save for investment in a real
estate enterprise, RMB funds obtained as a result of conversion shall not be used for
construction or purchase of real estate which will not be used by the enterprise.
On October 23, 2019, the State Administration of Foreign Exchange released the Notice
of the State Administration of Foreign Exchange on Further Promoting the Facilitation of
Cross-border Trade and Investment (лʷ
‘), according to which, besides foreign-invested enterprises engaged in investment
business, non-investment foreign-invested enterprises are also permitted to make domestic
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equity investments with their capital funds in accordance with the laws provided that such
investments do not violate the Negative List and the target investment projects are genuine and
in compliance with laws. According to the Notice of the SAFE on Optimizing Foreign
Exchange Administration to Support the Development of Foreign-related Business (̮
‘), issued by the State Administration of
Foreign Exchange on April 10, 2020, eligible enterprises are allowed to make domestic
payments by using their capital funds, foreign credits and the income under capital accounts
of overseas listing, without submitting the evidentiary materials concerning authenticity of
such capital for banks in advance; provided that their capital use is authentic and in compliance
with administrative regulations on the use of income under capital accounts. The bank in
charge shall follow the principle of prudential business development to manage and control
relevant business risks, and conduct post spot checking on the facilitation of payment for the
income under capital accounts in accordance with relevant requirements.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign
Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of
Overseas Publicly-Listed Companies (ᛆ
‘) (the “ Stock Option Rules ”). In accordance with the
Stock Option Rules and relevant rules and regulations, PRC citizens or non-PRC citizens
residing in China for a continuous period of not less than one year, who participate in any stock
incentive plan of an overseas publicly listed company, subject to a few exceptions, must
register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of
such overseas listed company, and complete certain procedures. In addition, the State Taxation
Administration of the PRC has issued circulars concerning employee share options or restricted
shares. Under these circulars, employees working in the PRC who exercise share options, or
whose restricted shares vest, will be subject to PRC individual income tax. The PRC
subsidiaries of an overseas listed company have obligations to file documents related to
employee share options or restricted shares with relevant tax authorities and to withhold
individual income tax of these employees related to their share options or restricted shares. If
the employees fail to pay, or the PRC subsidiaries fail to withhold, their individual income tax
in accordance with relevant laws, rules and regulations, the PRC subsidiaries may face
sanctions imposed by the tax authorities or other PRC government authorities.
REGULATIONS ON LABOR
Regulations on Employment
According to the Labor Law of the People’s Republic of China (2018 Amendment) ( ʕ
‘(2018͍)) promulgated by the SCNPC on July 5, 1994 that became
effective on January 1, 1995, and last amended and became effective on December 29, 2018,
workers are entitled to fair employment, choice of occupation, labor remuneration, leave, a safe
workplace, a sanitation system, social insurance and welfare and certain other rights. The
working time for workers may not exceed eight hours per day and no more than 44 hours per
week on average. Employers shall establish and improve their work safety and sanitation
system, educate employees on safety and sanitation, and provide employees with a working
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environment that meets the national work safety and sanitation standards. Enterprises and
institutions shall establish and improve their system of workplace safety and sanitation, strictly
abide by state rules and standards on workplace safety, educate laborers in labor safety and
sanitation in China. Labor safety and sanitation facilities shall comply with state-fixed
standards.
Pursuant to the Labor Contract Law of the People’s Republic of China (2012 Amendment)
(the “ Labor Contract Law ”) (‘(2012͍)), which was
promulgated by the SCNPC on June 29, 2007, amended on December 28, 2012 and became
effective on July 1, 2013, labor contracts shall be concluded in writing if labor relationships
are to be or have been established between enterprises or institutions and the laborers.
Enterprises and institutions are forbidden to force laborers to work beyond the time limit and
employers shall pay laborers for overtime work in accordance with the laws and regulations.
In addition, labor wages shall not be lower than local standards on minimum wages and shall
be paid to laborers in a timely manner.
The Employment Promotion Law of the People’s Republic of China (2015 Amendment)
(‘(2015͍)), which was promulgated by the SCNPC on
August 30, 2007, amended and became effective on April 24, 2015, requires that individuals
have equal employment opportunities, both in hiring and in employment terms, without
discrimination on the basis of ethnicity, race, gender, religious belief, communicable disease
or rural residence. Under this law, companies are also required to provide employees with
vocational training. Administrative authorities at the county level or above are responsible for
implementing policies to promote employment.
Social Insurance and Housing Provident Fund
In accordance with the Social Insurance Law of the People’s Republic of China (2018
Revision) (‘(2018ࠈࡌwhich was promulgated by the
SCNPC on October 28, 2010 and was latest amended on December 29, 2018, with the latest
revision effective on the same date, employers are required to contribute, on behalf of their
employees, to a number of social security funds, including funds for basic pension insurance,
unemployment insurance, basic medical insurance, occupational injury insurance, and
maternity insurance. Employers failed to promptly contribute social security premiums in full
amount shall be ordered by the social security premium collection agency to make or
supplement contributions within a stipulated period, and shall be subject to a late payment fine
computed from the due date at the rate of 0.05% per day; where payment is not made within
the stipulated period, the relevant administrative authorities shall impose a fine ranging from
one to three times the amount of the amount in arrears.
In accordance with the Regulations on the Administration of Housing Provident Fund
(2019 Revision) (၍ଣૢԷ‘(2019ࠈࡌwhich was promulgated by the State
Council on April 3, 1999, and was latest amended on March 24, 2019, with the latest revision
effective on the same date, an employer shall make registration of contribution to the housing
provident fund with the housing provident fund management center, and go through the
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formalities of opening housing provident fund accounts on behalf of its employees. And an
employer fails to undertake contribution registration of housing provident fund or fails to go
through the formalities of opening housing provident fund accounts for its employees, the
housing provident fund management center shall order it to go through the formalities within
a prescribed time limit; where failing to do so at the expiration of the time limit, a fine of not
less than RMB10,000 nor more than RMB50,000 shall be imposed. An employer is overdue in
the contribution of, or underpays, the housing provident fund, the housing provident fund
management center shall order it to make the contribution within a prescribed time limit; where
the contribution has not been made after the expiration of the time limit, an application may
be made to a people’s court for compulsory enforcement.
REGULATIONS IN RELATION TO TAX
Enterprise Income Tax
In accordance with the EIT Law which was promulgated by the SCNPC on March 16,
2007, and was latest amended on December 29, 2018, with the latest revision effective on the
same date and the Implementation Regulations for the Enterprise Income Tax Law of the
People’s Republic of China (ૢԷ‘) which was
promulgated by the State Council on December 6, 2007, and was latest amended on April 23,
2019, with the latest revision effective on the same date, a uniform income tax rate of 25% will
be applied to resident enterprises and non-resident enterprises that have established institutions
and premises in China. Besides, enterprises established within the PRC, enterprises established
in accordance with the laws of other judicial districts whose “de facto management bodies” are
within the PRC are considered “resident enterprises” and subject to the uniform 25% enterprise
income tax rate for their income derived from both inside and outside the PRC. Corporate
income tax for key advanced and new technology enterprises supported by PRC shall be at a
reduced tax rate of 15%.
In accordance with the Administrative Measures on Accreditation of High-tech
Enterprises (‘) which was promulgated by the Ministry of
Science and Technology, the Ministry of Finance and the State Administration of Taxation on
April 14, 2008 and amended on January 29, 2016 and came into effect on January 1, 2016,
high-tech enterprises referred to in these Measures shall mean resident enterprises registered
in mainland China (excluding Hong Kong SAR, Macau SAR and Taiwan) which are
continuously engaging in research and development and technology commercialization within
the realm of the Regions of Advanced Technologies Strongly Supported by PRC, forming the
core independent intellectual property of the enterprise, and carrying out business activities on
such basis, which accredited pursuant to these Measures may declare and claim tax incentives
pursuant to the EIT Law and its Implementation Regulations, the Administrative Law of the
People’s Republic of China on the Levying and Collection of Taxes, the Implementation
Regulations for the Law of the People’s Republic of China on Administration of Tax Collection
(‘) etc. Upon obtaining the qualification as a
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high-tech enterprise, the enterprise shall complete tax reduction and exemption formalities
with the tax authorities in charge and the qualifications of an accredited high-tech enterprise
shall be valid for three years from the date of issuance of the certificate.
Value-added Tax
In accordance with the Provisional Regulations of the People’s Republic of China on
V alue-added Tax (2017 Revision) (೼ᅲБૢԷ‘(2017ࠈࡌwhich
was promulgated by the State Council on December 13, 1993, and was latest amended on
November 19, 2017, with the latest revision effective on the same date, the Detailed Rules for
the Implementation Rules for the Provisional Regulations the People’s Republic of China on
V alue-added Tax (2011 Revision) (‘(2011ࠈࡌ))
which was promulgated by the Ministry of Finance (௅) on December 25, 1993, and was
latest amended on October 28, 2011, with the latest revision effective on November 1, 2011,
In accordance with the Decisions on Abolishing the PRC Provisional Regulations on Business
Tax and Amending the PRC Provisional Regulations on V alue-Added Tax (ᄻ˟
<ʕശɛ͏΍ձ਷ᐄุ೼ᅲБૢԷ>ҷ<೼ᅲБૢԷ>‘) which
was promulgated by the State Council and effective on November 19, 2017 and the Notice of
the Ministry of Finance and the State Administration of Taxation on the Adjustment to V A T
Rates (‘) which was promulgated by the
Ministry of Finance and the State Administration of Taxation on April 4, 2018 and came into
effect on May 1, 2018, entities and individuals selling goods, services and intangible assets in
the People’s Republic of China V A T taxpayers and shall pay V A T. Taxpayers selling services
and intangible assets are subject to a tax rate of 6%, except in particular circumstances. If a
taxpayer is engaged in sale subject to V A T at the previously applicable rate of 17%, the tax rate
is reduced to 16%. In accordance with the Announcement on Policies for Deepening the V A T
Reform (ʮѓ‘) which was issued by the Ministry of
Finance, State Taxation Administration and General Administration of Customs on March 20,
2019 and came into effect on April 1, 2019, if a general V A T taxpayer is engaged in a V A T
taxable sale or imports goods at the previously applicable rate of 16%, the tax rate is reduced
to 13%.
Urban Maintenance and Construction Tax
In accordance with Urban Maintenance and Construction Tax Law of People’s Republic
of China (‘) which was promulgated by the SCNPC on
August 11, 2020 and came effect on September 1, 2021 and the Notice of the State Council on
Harmonizing the Urban Maintenance and Construction Tax and Educational Surcharges for
Chinese and Foreign-funded Enterprises and Individuals (ࡈ
‘) which was promulgated by the State Council
on October 18, 2010 and latest effective on December 1, 2010, entities and individuals which
are subject to consumption tax and V A T shall pay urban maintenance and construction tax. The
tax rate is 7% for a taxpayer who is domiciled in a downtown area, and 5% for a taxpayer who
is domiciled in a county or town, and 1% for a taxpayer who is domiciled outside a downtown
area, county or town.
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OUR HISTORY
Overview
We are a leader of assembly character toys in China. Our history traces back to December
2014, when Mr. Zhu, our founder, Chairman and chief executive officer, founded Bloks
Technology, the principal operating entity of the Group primarily engaging in the design,
research and development and sales of assembly toys.
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on July 28, 2021, and as a result of the Reorganization, the Company became
the offshore holding company of the current business of the Group. See “— Reorganization.”
Key milestones
The following sets out a summary of the key development milestones of the Group:
Y ear Milestone(s)
2014 Mr. Zhu founded Bloks Technology, the principal operating entity of the
Group.
2016 We started research and development of our brick-based toys.
2017 We launched the Magic Blocks, our self-developed IP , based on which we
rolled out brick-based toys.
2019 We started research and development of the assembly character toys.
2021 We were accredited as “High and New Technology Enterprise” by the
Shanghai Science and Technology Commission.
We entered into a license agreement and obtained the rights to design,
develop, produce and sell Ultraman assembly character toys.
2022 We launched our assembly character toys.
We launched Hero Infinity, our self-developed IP .
We were selected as the “National Intellectual Property Advantage
Enterprise” by the National Intellectual Property Administration.
2023 We obtained IP licenses in a large number of countries around the world from
the IP proprietors, which enabled us to offer assembly character toys in the
overseas markets.
We were selected as the “Shanghai Patent Work Demonstration Enterprise”
by the Shanghai Intellectual Property Administration.
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OUR PRINCIPAL SUBSIDIARIES
The following sets forth the information on our subsidiaries that have made material
contribution to our operating results during the Track Record Period.
Subsidiaries
Place of
incorporation
Date of
incorporation Registered capital Principal activities
Bloks Technology /H1118/H1118/H1118/H1118PRC December 24,
2014
RMB300,000,000 Design, research and
development and
sales of toys
Bloks Bricks /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118PRC March 1, 2019 RMB100,000,000 Design, research and
development and
sales of toys
OUR HISTORY AND MAJOR SHAREHOLDING CHANGE BEFORE
REORGANIZATION
Bloks Technology has been the principal operating entity of our Group since its
establishment. Bloks Technology was founded in the PRC by Mr. Zhu on December 24, 2014
with a registered capital of RMB10,000,000. Upon establishment, Bloks Technology was
owned as to 92% by Mr. Zhu and 8% by Mr. Lin Taijun (इё)( “ Mr. Lin ”), respectively.
From August 2015 to February 2018, Bloks Technology underwent a series of capital
increase and equity transfers, whereby Mr. Sheng Xiaofeng (ࢤ“() Mr. Sheng ”), our
executive Director and president became a shareholder, and Ningbo Shengteng Investment
Management Partnership (Limited Partnership) (໋ᙜҳ༟၍ଣΥྫΆุ(Υྫ))
(“Ningbo Shengteng ”) was set up for employee equity incentive platform. Upon completion
of such capital increase and equity transfers, Bloks Technology was owned as to 81% by Mr.
Zhu, 15% by Ningbo Shengteng, 3% by Mr. Sheng and 1% by Mr. Lin, respectively. In
November 2018, Mr. Lin transferred all his equity interests in Bloks Technology to Mr. Sheng,
and in November 2020, Mr. Sheng subsequently transferred the same equity interests to Mr.
Huang Zheng (݁“() Mr. Huang ”), our vice president.
From February 2018 to April 2021, Bloks Technology has undertaken a series of capital
increases and equity transfers to raise capital and/or to expand shareholder base, details of
which are set forth as follows.
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Series Angel Investment
Pursuant to the capital increase agreements among the following series angel investors
(each a “ Series Angel Investor ”), Bloks Technology and its then shareholders dated February
26, 2018, October 18, 2018, May 10, 2019, November 22, 2019 and March 2, 2020,
respectively, the Series Angel Investors and Mr. Zhu agreed to subscribe for an increased
registered capital of RMB8,009,808 to be issued by Bloks Technology at an aggregate
consideration of RMB857,000,000 (the “ Series Angel Investment ”). The respective
subscription amount and consideration paid by the Series Angel Investors and Mr. Zhu in the
Series Angel Investment were as follows:
Subscribers
Registered
Capital
Subscribed for
Consideration
Paid
(RMB) (RMB)
February 26, 2018
Mr. Lin Qi (փ)(1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,000,000 100,000,000
Mr. Chen Weirui ( ௓ਃ๿)/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,000,000 100,000,000
Hangzhou Jinyi Chuangpin Equity Investment
Partnership Enterprise (Limited Partnership) (؄
ᛆҳ༟ΥྫΆุ(Υྫ))
(“Jinyi Chuangpin ”)/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118400,000 40,000,000
Mr. Qi Dahong ( ᄁɽ҃)(2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118100,000 10,000,000
Xinyu Bowen Investment Management Center
(Limited Partnership) ( อЯ௹˖ҳ༟၍ଣʕː
(Υྫ)) (“ Bowen Investment ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118200,000 20,000,000
Mr. Zhu (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,300,000 130,000,000
October 18, 2018
Bowen Investment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118131,613 15,000,000
Hangzhou Zheyi Investment Partnership Enterprise
(Limited Partnership) (ψएඅҳ༟ΥྫΆุ
(Υྫ)) (“ Zheyi Investment ”)(4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118175,484 20,000,000
Mr. Qi Dahong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111887,742 10,000,000
Mr. Chen Libiao ( ௓ᓿᅺ)(5) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118526,452 60,000,000
Mr. Jin Xudong (؇)H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118175,484 20,000,000
May 10, 2019
Jinyi Chuangpin /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118614,194 70,000,000
Shanghai Junjin Investment Management Co., Ltd.
(ʮ̡)( “ Junjin
Investment ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118438,710 50,000,000
HISTORY, DEVELOPMENT AND REORGANIZATION
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Subscribers
Registered
Capital
Subscribed for
Consideration
Paid
(RMB) (RMB)
November 22, 2019
SinoMedia Advertising Co., Ltd. (዗ᄿѓϞ
ʮ̡)( “ SinoMedia Advertising ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,070,451 122,000,000
Jinyi Chuangpin /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118350,968 40,000,000
March 2, 2020
Mr. Chen Weirui /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118350,968 40,000,000
Mr. Chen Libiao /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111887,742 10,000,000
Total/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,009,808 857,000,000
Notes:
(1) Such equity interest was inherited by the children of Mr. Lin Qi, and was subsequently transferred to
Mr. Jin Xudong on April 16, 2021 at the consideration of RMB146,680,300.
(2) Mr. Qi Dahong, the brother of Mr. Qi Daqing ( ᄁɽᅅ), acted as a nominal shareholder and held such
beneficiary interest in Bloks Technology on behalf of Mr. Qi Daqing.
(3) Pursuant to the capital increase agreement dated July 29, 2020 in the Series Pre-A Investment, Suzhou
Y uanming V enture Capital Center (Limited Partnership) (௴ุҳ༟ʕː(Υྫ)) (“ Suzhou
Yuanming ”) and Suzhou Y uanqi Equity Investment Center (Limited Partnership) (ᛆҳ༟ʕ
ː(Υྫ)) (“ Suzhou Yuanqi ”) were granted an option to acquire the registered capital of Bloks
Technology which was subscribed for by Mr. Zhu in the Series Angel Investment, at 70% of the cost per
RMB1.00 registered capital of Bloks Technology they subscribed for in the Series Pre-A Investment,
provided that the total consideration payable by Suzhou Y uanming and Suzhou Y uanqi shall not exceed
RMB100,000,000. On March 1, 2021, Suzhou Y uanming and Suzhou Y uanqi exercised such option in
full and acquired the registered capital of RMB752,068 and RMB501,379 from Mr. Zhu, at the
consideration of RMB60,000,000 and RMB40,000,000, respectively.
(4) On August 15, 2019, the registered capital of RMB175,484 held by Zheyi Investment was transferred
to Hangzhou Jinyi Maibang Investment Partnership (Limited Partnership) (ᄂ௥Ԟҳ༟ΥྫΆุ
(Υྫ)) (“ Jinyi Maibang ”) at the consideration of RMB20,000,000.
(5) Mr. Chen Libiao transferred the registered capital of RMB438,710 out of the registered capital of
RMB526,452 held by him to Mr. Y ao Rongjun (࿲ё)( “ Mr. Y ao ”) at the consideration of
RMB50,000,000 on May 6, 2019.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Series Pre-A Investment
Pursuant to the capital increase agreements among the following series Pre-A investors
(each a “ Series Pre-A Investor ”), Bloks Technology and its then shareholders dated July 29,
2020 and November 29, 2020, the Series Pre-A Investors and Mr. Zhu agreed to subscribe for
an increased registered capital of RMB2,895,484 to be issued by Bloks Technology at an
aggregate consideration of RMB330,000,000 (the “ Series Pre-A Investment ”). The respective
subscription amount and consideration paid by the Series Pre-A Investors and Mr. Zhu in the
Series Pre-A Investment were as follows:
Subscribers
Registered
Capital
Subscribed for
Consideration
Paid
(RMB) (RMB)
July 29, 2020
Suzhou Y uanming /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118526,451 60,000,000
Suzhou Y uanqi /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118350,968 40,000,000
November 19, 2020
Suzhou Junjunde Equity Investment, L.P . ( ᘽψё
ᛆҳ༟ΥྫΆุ(Υྫ)) (“ Suzhou
Junjunde ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,316,129 150,000,000
Beijing Gaorong Phase IV Kangteng Equity
Investment Partnership (L.P .) ( ̏ԯ৷࿰̬ಂੰ
ᛆҳ༟ΥྫΆุ(Υྫ)) (“ Beijing
Gaorong ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118372,903 42,500,000
Chengdu Tianfu New District Gaorong Phase IV
Kangyong Investment Partnership (Limited
Partnership) (อਜ৷࿰̬ಂੰ͑ҳ༟
ΥྫΆุ(Υྫ)) (“ Chengdu Gaorong ”) /H1118/H1118/H1118/H111865,807 7,500,000
Mr. Zhu
(1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118263,226 30,000,000
Total/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,895,484 330,000,000
Note:
(1) On March 1, 2021, Mr. Zhu entered into an equity transfer agreement with Hangzhou Wenqu Equity
Investment Partnership (Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)) (“ Hangzhou
Wenqu”), pursuant to which Hangzhou Wenqu acquired the registered capital of Bloks Technology of
RMB250,689 from Mr. Zhu at a consideration of RMB20,000,000. Such equity interests were
subsequently re-designated as Series Angle Preferred Shares in our Company.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Series A Investment
Pursuant to the capital increase agreement among the following series A investors (each
a“ Series A Investor ”), Bloks Technology and its then shareholders dated April 24, 2021, the
Series A Investors agreed to subscribe for an increased registered capital of RMB3,718,661 to
be issued by Bloks Technology at an aggregate consideration of RMB599,999,631 (the “ Series
A Investment ”). The respective subscription amount and consideration paid by the Series A
Investors in the Series A Investment were as follows:
Subscribers
Registered
Capital
Subscribed for
Consideration
Paid
(RMB) (RMB)
Hainan Y unfeng Tuoyuan Fund Center (Limited
Partnership) (ʕː(Υྫ))
(“Yunfeng Tuoyuan ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,055,679 331,680,312
Suzhou Y uanming /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118200,359 32,327,584
Suzhou Junjunde /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118200,359 32,327,584
Beijing Junlian Shengyuan Equity Investment
Enterprise (Limited Partnership) ( ̏ԯёᑌ᳅๕
ᛆҳ༟ΥྫΆุ(Υྫ)) (“ Beijing
Junlian ”)/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118801,438 129,310,659
Beijing Gaorong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118136,244 21,982,738
Chengdu Gaorong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,043 3,879,297
Jinyi Chuangpin /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111840,072 6,465,549
Hangzhou Xinshan Investment Management Co.,
Ltd. (ʮ̡)( “ Hangzhou
Xinshan ”)/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118200,359 32,327,584
Mr. Qi Dahong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111860,108 9,698,324
Total/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,718,661 599,999,631
HISTORY, DEVELOPMENT AND REORGANIZATION
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Furthermore, pursuant to the equity transfer agreements entered into among the Series A
Investors and the then shareholders of Bloks Technology set out below dated April 24, 2021,
certain Series A Investors agreed to acquire registered capital of Bloks Technology in a total
amount of RMB1,465,773 from certain of the then shareholders of Bloks Technology at an
aggregate consideration of RMB214,999,988, the details of which are set out as follows:
Selling Shareholder Series A Investor
Registered
Capital
Subscribed for
Consideration
Paid
(RMB) (RMB)
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beijing Gaorong 81,928 12,017,224
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beijing Junlian 481,928 70,689,343
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Chengdu Gaorong 14,458 2,120,704
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Hangzhou Xinshan 120,482 17,672,336
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Jinyi Chuangpin 24,096 3,534,408
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Mr. Qi Dahong 36,144 5,301,613
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Suzhou Junjunde 120,482 17,672,336
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Suzhou Y uanming 120,482 17,672,336
Mr. Chen Libiao /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Y unfeng Tuoyuan 175,484 25,740,046
Mr. Huang /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Y unfeng Tuoyuan 27,270 3,999,972
Mr. Sheng /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Y unfeng Tuoyuan 27,270 3,999,972
Ningbo Shengteng /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Y unfeng Tuoyuan 235,749 34,579,698
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,465,773 214,999,988
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 148 ---
Set forth below is shareholding information of Bloks Technology immediately following
the completion of the Series Angel Investment, Series Pre-A Investment and Series A
Investment:
Name of Shareholder
Amount of
Registered
Capital
Shareholding
Percentage
(RMB)
Mr. Zhu /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,359,090 54.59%
Ningbo Shengteng /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,264,251 9.56%
Y unfeng Tuoyuan /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,521,452 5.65%
Suzhou Junjunde /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,636,970 3.67%
Suzhou Y uanming /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,599,360 3.58%
Jinyi Chuangpin /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,429,330 3.20%
Mr. Chen Weirui /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,350,968 3.03%
Beijing Junlian /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,283,366 2.88%
SinoMedia Advertising /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,070,451 2.40%
Mr. Sheng /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118872,730 1.96%
Suzhou Y uanqi /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118852,347 1.91%
Beijing Gaorong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118591,075 1.32%
Junjin Investment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118438,710 0.98%
Mr. Y ao /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118438,710 0.98%
Bowen Investment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118331,613 0.74%
Hangzhou Xinshan /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118320,841 0.72%
Mr. Qi Dahong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118283,994 0.64%
Mr. Huang /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118272,730 0.61%
Hangzhou Wenqu /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118250,689 0.56%
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118175,484 0.39%
Jinyi Maibang /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118175,484 0.39%
Chengdu Gaorong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118104,308 0.23%
Total/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111844,623,953 100.00%
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 149 ---
REORGANIZATION
In order to optimize our corporate structure to further develop the business of our Group and to access the international capital markets more
readily, we underwent the Reorganization pursuant to which our Company became the holding company and listing entity of our Group.
The following chart sets forth the corporate structure of our Group with principal operating entities immediately prior to our Reorganization
starting from July 28, 2021:
Mr. Zhu
54.59% 1.96% 0.61% 9.56%
100.00%
3.58% 1.91% 15.59%
Mr. Sheng
Bloks Technology
Bloks Bricks
Mr. Huang Ningbo
Shengteng
5.65%
Yunfeng
Tuoyuan
3.67% 2.88%
Suzhou
Junjunde
Beijing
Junlian
Suzhou
Yuanming
Suzhou
Yuanqi
Other
shareholders(1)
Note:
(1) Other shareholders of Bloks Technology include Jinyi Chuangpin (3.20%), Mr. Chen Weirui (3.03%), SinoMedia Advertising (2.40%), Beijing Gaoro ng (1.32%), Junjin
Investment (0.98%), Mr. Y ao (0.98%), Bowen Investment (0.74%), Hangzhou Xinshan (0.72%), Mr. Qi Dahong (0.64%), Hangzhou Wenqu (0.56%), Mr. Jin Xud ong (0.39%),
Jinyi Maibang (0.39%) and Chengdu Gaorong (0.23%).
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 150 ---
The Reorganization involved the following steps:
1. Incorporation of our Company and offshore holding companies
Our Company was incorporated as an exempted company with limited liability in the
Cayman Islands on July 28, 2021. The authorized share capital of our Company was
US$50,000 divided into 500,000,000 Shares with a nominal value of US$0.0001 each. At the
time of incorporation, our Company allotted and issued 100 Ordinary Shares to Next Bloks,
100 Ordinary Shares to Smart Bloks, 1 Ordinary Share to ShawnXF Limited, 1 Ordinary Share
to Bloks Is Coming Limited and 1 Ordinary Share to Way Elegance Limited (“ Way
Elegance ”), representing 49.26%, 49.26%, 0.49%, 0.49% and 0.49% of the then issued share
capital of our Company, respectively.
Bloks Holding was incorporated in the BVI on August 10, 2021 and became a
wholly-owned subsidiary of our Company. China Bloks was incorporated in Hong Kong on
August 31, 2021 and became a wholly-owned subsidiary of Bloks Holding.
2. Capital reduction of Bloks Technology
Pursuant to the resolutions of the shareholders of Bloks Technology dated August 5, 2021
and the capital reduction agreement entered into among Bloks Technology and all of its
shareholders dated August 5, 2021, Bloks Technology reduced its registered capital from
RMB44,623,953 to RMB30,823,118 (the “ Onshore Capital Reduction ”) and repurchased the
registered capital of RMB13,800,835 from the following shareholders (the “ Onshore
Withdrawn Investors ”) at the considerations set forth below.
Name of Shareholder
Registered
Capital Held
before
Reduction
Registered
Capital Held
after
Reduction Consideration (1)
(RMB) (RMB) (RMB)
Y unfeng Tuoyuan /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,521,452 Nil 400,000,000 (2)
Suzhou Junjunde /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,636,970 Nil 199,999,920
Suzhou Y uanming /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,599,360 Nil 169,999,920
Jinyi Chuangpin /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,429,330 Nil 159,999,957
Mr. Chen Weirui /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,350,968 Nil 140,000,000
Beijing Junlian /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,283,366 Nil 200,000,002
SinoMedia Advertising /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,070,451 Nil 122,000,000
Suzhou Y uanqi /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118852,347 Nil 80,000,000
Beijing Gaorong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118591,075 Nil 76,499,962
Junjin Investment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118438,710 Nil 50,000,000
Hangzhou Xinshan /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118320,841 Nil 49,999,920
Hangzhou Wenqu /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118250,689 Nil 20,000,000
Mr. Jin Xudong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118175,484 Nil 24,480,000
Jinyi Maibang /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118175,484 Nil 20,000,000
Chengdu Gaorong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118104,308 Nil 13,500,001
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813,800,835 Nil 1,726,479,682
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 151 ---
Notes:
(1) The consideration for the repurchased registered capital held by each of the Onshore Withdrawn
Investors was determined with reference to the initial investment cost of each of them in Bloks
Technology.
(2) Out of the total consideration of RMB400,000,000 which was payable to Y unfeng Tuoyuan for reducing
the RMB2,521,452 registered capital of Bloks Technology, (i) RMB217,000,000 were paid by Bloks
Technology upon the completion of foreign exchange registration approval by Y unfeng Tuoyuan or its
designated affiliates and (ii) RMB183,000,000 were payable upon exercise of Y unfeng Warrant. See “—
4. Allotment and issuance of Shares of our Company and issue of the Y unfeng Warrant to restore the
shareholding interests in Bloks Technology” below for further details.
Immediately following the completion of the Onshore Capital Reduction, the
shareholding structure of Bloks Technology is as follows:
Name of Shareholder
Amount of
Registered
Capital
Shareholding
Percentage
(RMB)
Mr. Zhu /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,359,090 79.03%
Ningbo Shengteng /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,264,251 13.83%
Mr. Sheng /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118872,730 2.83%
Mr. Y ao /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118438,710 1.42%
Bowen Investment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118331,613 1.08%
Mr. Qi Dahong /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118283,994 0.92%
Mr. Huang /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118272,730 0.88%
Total/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830,823,118 100.00%
3. Capital increase in Bloks Technology
On September 26, 2022, Bloks Technology issued registered capital of RMB311,345 to
Gaintex Investment Limited (“ Gaintex ”), which represented 1.00% of its enlarged registered
capital, at a consideration of RMB330,000. Such consideration was determined based on the
then appraised value of Bloks Technology by an independent professional valuer. Upon
completion of the above capital increase, the registered capital of Bloks Technology was
increased to RMB31,134,463.
4. Allotment and issuance of Shares of our Company and issue of the Yunfeng Warrant
to restore the shareholding interests in Bloks Technology
On July 25, 2022, our Company reclassified and re-designated a total of 74,275,760
unissued Shares of US$0.0001 each as 35,192,300 Series Angel Preferred Shares, 13,161,290
Series Pre-A Preferred Shares and 25,922,170 Series A Preferred Shares, respectively. On the
same date, our Company, the then shareholders of Bloks Technology, the Onshore Withdrawn
Investors (other than Mr. Chen Weirui) and/or their respective designated affiliates and Gaintex
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 152 ---
entered into the share subscription agreement, pursuant to which our Company has agreed to
allot and issue, and the then shareholders of Bloks Technology, the Onshore Withdrawn
Investors (other than Mr. Chen Weirui) and/or their respective designated affiliates and Gaintex
have agreed to subscribe for, the Shares in the Company at the consideration (i) equivalent to
the consideration received in the Onshore Capital Reduction for the Onshore Withdrawn
Investors; or (ii) at nominal value per Share for the then shareholders of Bloks Technology, to
ultimately align their interest in our Company to their previous shareholding interest in Bloks
Technology. Mr. Chen Weirui, an Onshore Withdrawn Investor, decided not to take up his
entitlement of Shares in our Company due to personal reasons, and Gaintex agreed to subscribe
for such Shares at the consideration equal to the consideration received by Mr. Chen Weirui for
the capital reduction of Bloks Technology. On the same date, our Company also entered into
the warrant agreement with Y unfeng Tuoyuan, pursuant to which our Company has agreed to
issue a warrant to Y unfeng Tuoyuan for it or its designated affiliates to subscribe for an
aggregate of 5,767,820 Series A Preferred Shares (the “ Yunfeng Warrant ”).
Upon completion of the subscriptions under the share subscription agreement above and
assuming the Y unfeng Warrant was exercised in full, the shareholding structure of our
Company is set forth as follows:
Name of Shareholder
Ordinary
Shares
Series Angel
Preferred
Shares
Series Pre-A
Preferred
Shares
Series A
Preferred
Shares Total
Next Bloks (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118110,639,460 – – – 110,639,460
Smart Bloks (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111811,155,990 – – – 11,155,990
First Prosperity (2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111821,321,255 – – – 21,321,255
ShawnXF Limited (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,363,650 – – – 4,363,650
Bloks Is Coming
Limited (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,363,650 – – – 1,363,650
Gaintex (5) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 6,754,840 – – 6,754,840
Way Elegance (6) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,193,550 – – 2,193,550
Mr. Qi Daqing (7) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 938,710 – 481,260 1,419,970
JYCP Holding Limited (8) /H1118/H1118/H1118 – 7,703,230 – 320,840 8,024,070
JYMB Holding Limited (9) /H1118/H1118 – 877,420 – – 877,420
Beihai Kmind Management
Consulting Limited
(“Beihai Kmind
Management
Consulting ”)
(10) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,193,550 – – 2,193,550
NAW Investment Co., Ltd.
(“NA W”)(11) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,658,065 – – 1,658,065
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 153 ---
Name of Shareholder
Ordinary
Shares
Series Angel
Preferred
Shares
Series Pre-A
Preferred
Shares
Series A
Preferred
Shares Total
SinoMedia (Asia Pacific)
Company Limited
(“SinoMedia (Asia
Pacific) ”)
(12) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 5,352,255 – – 5,352,255
HFHI investment Limited
(“HFHI ”)(13) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,253,445 – – 1,253,445
BlueCo Investment L.P .
(“BlueCo ”)(14) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 6,267,235 4,387,095 1,604,205 12,258,535
IDEA GREA T LIMITED
(“Idea Great ”)(15) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 6,580,645 8,021,035 14,601,680
Gaorong BLK Holding
Limited (16) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 2,193,550 1,283,365 3,476,915
Y unfeng Tuoyuan or its
designated affiliates (17) /H1118/H1118/H1118 – – – 5,767,820 (18) 5,767,820
Y unfeng Blocks
Management Limited
(“Yunfeng Blocks ”)
(17) /H1118/H1118/H1118 – – – 6,839,440 6,839,440
Hongshan Limited (19) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 1,604,205 1,604,205
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118148,844,005 35,192,300 13,161,290 25,922,170 223,119,765
Notes:
(1) Smart Bloks is wholly-owned by Mr. Zhu, our chairman and executive Director. Next Bloks is owned
as to 99% by Wit Bright Limited and indirectly owned as to 1% by Mr. Zhu. Wit Bright Limited is a
holding vehicle of the Wise Global Trust, a discretionary trust established by Mr. Zhu.
(2) First Prosperity is a platform holding the underlying incentive Shares under the Share Incentive Scheme.
A total of 21,321,255 Shares were reserved for the purpose of share incentive scheme pursuant to the
share subscription agreement dated July 25, 2022, and such Shares were allotted and issued to First
Prosperity on January 13, 2023.
(3) ShawnXF Limited is wholly-owned by Mr. Sheng.
(4) Bloks Is Coming Limited is wholly-owned by Mr. Huang.
(5) Mr. Chen Weirui (as an Onshore Withdrawn Investor) decided not to take up the Shares of the Company
due to personal reasons, and the 6,754,840 Series Angel Preferred Shares corresponding to Mr. Chen
Weirui’s reduced interest of RMB1,350,968 in Bloks Technology was subscribed for by Gaintex.
(6) Way Elegance is wholly-owned by Mr. Y ao.
(7) Mr. Qi Daqing is a brother of Mr. Qi Dahong. Mr. Qi Dahong acted as nominal shareholder of Bloks
Technology and held the beneficiary interests in Bloks Technology on behalf of Mr. Qi Daqing.
(8) JYCP Holding Limited is wholly-owned by Jinyi Chuangpin, which is in turn owned by Mr. Jin Xudong
as to 55.4085%.
HISTORY, DEVELOPMENT AND REORGANIZATION
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(9) JYMB Holding Limited is wholly-owned by Jinyi Maibang.
(10) Beihai Kmind Management Consulting is an affiliate designated by Junjin Investment to subscribe for
the Shares.
(11) NAW is wholly-owned by Fiona Wei, whose father owned 99% of the equity interest in Bowen
Investment.
(12) SinoMedia (Asia Pacific) is a same group company as SinoMedia Advertising.
(13) HFHI is a wholly-owned subsidiary of Hangzhou Wenqu.
(14) BlueCo is owned by Suzhou Y uanming and Suzhou Y uanqi.
(15) Idea Great is owned by Suzhou Junjunde and Beijing Junlian.
(16) Gaorong BLK Holding Limited is owned by Beijing Gaorong and Chengdu Gaorong.
(17) Y unfeng Blocks is a wholly-owned subsidiary of Y unfeng Tuoyuan, which is designated thereby to
subscribe for the 6,839,440 Series A Preferred Shares corresponding to the consideration of
RMB217,000,000, being part of the total consideration for reducing registered capital of Bloks
Technology held by Y unfeng Tuoyuan.
(18) Representing an aggregate of 5,767,820 Series A Preferred Shares which Y unfeng Tuoyuan or its
designated affiliates was entitled to subscribe for assuming the Y unfeng Warrant was exercised in full.
On April 3, 2024, our Company and Y unfeng Tuoyuan entered into the warrant termination agreement,
pursuant to which Y unfeng Warrant was cancelled upon receipt by Y unfeng Tuoyuan on April 11, 2024
of RMB183,000,000, being the consideration for reducing Y unfeng Tuoyuan’s capital contribution in
Bloks Technology corresponding to the 5,767,820 Series A Preferred Shares.
(19) Hongshan Limited is an affiliate designated by Hangzhou Xinshan to subscribe for the Shares.
5. Acquisition of all the equity interests of Bloks Technology by China Bloks
On November 7, 2022, China Bloks acquired all the equity interests in Bloks Technology
from the then shareholders of Bloks Technology at a total consideration of RMB33 million.
Such considerations were determined based on the then appraised value of Bloks Technology
by an independent professional valuer. Upon completion of the transaction above, Bloks
Technology was wholly-owned by China Bloks and became an indirectly-wholly-owned
subsidiary of the Company.
6. Termination of Contractual Arrangements
Prior to the Reorganization, we engaged in certain business related to our self-developed
IP , such as the production of animation. As advised by our PRC Legal Advisor, foreign
investors were prohibited from holding legal ownership over such business according to the
Special Management Measures (Negative List) for the Access of Foreign Investment (2021
V ersion) (݄(૶ఊ)(2021وConsequently, as part of the
Reorganization, we transferred our equity interest in the subsidiaries engaged in such business
to Bloks Information on August 5, 2021, and a series of contractual arrangements were entered
into on the same date among Bloks Technology and Bloks Information and its then registered
HISTORY, DEVELOPMENT AND REORGANIZATION
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shareholders Mr. Zhu and Mr. Sheng (the “ Contractual Arrangements ”), pursuant to which
Bloks Technology gained control over the operation of, and enjoyed the economic benefits
from, Bloks Information and its subsidiaries.
To streamline our business operations and after considering the overall operating
environment in China, we terminated the Contractual Arrangements on March 31, 2024 as part
of the Reorganization. During the Track Record Period, the revenue contribution by Bloks
Information and its subsidiaries was materially insignificant, which accounted for 1.4% of our
total revenue recorded during the entire Track Record Period. We are of the view that such
termination of the Contractual Arrangements has no material adverse impact on our business
operations or overall financial performance of the Group. We further confirm that as of the
Latest Practicable Date, we were not aware of any potential or actual litigation, claims or other
disputes that would arise from termination of the Contractual Arrangements or any material
non-compliance incidents of Bloks Information or its subsidiaries during the Track Record
Period prior to the termination of the Contractual Arrangements. As advised by our PRC Legal
Advisor, (i) the implementation of the above arrangements does not violate the PRC laws and
regulations in any material respect; and (ii) all rights and obligations under the Contractual
Arrangements have ceased legally and the parties waived all rights and claims (if any)
thereunder.
Bloks Technology also entered into an IP content production cooperation framework
agreement with Bloks Culture (a subsidiary of Bloks Information), pursuant to which Bloks
Culture agrees to provide to Bloks Technology and/or its subsidiaries, from time to time,
certain services in connection with the production of our self-developed IP content including
but not limited to Magic Blocks and Hero Infinity. In October 2024, we ceased such
cooperation with Bloks Culture, given the animation production industry in China is relatively
mature with ample qualified suppliers.
As of the Latest Practicable Date, in order to further enhance the independence of the
Group and Bloks Information and its subsidiaries, the Group and Bloks Information and its
subsidiaries have adopted the following measures: (i) Bloks Information and its subsidiaries
have ceased to use the trade name of “Bloks” or other trade names related to the brands of the
Group, and changed the corporation names; (ii) Bloks Information and Bloks Culture have
cancelled their previous qualifications and licenses for engaging in foreign investment
prohibited/restricted businesses and changed their business scope accordingly; and (iii) the
Group has terminated all transactions with Bloks Culture and has undertaken not to carry out
any direct or indirect transactions with Bloks Culture in the future.
HISTORY, DEVELOPMENT AND REORGANIZATION
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The following chart sets forth our Group’s corporate and shareholding structure with
principal operating entities immediately after the Reorganization.
Playcreation
Holding
Limited
Wit Bright
Limited
Mr. Zhu
100%
Mr. Sheng
100%
Mr. Huang
100%99%
Next Bloks Smart Bloks ShawnXF
Limited
Bloks Is
Coming
Limited
50.90% 5.13% 2.01% 0.63%
First
Prosperity
Other
Shareholders(2)
9.81% 31.52%
1% 100%
The Company
Bloks Technology
offshore
onshore
Bloks Bricks
Bloks Holding
China Bloks
100%
100%
100%
100%
Notes:
(1) The Wise Global Trust is a discretionary trust established by Mr. Zhu as the settlor on June 16, 2022, for the
benefit of Mr. Zhu and his family members with Trident Trust Company (HK) Limited as the trustee. Wit
Bright Limited is a holding vehicle of the Wise Global Trust incorporated in the BVI, through which Mr. Zhu
has control over Next Bloks.
(2) Other Shareholders include Idea Great (6.72%), BlueCo (5.64%), JYCP Holding Limited (3.69%), Y unfeng
Blocks (3.15%), Gaintex (3.11%), SinoMedia (Asia Pacific) (2.46%), Gaorong BLK Holding Limited (1.60%),
Way Elegance (1.01%), Beihai Kmind Management Consulting (1.01%), NAW (0.76%), Hongshan Limited
(0.74%), Mr. Qi Daqing (0.65%), HFHI (0.58%) and JYMB Holding Limited (0.40%).
HISTORY, DEVELOPMENT AND REORGANIZATION
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ACQUISITIONS, MERGERS AND DISPOSALS
Save as disclosed above and in the paragraph headed “— Reorganization” in this section,
we had no other major acquisitions, disposals or mergers during the Track Record Period and
up to the Latest Practicable Date.
PRE-IPO INVESTMENTS
Overview
From 2018 to 2024, our Group has completed several rounds of Pre-IPO Investments at
the onshore level in Bloks Technology or at the offshore level in our Company.
For the Pre-IPO Investments at the onshore level prior to the Reorganization, see “— Our
History and Major Shareholding Change before Reorganization” in this section.
After the Reorganization, at the offshore level, pursuant to the share transfer agreements
dated April 11, 2024, Gaintex, Mr. Qi Daqing, Dragon Ridge Limited, LC Fund IX, L.P . (“ LC
Fund ”), Lenient Investment L.P . (“ Lenient ”) agreed to acquire a total of 2,350,144 Ordinary
Shares of our Company from Smart Bloks at an aggregate consideration of US dollar
equivalent to RMB75,838,350; and Gaintex agreed to acquire 895,293 Series A Preferred
Shares from Gaorong BLK Holding Limited at a consideration of US dollar equivalent to
RMB28,890,800 (collectively, the “ 2024 Share Transfers ”), the details of which are set out as
follows:
Selling Shareholders Investors Type of Shares No. of Shares
Consideration
Paid
(US dollar
equivalent to
RMB)
Smart Bloks Gaintex Ordinary Shares 447,646 14,445,400
Smart Bloks Mr. Qi Daqing Ordinary Shares 335,735 10,834,050
Smart Bloks Dragon Ridge Limited Ordinary Shares 223,823 7,222,700
Smart Bloks LC Fund Ordinary Shares 671,470 21,668,100
Smart Bloks Lenient Ordinary Shares 671,470 21,668,100
Total 2,350,144 75,838,350
Gaorong BLK
Holding Limited
Gaintex Series A Preferred
Shares
895,293 28,890,800
Total 895,293 28,890,800
The last installation of the considerations for the 2024 Share Transfers was settled on
April 16, 2024.
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Details of the Pre-IPO Investments by our Pre-IPO Investors through subscription of new
shares and/or acquisition of existing shares of our Group are summarized below.
Pre-IPO Investors Class of Shares
Number of
Shares
Subscribed
for or
Purchased
Date of
Settlement (1)
Total
Consideration
Paid (2)
Cost per
Share
Discount to
the Offer
Price (3)
(RMB ) (RMB )
Series Angel Investment
Gaintex Series Angel
Preferred Shares
6,754,840 April 27,
2020
140,000,000 20.73 61.38%
NAW Series Angel
Preferred Shares
1,658,065 November 9,
2018
35,000,000 21.11 60.67%
Mr. Qi Daqing Series Angel
Preferred Shares
938,710 November 9,
2018
20,000,000 21.31 60.30%
JYCP Holding
Limited
Series Angel
Preferred Shares
7,703,230 May 14,
2021
174,480,000 22.65 57.80%
JYMB Holding
Limited
Series Angel
Preferred Shares
877,420 September
24, 2019
20,000,000 22.79 57.54%
Way Elegance Series Angel
Preferred Shares
2,193,550 June 10,
2019
50,000,000 22.79 57.54%
Beihai Kmind
Management
Consulting
Series Angel
Preferred Shares
2,193,550 May 21,
2019
50,000,000 22.79 57.54%
SinoMedia (Asia
Pacific)
Series Angel
Preferred Shares
5,352,255 May 25,
2020
122,000,000 22.79 57.54%
Transfer of existing equity under Series Angel Investment
HFHI Series Angel
Preferred Shares
1,253,445 March 1,
2021
20,000,000 15.96
(4) 70.27%
BlueCo Series Angel
Preferred Shares
6,267,235 March 18,
2021
100,000,000 15.96 (4) 70.27%
Series Pre-A Investment
BlueCo Series Pre-A
Preferred Shares
4,387,095 August 14,
2020
100,000,000 22.79 57.54%
Idea Great Series Pre-A
Preferred Shares
6,580,645 December 3,
2020
150,000,000 22.79 57.54%
Gaorong BLK
Holding Limited
Series Pre-A
Preferred Shares
2,193,550 December 3,
2020
50,000,000 22.79 57.54%
HISTORY, DEVELOPMENT AND REORGANIZATION
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Pre-IPO Investors Class of Shares
Number of
Shares
Subscribed
for or
Purchased
Date of
Settlement (1)
Total
Consideration
Paid (2)
Cost per
Share
Discount to
the Offer
Price (3)
(RMB ) (RMB )
Series A Investment
Gaorong BLK
Holding Limited
Series A Preferred
Shares
1,283,365 May 8,
2021
39,999,963 31.17 41.93%
Hongshan Limited Series A Preferred
Shares
1,604,205 May 14,
2021
49,999,920 31.17 41.93%
Mr. Qi Daqing Series A Preferred
Shares
481,260 April 29,
2021
14,999,937 31.17 41.93%
JYCP Holding
Limited
Series A Preferred
Shares
320,840 May 7,
2021
9,999,957 31.17 41.93%
BlueCo Series A Preferred
Shares
1,604,205 May 21,
2021
49,999,920 31.17 41.93%
Idea Great Limited Series A Preferred
Shares
8,021,035 July 26,
2021
249,999,922 31.17 41.93%
Y unfeng Blocks Series A Preferred
Shares
6,839,440 July 23,
2021
217,000,000 31.73 40.89%
2024 Share Transfer
Gaintex Ordinary Shares 447,646 April 12,
2024
14,445,400 32.27 39.88%
Series A Preferred
Shares
895,293 April 12,
2024
28,890,800 32.27 39.88%
Mr. Qi Daqing Ordinary Shares 335,735 April 16,
2024
10,834,050 32.27 39.88%
Dragon Ridge
Limited
Ordinary Shares 223,823 April 12,
2024
7,222,700 32.27 39.88%
LC Fund Ordinary Shares 671,470 April 16,
2024
21,668,100 32.27 39.88%
Lenient Ordinary Shares 671,470 April 16,
2024
21,668,100 32.27 39.88%
Notes:
(1) This refers to the timing of last installation of payment made by the Pre-IPO Investors (i) to Bloks Technology
or the relevant selling shareholders of Bloks Technology in the Series Angel Investment, Series Pre-A
Investment and Series A Investment and (ii) to the selling Shareholders in the 2024 Share Transfer.
HISTORY, DEVELOPMENT AND REORGANIZATION
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(2) This refers to (i) the consideration for allocation and issue of the Shares by our Company to the relevant Series
Angel Investors, Series Pre-A Investors and Series A Investors to restore their equity interests in Bloks
Technology during the Reorganization, which was determined with reference to the initial investment cost of
such investors and (ii) the consideration for the sale of the Shares by the selling Shareholders in the 2024 Share
Transfer.
(3) The discount to the Offer Price is calculated (i) based on the mid-point of the indicative Offer Price range of
HK$58.00 per Share; and (ii) assuming the Preferred Shares are converted into Ordinary Shares on a
one-to-one basis.
(4) The cost per share of the Series Angel Preferred Shares paid by HFHI and BlueCo is relatively low compared
to the other Series Angle Preferred Shares because their onshore affiliates acquired the equity interests of
Bloks Technology corresponding thereto from Mr. Zhu by a sale of equity instead of capital increase of Bloks
Technology on March 1, 2021 after commercial negotiation. See “— Our History and Major Shareholding
Change before Reorganization” in this section.
(5) For the date of each investment, see “— Our History and Major Shareholding Change Before Reorganization”
and “— Reorganization” in this section.
Principal terms of the Pre-IPO Investments
The table below sets forth the principal terms of the Pre-IPO Investments:
Basis of consideration The consideration for the Pre-IPO Investment was
determined based on arm’s length negotiations after
taking into account the timing of the investment and
the status of the Group’s business development at the
time of entering into the capital increasing
agreement.
Use of proceeds and whether
they have been fully utilized
We have raised gross proceeds of RMB1,817.0
million in total from the Pre-IPO Investment. The
proceeds from the Pre-IPO Investment shall be used
towards business operations of the Group and in
accordance with the business plan and budget
approved by the Board. As of the Latest Practicable
Date, all the proceeds raised by our Group from the
Pre-IPO Investment have been utilized.
Lock-up The Pre-IPO Investors are not subject to lock-up
according to the terms of the shareholders’ agreement
entered into among the Pre-IPO Investors, the
Company and other Shareholders.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Strategic benefits of the
Pre-IPO Investment
Our Directors were of the view that our Company
would benefit from the additional capital provided by
the Pre-IPO Investors’ investments in our Company,
insights for industry, professional advices on our
Group’s development, corporate governance,
financial reporting and internal control that the Pre-
IPO Investors may bring to our Company. The
investments from the Pre-IPO Investors demonstrate
their commitment and confidence in the business
performance and operations, strengths and long-term
prospects of our Group.
Special rights granted to the Pre-IPO Investors
In connection with the Pre-IPO Investments, certain Pre-IPO Investors had been granted
certain special rights, including, among others, information and inspection rights, registration
rights, the right to preferred liquidation, pre-emptive rights, right of first refusal and right of
co-sale, the right to nominate Directors, anti-dilution rights, repurchase rights, out of which the
repurchase rights have been terminated immediately before the submission of the listing
application for the Global Offering (the “ Listing Application ”) provided that the rights so
terminated shall resume in the event that the Listing Application is withdrawn or rejected by
the Stock Exchange, and all other special rights will be terminated automatically upon the
Listing.
The Pre-IPO Investors are entitled to subscribe for Shares at Offer Price in the Global
Offering in order to maintain their shareholding percentage immediately before completion of
the Global Offering subject to the waiver from strict compliance with Rule 10.04 of the Listing
Rules and a prior consent under paragraph 5(2) of Appendix F1 to the Listing Rules to be
granted by the Stock Exchange.
Each of the Preferred Shares will convert automatically on a one-for-one basis into
Ordinary Shares upon consummation of the Global Offering, at which time, our share capital
will comprise one class of shares. For further information on the rights attached to our
Ordinary Shares, see “Share Capital.”
Information about the Pre-IPO Investors
To the best knowledge of the Company and the Directors, each of the Pre-IPO Investors
is an Independent Third Party. Set out below is a description of our Pre-IPO Investors.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Legend Capital
Idea Great
Idea Great is an investment company incorporated in Hong Kong on April 1, 2021. Idea
Great is owned as to 56.05% by Suzhou Junjunde and as to 43.95% by Beijing Junlian. Suzhou
Junjunde is owned by a total of 16 limited partners, none of which hold one-third or more of
the interest therein. Beijing Junlian is owned as to 35.71% by National Council for Social
Security Fund of People’s Republic of China (ଣԫึ) and other 20 limited
partners (none of which hold one-third or more of the interest therein). Both Suzhou Junjunde
and Beijing Junlian are controlled by their common general partner, which is a wholly-owned
subsidiary of Legend Capital Management Co., Ltd. (ʮ̡)( “ Legend
Capital ”).
LC Fund
LC Fund is an investment holding company incorporated in Cayman Islands on January
27, 2022. LC Fund is managed by its general partner LC Fund IX GP , L.P ., which is in turn
managed by its general partner LC Fund GP Limited. LC Fund GP Limited is wholly-owned
by Legend Capital. LC Fund is owned by 17 limited partners, and none of them holds one-third
or more of the interests therein.
Legend Capital is owned as to 80.00% by Beijing Juncheng Hezhong Investment
Management Partnership (Limited Partnership) ( ̏ԯё༐Υ଺ҳ༟၍ଣΥྫΆุ(Υྫ))
(“Juncheng Hezhong ”), and as to 20% by Legend Holdings Corporation (ࠢ
ʮ̡), the shares of which are listed on the Stock Exchange (stock code: 03396). Juncheng
Hezhong is controlled by its general partner Beijing Junqi Jiarui Enterprise Management Co.,
Ltd. (ʮ̡), which is owned by Chen Hao ( ௓ख), Li Jiaqing (࢕
ᅅ), Zhu Linan (یand Wang Nengguang ( ˮঐΈ) as to 40%, 20%, 20% and 20%,
respectively. To the best knowledge of the Company, each of Legend Capital, Idea Great, LC
Fund and their respective ultimate beneficial owners (other than Mr. Chen Rui who is our
non-executive Director and holds 5.98% limited partner interests in one of Juncheng
Hezhong’s limited partner) is an Independent Third Party.
BlueCo
BlueCo was incorporated in the Cayman Islands. The general partner of BlueCo is All
Direct Holdings Limited, which is indirectly wholly owned by Mr. Charlie Cao. BlueCo is
owned as to 100% by its limited partner, Hainan Y uanke Technology Partnership Enterprise
(Limited Partnership) (ҦΥྫΆุ(Υྫ), “Hainan Yuanke ”), which is in turn
owned as to 67.97% by Suzhou Y uanming and 31.99% by Suzhou Y uanqi as limited partners.
All of Hainan Y uanke, Suzhou Y uanming and Suzhou Y uanqi are under the control of Mr.
Charlie Cao.
HISTORY, DEVELOPMENT AND REORGANIZATION
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To the best knowledge of the Company, each of BlueCo and its ultimate beneficial owners
(other than Mr. Chang Kaisi ( ੬௱౶) who is our non-executive Director and holds 1.73%
limited partner interest in an indirect limited partner of Suzhou Y uanming) is an Independent
Third Party.
Yunfeng Capital
Y unfeng Blocks is an investment company incorporated under the laws of BVI on July 13,
2021. Y unfeng Blocks is wholly-owned by Y unfeng Tuoyuan, a limited partnership established
in the PRC on December 23, 2020. The general partner of Y unfeng Blocks is Hainan Y unfeng
Enterprise Management Center (Limited Partnership) (ථቜΆุ၍ଣʕː(Υྫ))
(“Hainan Yunfeng Center ”). The general partner of Hainan Y unfeng Center is Shanghai
Y unfeng Xinchuang Enterprise Management Co., Ltd. (ʮ̡), an
investment management company ultimately controlled by YU Xuedong (؇Y unfeng
Blocks is the investment entity of Y unfeng Capital (ږa leading private equity
investment firm in the PRC. Founded in 2010, Y unfeng Capital is committed to fostering
forward-thinking enterprises. Y unfeng Capital has developed deep industry expertise and
industry insights in various sectors, including technology, business services, green energy,
modern agriculture, bio-tech and consumer industry. To the best knowledge of the Company,
each of Y unfeng Blocks and its ultimate beneficial owners is an Independent Third Party.
Gaintex
Gaintex is an investment holding company incorporated under the laws of Hong Kong on
July 2, 2021, which is owned by Sze-To Kin Sun (อ) as to 50% and So Kai Sing ( ᘽ
઼ᑊ) as to 50%. To the best knowledge of the Company, each of Gaintex, Sze-To Kin Sun and
So Kai Sing is an Independent Third Party.
Way Elegance
Way Elegance is an investment holding company incorporated under the laws of the BVI
on July 2, 2021, and is wholly-owned by Mr. Y ao. To the best knowledge of the Company, each
of Way Elegance and Mr. Y ao is an Independent Third Party.
Mr. QI Daqing
Mr. Qi Daqing is currently a professor of accounting at the Chung Kong Graduate School
of Business, and serves as an independent director of several listed companies. To the best
knowledge of the Company, Mr. Qi Daqing is an Independent Third Party.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Jinyi Investment
JYCP Holding Limited
JYCP Holding Limited is an investment holding company incorporated under the laws of
the BVI on August 20, 2021. JYCP Holding Limited is wholly-owned by Jinyi Chuangpin,
which is in return managed by its general partner Hangzhou Jinyi Investment Management
Limited (ʮ̡)( “ Jinyi Investment ”), and is owned by Mr. Jin Xudong
as to 55.4085%, Mr. Huang Xin ( ර㒥) as to 15.1152% and other eight limited partners none
of whom holds one third or more of the interests therein. Mr. Huang Xin was our former
Director from July 25, 2022 to April 11, 2024.
JYMB Holding Limited
JYMB Holding Limited is an investment holding company incorporated under the laws of
the BVI on August 20, 2021. JYMB Holding Limited is wholly-owned by Jinyi Maibang, which
is in return managed by its general partner Hangzhou Jinyi and is owned by 12 limited partners
none of whom holds one third or more of the interests therein.
Jinyi Investment is owned by Mr. Jin Xudong as to 60% and other three other
shareholders none of whom holds one-third or more of the interests therein. To the best
knowledge of the Company, each of Mr. Jin Xudong, JYCP Holding Limited, JYMB Holding
Limited and their respective ultimate beneficial owners (other than Mr. Huang Xin as a former
Director) is an Independent Third Party.
Beihai Kmind Management Consulting
Beihai Kmind Management Consulting is a strategy consulting company incorporated in
the PRC on October 30, 2019. It is wholly-owned by Shanghai Kmind Enterprise Management
Co., Ltd. (ʮ̡)( “ Shanghai Kmind ”), which is ultimately controlled
by Xie Weishan ( ᑽሊʆ). To the best knowledge of the Company, each of Xie Weishan and
Baihai Kmind and its ultimate beneficial owners is an Independent Third Party.
NAW
NAW is an investment company incorporated under the laws of the BVI on April 2, 2013.
It is indirectly wholly-owned by Fiona Wei. To the best knowledge of the Company, each of
NAW and Fiona Wei is an Independent Third Party.
HISTORY, DEVELOPMENT AND REORGANIZATION
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SinoMedia
SinoMedia (Asia Pacific) is a company incorporated in Hong Kong on May 31, 2011.
SinoMedia (Asia Pacific) is wholly-owned by SinoMedia Holding Limited, whose shares are
listed on the Stock Exchange (stock code: 0623). To the best knowledge of the Company, each
of SinoMedia Holding Limited and its ultimate beneficial owners is an Independent Third
Party.
HFHI
HFHI is an investment company incorporated under the laws of the BVI on July 23, 2021.
HFHI is wholly-owned by Hangzhou Wenqu, which is controlled by and owned as to 0.74% by
its general partner Zheng Yiwen ( ቍɓත) and is held as to 99.26% by Hangzhou Net
Xinhuagang Equity Investment Partnership (Limited Partnership) (ᛆҳ༟Υྫ
Άุ(Υྫ)) (“ Hangzhou Net Xinhuagang ”). Hangzhou Net Xinhuagang is controlled by
and owned as to 4.4% by its general partner Hangzhou Xinwang Equity Investment Co., Ltd.
(ப΂ʮ̡), and is held by Insigma Technology Co., Ltd. (߅
ʮ̡) (a listed company on Shanghai Stock Exchange (stock code: 600797)),
Zhejiang Wangxin Group Co., Ltd. (ʮ̡) and Zhejiang Wangxin Yintong
Investment Holding Co., Ltd. (ʮ̡) as limited partners as to 48%,
32%, and 15.6%, respectively.
To the best knowledge of the Company, each of HFHI and its ultimate beneficial owners
is an Independent Third Party.
Gaorong Capital
Gaorong BLK Holding Limited is an investment company incorporated under the laws of
the BVI on August 5, 2021. Gaorong BLK Holding Limited is held by Beijing Gaorong and
Chengdu Gaorong as to 85% and 15%, respectively.
Beijing Gaorong is controlled by its general partner Beijing Gaorong Capital
Management Consulting Co., Ltd. (ʮ̡)( “ Gaorong Capital ”)
and is owned by 36 limited partners none of whom holds one-third or more of the interests
therein. Gaorong Capital is held by Zhang Zhen ( ੵቤ), Y ue Bin (ⅳ֪and Gao Xiang ( ৷ജ),
holding 33.34%, 33.33% and 33.33%, respectively.
Chengdu Gaorong is controlled by its general partner Tibet Rongkang Investment
Management Co., Ltd. (ʮ̡) (a wholly-owned subsidiary of Gaorong
Capital), and is owned as to 65.36% by Taikang Life Insurance Co., Ltd. (ࠢ
ப΂ʮ̡) and other four limited partners, none of which hold one-third or more of the interest
therein.
To the best knowledge of the Company, each of Gaorong BLK Holding Limited and its
ultimate beneficial owners is an Independent Third Party.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Hongshan Limited
Hongshan Limited is an investment holding company incorporated under the laws of the
BVI on April 25, 2017, which is wholly-owned by Wu Y ongming. To the best knowledge of the
Company, Wu Y ongming is an Independent Third Party.
Dragon Ridge Limited
Dragon Ridge Limited is an investment holding company incorporated under the laws of
the BVI, which is wholly-owned by Lu Xin (׿To the best knowledge of the Company, Lu
Xin is an Independent Third Party.
Lenient
Lenient is an investment holding company incorporated in Cayman Islands. Its general
partner is L YCAON Capital Co., which is controlled by Li Chunyong (ۇ݆To the best
knowledge of the Company, each of Lenient and its ultimate beneficial owners is an
Independent Third Party.
COMPLIANCE WITH PRE-IPO INVESTMENT GUIDANCE
On the basis that (i) the consideration for the Pre-IPO Investments was irrevocably settled
no less than 28 clear days before the date of our first submission of the Listing Application to
the Stock Exchange in relation to the Listing; and (ii) the special rights granted to the Pre-IPO
Investors shall cease to be exercisable upon the Listing (save for the repurchase rights which
have been terminated immediately before the submission of the listing application as described
above), the Joint Sponsors confirm that the Pre-IPO Investments are in compliance with the
Chapter 4.2 under the Guide for New Listing Applicants published by the Stock Exchange
effective from January 1, 2024.
HISTORY, DEVELOPMENT AND REORGANIZATION
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CORPORATE STRUCTURE IMMEDIATELY PRIOR TO THE GLOBAL OFFERING
The following chart sets forth our Group’s corporate and shareholding structure immediately prior to the Global Offering:
The Company
Bloks Technology
Blokees
Technology Inc.
offshore
onshore
Bloks Bricks
Shanghai Puti
Culture
Communication
Limited
Bloks Technology
(Hang Zhou) Limited
Shanghai Bloks
Trading Limited
Shanghai Bloks Toy
Limited
Bloks Global LimitedBloks Holding Bloks International Limited
PT BLOKEES TOYS INDONESIA
China Bloks Bloks Singapore Pte. Ltd. Bloks Games Limited
100% 100% 100%
100%
100%
100% 100% 100%
100%
99% 1%
100%
100% 100%
100%
100% 100%
Next Bloks(1) Smart Bloks(1) ShawnXF Limited Bloks Is Coming Limited First Prosperity(2) Other Pre-IPO Investors(3)
Playcreation Holding Limited(1)Wit Bright Limited(1)
Mr. Zhu(1)
100%
99%
50.90% 4.05% 2.01% 0.63%
100%
9.81% 19.93%
1%
Mr. Sheng
100%
Mr. Huang
100%
Idea Great(3) LC Fund(3) BlueCo(3)
6.72% 0.31% 5.64%
BLOKEES UK
LIMITED
BLOKEES MALAYSIA
SDN. BHD.
Notes:
(1) Each of Mr. Zhu, Next Bloks, Smart Bloks, Wit Bright Limited and Playcreation Holding Limited will be a Controlling Shareholder upon completion of the Global Offering.
For details, see “Relationship with the Controlling Shareholders.”
(2) First Prosperity is a platform holding underlying Shares under the Share Incentive Scheme, which is wholly-owned by Trident Trust Company (HK) Li mited (as trustee of the
Bloks First Trust, which was established by the Company for the purposes of the Share Incentive Scheme).
(3) For details and background information of the Pre-IPO Investors, see “Pre-IPO Investments” in this section.
HISTORY, DEVELOPMENT AND REORGANIZATION
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CORPORATE STRUCTURE IMMEDIATELY FOLLOWING THE GLOBAL OFFERING
The following chart sets forth our Group’s corporate and shareholding structure immediately after the Global Offering (assuming that the Offer
Size Adjustment Option and the Over-allotment Option are not exercised)
The Company
Bloks Technology
offshore
onshore
Bloks Bricks
Shanghai Puti
Culture
Communication
Limited
Bloks Technology
(Hang Zhou) Limited
Shanghai Bloks
Trading Limited
Shanghai Bloks Toy
Limited
Bloks Global LimitedBloks Holding Bloks International Limited
China Bloks Bloks Singapore Pte. Ltd. Bloks Games Limited
100% 100% 100%
100%
100%
100% 100%
100% 100%
100%
100% 100%
Next Bloks(1) Smart Bloks(1) ShawnXF Limited Bloks Is Coming Limited First Prosperity(2) Other Pre-IPO Investors(3) Other public shareholders
Playcreation Holding Limited(1)Wit Bright Limited(1)
Mr. Zhu(1)
100%
99%
45.82% 3.65% 1.81% 0.56%
100%
8.83% 17.94% 9.99%
1%
Mr. Sheng
100%
Mr. Huang
100%
Idea Great(3) LC Fund(3) BlueCo(3)
6.05% 0.28% 5.08%
Blokees
Technology Inc. PT BLOKEES TOYS INDONESIA
100% 100% 100% 99% 1%
BLOKEES UK
LIMITED
BLOKEES MALAYSIA
SDN. BHD.
Notes:
(1) Each of Mr. Zhu, Next Bloks, Smart Bloks, Wit Bright Limited and Playcreation Holding Limited will be a Controlling Shareholder upon completion of the Global Offering.
For details, see “Relationship with the Controlling Shareholders.”
(2) First Prosperity is a platform holding underlying Shares under the Share Incentive Scheme, which is wholly-owned by Trident Trust Company (HK) Li mited (as trustee of the
Bloks First Trust, which was established by the Company for the purposes of the Share Incentive Scheme).
(3) For details and background information of the Pre-IPO Investors, see “Pre-IPO Investments” in this section.
HISTORY, DEVELOPMENT AND REORGANIZATION
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PUBLIC FLOAT
Upon completion of the Global Offering, a total of 125,172,606 Shares, comprising (i)
119,445,306 Shares controlled by Mr. Zhu through Next Bloks and Smart Bloks, (ii) 4,363,650
Shares controlled by Mr. Sheng through ShawnXF Limited and (iii) 1,363,650 Shares
controlled by Mr. Huang (as a director of several subsidiaries of the Company) through Bloks
Is Coming Limited, representing 51.84% of the total issued Shares immediately after the
Global Offering (assuming the Offer Size Adjustment Option and the Over-allotment Option
are not exercised), will not be counted towards the public float of the Company.
Save as disclosed above, as at the date of this prospectus, no other Shareholder will be
a core connected person of the Company (as defined in the Listing Rules) upon Listing. Taking
into account the above and the Shares to be issued pursuant to the Global Offering (assuming
the Offer Size Adjustment Option and the Over-allotment Option are not exercised), 48.16%
of the total issued Shares upon Listing will be counted towards the public float of the Company.
PRC LEGAL COMPLIANCE
Our PRC Legal Advisor confirmed that (i) the establishment of our subsidiaries in China
and their subsequent shareholding changes have complied with the relevant PRC laws and
regulations in all material respects; and (ii) the Reorganization has complied with relevant
applicable PRC laws and regulations in material respects.
SAFE REGISTRATION
Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas
Investment, Financing and Round-trip Investments Conducted by Domestic Residents through
Special Purpose V ehicles (೻ҳ
ٝthe “ SAFE Circular 37 ”), promulgated by SAFE and which
became effective on 14 July 2014, which replaced the Notice on Issues Relating to the
Administration of Foreign Exchange in Fund-Raising and Round-Trip Investment Activities of
Domestic Residents Conducted via Offshore Special Purpose Companies (͏ஷཀྤ
ٝthe “ SAFE Circular 75 ”), (a) a
PRC resident must register with the local SAFE branch before he or she contributes assets or
equity interests to an overseas special purpose vehicle (the “ Overseas SPV ”) that is directly
established or indirectly controlled by the PRC resident for the purpose of conducting
investment or financing; and (b) following the initial registration, the PRC resident is also
required to register with the local SAFE branch for any major change, in respect of the
Overseas SPV , including, among other things, a change of Overseas SPV’s PRC resident
shareholder(s), the name of the Overseas SPV , terms of operation, or any increase or reduction
of the Overseas SPV’s capital, share transfer or swap, and merger or division. Pursuant to
SAFE Circular 37, failure to comply with these registration procedures may result in penalties.
Pursuant to the Circular of the SAFE on Further Simplification and Improvement in
Foreign Exchange Administration on Direct Investment (ટҳ༟̮ි
ٝthe “ SAFE Circular 13 ”), promulgated by SAFE and which became
effective on 1 June 2015, the power to accept SAFE registration was delegated from local
SAFE to local banks where the assets or interests in the domestic entity are located.
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Our PRC Legal Advisor have confirmed that Mr. Zhu and other three individual
shareholders of the offshore holding vehicles holding our Shares, being PRC residents, have
duly registered in respect of his/her investment in the Group in accordance with SAFE Circular
No. 37 and SAFE Circular No. 13 in October 2021.
M&A RULES
According to Article 2 of the “Provisions on the Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors” (֛the “ M&A Rules ”)
jointly issued by six PRC governmental and regulatory agencies, including MOFCOM and
CSRC, which became effective on September 8, 2006 and amended on June 22, 2009, foreign
investors should comply with the M&A Rules and other applicable PRC laws and regulations
when the foreign investors purchase equity interests in a domestic non-foreign-invested
enterprise (“ domestic company ”) or subscribes for increased capital of a domestic company,
thus changing the nature of the domestic company into a foreign-invested enterprise (“ merger
and acquisition of equity interests ”); or when the foreign investors establish a foreign-
invested enterprise in the PRC, through which they purchase and operate the assets of a
domestic company by agreement; or when foreign investors purchase the assets of a domestic
company, establish a foreign-invested enterprise by injecting such assets, and operate the
assets. The M&A Rules, among other things, further purport to require that an offshore special
vehicle, or a special purpose vehicle, formed for overseas listing purposes and controlled
directly or indirectly by PRC companies or individuals, to obtain the approval of the CSRC
prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock
exchange, in the event that the special purpose vehicle acquires shares of or equity interests in
the PRC companies in exchange for the shares of offshore companies.
According to Article 11 of the M&A Rules, the merger and acquisition of a domestic
company with or by a domestic company, enterprise or individual, that has related party
relationship with the target company, in the name of an overseas company legitimately
incorporated or controlled by the domestic company, enterprise or individual, shall be subject
to examination and approval by MOFCOM. Pursuant to the Manual of Guidance on
Administration for Foreign Investment Access (ˏ˓̅‘(2008))
promulgated by Foreign Investment Department of the Ministry of Commerce ( ਠਕ௅̮༟̡),
notwithstanding the fact that (i) the domestic shareholder of the domestic company has
connected relations with the foreign investor or not, (ii) whether the foreign investor is an
existing shareholder or a new investor, the M&A Rules shall not apply to the merger and
acquisition of equity interests in an established foreign-invested enterprise.
Therefore, our PRC Legal Advisor has advised that the Reorganization of our Group is not
subject to the Article 11 of M&A Rules. However, there is uncertainty as to how the M&A
Rules will be interpreted or implemented, and there can be no assurance that the PRC
regulatory authorities will not take a view that is contrary to or otherwise different from the
above opinions of our PRC Legal Advisor in the future.
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OVERVIEW
Who We Are
We are a leader of assembly character toys in China. Leveraging our portfolio of more
than 500 patents, in-house IP development capability and cooperative relationships with
approximately 50 renowned non-exclusive IP franchises, we are dedicated to providing
consumers with a wide range of quality-for-money assembly character toys and have achieved
rapid growth. Our assembly character toys recreate the essence of IP characters. Through the
combination of our product strength and supply chain capabilities, we are able to maintain cost
advantages and continuously expand product categories. We have established a multi-channel
sales network in China with a comprehensive and extensive consumer reach. We pivoted to
offline sales channel with a focus on distributors as we began to offer assembly character toys
in 2022. According to Frost & Sullivan, we are China’s largest and leading player in the
assembly character toy segment with a GMV of approximately RMB1.8 billion in 2023. We are
also a fast-growing toy company with a GMV growth of over 170% in 2023. Our market share
in China’s assembly character toy segment and China’s assembly toy market in terms of GMV
was 30.3% and 7.4% in 2023, respectively. China had an assembly character toy market size
of RMB5.8 billion in terms of GMV , representing 5.5%, 14.3% and 24.4% of China’s toy
market, characters toy market and assembly toy market in 2023, respectively.
Our Major Products
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Evolution of Our Business
We have been dedicated to the design, development and sales of assembly toys since
2016. Starting from brick-based toys, we accumulated a wealth of knowledge in assembly toys
which served as a solid foundation for expanding our product offering. We then strategically
diversified our product offering to include assembly character toys. We started the research and
development of assembly character toys in 2019 and began to offer such products in 2022, as
we saw large growth potential driven by strong demand for toys that combine highly engaging
assembling process and popular IP characters with strong and loyal fan bases. According to
Frost & Sullivan, China’s assembly character toy market grew by a CAGR of 49.6% from
RMB1.2 billion in 2019 to RMB5.8 billion in 2023, and is expected to grow at a CAGR of
41.3% from RMB5.8 billion in 2023 to RMB32.5 billion in 2028.
Brick-based toys and assembly character toys, both being assembly toys, share many
similarities in product design and production. Both brick-based toys and assembly character
toys employ the concept of standard components, have components that are compatible across
various products, and involve assembling and connecting mechanism. In addition, the raw
materials and production process for brick-based toys and assembly toys are similar, which
enabled us to leverage our expertise, knowledge and established relationship in production and
supply chain management. This can be further corroborated by the fact that three of our partner
factories have been working with us to produce brick-based toys since 2017, 2018 and 2021,
respectively, and continued to produce assembly character toys for us afterwards.
Due to the abovementioned similarities, we are able to leverage our management and
other experiences from brick-based toys in diversifying our assembly toy offering to include
assembly character toys. Particularly, we have accumulated knowledge in product design
(including connection mechanism and materials) and production (including molding, injection
and painting). On the back of our experience in brick-based toys, we developed the Bloks
System specifically for our assembly character toys. Our assembly character toys quickly
achieved success. We began to offer assembly character toys in January 2022. The revenue
from our assembly character toys increased by 553.5% from RMB117.7 million in 2022 to
RMB769.0 million in 2023, and increased by 323.8% from RMB241.4 million in the six
months ended June 30, 2023 to RMB1,023.1 million in the six months ended June 30, 2024.
In 2022, our assembly character toys achieved a gross profit margin of 36.8%, similar to that
of brick-based toys. The gross profit margin further increased to 48.4% in 2023 and 53.3% in
the six months ended June 30, 2024, exceeding that of brick-based toys at 38.7% and 38.1%
for the respective periods.
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Prior to the launch of our assembly character toys, we sold our brick-based toys through
offline channels such as distributors and consignment sales as well as online channels. In 2021,
45.7% and 51.8% of our revenue were generated through offline channels and online channels,
respectively. We pivoted to offline sales channel with a focus on distributors as we began to
offer assembly character toys in 2022. This approach leveraged the local resources and market
intelligence of distributors, enabling us to effectively penetrate the market. More specifically,
offline distributorship allows our target consumers to conveniently experience and purchase
our products offline. By utilizing offline distributorship, we were able to expand presence and
drive our growth efficiently and effectively. In 2022, 2023 and the six months ended June 30,
2024, our offline distribution sales amounted to 48.2%, 83.6% and 91.6% of our total revenue,
respectively.
The Bloks System
Within the global toy market, character toy is the largest segment by form. However, there
is significant room for improvement in efficiently meeting consumer demand for quality-for-
money character toys. More specifically, while character toys exhibit individuality elements
such as the recreation of the IP characters and simulation of their poses, there is a lack of a
highly standardized system for industry players to efficiently and consistently launch products
that combine assembling experience, consistent quality and great value-for-money. The
application of assembling mechanism in character toys is typically done through either
construction blocks or a high proportion of customized components to recreate the IP
characters and simulate their poses. We combine the advantages of character toys and
assembling mechanism and improve thereupon, and offer consumers a new choice in the
character toy segment with our patent-protected Bloks System. The Bloks System comprises
the standardization of product design, research and development and production, a self-
compatible product system and a consumer ecosystem, and enabled us to forge a new assembly
character toy category combining standardization and individuality elements.
 Standardization of product design, research and development and production. In
terms of product design, the majority of components of a single product are standard
components. Such standard components are primarily used as the structures and
joints of an assembly character toy and can be shared across different models. A
same set of structures and joints can be used as the basis of design for different
products, thereby realizing design efficiency. By combining standard and
customized components with a certain proportion, we are able to design products
that can be adapted to a broad array of IPs, and recreate the essence of IP characters
with great value-for-money. In terms of research and development, we have a patent
portfolio covering component-related patents and production technique-related
patents. Component-related patents enable standardized connections between
different product components, while production-related patents facilitates
standardized production. In terms of production, the production process of standard
components can be easily standardized, which enables us and our partner factories
to produce products with consistent quality while benefiting from economies of
scale.
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 Self-compatible product system. Our extensive patent portfolio and rich IP portfolio
enable us to develop a comprehensive and self-compatible Bloks product system
catering to wide demographics and price segments. Standardization patents not only
protect the originality of our systemized product offering, but also make a large
portion of components in our distinctive product system highly compatible. Our rich
IP portfolio not only attracts consumers to continuously purchase new product
series, but also enables them to “mix-and-match” the highly compatible components
from different products to form unique and individualistic assembly and re-creations
based on their creativity and interests, therefore becoming long-term consumers in
our product system.
 Consumer ecosystem. Due to the consumer connection from the assembling process,
and the fact that IP characters are closely associated with rich contents that can be
widely disseminated, we execute a content-driven online marketing strategy to
effectively reach and maintain a broad base of consumers, fans and Blokees Figures
Creators (“ BFCs ”), thereby nurturing a consumer ecosystem with a closed feedback
loop. Our consumer ecosystem not only augments the success rates of new product
launches and sales efficiency, but also increases the stickiness and repeat purchases
of our consumers and fans.
The Bloks System
Consumer ecosystem
Product offering
Highly
compatible
components
Extensive
patent
portfolio
Fans
Consumers
Rich IP
portfolio
Product
system
Blokees Figures
Creators (BFCs)
Standardization
Design
R&D
Production
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Market Opportunities
Assembly character toy is the fastest-growing segment in the global toy market and has
significant growth potential. Due to the emergence of innovative systems and quality supply,
assembly character toys enjoy significant differentiated advantages over traditional character
toys, gradually becoming the preferred choices of consumers, with the penetration rate in the
global toy market expected to increase in the long run.
According to Frost & Sullivan, the global and China’s character toy market reached
RMB345.8 billion and RMB40.3 billion in 2023, and is expected to grow at a CAGR of 9.3%
and 17.7% to reach RMB540.7 billion and RMB91.1 billion in 2028, respectively. Within the
above markets, the global and China’s assembly character toy market reached RMB27.8 billion
and RMB5.8 billion in 2023, and is expected to grow at a CAGR of 29.0% and 41.3% to reach
RMB99.6 billion and RMB32.5 billion in 2028, respectively. The penetration rate of global and
China’s assembly character toys in the character toy market is expected to increase from 8.0%
and 14.3% in 2023 to 18.4% and 35.6% in 2028, respectively. Furthermore, the innovative
systems can be applied to multiple categories of toys, including vehicle toys and various
scenery toys. In particular, the global and China’s vehicle toy market reached RMB96.7 billion
and RMB15.1 billion in 2023, and is expected to grow at a CAGR of 2.9% and 6.3% to reach
RMB111.6 billion and RMB20.5 billion in 2028, respectively.
Rich IP Portfolio
Our self-developed IPs and renowned licensed IPs form our rich IP portfolio. We have
successfully developed two IPs in-house, including the children-development-oriented Magic
Blocks ( ϵᜊ̺ኁ̙) and the Chinese culture-themed Hero Infinity (ࠢOur assembly
character toys efficiently commercialize IP at scale and position us as a preferred partner of
various proprietors of renowned IPs. As of the Latest Practicable Date, we had obtained
licenses for approximately 50 renowned IPs, including Ultraman, TRANSFORMERS, Naruto,
Marvel’s Infinity Saga, Marvel’s Spidey and His Amazing Friends, Minions, Pokémon, Kamen
Rider, Detective Conan, Hatsune Miku, Saint Seiya, EV ANGELION, Hello Kitty, Sesame
Street, SUPER SENTAI, DC’s Superman, DC’s Batman, Harry Potter and STAR W ARS. Our
rich IP portfolio enables us to offer products to reach consumers across different age groups
and genders globally.
Comprehensive Product Offering
We capture the market opportunities and are committed to leveraging our Bloks System
that combines standardization and individuality elements to create highly popular and fun
assembly character toys, address global consumers’ widespread demand for toys that recreate
the essence of IP characters, and deliver the joy of assembling. Through a large number of
SKUs, a comprehensive price segment coverage and a rich IP portfolio, we have built an
expansive matrix-style product offering and continue to serve consumers, fans and BFCs with
a wide selection of products. As of June 30, 2024, we had a total of 431 SKUs available for
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sale, including 116 SKUs designed primarily for children under the age of six, 295 SKUs
designed primarily for consumers between the ages of six and 16, and 20 SKUs designed
primarily for consumers over the age of 16.
Our products offer consumers various quality-for-money propositions, including
excellent play experience, exquisite design and high quality.
 Fun experience. Our innovative and systemized assembling mechanism ensures our
products are easy to play with. Consumers’ involvement in the assembling process
promote individualistic expression. As such, our products have strong collectability
and can provide consumers with long-term companionship.
 High quality. Our products are high quality, safe, enduring, and exquisitely-designed
with consistent assembling experience.
 Great value-for-money. Our product pricing strategy covers a comprehensive price
range, and our mainstream products’ suggested retail prices primarily range from
RMB9.9 to RMB399, with great value-for-money at each price segment. Our
best-selling products in the mass-market price segment are priced at RMB39 per
unit, while products in the value price segment that can reach a wider consumer
group are priced from RMB9.9 to RMB19.9 per unit.
As a result of these features and propositions, our assembly character toy products have
attained wide-spread popularity as evidenced by the strong growth since their launches, despite
the fact that a number of them are based on licensed IPs that are non-exclusive and therefore
compete with products based on the same IP(s) produced by other industry players. To the best
of our knowledge, there are no fewer than two other companies that can sell assembly character
toys under the Ultraman IP in China and overseas. For the TRANSFORMERS IP , to the best
of our knowledge, there are no fewer than three other companies that can sell assembly
character toys under the IP in China, with two of these companies also being able to sell
overseas.
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Our Product Offering
Our Performance
We achieved significant growth during the Track Record Period. We recorded revenue of
RMB329.8 million, RMB325.6 million, RMB876.7 million and RMB1,046.2 million in 2021,
2022 and 2023 and the six months ended June 30, 2024, respectively, with a CAGR of 63.0%
from 2021 to 2023 and a period-over-period growth of 237.6% in the six months ended June
30, 2024. We recorded gross profit of RMB123.4 million, RMB123.4 million, RMB414.9
million, and RMB553.7 million in 2021, 2022 and 2023 and the six months ended June 30,
2024, respectively, with a CAGR of 83.4% from 2021 to 2023 and a period-over-period growth
of 306.5% in the six months ended June 30, 2024. Our gross margin continued to grow during
the Track Record Period, from 37.4% in 2021 to 37.9% in 2022 and further to 47.3% in 2023
and 52.9% in the six months ended June 30, 2024. In the six months ended June 30, 2024, we
recorded adjusted profit for the period (a non-IFRS measure) of RMB292.2 million,
representing an increase of 300.9% from the year ended December 31, 2023.
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COMPETITIVE STRENGTHS
Hard-to-replicate combination of wide ranging patents and rich IP portfolio
Wide ranging patents
We have an extensive patent portfolio to protect the originality of our self-compatible
assembly character toy product system. Through our patent portfolio covering components and
production techniques, we not only make the Bloks System hard-to-replicate, but also provide
our partner factory network with a solid technology and technique foundation for specialized
assembly character toy production.
 Component-related patents. Component related patents, including patents related to
overall assembly structure and key joint components, are the core of our patent
portfolio, and are critical for standardizing our assembly character toys. Component-
related patents facilitate highly standardized production, which in turn enables us to
better control product quality, improve the consumer experience in fun and
ease-to-play-with and lower our costs. In addition, component-related patents enable
highly standardized connections between different product components and form an
important foundation for our self-compatible product system. Through highly
standardized connection mechanisms, our standard components and customized
components that represent IP characters’ unique features are highly compatible and
can be mixed-and-matched for different assembly combinations, not only providing
a consistent assembling experience, but also strengthening the individuality
elements such as the recreation of the essence of IP characters and the simulation of
dynamic poses, thereby enhancing the fun features of our products.
 Production technique-related patents . Production technique-related patents,
including injection molding and process automation, enable us to curate proprietary
production techniques and customized equipment, allowing the specialized,
efficient, and scaled production of our assembly character toys while maintaining
distinctive cost advantages.
Our extensive patent portfolio includes patents granted in China and major overseas
markets. As of the Latest Practicable Date, we had 512 granted patents in China, including 75
invention patents, as well as 24 granted patents in overseas countries and regions, including the
United States, Europe and Japan. Our expertise in building a patent portfolio has also earned
us numerous honors and awards. We were accredited as “High and New Technology
Enterprise” by the Shanghai Science and Technology Commission in 2021, “National
Intellectual Property Advantage Enterprise” by the National Intellectual Property
Administration in 2022 and “Shanghai Patent Work Demonstration Enterprise” by the Shanghai
Intellectual Property Administration in 2023.
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Rich IP portfolio
We have built a rich IP portfolio with our self-developed IPs and licensed IPs, and
adapted the IPs to products that would address diverse consumer preferences to develop a
product offering catering to wide demographics and price segments. We follow a systematic
approach for IP development, licensing and management, factoring in the overall popularity of
IPs, consumer preferences, product adaptability and product offering expansion potential, to
continuously optimize and cultivate our leading IP commercialization and management
capabilities.
Through long-term consumer insights and an experienced IP development team, we have
successfully incubated and commercialized our self-developed IPs. We have strong IP
development capabilities and have widely disseminated our self-developed IP contents. As of
the Latest Practicable Date, our animated series based on Magic Blocks and Hero Infinity had
cumulative viewing on pop-up basis of over 15.2 billion and over 5.0 million followers in
aggregate. Our self-developed IPs also demonstrate strong monetization potential. As of June
30, 2024, we had 50 SKUs available for sale under our Magic Blocks franchise, and 53 SKUs
available for sale under our Hero Infinity franchise, with major characters including Monkey
King (٤ࢻ࢑Nezha (Ω), Guan Y u ( ᗫϻ), Zhang Fei (࠭Zhao Y un ( Ⴛථ) and Y ang
Jian ( เ⚖).
On the IP licensing front, assembly character toys are considered a high-quality medium
for IP proprietors to expand consumer reach and maintain consumer loyalty. More specifically,
assembly character toys, due to their connection with consumers and their collectability, have
become an ideal medium for the storyline and values of a particular IP franchise. Products
under our Bloks System can recreate the essence of IP characters for wide demographics and
price segments, and effectively commercialize the IPs, which in turn position us as a preferred
partner of various proprietors of renowned IPs. As of the Latest Practicable Date, we had
obtained licenses for approximately 50 renowned IPs, including Ultraman, TRANSFORMERS,
Naruto, Marvel’s Infinity Saga, Marvel’s Spidey and His Amazing Friends, Minions, Pokémon,
Kamen Rider, Detective Conan, Hatsune Miku, Saint Seiya, EV ANGELION, Hello Kitty,
Sesame Street, SUPER SENTAI, DC’s Superman, DC’s Batman, Harry Potter and STAR
W ARS. We have successfully launched products based on 12 of the licensed IPs. As of June
30, 2024, we had available for sale 134 SKUs of toys under the Ultraman franchise and 64
SKUs of toys under the TRANSFORMERS franchise. Under our IP licensing agreements, we
have the right to offer assembly character toys in a large number of countries around the world.
For example, we have the right to sell our products under the TRANSFORMERS franchise in
major toy markets such as China, the United States, Europe and Southeast Asia.
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Unique advantages of combining patents and IP
Through the combination of our wide-ranging patents and rich IP portfolio, we have
created core competitive advantages that are hard-to-replicate:
 Balancing quality and cost. Through the integration of patents and IP in the entire
process of product design, research and development and production, we are able to
achieve a balance between product quality and cost control.
 Matrix-style and compatible product offering. Utilizing our patents and IPs, we have
successfully launched various individual products and product series and built an
extensive and hard-to-replicate matrix-style product offering. In addition, our
assembly character toys are highly compatible, and substantially all of the
components in our products can be used in our other models for mixing-and-
matching.
 Consumer ecosystem system. Through a matrix-style and compatible product
offering, we continue to attract a large number of highly active consumers, fans and
BFCs and provide them with the flexibility of re-creations such as re-touch and
modification. Due to the popularity of renowned IPs and our own event operations,
fans and BFCs actively create and disseminate a rich variety of high-quality UGCs.
The participation of fans and BFCs increases the activities of a large number of
consumers in our ecosystem, attracts new consumers to join our ecosystem, and
converts some consumers into fans and BFCs. The positive feedback from
consumers on UGCs created by fans and BFCs has further stimulated the creativity
and vitality of the ecosystem, thereby forming a unique Bloks consumer ecosystem
with a positive feedback loop.
Product strength underpinned by the full integration of R&D and production
Efficient research and development
We have a robust and efficient research and development team. As of June 30, 2024,
approximately 64% of our employees were engaged in research and development, of which
approximately 84% were focused on product-related research and development functions. Our
dedication to research and development enables us to build an extensive patent portfolio, which
protects the originality of our self-compatible product system and facilitates the establishment
of a network of partner factories specializing in the production of assembly character toys.
We follow a consumer-centric research and development philosophy, with a particular
focus on consumer feedback and consumer experience, and we apply our consumer insights
throughout the entire process, from product design to launch. In the product design phase, we
continue to improve the quality and experience of the product through consumer surveys and
participation. After product launch, we iterate the product based on consumer feedback to form
a closed loop to optimize product experience.
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Through our proprietary research and development system, coupled with our self-
developed software and information management systems, such as component editing software
and SKU information management system, we have achieved efficient and standardized
product design and development processes.
A partner factory network specializing in the production of assembly character toys
Leveraging China’s vast, high-quality and cost-effective production resources, we follow
a strict standard to select and manage our production partners, and establish long-term category
exclusive cooperation with industry-leading third-party partner factories, forming a technically
advanced partner factory network specializing in the production of assembly character toys.
Our research and development are deeply integrated with our specialized and modularized
partner factory network across China. We utilize our know-how in assembly character toy
production and various patents to curate proprietary production techniques and customized
equipment, making our partner factory network hard-to-replicate.
Through a highly standardized molding process, and an automated process of mold
injection, UV printing and painting, component sorting, and box packaging, we have achieved
efficient large-scale production and cost advantages. In the six months ended June 30, 2024,
we recorded a gross profit margin of 52.9%, which is above industry average, and were able
to offer products at the value price segment at RMB19.9 per unit at scale. Meanwhile, we have
achieved a molding accuracy of 0.004 mm, significantly higher than the industry average,
through an innovative molding technique. Therefore, our different products have consistent
quality, and the snapping forces required across different models are similar, which lead to a
smooth and consistent assembling experience.
We have formulated strict Bloks toy safety standards for our partner factory network
specializing in the production of assembly character toys, and the test indicators under our
safety standard meet global industry safety standards, including China’s toy safety standard
GB6675-2014, the United States toy safety standard ASTM F963 and the European Union toy
safety standard EN71.
Product strength
Integrating research and development and production brings about our product strength,
mainly including the following elements:
 Quality-for-money. Our products feature high quality, safety, endurability, exquisite
design, consistent assembling experience and recreation of the essence of IP
characters, and can be produced at a competitive cost, enabling us to launch
quality-for-money products in different price segments. For example, multiple SKUs
in the value price segment at RMB19.9 per unit that were launched in December
2023 under the Hero Infinity Galaxy V ersion Turbo, attained high popularity among
a wide base of value-conscious consumers, with a sales volume of over 350,000
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units in its first quarter of launch. In November 2024, we launched the
TRANSFORMERS Galaxy V ersion Defender in the value price segment at a
suggested retail price of RMB9.9 per unit to further expand the price segment
coverage of our products.
 Efficient new product launch . Our product launch is characterized by short cycle,
high frequency, large quantity and high success rates. In terms of the product launch
cycle, it takes approximately six to seven months from conceptualization to mass
production, which is lower than the industry average of 10 to 12 months. We
launched SKUs at a high frequency of approximately 30 to 90 SKUs per quarter
from 2023 to the six months ended June 30, 2024. In 2023, we launched a total of
197 SKUs, and plan to launch approximately 400 and 800 SKUs in 2024 and 2025,
respectively. In terms of product launch success rate, the products we launched
remain popular in the market and have achieved high success rates. Currently, the
vast majority of assembly character toy SKUs newly launched in 2023 remains
available for sale.
 Long IP’ s product life cycle. We continue to launch new product versions and series
under each individual IP franchise, and extend each IP’s product life cycle through
continuous iterations. For example, we had launched seven versions and 26 series
under the Ultraman franchise, with a total of 134 SKUs available for sale as of June
30, 2024. Currently, all 13 series of Ultraman Galaxy V ersion we launched remain
available for sale, with Series 11 of such version achieving a 86.7% increase in sales
in its first quarter of launch as compared to that of Series 10.
 High consumer stickiness. As of June 30, 2024, we had approximately 2.0 million
registered members in the Weixin mini program, with a large number of repeat
purchasers. Members who activated their products on the Weixin mini program in
2023 activated an average of approximately five units of our assembly character
toys.
Content-driven online marketing strategy facilitating the efficient buildout of multi-
channel sales network
Unlike traditional toys, assembly character toys are naturally suitable for content-driven
marketing due to the consumer connection from the assembling process, and the fact that IP
characters are closely associated with rich contents that can be widely disseminated. As such,
we are able to leverage the popularity and influence of our rich IP portfolio and execute a
content-driven online marketing strategy to effectively reach and maintain a broad base of
consumers, fans and BFCs, and collect feedback on our products.
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We carry out systematic product content dissemination on social media platforms by
using multiple communication channels, including our official accounts and the accounts of
KOLs, KOCs, fans and BFCs, combining the IP attributes and channel characteristics, and
synchronizing timing with the IP proprietors’ promotional activities:
 Official accounts. We publish high-quality images and videos that highlight our
product design and the essence of IP characters to enhance brand awareness.
Additionally, we dynamically adjust the timing of new product launches and
marketing content releases based on the relevant IP’s content release schedule,
effectively supporting our product marketing.
 Collaborations with KOLs and KOCs. The KOLs and KOCs we work with publish
contents to highlight the advantages of our products, including new product features
such as cool appearances and new production techniques, recreations of classical
movie scenes, and assembling experience sharing, to stimulate the activities of our
consumer ecosystem. We worked with more than 900 KOLs and KOCs from January
2022, when we began to offer assembly character toys, to the Latest Practicable Date
across various online platforms. There was no concentration of KOLs and KOCs
during the Track Record Period and up to the Latest Practicable Date.
 UGCs . Our products that recreate the essence of IP characters stimulate the fans’ and
BFCs’ interests in product re-creations and subsequent content sharing utilizing our
diverse product offering. Through official reposting and event operations such as
product photo sharing, assembling and re-creation competition and offline
exhibitions, we further promote creativity and UGC sharing by consumers, fans and
BFCs on social media platforms.
Hashtags related to us and our products have generated more than 11 billion views across
various social media platforms, which corroborates the success of our content-driven online
marketing strategy. We actively reflect consumer feedback on our products from these social
media platforms in product development and iteration processes, forming a positive feedback
loop based on consumer insights.
Our content-driven online marketing strategy has enabled us to efficiently establish a
multi-channel sales network. Content-driven marketing deepens consumers’ awareness of our
brand and products, promotes our products effectively, improves the success rates of new
product launches, and has a network effect on multi-channel sales promotion. A large number
of online and offline channel partners also seek cooperation with us because of our product
strength and popularity. As of June 30, 2024, we had established a strong market position in
offline sales channels in China, including retail outlets and specialty outlets. Through over 450
distributors, our products can effectively reach all first- and second-tier cities and over 80% of
the third-tier cities and below. Our products are also sold in large-scale supermarkets and
specialty outlets in China, including Toys“R”Us, Kidswant, Kulechaowan, and Walmart. Our
online channels in China cover mainstream e-commerce platforms, including Tmall, JD.com,
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Douyin, and Pinduoduo, as well as our own Weixin mini-program. Meanwhile, our products are
also sold through online and offline channels including Amazon, Toys“R”Us, 7-Eleven and
Walmart in overseas markets including the United States, Southeast Asia and Europe.
Through our content-driven online marketing strategy and multi-channel sales network,
we have achieved solid sales and marketing results. As a leader in China’s assembly character
toy segment, we are widely recognized by consumers. We had a total of more than 13 million
fans on online platforms including JD.com, Weixin, Tmall, Douyin, Pinduoduo, Kuaishou,
Weibo, Xiaohongshu and Bilibili as of the Latest Practicable Date, ranking us one of the top
two brands in the Chinese toy industry in this regard. Our assembly character toys enjoy fast
inventory turnover. In the six months ended June 30, 2024, our assembly character toys stayed
in our warehouses for approximately 30 days on average. In the six months ended June 30,
2024, our marketing and promotion expenses accounted for 4.6% of our total revenue,
significantly lower than the industry average.
Sustainable growth model with matrix-style product offering covering all demographics,
all price segments and global consumers
Leveraging our advantages as a leader in the assembly character toy segment, we have
successfully curated a product offering catering to all demographics, all price segments and
global consumers:
 All demographics. Based on the Bloks System and our rich IP portfolio, we
developed a product offering that can meet the long-term needs of diverse
consumers and fans of all ages and genders. As of June 30, 2024, we had available
for sale 116 SKUs designed primarily for children under the age of six, including
products under the Magic Blocks franchise, 295 SKUs designed primarily for
consumers between the ages of six and 16, including products under the Hero
Infinity, Ultraman, TRANSFORMERS and Naruto franchises, and 20 SKUs
designed primarily for consumers over the age of 16, including products under the
Ultraman and TRANSFORMERS franchises.
 All price segments. Leveraging our efficient research and development and partner
factory network with cost advantages and consistent quality, we are able to launch
highly popular quality-for-money products covering all price segments. Suggested
retail prices of our mainstream products range from RMB9.9 to RMB399, with the
majority having a suggested retail price between RMB19.9 and RMB79, and we are
also capable of expanding the price range of our products upwards and downwards.
Our multi-channel sales network brings our products in the value, mass-market,
mid-end and high-end price segments to a large number of consumers. We launched
the Ultraman Galaxy V ersion in the mass-market price segment at a suggested retail
price of RMB39 in January 2022, and the Hero Infinity Galaxy V ersion Turbo in the
value price segment at a suggested retail price of RMB19.9 in December 2023, both
of which achieved strong sales with positive consumer feedback. In November 2024,
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we launched the TRANSFORMERS Galaxy V ersion Defender in the value price
segment at a suggested retail price of RMB9.9 per unit to further expand the price
segment coverage of our products.
 Global consumers. Assembling mechanism has a universal appeal, thus assembly
character toys can naturally meet the widespread demands of consumers and fans
around the world for toys that are easy to play with. Leveraging China’s high-quality
production resources and our partner factory network specializing in the production
of assembly character toys, we are able to provide quality-for-money toys to global
consumers. We also have the rights to sell assembly character toys under IP
franchises popular among global consumers and fans in multiple countries, and we
have been building a sales network covering various overseas markets.
Our product offering catering to all demographics, all price segments and global
consumers are three distinctive drivers for our continued, sustainable and robust growth. In
addition, we plan to expand into new categories, such as vehicle toys, following the same
product offering approach.
Dedicated founder and management team with a track record of entrepreneurship and
innovation capabilities
We have a team of dedicated founders and senior management with successful experience
in innovation. Our management team combines talents from toy, cultural and entertainment and
TMT industries. With an average of over 15 years of experience in relevant industries, our
founder and the core members of our senior management possess a combination of innovative
thinking and expertise from different fields.
Our founder Mr. Zhu is a seasoned serial entrepreneur, who has co-founded a listed
company. Mr. Zhu possesses deep industry experience across key areas ranging from product
research and development, IP development and management, production to sales and
marketing. Mr. Zhu’s leadership, profound industry insights and innovative and entrepreneurial
spirit spearheaded our rapid growth in the past, and will continue to propel our growth in the
future. Our senior management team has strong capabilities in products innovation and
development, and we have won multiple prominent awards and honors in the industry.
With the leadership of Mr. Zhu and the assistance of the senior management team, we will
continue to uphold the vision of offering fun products globally and deliver the joy of
assembling to global consumers and fans.
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STRATEGIES
Solidify our leadership position in assembly character toys by continuously capturing
growth opportunities across all demographics, all price segments and global consumers
We aim to continue to execute our growth strategy of capturing all demographics, all price
segments and global consumers to solidify our leadership in the assembly character toy
segment. Specifically, we plan to continue to expand our product offering, deepen our IP
accumulation, expand our multi-channel sales network and strengthen our consumer ecosystem
to meet the diverse demands of a wide range of consumer and fan groups.
 Product offering. We plan to continuously expand our product offering to further
expand target consumers and price segment coverage, including more SKUs based
on renowned IP franchises, including Minions, Pokémon, Detective Conan,
EV ANGELION and Hello Kitty. We plan to leverage our proven capability to
develop assembly character toys with various quality-for-money propositions,
including excellent experience, exquisite design and high quality to launch new
products based on these non-exclusive IPs that compete favorably with products
based on the same IP(s) produced by other industry players.
 IP accumulation. We plan to continue to accumulate more IPs to meet the needs of
diverse consumers and fans by strengthening our efforts in in-house IP
developments and expanding cooperation with proprietors of renowned IPs. As of
the Latest Practicable Date, we were negotiating IP licensing arrangements for more
than 25 renowned IPs.
 Multi-channel sales network. We plan to continue to expand our offline channels in
China to cover more retail outlets, especially in lower-tier cities. In addition, we
plan to develop online and offline DTC channels to have more direct and timely
consumer feedback in order to better connect with our consumer and fan base. In
particular, we plan to open flagship stores in selected major cities in the near future.
These stores can serve as physical touchpoints where customers can experience our
products firsthand and provide immediate reactions and opinions. Additionally,
flagship stores create a space for building stronger relationships with loyal
customers, fostering a deeper sense of community. Meanwhile, leveraging our
leading position in China and an expanding overseas coverage of the licensed IPs,
we plan to cooperate with more overseas channel partners to effectively increase the
number of retail outlets and expand geographical coverage, so as to realize rapid
growth in the sales of our diverse, quality-for-money, and fun products in the
overseas markets.
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In order to implement our growth strategy of capturing all demographics, all price
segments and global consumers, on the production front, we plan to invest in core production
resources such as molds and our own scaled factories specializing in the production of
assembly character toys to expand and optimize our production resources. We seek to achieve
economies of scale efficiently by considering a range of factors related to the potential
self-operated factory, including cost, quality control, production capacity, production delivery
and logistics, and aiming to realize the best business and financial returns with the optimal
balance between the self-operated production capacity and partner factories’ production
capacity.
Expand product categories
Leveraging the strong expandability of the Bloks System, we plan to replicate our success
in the assembly character toy category across a wider range of toy categories, including vehicle
toys and various scenery toys. Our current brick-based toy offering contains vehicles and
therefore we already possess relevant experience in developing vehicle toys. Moreover, we
believe that the conceptualization and mechanical design of assembly toys based on vehicles
to be much less complicated than those of assembly toys based on IP characters due to factors
such as posability and amount of details. The Bloks System allows us to incorporate our
innovative and systemized assembling mechanism and standardized connection mechanism in
the design of assembly vehicle toys to reduce development costs. We are also able to leverage
our network of partner factories to produce these assembly vehicle toys at a competitive cost.
According to Frost & Sullivan, the vehicle toy segment is the second largest toy segment by
form in the global and China’s toy market, with a GMV of RMB96.7 billion and RMB15.1
billion and a penetration rate of 12.5% and 14.4% in the global and China’s toy market in 2023,
respectively. Our rich experience in commercializing a wide range of IPs serve as a solid
foundation for us to make assembly vehicle toys an important new category for development.
We plan to launch vehicle toys in 2026 and scenery toys further down the road. A product
offering covering diverse assembly toy categories and the combination of different assembly
toy categories will significantly expand the playing themes of our toys and bring significant
mid- to long-term growth potential.
Build a team of high quality global talents
We uphold a people-oriented corporate culture and regard employees as the cornerstone
of sustainable corporate development, and we plan to continue to attract, train, retain and
motivate high-quality global talents to support our global growth strategy. Specifically, we plan
to continue to recruit and cultivate talents for innovation in key aspects of our business,
including product design and development, in-house development and licensing of IPs,
procurement and production, and sales and marketing, so as to effectively cover major markets
in China and overseas to offer quality-for-money products to global consumers. We believe that
a high quality, dedicated and experienced team is the key to our success. Furthermore, we plan
to strengthen our talent incentive programs to support our employees in achieving career
development while driving our business success.
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Strategically pursue investment and acquisition opportunities
To execute our growth strategy, we aim to pursue further strategic cooperation with a
wide range of partners in the global assembly character toy industry value chain, including IP
proprietors, partner factories and sales channel partners, to build a strategic partner network.
In particular, we plan to jointly invest in IP contents and deepen cooperation with proprietors
of renowned IPs. We also aim to strategically explore potential acquisition opportunities to
further strengthen our IP portfolio, product offering, research and development capabilities and
sales channels. As of the Latest Practicable Date, we had not identified any targets for any
significant investments or acquisitions in the near future.
Commitment to sustainability and social impact
We are committed to fulfilling our social responsibilities, and believe that ESG-related
strategy is critical to the sustainable development and success of our business. In the product
design process, we plan to adhere to environment friendly and compatibility design concepts:
(i) Environment-friendly: We plan to increase the use of degradable, environmentally friendly
raw materials for product production and packaging without compromising consumer
experience; (ii) Compatibility: We focus on product compatibility and endurability, providing
consumers and fans with various ways to play with our toys and reuse the parts and
components, thereby reducing the waste of raw materials in the industry. We also plan to
continuously optimize production techniques and upgrade automation technologies to further
reduce production waste, energy use and carbon emissions.
We will continue to support and participate in charitable events that are in line with our
values, and we are in the process of establishing the Bloks Foundation. We plan to focus our
charitable events on causes such as green and environmentally friendly technologies in the
field of toy production, the cultivation of innovative talents, original content creation and
funding for children’s development.
OUR PRODUCT APPROACH
We adopt a product approach that offers consumers a new choice in the highly popular
character toys market. Through our product approach that employs an optimal combination of
standard and customized components, we produce character toys that recreate the essence of
the IP characters, and are fun to assemble and play with, and more accessible in terms of
pricing.
Surrounding our product approach, we have built the Bloks System that comprises
standardization of product design, research and development and production, a self-compatible
product system and a consumer ecosystem. The use of standard components across different
models brings design and production efficiency, which in turn enables us to offer quality-for-
money toys. To entrench the distinctive advantages of our product approach, we have
developed and accumulated a hard-to-replicate combination of wide-ranging patents that
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protects the originality of our self-compatible product system. Our product approach also
enables us to effectively commercialize our self-developed and licensed IPs to strengthen and
rapidly broaden our product offering.
The Architecture of Our Assembly Character Toys
The architecture of our assembly character toys draws inspiration from human physique
to assimilate stability, mobility and appearance. Under this approach, we recreate characters
that can be assembled, posed and customized with details through the combination of standard
and customized components.
Standard components are primarily used as the structures and joints of an assembly
character toy which can be shared across different models. The use of standard components
enables consumers to mix and match different parts of different models for their own unique
creations. Separately, production process of these components can be more easily standardized,
which enables us and our partner factories to produce products with consistent quality while
benefiting from economies of scale, thereby offer quality-for-money toys. Customized
components are primarily the external appearance layer which allows us to recreate the unique
visual and narrative elements of popular characters from the IPs in miniature form.
With standardized design, particularly the connecting mechanism, substantially all of the
standard and customized components among different models can be interchangeable for
re-creation. Separately, the majority of components of a single product are standard
components.
 Standard Components — “Structures” and “Joints”
The “structures” used in our products are designed to mimic the skeletal structure
of human beings to support the weight and maintain the shape of our assembly
character toys. The “joints” used in our products are designed to mimic the joints of
human beings which connect different toy parts together. We integrate the ratchet
mechanisms into the joints to provide support for complex and dynamic poses,
allowing for flexible and precise control over the positioning and movement of the
figure’s limbs. Such design improves the stability of different customized poses that
can be maintained over time. In addition, snapping forces required to assemble the
standardized joints across our SKUs are similar, which improves the experience in
the consumers’ assembling process. A same set of structures and joints can be used
as the basis of design for different products.
 Customized Components — Appearance Layers
The appearance layers such as the unique armor or clothing for the IP characters are
used to recreate their design and narrative elements. These components are designed
with patterns, colors and texture that enhance the appearances and closely mimic the
characters’ original appearances.
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The Architecture of Our Assembly Character Toys
UltramanHero Infinity –
Guan Yu
(“ᜢԳ”)
Customized Components
(Appearance Layer)
Standard Components
(Structure and Joints)
Our Patent Portfolio
We have a patent portfolio covering components and production techniques, which
protects the originality of our self-compatible product system, and provides our partner
factories with the technology and technique foundation for the production of our assembly
character toys.
Component-related patents include overall assembly structure, joints, appearance design,
connecting mechanism and posing mechanism. These patents enable us to better control
product quality, improve the consumer experience in terms of fun and ease of assembly while
achieving economies of scale, as well as accurately convey the unique design and narrative
elements and simulate dynamic poses of popular IPs in our assembly character toys. Production
technique-related patents, including mold injection and production process automation, enable
us and our partner factories to achieve efficiency and ensure quality in scaled production, both
of which facilitate cost reduction.
For example, we have a patent relating to the overall assembly structure of our assembly
character toys which standardizes the design of such products using modularized components,
allowing for efficient conversion of IPs into assembly character toys. Our patent relating to
joints of our assembly character toys improves the durability of the product’s rotation structure
through special mechanical design. In addition, our different standard and customized
components can be connected through our patented connecting mechanisms, making the parts
and components from different models mutually compatible and interchangeable. Furthermore,
our patented injection technique reduces the injection pressure and shortens the time needed for
stabilizing the injected plastics, which effectively improves the production efficiency. We
utilize these patents for our proprietary production techniques and customized equipment to be
used by our specialized partner factories.
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Our IP Portfolio
We follow a systematic approach for IP development, sourcing and management to build
a rich portfolio of IPs. When developing or selecting the IPs to be licensed, we consider key
factors including overall popularity of IPs, consumer preferences, product adaptability and
product offering expansion potential. We have a dedicated team to oversee IP operations,
focusing on IP portfolio expansion, extending IPs’ product life cycle and maximizing the value
of IPs through commercialization.
Since our inception, we have accumulated a diverse portfolio of IPs through self-
development and licensing. In addition to our success in incubating self-developed IPs, our
successful track record in commercializing self-developed and licensed IPs positions us as a
preferred partner for IP proprietors. The number of IPs in our portfolio increased from nine as
of December 31, 2021, to approximately 50 as of the Latest Practicable Date. We are able to
develop multiple versions of assembly character toys and brick-based toys with different sizes,
pricing and levels of details under each IP .
Our Selected IPs
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Self-developed IPs
We currently have two self-developed IPs: Magic Blocks ( ϵᜊ̺ኁ̙) and Hero Infinity
(ࠢWe have the full right to these self-developed IPs, including the development of
various products such as assembly character toys and brick-based toys and the right to produce
animated series, among others. Through original stories and products, our self-developed IPs
enable us to further unlock our brand value and strengthen brand awareness. As of the Latest
Practicable Date, our Magic Blocks and Hero Infinity animated series had a cumulative
viewing of over 15.2 billion on a pop-up basis and over 5.0 million followers in aggregate. As
of June 30, 2024, we had 103 SKUs of toys available for sale.
 Magic Blocks. Launched in 2017, the Magic Blocks story revolves around the
adventure of three main characters, Bobo, Lulu and Coco and their friends. Magic
Blocks is developed primarily for children under the age of six. As of the Latest
Practicable Date, we had launched 214 episodes of Magic Blocks animated series.
As of June 30, 2024, we had 50 SKUs of Magic Blocks toys available for sale.
Magic Blocks ( ϵᜊ̺ኁ̙)
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 Hero Infinity. Hero Infinity was launched in 2022. We combine the mecha elements
with the iconic fictional figures from classical Chinese literatures, such as the
Monkey King (٤ࢻ࢑Nezha (Ω) and the Bull Demon King ( ˬᚭˮ), and
historic figures, such as Guan Y u ( ᗫϻ), Zhang Fei (࠭and Zhao Y un ( Ⴛථ), to
create hero stories with modern elements. Hero Infinity is developed for a broad
consumer base. As of the Latest Practicable Date, we had launched 62 episodes of
Hero Infinity short videos. As of June 30, 2024, we had 53 SKUs of Hero Infinity
toys available for sale.
Hero Infinity (ࠢ)
Case Study — Hero Infinity
Through a combination of innovative design, captivating storytelling, high-quality
assembly character toys and our consumer engagement, Hero Infinity has the potential to
capture the imagination of a global audience.
IP and Character Design
Our characters are carefully chosen from classical Chinese literatures based on the
characters’ cultural significance, enduring popularity, unique personalities and potential for
reinterpretation within a mecha universe. We combine iconic imagery with innovative designs
that convey the personality and cultural narratives of each selected character through details.
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Animation Production
Following character design and story development, animation is created to bring the
heroes to life. This stage involves detailed scriptwriting and storyboarding, character
animation, scene creation and special effects, ensuring a visually captivating experience.
During the Track Record Period, we engaged Bloks Culture, which was a subsidiary of the
Group prior to the termination of the Contractual Arrangement, for animation production. In
October 2024, we ceased such cooperation with Bloks Culture, given the animation production
industry in China is relatively mature with ample qualified suppliers.
Product Commercialization
The transition from concept art to a tangible assembly character toy involves a
comprehensive process. We first conduct mechanical design to curate a set of standard and
customized components for toy assembling. During this process, we apply DFM principles to
determine the optimal combination of standard and customized components in toys. Colors,
materials and finishes are carefully chosen to match the character designs.
Once the designs are completed, we design high-quality molds to replicate the
components. Because we use a significant portion of standard components in our designs, we
can use the molds for such standard components for many different models and only need to
create molds for customized components for each new model.
We work with specialized partner factories that are dedicated to the production of our
products. We integrate our know-how in assembly character toy production and various patents
to curate proprietary production techniques that can ensure the delivery of quality finished
products.
Consumer Engagement
The assembly character toys under Hero Infinity were highly popular among consumers.
Enthusiasts of our assembly character toys created and published videos and posts sharing their
experience and passion for our products and received millions of views on social media
platforms. One of the most popular UGC videos received more than 25 million views across
various social media platforms within one year of its publication. Such UGCs further promote
the Hero Infinity IP .
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Licensed IPs
We are able to successfully develop products that resonate with fans and effectively
commercialize IPs. As such, we have become a preferred partner among proprietors of
renowned IPs. We enter into non-exclusive license agreements to secure the rights to develop
and sell toys in China and overseas. As of December 31, 2021, 2022 and 2023 and June 30,
2024, we had seven, 10, 13 and 18 IP licensing agreements in effect with seven, 10, 11 and 12
IP proprietors or licensors. As of the Latest Practicable date, we had 23 IP licensing agreements
in effect with 10 IP proprietors and three licensors. See “— Intellectual Properties — IP
Licensing Arrangements.” Generally, our licensing agreements do not provide predetermined
conditions for renewal, and they can be renewed or extended upon mutual agreement. We strive
to maintain positive relationship with our IP proprietors and licensors. As a result, we have
been successful in renewing or extending our licenses without a significant increase in the fee
rates. We typically start the renewal or extension negotiation three to six months prior to the
expiration of our licenses. For certain IPs with good product sales and high potential, we may
seek to start such negotiation at an earlier stage. Our licensed IP portfolio includes a wide range
of IPs that are popular across wide demographics including age groups and genders. As of June
30, 2024, we had more than 30 licensed IPs and 263 SKUs available for sale based on our
licensed IPs. The table below sets forth certain information on our selected licensed IPs under
the 23 IP licensing agreements in effect as of the Latest Practicable Date.
IP Name
Counter-
parties of
the licensing
agreements Licensed Territories
Licensing
Expiration Y ear
Ultraman IP licensor China
(1) 2027
North America, Europe
and certain regions
in Asia
2025
TRANSFORMERS IP proprietor Over 50 countries
globally
2028
Naruto IP licensor China 2025
Marvel: Infinity Saga
and Spidey and His
Amazing Friends
IP proprietor Nine countries in Asia 2025
Minions IP proprietor Over 150 countries
globally
2027
Pokémon IP licensor and
IP proprietor
China 2025
Note:
(1) Including Hong Kong, Macau and Taiwan.
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IP Name
Counter-
parties of
the licensing
agreements Licensed Territories
Licensing
Expiration Y ear
Sanrio: Hello Kitty, My
Melody, Cinnamoroll,
Pom Pom Purin,
Kuromi, Pochacco,
Hangyodon and
Tinychum
IP licensor China 2027
Sesame Street IP proprietor 40 countries in Asia,
Oceania, North
America and Europe
2026
Y eloli IP proprietor Globally other than
the United States,
Mexico and Canada
2026
Three-Body IP proprietor China 2027
THE LAND
OF W ARRIORS
IP proprietor China
(1) 2026
Saint Seiya IP licensor China 2026
Hatsune Miku IP licensor China 2026
Detective Conan IP licensor China 2026
Kamen Rider IP licensor China 2025
EV ANGELION IP licensor China 2026
Shin Kamen Rider IP licensor China 2025
Honor of Kings IP proprietor China 2026
SUPER SENTAI IP licensor China 2025
Anime ULTRAMAN
Series
IP licensor China 2026
Harry Potter and DC:
Superman, Batman,
The Justice League,
Aquaman, The Flash
and Wonder Woman
IP proprietor China 2027
STAR W ARS IP proprietor China 2028
Y u Y u Hakusho IP licensor China
(1) and certain
other countries in
Asia
2026
Case Study — Ultraman
Ultraman is a highly popular Japanese science fiction franchise that began in 1966. The
franchise has since spawned many TV series, films, comic books, animes and other media
publications.
Note:
(1) Including Hong Kong, Macau and Taiwan.
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We entered into license agreement with the IP licensor of Ultraman in 2021 and obtained
the rights to design, develop, produce and sell Ultraman assembly character toys in China.
Our success with Ultraman can be attributed to a number of factors, including:
 Continuous product innovation: We continuously rolled out new products. We
launched Ultraman Galaxy V ersion in 2022. Since then, we have developed and
introduced 13 series of assembly character toys under this version. As of the Latest
Practicable Date, all series under the Ultraman Galaxy V ersion remained available
for sale. The Series 11 achieving a 86.7% increase in sales volume in the first quarter
of its launch in April 2024 compared to that of Series 10.
 Effective content-driven marketing strategy: Our Ultraman assembly character toys
were promoted leveraging our content-driven online marketing strategy through
various channels, including official accounts and the accounts of KOLs and KOCs
on social media platforms. BFCs also posted UGCs showcasing their own creative
combination and modification of the assembly character toys using parts from
different products of ours.
Selection of IPs
We actively look for IPs that are widely popular and can potentially complement our
current product offering and further expand our target consumer groups. In the IP selection
process, we conduct extensive market research and rely on our deep insights on market trends.
The key personnel responsible for our IP selection have extensive experience with a deep
understanding in the animation industry.
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Generally, we will take into account of below factors when selecting IPs:
 Popularity : Popularity of a candidate IP can determine its potential for sales and
product feasibility to gain access to the market. Reputation of a candidate IP is also
important as our brand image will be closely associated with the selected IP after we
launch new products under it.
 Consumer preference : We assess whether the fans of a candidate IP align with the
target consumer groups of our potential product offering. Fans base, location and
willingness to purchase IP merchandises are important factors to be taken into
account during such assessment.
 Product adaptability: We carefully evaluate the feasibility and associated cost to
develop assembly character toys from the candidate IPs. For example, we prioritize
obtaining IPs of selected heroes, robots and cuddly animal monsters, which can be
more conveniently converted into assembly character toys and better complement
our existing product offering.
 Product offering expansion potential: We consider the worldview and storylines
associated with the IPs and the variety of characters within the IP franchise to make
sure we are able to expand our product offering under each individual IP .
IP Protection
We employ stringent measures to protect our rights under self-developed IPs and licensed
IPs. In addition, we have a special task force to comprehensively monitor and handle IP
infringements.
Self-developed IPs
In safeguarding our self-developed IPs, we implement rigorous internal protocols to
ensure comprehensive protection. This involves thorough documentation of the creation of the
IP and prompt registration of the relevant intellectual property rights. We also implement
robust confidentiality procedures and protocols. In addition, we proactively monitor public IP
registration platforms and appearances of our self-developed IPs and actively seek remedies for
any potential or identified infringements.
Licensed IPs
To safeguard our rights under the licensed IPs, we conduct thorough checks to ensure the
validity of the rights held by IP proprietors or licensors. This involves reviewing their licenses
and researching to confirm no conflicts or infringements exist. We also have contractual
protection under the licensing agreements. We require that IP proprietors or licensors to
represent that they have the relevant intellectual property rights or full authorization in relation
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to the IPs. If we incur losses as a result of defects in the IP proprietor’s or licensor’s intellectual
property rights, the IP proprietor or licensor shall be held liable for breach of contract. In
addition, similar to self-developed IPs, we implement robust confidentiality procedures and
protocols.
OUR PRODUCT OFFERING
We primarily offer assembly character toys, and to a lesser extent, brick-based toys.
Driven by a passion for fun and creativity, we combine our outstanding product design
capabilities with our rich IP portfolio, and develop products catering to wide demographics,
price segments and global consumers. As of June 30, 2024, we had 431 SKUs of products
available for sale.
Set forth below illustrates our product offering.
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The table below sets forth the breakdown of our total revenue by product type and IP
category for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Assembly character toys
Self-developed IP /H1118/H1118/H1118/H1118/H1118/H1118– – 1,865 0.6% 64,203 7.3% 18,494 6.0% 173,073 16.5%
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 1,865 0.6% 64,203 7.3% 18,494 6.0% 169,713 16.2%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – – – – 3,360 0.3%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 115,808 35.5% 704,835 80.4% 222,935 71.9% 850,009 81.3%
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 111,483 34.2% 556,720 63.5% 203,880 65.8% 600,681 57.4%
TRANSFORMERS /H1118/H1118/H1118/H1118/H1118– – – – 124,977 14.3% 4,553 1.5% 195,444 18.7%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 4,325 1.3% 23,138 2.6% 14,502 4.6% 53,884 5.2%
Subtotal /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 117,673 36.1% 769,038 87.7% 241,429 77.9% 1,023,082 97.8%
Brick-based toys
Self-developed IP and other
self-developed products /H1118/H1118301,286 91.4% 176,952 54.4% 91,711 10.5% 58,099 18.8% 22,434 2.1%
Magic Blocks /H1118/H1118/H1118/H1118/H1118/H1118142,228 43.1% 83,321 25.6% 51,195 5.8% 35,033 11.3% 9,574 0.9%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118159,058 48.3% 93,631 28.8% 40,516 4.7% 23,066 7.5% 12,860 1.2%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,377 6.1% 29,699 9.1% 14,571 1.6% 9,976 3.2% 531 0.1%
Subtotal /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118321,663 97.5% 206,651 63.5% 106,282 12.1% 68,075 22.0% 22,965 2.2%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,109 2.5% 1,250 0.4% 1,366 0.2% 435 0.1% 156 0.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Note:
(1) Others primarily include other non-toy revenue, such as certain revenue generated from advertisements shown
before, during or after the play of our animations on online platforms.
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Our revenue increased by 169.3% from RMB325.6 million in 2022 to RMB876.7 million
in 2023, and by 237.6% from RMB309.9 million in the six months ended June 30, 2023 to
RMB1,046.2 million in the six months ended June 30, 2024. Such increase was primarily due
to an increase in revenue from assembly character toys. We began to offer assembly character
toys in January 2022 on the back of the Bloks System. Our successful commercialization of an
expanding and diversifying portfolio of self-developed and licensed IPs and the rapid
expansion of our sales network resulted in a significant increase in the sales volume and
revenue of assembly character toys from 2022 to 2023 and the six months ended June 30, 2023
to the six months ended June 30, 2024.
The table below sets forth the sales volume and average selling prices of our toy products
for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Sales
volume
Average
Selling
Price (1)
Sales
volume
Average
Selling
Price
Sales
volume
Average
Selling
Price
Sales
volume
Average
Selling
Price
Sales
volume
Average
Selling
Price
(Unit
’000) (RMB)
(Unit
’000) (RMB)
(Unit
’000) (RMB)
(Unit
’000) (RMB)
(Unit
’000) (RMB)
Assembly character
toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 6,291 19 36,474 21 11,004 22 56,225 18
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 5,932 19 26,629 21 9,342 22 29,470 20
TRANSFORMERS /H1118/H1118/H1118–––– 5,387 23 254 18 8,845 22
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 89 21 3,240 20 712 26 14,500 12
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H11183,594 89 2,154 96 926 115 531 128 236 97
Magic Blocks /H1118/H1118/H1118/H1118/H1118/H1118/H11181,501 95 718 116 390 131 265 132 86 112
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,594 89 8,445 38 37,400 23 11,535 27 56,461 19
Note:
(1) Average selling price is calculated through dividing revenue by the relevant sales volume during the
same year/period, representing the average price at which we sold to our customers.
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The table below sets forth the breakdown of our gross profit and gross profit margin by
product type and IP category for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
(unaudited)
Assembly character toys
Self-developed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 768 41.2% 35,742 55.7% 8,985 48.6% 107,208 61.9%
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 768 41.2% 35,742 55.7% 8,985 48.6% 105,254 62.0%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – – – – 1,954 58.2%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 42,522 36.7% 336,647 47.8% 97,889 43.9% 437,624 51.5%
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 41,825 37.5% 262,118 47.1% 90,371 44.3% 302,695 50.4%
TRANSFORMERS /H1118/H1118/H1118/H1118/H1118/H1118– – – – 67,927 54.4% 2,309 50.7% 110,670 56.6%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 697 16.1% 6,602 28.5% 5,209 35.9% 24,259 45.0%
Subtotal/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 43,290 36.8% 372,389 48.4% 106,874 44.3% 544,832 53.3%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Self-developed IP and other self-
developed products /H1118/H1118/H1118/H1118/H1118/H1118112,413 37.3% 69,637 39.4% 38,048 41.5% 25,347 43.6% 8,541 38.1%
Magic Blocks /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111859,116 41.6% 37,660 45.2% 23,687 46.3% 16,554 47.3% 4,329 45.2%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853,297 33.5% 31,977 34.2% 14,361 35.4% 8,793 38.1% 4,212 32.8%
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,105 30.0% 9,242 31.1% 3,119 21.4% 3,552 35.6% 207 39.0%
Subtotal/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118118,518 36.8% 78,879 38.2% 41,167 38.7% 28,899 42.5% 8,748 38.1%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,883 60.2% 1,250 100.0% 1,366 100.0% 435 100.0% 156 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9% 414,922 47.3% 136,208 43.9% 553,736 52.9%
Note:
(1) Others primarily include other non-toy gross profit, such as certain gross profit generated from advertisements
shown before, during or after the play of our animations on online platforms, which is generally not directly
associated with any cost of sales.
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Our gross profit increased by 236.2% from RMB123.4 million in 2022 to RMB414.9
million in 2023, and by 306.5% from RMB136.2 million in the six months ended June 30, 2023
to RMB553.7 million in the six months ended June 30, 2024. Such increases were primarily
due to an increase in gross profit from assembly character toy sales, which was mainly
attributable to an increase in sales volume of our assembly character toys. Our gross profit
margin increased from 37.9% in 2022 to 47.3% in 2023, and from 43.9% in the six months
ended June 30, 2023 to 52.9% in the six months ended June 30, 2024. Such increases were
primarily due to strong increases in revenue contribution and gross profit margin from
assembly character toy sales as we enjoyed stronger economies of scale along with our
business growth.
Our assembly character toys under self-developed IPs have higher gross profit margin
than those under licensed IPs because no licensing fee is required for using our own IPs.
Assembly Character Toys
Our assembly character toys are welcomed by fans for their creativity, fun and aesthetics.
Our assembly character toys are all designed based on IPs. We develop different versions of
products under our IPs with various sizes, component details and suggested retail prices. Under
one version of products, we may launch multiple series with different SKUs covering different
characters.
Our assembly character toys incorporate visual and narrative elements of IP characters,
and are highly enjoyable through assembling and mix-and-match of components across our
products. We offer a vast number of SKUs catering to wide demographics, price segments and
global consumers. As of June 30, 2024, we had 321 SKUs available for sale among which 11
SKUs were designated primarily for consumers below the age of six, 290 SKUs were designed
primarily for consumers between the ages of six to 16 and 20 SKUs were designed primarily
for consumers over the age of 16. Ultraman, TRANSFORMERS and Hero Infinity are our top
three IPs in 2023. The IP proprietor or licensor of Ultraman and TRANSFORMERS are among
our top five suppliers for the six months ended June 30, 2024. The table below sets out key
information relating to our top three IPs in 2023 and the six months ended June 30, 2024.
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IPs SKU
Suggested
retail price
range Source of IP
Identity and
background of IP
proprietor or licensor
(RMB)
Ultraman /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118134 39-399 Non-exclusively
licensed from
IP licensor
Tsubaraya Productions Co.,
Ltd. is the proprietor of the
Ultraman IP , who granted
SCLA an exclusive license
of certain Ultraman
characters in China with
several additional
distribution territories
TRANSFORMERS /H1118/H1118/H1118/H111864 39-299 Non-exclusively
licensed from
IP proprietor
Hasbro, a leading US-based
NASDAQ listed toy and
game company, owner of
the TRANSFORMERS IP
with global operations
Hero Infinity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853 19.9-249 Self-developed –
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111870 39-69 – –
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118321
In 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, we had nil,
95, 188, 142 and 134 SKUs under the Ultraman IP . In 2021, 2022 and 2023 and the six months
ended June 30, 2023 and 2024, we had nil, nil, 36, 10 and 64 SKUs under the
TRANSFORMERS IP . In 2021, 2022 and 2023 and the six months ended June 30, 2023 and
2024, we had nil, six, 30, 12 and 53 SKUs under the Hero Infinity IP .
All our revenue from the Ultraman IP were generated from the sales of products under
such IP licensed by SCLA. All our revenue from the TRANSFORMERS IP were generated
from the sales of products under such IP licensed by Hasbro. In 2022, 2023 and the six months
ended June 30, 2024, despite the strong growth in the sales of our Ultraman assembly character
toys, its revenue contribution continued to decrease as a result of a stronger increase in the
sales of our Hero Infinity products and the success of our TRANSFORMERS products.
During the Track Record Period, some of our products were in the form of blind boxes,
which is a popular form in the toy industry according to Frost & Sullivan and is allowed
according to the relevant laws and regulations, including the Blind Boxes Guidelines. In 2021,
2022, 2023 and the six months ended June 30, 2024, we had nil, 121, 230 and 255 blind
box-related SKUs, respectively, accounting for nil, 43.1%, 48.1% and 59.2% of our total SKUs,
respectively. In 2021, 2022, 2023 and the six months ended June 30, 2024, the sales volume
of products in the form of blind boxes were nil, 6,168 thousand units, 31,683 thousand units,
49,855 thousand units, accounting for nil, 73.0%, 84.7% and 88.3% of our total sales volume,
respectively, which accounted for nil, 34.8%, 63.3% and 73.9% of our revenue, respectively.
See “Regulatory Overview — Regulations On Assembly Character Toys — Regulation on
Blind Boxes.”
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We have adopted various measures and internal policies for blind boxes to ensure
compliance with the relevant laws and regulations. Particularly, we set out key information
relating to the product (such as the range of models that may be selected from a chosen box
and the probabilities of each model being selected) and include appropriate language regarding
age limits and other information disclosure in accordance with the relevant laws and
regulations on our online sales channels as well as on the packaging of the relevant products.
With regard to age limits, our internal policy specifically prohibits the sales of blind
boxes to anyone under the age of eight, and sets out the requirement for the guardians to agree
to purchase of blind boxes by any minor aged eight or above. For direct sales of blind boxes
to end consumers through our online channels, we prominently notify the consumers that
anyone under the age of eight are prohibited from buying blind boxes and any minor aged eight
or above shall be agreed by his or her guardian, and we reiterate such age limits in our live
streaming sessions. As an additional safeguard, we ask the consumers to confirm that they are
adults, or minors aged eight or above whose guardians have agreed the purchases, before
placing orders to purchase blind boxes, where the systems support such mechanism, such as our
flagship stores on Tmall or our Weixin mini-program. Retail sales of blind boxes to end
consumers through retail outlets are not made by us. Nevertheless, we remind our distributors
and retailers to strictly comply with Blind Boxes Guidelines. As a practical guidance, we
recommend our retailers to inquire and identify the consumer’s real age before the sales. If the
retailers determine or suspect that the consumer is under the age of eight, they shall not sell
the blind boxes to him or her. For any minor aged eight or above, the retailers shall ensure the
purchase has been agreed by the guardians through physical presence, phone call, messaging
or other available means. We actively conduct frequent site visits at retail outlets, and
continuously reiterate and emphasize the compliance of the Blind Boxes Guidelines and our
practical guidance. If we detect any violation from the Blind Boxes Guidelines and our
practical guidance, we shall communicate with the relevant party for compliance with the Blind
Boxes Guidelines and our practical guidance. We then continue to monitor the situations.
Should the violation persist, we may decide to reduce the shipments, or terminate our
cooperation with the relevant distributors.
Furthermore, we have protocols for the design, packaging and delivery of our products to
ensure the selection outcomes cannot be arbitrarily altered. We have pre-programmed
automated production lines which ensure our products are packaged according to our blind box
selection rules and probabilities, and we also have subsequent sampling inspection mechanism
to monitor and verify such selection outcomes. When setting the prices for our products, we
make sure that we set fair prices for blind boxes, taking into consideration of product costs,
prevailing market prices for similar products and the pricing of our similar products sold in
non-blind box forms. We do not engage in hoarding, hyping, or entering the secondary market
with regard to our products. In addition, we maintain appropriate sales record of products in
the form of blind boxes in accordance with the relevant laws and regulations.
According to Frost & Sullivan, our measures and internal policies for blind boxes are in
line with the industry norm. During the Track Record Period and up to the Latest Practicable
Date, we had not been subject to any administrative penalties relating to the sales of products
in the form of blind boxes. Our PRC Legal Advisor is of the view and our Directors confirm
that, during the Track Record Period and as of the Latest Practicable Date, we comply with the
Blind Boxes Guidelines in all material respects. Furthermore, our sales and results of
operations during the Track Record Period were not materially and adversely impacted by the
Blind Boxes Guidelines.
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Brick-based Toys
We also offer brick-based toys such as large blocks designed for children under the age
of six. These toys have relatively simple structure, offer a better assembly experience for
children and are safer for children to play with. As of June 30, 2024, we had 110 SKUs of
brick-based toys available for sale, which included 43 SKUs under the Magic Blocks IP . Set
below are examples of our brick-based toys.
Brick-Based Toys
Brick Buckets Brick Desks Brick Vehicles
 Brick Buckets: Brick Buckets are buckets of bricks with various themes. With the
bricks in it, children can create their objects of choice, including vehicles, buildings
and figures. Suggested retail prices of our Brick Buckets range between RMB99 and
RMB459.
 Brick Desks: Brick Desks are sets of bricks that come with chairs and
multifunctional tables. In addition to serving as the base over which the bricks can
be assembled, the multifunctional tables can be used for studying and dining.
Suggested retail prices of our Brick Desks range between RMB99 and RMB599.
 Brick V ehicles: Brick V ehicles are based on our self-developed Magic Blocks IP . It
is a set of bricks that can be assembled into different kinds of vehicles and can spark
the creativity of children. Suggested retail prices of our Brick V ehicles range
between RMB149 to RMB729.
Pricing Policy
The prices of our products are determined based on various factors, including design,
materials, sizes, licensing fees, production costs and the prevailing market prices for similar
products. We offer different tiers of products at different price segments to cater diverse
consumer preferences. The suggested retail prices of our assembly character toys range from
RMB9.9 to RMB399. Utilizing the Bloks System, we are able to expand our price ranges by
introducing higher-priced products with more features, or lower-priced products to appeal to
more value-conscious consumers.
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Others
During the Track Record Period, we engaged in other non-toy businesses associated with
our self-developed IPs such as animation, which generates passive advertisement-related
income for advertisements shown before, during or after the play of animations on online
platforms. Such businesses accounted for an insignificant portion of our total revenue. In 2021,
2022, 2023 and the six months ended June 30, 2023 and 2024, we had revenue from others of
RMB8.1 million, RMB1.3 million, RMB1.4 million, RMB0.4 million and RMB0.2 million,
respectively, accounting for 2.5%, 0.4%, 0.2%, 0.1% and 0.0% of our total revenue,
respectively.
RESEARCH AND DEVELOPMENT
Research and development is a key component of the Bloks System and is crucial to our
success. We have established a dedicated research and development team consisting of 331
employees as of June 30, 2024. Our research and development team members possess deep
experience and understanding of toys, consumer goods and popular culture. Our research and
development team is responsible for two functions (i) product development and (ii) IP
development. We actively seek patent protection for our R&D efforts. See “— Intellectual
Properties.” We have also developed proprietary software and management systems, such as
component editing system and SKU information management system, to further facilitate an
efficient and standardized product development process.
We follow a consumer-oriented research and development approach. Throughout the
product design and development process, we leverage our consumer insights from the
collection of feedback and consumer participation. We also constantly upgrade our products
after the launch based on consumer feedback.
Product Design and Development Process
Our overall product design and development process is divided into three phases: (i)
conceptualization phase, (ii) mechanical design phase and (iii) prototype and DFM phase.
 Conceptualization Phase
At the conceptualization phase, we brainstorm product ideas and concepts based on
the selected IP . Specifically, we first delve into the original work of the selected IP
to gain a thorough understanding of the characters, worldview and stories behind it.
Then we conduct analysis on the market of the selected IP to learn about its fans,
including their age, locations and preference. After that, we leverage our deep
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understanding of the IP and the competitive landscape to focus on designing our
products. At this stage, we design the two-dimensional sketches and preliminary
three-dimensional models, and determine, among others, the forms, target pricing,
costs, and serial planning of the planned products.
For our self-developed IPs, we typically spend less time at the conceptualization
phase as our self-developed IPs are designed with our products in mind at the outset.
For our licensed IPs, we send our product proposals formed at the conceptualization
phase to the IP proprietors or licensors as required. The IP proprietors and licensors
may send their feedback and suggestions back to us, based on which we may update
our proposals.
 Mechanical Design Phase
At the mechanical design phase, we translate the conceptual ideas into detailed
three-dimensional designs and specifications based on the preliminary three-
dimensional models developed at the conceptualization phase. We design and
determine the colors, materials and finishes of the planned products, with an aim to
convey the theme of the original IPs, ensure the quality of our products and add
unique visual appeal to our products. Separately, we determine the number and
shapes of the standard and customized components and the connection mechanisms,
with an aim to find a feasible and most cost-effective way to realize our conceptual
design.
 Prototype and DFM
We design the prototypes based on the detailed three dimensional model to verify
the conceptualization and assembling results. Meanwhile, we initiate discussion
with our partner factories for DFM in details, which is followed by molding. After
molding, we initiate mass production of our products with our specialized partner
factories.
IP Development Process
Our IP development process includes story creation, character design and content
creation. We focus on matching the storylines and IP characters to create captivating
storytelling that resonate with the audiences. Once the characters and story take shape, we
typically produce various media content for wide dissemination, including animation. Our IPs
are combined with products and can attain connection and recognition from the audiences,
thereby forming an IP-product commercial close loop.
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PRODUCTION
We collaborate with specialized third-party partner factories to produce our products. We
integrate our know-how in assembly character toy production and various patents to curate
proprietary production techniques and customized equipment to be applied in a network of toy
factories dedicated to the production of our products.
Our Partner Factories
Working with our network of specialized partner factories enables us to focus our
resources on key stages of the product launch cycle, such as product design, research and
development, brand development and management, and sales and distribution. This strategy
also enables us to rationalize capital investment and facilitates us in focusing our resources to
effectively adjust our product offering in response to evolving market trends. As of June 30,
2024, we had six specialized partner factories in our network dedicated to the production of our
products. We have been collaborating with three of these factories for brick-based toys, and
began our collaboration with them for assembly character toys in 2021 and 2022, respectively.
We started our collaboration for assembly character toys with one additional partner factory in
2023 and two additional partner factories in 2024. These partner factories were selected
through strict processes based on factors such as qualification, product quality, production
capacity, pricing, automation capability, mold and injection equipment, reputation and
compliance with applicable laws and regulations. China has a vast supply of high-quality
production resources, and we have identified two qualified factories that we may cooperate
with to increase the outputs to meet the growing demand of our products. As we possess the
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key know-how and patents, we can work with new factories and set up the production lines
within approximately three months. Furthermore, we have staff stationed at the partner
factories to oversee the entire production process in order to make sure that our products are
produced according to our standards. See “— Quality Control.”
Generally, the specialized partner factories produce our products through the following
process:
We typically enter into framework production agreements with our specialized partner
factories. Under these agreements, we place production orders with our partner factories
specifying the SKU, quantity, price and delivery time. The key terms of our collaboration with
partner factories are set out below:
 Production : We engage the partner factories to produce our designed products
according to the specifications and requirements in the agreements and specific
orders.
 Raw materials : Our partner factories are responsible for the procurement of key raw
materials from qualified suppliers designated or approved by us.
 Product quality : The products delivered by the partner factories shall meet the
quality standards of applicable laws and regulations, as well as the industry
standards. The partner factories are required to strictly comply with the product
standards specified in the agreement, including the design, shape, color, key raw
materials, quality control standards, production qualifications and testing
equipment, among others. Upon receiving the products, we will inspect the products
and reserve the right to ask for product returns.
 Supervision : We reserve the right to take necessary measures to supervise the overall
production process at the partner factories, including designation or approval of raw
material procurement, production, quality control and logistics.
 Duration : Typically, the duration of our production agreement with the partner
factories is three years.
 Fees and pricing : We pay for the finished goods produced by the suppliers.
Generally, the prices for the final products delivered are specified in the individual
orders under the agreement.
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 Payment: We are typically required to pay our partner factories within five to seven
months upon receipt of invoice.
 Intellectual property rights : The partner factories have no intellectual property
rights in relation to any products, packaging or molds under the agreements and
specific orders thereof.
 Non-competing terms : The partner factories are required not to compete with us
directly or indirectly, including through cooperation with third parties.
 Confidentiality : We enter into separate confidentiality agreement with the partner
factories which require them to keep strictly confidential of all know-how, operating
information, marketing plans, product drafts, pictures, product specifications and
other confidential information as specified in the confidentiality agreement, until
such information is rendered public by us.
 Liability : The specialized partner factories are responsible for all product liabilities
and claims resulted from product defects caused by the partner factories, and shall
indemnify us of any loss resulted therefrom.
 Termination : We reserve the right to unilaterally terminate the agreement in the
event of material breaches of certain terms.
During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any major product claim from the consumers, and we have not experienced any
difficulty to claim indemnity from our partner factories.
Plan for Self-operated Factories
In order to implement our growth strategies, we plan to invest in our own scaled factories
specializing in the production of assembly character toys to expand and optimize our
production resources. We expect to complete the self-operated factory by or around the end of
2026 with a designed capacity of approximately nine million units per month.
We seek to achieve economies of scale efficiently by considering a range of factors
related to the potential self-operated factory, including cost, quality control, production
capacity, production delivery and logistics, and aiming to realize the best business and
financial returns with the optimal balance between the self-operated production capacity and
partner factories’ production capacity.
More specifically, with a self-operated factory, we will acquire additional production
capacity to meet the growing demand for our products and complement the capacity of partner
factory network. The planned self-operated factory is also expected to facilitate us in
accumulating knowledge in the research and development and production of assembly
character toys. We also expect a self-operated factory can improve the time-to-market for our
new products. In the long run, as we ramp up the utilization rate of the planned self-operated
factory, we expect to further improve our gross profit margin.
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Historically, all our products were produced by our partner factories. However, we
acquired production know-how and patents through active involvement in the production
process. We apply DFM principles and our research and development team engage in
conversations with production partners across all production stages, addressing specific issues
and tackling technical bottlenecks, which often lead to the development of know-how and
patents. We applied these know-how in assembly character toy production and various patents
to curate proprietary production techniques and customized equipment, which can serve as the
cornerstone for building self-operated factories. In addition, we have dedicated personnel
stationed at our partner factories to supervise the production of our products. As such, we have
also accumulated rich hands-on experience in the production of assembly character toys, which
we believe will facilitate in the success of our self-operated factories. Through extensive
collaboration with partner factories over the years, we also developed a team of production
experts as well as our own methodology covering the following areas:
 Factory planning : We are able to produce a factory layout which optimizes the
physical placement of key production processes such as molding, injection,
printing/painting, sorting and packaging to ensure production efficiency.
 Materials : We have developed detailed standards for ABS used in our products and
established connection with quality suppliers, ensuring product quality and cost-
efficiency.
 Equipment selection : We have identified the most suitable equipment for various
production stages of our products and can apply customized equipment in
self-operated factories.
 Production methods : We have refined various key production processes from
molding to packaging. Such processes have been validated in partner factories and
can be used by us to achieve production efficiency.
 Quality control : We have formed our own product quality assessment system that
covers the key production processes, which is effective in identifying issues
promptly during production, thereby safeguarding our product quality.
We believe that the experience and knowledge listed above will be instrumental in
establishing our self-operated factories. Nevertheless, we may face challenges with respect to
self-operated factories. See “Risk Factors — Our investment and future operations in
self-operated factories may not be successful.”
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MARKETING AND CONSUMER ENGAGEMENT
Our Content-Driven Online Marketing Strategy
Assembly character toys are naturally suitable for content-driven marketing due to the
consumer connection from the assembling process, and the fact that IP characters are closely
associated with rich contents that can be widely disseminated. Leveraging such unique
characteristics of IP-based assembly character toys, we adopt a content-driven online
marketing strategy that enables us to effectively reach and maintain a broad base of consumers,
fans and BFCs, and collect feedback on our products. We use multiple communication
channels, including our official accounts and the accounts of KOLs, KOCs, fans and BFCs on
social media platforms.
 Official Accounts : We utilize social media platforms to demonstrate the potential of
our assembly character toys. We publish high-quality images and videos that
highlight our product design and the IP character elements to promote our products
and their assembling experience, thereby strengthening brand awareness. The
comment sections beneath these posts provide space where fans can share their
comments about the products, ask questions about specific models, and offer helpful
tips to other consumers. By closely monitoring metrics such as fan growth, video
views and the number of comments on our posts, we gain valuable insights into
consumer preferences which allow us to identify popular products and address any
feedback raised in the comments. Separately, we dynamically adjust the timing of
new product launches and marketing content releases based on the relevant content
release schedule of the IP proprietor, effectively supporting our product marketing.
We have official accounts on different social media platforms, including Weixin,
Douyin, Kuaishou, Xiaohongshu, Weibo and Bilibili, covering a wide range of
audience.
 Collaborations with KOLs and KOCs : KOLs and KOCs we collaborate with play a
crucial role in our content-driven online marketing strategy. These KOLs and KOCs
publish a wide range of content in different forms including videos and posts,
demonstrating the features of our products. For example, there are posts to show (i)
the design and features of our new products in detail, including the cool appearances
and new production techniques, to promote the sales of new products; (ii) re-touch
and modification of our products, encouraging consumers to personalize their own
creations; (iii) imaginative modifications that go beyond existing IP characters; (iv)
recreations of classical movie scenes using our products, mobilizing the fans of the
IP; and (v) assembling experience that demonstrates the consistent quality and play
experience of our products. Our collaboration with KOLs and KOCs is an effective
way for us to reach our target consumers and further establish our brand awareness
among them. We worked with more than 900 KOLs and KOCs from January 2022,
when we began to offer assembly character toys, to the Latest Practicable Date
across various online platforms.
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 UGCs: We foster deep connection with consumers and fans, encouraging them to
become BFCs and create UGCs on social media platforms. Through official
reposting and event operations such as finished-products sharing, assembling and
re-creation competition and offline exhibitions, we further promote the creation and
sharing of UGCs by consumers, fans and BFCs. These events also provide a
platform for fans to connect with each other, share ideas and inspire a broader
community. Our video sharing event held between September 2023 and January
2024 attracted over 15,000 video submissions, with the most popular single video
accumulating over 640,000 views. As of the Latest Practicable Date, hashtags
related to us and our products have generated more than 11 billion views across
various social media platforms.
Content-driven Marketing Strategy
Official Accounts Collaborations with KOLs and KOCs UGCs
The animated series based on our self-developed IPs, namely Magic Blocks and Hero
Infinity, also served a unique marketing purpose and have attracted a large group of fans who
are our potential consumers. See “— Our Product Approach — Our IP Portfolio —
Self-developed IPs — Case Study.” We place our animated series across different channels to
maximize their reach, including TV channels, social media and online video platforms.
To better market our products and brand, we have established a dedicated marketing team
that is responsible for formulating and coordinating marketing activities and promotion
campaigns with deep consumer insight and extensive industry experience. Our content-driven
online marketing strategy proves highly effective. In the six months ended June 30, 2024, our
marketing and promotion expenses amounted to RMB48.0 million, accounting for 4.6% of our
total revenue, significantly lower than the industry average according to Frost & Sullivan.
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Consumer Engagement
We have established a multi-channel membership program, including membership of our
Weixin mini program Bloks Club ( ̺ኁ̙ጐ˝ɛClub) and our flagship stores on e-commerce
platforms, to build our consumer community, enhance their stickiness and drive repeat
purchases.
Our Weixin mini program Bloks Club is a platform where consumers can engage with us
and others. For example, registered members can post pictures and text to share their
collections and re-creations. In addition, consumers can gain access to our product releases and
events. Furthermore, we host voting campaigns to encourage consumer participation in the
development of our new products through our Co-creation Base ( ΍௴ਿή) feature within the
Bloks Club. The product proposal with the highest number of votes may be transformed into
real products. Our consumers can register their products at Bloks Club by scanning the QR
code on the packaging of our products and character identity card enclosed within the products.
We build a triumph system on Bloks Club that allows registered members to activate their
purchases to earn credits and obtain achievement trophies. The credits can then be used to
offset product purchases made at the Bloks Club. As of June 30, 2024, we had approximately
2.0 million registered members on Bloks Club, and approximately 80% of our Bloks Club
members activated at least one product. Bloks Club members who activated their products in
2023 activated an average of approximately five units of our assembly character toys.
Bloks Club
Co-creation Base Triumph System
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Our consumers can follow us on flagship stores of various e-commerce platforms such as
Tmall, JD.com, Douyin and Pinduoduo. We have a tiered membership program offering
different tiers of benefits on e-commerce platforms, including membership discounts, coupons
and points redemption. As of June 30, 2024, we have over 8.8 million fans across our
e-commerce flagship stores.
We collect certain personal data, including phone numbers and addresses for the purpose
of online account registration, including membership program, and sales through e-commerce
platforms. For personal data protection measures, see “— User Privacy and Data Security.”
Consumer Support and Product Return
We are committed to offering high-quality consumer support which reflects the high level
of consumer satisfaction we strive to achieve. Our consumer care team responds to consumers’
queries, requests and feedback. We regularly seek consumer input and address their queries
through a variety of channels, including offline stores, consumer care hotlines, online
e-commerce platforms and our Weixin mini program. Product defects can also be reported
through these channels. Our consumer care staff keeps track of all inquiries, feedback and
complaints, as well as the outcomes of any potential follow-ups or solutions in these areas. Our
product return policy stipulates that we generally do not accept product returns unless there are
defective products. Subject to our terms and conditions, consumers who purchase from our
authorized retail outlets can enjoy a one-time product component replacement service of up to
three components within 15 days of the purchase. If there is any product defect, we will deal
with the claims from consumers and bear the relevant product liabilities. To the extent the
defect is caused by our partner factories, we would seek indemnity from them. See “—
Production.” We have not experienced any consumer complaint or product returns that
materially and adversely affected our business during the Track Record Period and up to the
Latest Practicable Date.
SALES NETWORK
We sell our products through a multi-channel sales network, which consists of (i) offline
sales channels, including distributors and consignment sales, and (ii) online sales channels,
including various e-commerce platforms. All our products are available for sale in each of our
sales channels. We have suggested retail prices for our products and such prices are the same
across all sales channels in China. The revenue from others represents non-toy revenue
associated with our self-developed IPs for advertisements shown before, during or after the
play of animations on online platforms, which does not fall under offline or online sales
channels. During the Track Record Period and up to the Latest Practicable Date, we did not
experience any material disagreements with our distributors, consignment sales partners and
e-commerce platform operators or breach of contractual terms by them.
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The table below set forth the breakdown of our revenue by sales channel for the periods
indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Offline channels
Distribution sales /H1118/H1118/H1118112,837 34.2% 157,004 48.2% 732,700 83.6% 238,111 76.8% 957,859 91.6%
Consignment sales /H1118/H111837,869 11.5% 32,908 10.1% 36,371 4.1% 19,447 6.3% 13,572 1.3%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118150,706 45.7% 189,912 58.3% 769,071 87.7% 257,558 83.1% 971,431 92.9%
Online channels /H1118/H1118/H1118/H1118/H1118170,957 51.8% 134,412 41.3% 106,249 12.1% 51,946 16.8% 74,616 7.1%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,109 2.5% 1,250 0.4% 1,366 0.2% 435 0.1% 156 0.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Note:
(1) Others primarily include other non-toy revenue associated with our self-developed IPs, including certain
passive advertisement-related revenue for advertisements shown before, during or after the play of
animations on online platforms, which do not fall under offline or online sales channel.
Apart from China, we also sell our products in overseas markets. Our revenue from
overseas sales increased by 66.8% from RMB5.0 million in 2021 to RMB8.3 million in 2022,
and further by 25.5% to RMB10.4 million in 2023. Our revenue from overseas sales increased
by 135.5% from RMB4.7 million in the six months ended June 30, 2023 to RMB11.2 million
in the six months ended June 30, 2024.
We target to maintain consistent pricing for our products across all sales channels. We
provide suggested retail prices to all the distributors and consignment sales partners and
e-commerce platforms. However, other than the consignment sales partners, we have no direct
control as to the price at which the distributors or online platforms sell our products. Instead,
we actively monitor retail prices through various measures, including regular online and offline
price checks. The purpose of these checks is to ensure that our pricing remains largely
consistent, minimizing major discrepancies that could undermine our market strategy. If we
detect any significant price deviations, we actively engage and communicate with the relevant
party to identify the causes of such actions, reach mutually acceptable solutions such as
adherence to our suggested retail price. We then continue to monitor the implementations
thereof. Should the deviation persist, we may decide to terminate our cooperation with the
relevant party, including the distributors. During the Track Record Period and up to the Latest
Practicable Date, no cooperation with distributors or consignment sales partners was
terminated due to the deviation of the suggested retail prices.
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Offline Sales Channels
Distributors
The background of our distributors typically includes distributors of toys and cultural and
creative products with specific regional coverage and established local sales network. We also
work with large-scale distributors with national coverage. Our offline distribution sales
amounted to RMB112.8 million, RMB157.0 million, RMB732.7 million, RMB238.1 million
and RMB957.9 million, accounting for 34.2%, 48.2%, 83.6%, 76.8% and 91.6% of our total
revenue in 2021, 2022, 2023 and the six months ended June 30, 2023 and 2024, respectively.
We have a seller-buyer relationship with our distributors. Revenue is recognized when control
of the products has been transferred, being the point at which products are delivered to and
accepted by our distributors.
Distributorship business model enables us to rapidly expand our presence and drive our
sales growth. According to Frost & Sullivan, our existing distribution model is consistent with
the industry practice and serves to ensure the extensive coverage of our sales network while
controlling our costs of distribution.
Selection and Management of Our Distributors
We select our distributors based on a number of factors, including their qualifications,
scope of operations, business scale, experience in toy industry, locations, distribution network,
retail outlets coverage and customer service capabilities. For our assembly character toys, we
prefer distributors that have extensive retail or distribution network covering retail outlets and
specialty outlets at desirable locations, which typically have high consumer traffic.
We regularly assess the performance of our distributors and leverage the assessment as a
basis to determine whether to renew our agreement with a given distributor. More specifically,
we consider various factors for renewing agreements with distributors, including their
historical sales of our products, payment record, compliance with the distribution agreement
and sales and marketing capabilities. We typically set a minimal purchase amount in our
distribution agreements, non-achievement of which enables us to terminate the agreement
unilaterally. However, such minimal purchase amount is far less than the average sales volume
of our distributors during the Track Record Period, and thus it primarily serves as a mechanism
to eliminate distributors with unsatisfactory performance. We typically do not set minimum
sales targets for distributors.
Our distributors are generally only allowed to sell our products in designated channels
and areas. We generally reserve the right to impose penalty, forfeit deposits (if any) and
terminate the distribution agreement in the event that the distributors breach such requirements
on distribution channels and areas. Any new retail outlets or sales through online channels
should be approved by us. Our distributors also need to consult with us when developing any
sub-distributors. Some of our distributors may engage sub-distributors. They typically further
enter into agreements with the sub-distributors, and we generally do not enter into agreements
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or directly establish relationships with the sub-distributors. Consequently, we have no control
over the sub-distributors. Any violation of our policy by the retail outlets and sub-distributors
would be deemed as a violation by the distributor. We typically have QR codes printed on the
package of each unit of our products, which contain information as to the designated
distributor, channels and areas. We perform regular onsite spot checks at retail outlets by
scanning the QR codes, as well as random checks on e-commerce platforms, thereby
identifying whether the product is sold within the authorized channels or areas. Our sales team
makes at least 10,000 visits at our retail outlets each month to conduct spot checks. Through
such measures, we could effectively minimize the competition among different channels.
We implement a series of measures to manage the inventory level of distributors.
Typically, the amount of products that a distributor can purchase during a certain period is
determined by us taking into account the sales capabilities and historical performance of such
distributor. Separately, we typically require our distributors to make full or partial payment
before delivery of our products. We also have a designated team that visits most of our
distributors monthly to monitor their inventory and we require them to report the sales
information and inventory balances to us every month. To ensure that we have accurate
information relating to distributors’ inventory levels, we conduct stock-taking on our visit to
distributors, cross-checking the stock-take results against the sales and inventory balances
reported and the actual orders placed by distributors. This detailed verification process enables
us to identify discrepancies and swiftly address potential issues, ensuring that we have a
thorough understanding of the inventory level of distributors. In addition, if we identify
unusually large purchase orders, we may seek to verify the business reasons before accepting
such orders. We maintain close oversight and engage in frequent communication with
distributors to monitor their inventory levels continuously. Furthermore, once the products are
delivered to and accepted by our distributors, they cannot be returned except for product
defects, which is in line with the market practice according to Frost & Sullivan.
We proactively monitor the retail price of our products to ensure consistency of pricing
across different channels through measures including online and offline price checks. To the
extent that any major inconsistency in product price is identified, we may choose to discontinue
cooperation with the relevant party.
To the best knowledge of our Directors, as of the Latest Practicable Date, all our
distributors were independent third parties and none of our distributors were controlled by any
of our former or present employees during the Track Record Period and up to the Latest
Practicable Date. During the Track Record Period, none of our distributors had any business,
employment, family or financing relationships with any of our Directors, Shareholders, senior
management and employees. During the Track Record Period, none of our distributors were our
suppliers, and we did not provide financing to any of our distributors other than the credit terms
to certain distributors as described below.
See “Risk Factors — Risks Relating to Our Business and Industry — We may be unable
to expand, manage, monitor and coordinate our multi-channel sales network effectively” for
details of risk in relation to distributorship.
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The salient terms of our typical distribution agreements are set out below:
 Duration : Typically one year, renewable upon mutual agreements.
 Retail price : We set suggested retail prices for our products.
 Access to information : Distributors are required to cooperate with us to periodically
provide sales information in relation to our products.
 Minimum purchase amount : Typically, failure to reach RMB0.3 million in the first
six months of the term of the distribution agreements or failure to place any
purchase order with us for two consecutive months will grant us the unilateral right
to terminate the agreement.
 Sales rebate : We typically rebate a prescribed percentage ranging from 1% to 2% of
our distributors’ annual sales, determined by annual sales amount of our distributors,
to the sales rebate pools. Balance of the sales rebate pool can only be used to offset
the price for procurement of our distributors from us. As a precondition to enjoy
such sales rebate, the distributor needs to achieve a prescribed sales target in given
periods. We generally reserve the right to cancel any sales rebate in events of
delayed procurement payments, or material non-compliance of restrictions on sales
channels and areas. Any unutilized sales rebate will be cancelled upon the
termination or expiration of the agreement. According to Frost & Sullivan, such
practices in relation to rebates are in line with industry practices. For 2021, 2022,
2023 and the six months ended June 30, 2024, we offered rebates to distributors of
RMB2.2 million, RMB3.0 million, RMB28.4 million and RMB52.1 million,
respectively.
 Credit terms : We typically do not provide credit terms to our distributors, and will
require them to make the payment before the shipment of the products ordered.
However, for certain credit-worthy distributors, we may grant them a credit term
typically between one to three months. Such credit policy is in line with the industry
norm, according to Frost & Sullivan. Approximately 25.3%, 25.1%, 24.6% and
22.5% of our distributors as of December 31, 2021, 2022 and 2023 and June 30,
2024 were granted credit terms by us.
 Product return policy : We do not accept product returns after delivery and
acceptance, except for product defects. According to Frost & Sullivan, such
practices in relation to product returns are in line with industry practices.
 Logistics: Generally, we arrange delivery services with a third-party logistics
company and the relevant costs are borne by us.
 Termination rights : We reserve the rights to terminate the agreement in the event
that the distributor breaches any material terms of the agreement.
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Consignment Sales
We make consignment sales at retail outlets operated by our consignment sales partners.
Ownership of the goods remain with us until sales to consumers occur. We recognize revenue
upon sales to end-consumers are made through consignment sales partners. Consignment sales
partners are considered as our customers under IFRS15 because (i) title of goods are passed
back-to-back from us to consignment sales partners and further to end-customers when sales
take place, (ii) we have contractual arrangements with the consignment sales partners, (iii)
operating retail outlets and sell toys products are the ordinary activities of consignment sales
partners, and (iv) consignment sales partners pay for the goods they obtain from us. Consumers
may return product with quality defect(s) to our consignment sales partners, who will then pass
the returned goods to us. The return of unsold goods from our consignment sales partners does
not have any financial impact on us, particularly on our revenue and inventory, because the title
of the goods does not leave us until they are sold to end-customers. In each of 2021, 2022 and
2023 and the six months ended June 30, 2024, we had three consignment sales partners. Such
consignment sales partners primarily operate retail outlets for toys, children’s goods and gifts.
The salient terms of typical consignment agreements are set forth below:
 Duration: The term of the agreement is typically one year.
 Sales and pricing policy: We generally provide pricing guidelines, and consignment
sales partners shall sell with reference to the suggested retail prices. We are entitled
to adjust the pricing guidelines.
 Payment and credit terms: The credit period typically ranges from one to three
months.
 Ownership of the stock: Products stocked up at the consignment sales partners’ retail
outlets remain our properties and we carry the risk of any incidental loss or damages
to such products until they are sold, except for certain limited circumstances.
 Return of unsold inventory: Upon request from the consignment sales partners, we
are responsible for collecting unsold relevant products within a period specified in
the agreement. If we fail to collect the relevant products within such period, the
consignment sales partners may dispose the unsold products and retain the proceeds
generated therefrom.
 Termination rights: Consignment sales partners generally reserve the right to
terminate the agreement upon the occurrence of certain specified events specified in
the agreement, including the default in payment and supply cut-off by us.
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Online Sales Channels
We have established our online channels, primarily through (i) the opening of flagship
stores on Tmall, JD.com, Douyin, Pinduoduo and other e-commerce platforms in China, and
(ii) our Weixin mini program Bloks Club. To a much lesser extent, we also sell our products
to certain e-commerce platforms on arrangements either similar to those for offline
consignment sales partners, or those for offline distributors. In 2021, 2022, 2023 and the six
months ended June 30, 2023 and 2024, revenue from our online channels was RMB171.0
million, RMB134.4 million, RMB106.2 million, RMB51.9 million and RMB74.6 million,
accounting for 51.8%, 41.3%, 12.1%, 16.8% and 7.1% of our total revenue, respectively.
Movement of Distributors
The table below sets forth the number of our distributors and their movements for the
periods indicated.
Y ear Ended December 31,
Six Months Ended
June 30,
2021 2022 2023 2023 2024
Number of distributors at the
beginning of the period /H1118/H1118/H1118/H1118/H1118/H1118/H111840 225 354 354 415
Number of new distributors
during the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118252 257 184 105 121
Number of terminated
distributors during the
period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111867 128 123 53 25
Number of distributors at the
end of the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118225 354 415 406 511
In 2021, 2022, 2023 and the six months ended June 30, 2023 and 2024, we terminated the
relationship with 67, 128, 123, 53 and 25 distributors. The reasons for such terminations
primarily include (i) termination with certain brick-based toy distributors as we focused on the
growth of assembly character toys which we began to offer in January 2022 and (ii) certain
distributors who no longer meet our cooperation criteria such as our minimum purchase
requirement or stopped being toy distributors due to their own business reasons.
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The table below sets forth the number of distributors by geographical location of the
distributors for the periods indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
First-tier cities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111842 67 78 93
Second-tier cities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118107 177 207 254
Third-tier cities and below /H1118/H1118/H1118/H111855 96 111 128
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111821 14 19 36
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118225 354 415 511
Note:
(1) Others are overseas distributors.
OUR CUSTOMERS
Our direct customers primarily include the distributors, consignment sales partners,
e-commerce platforms and online consumers. All our five largest customers in each year or
period during the Track Record Period are our distributors, consignment sales partners and an
e-commerce platform. In 2021, 2022, 2023 and the six months ended June 30, 2024, revenue
from our five largest customers in each year or period during the Track Record Period
accounted for 26.6%, 22.5%, 15.3% and 12.1% of our total revenue for such year or period
during the Track Record Period. In 2021, 2022, 2023 and the six months ended June 30, 2024,
revenue from our largest customer in each year or period during the Track Record Period
accounted for 12.2%, 9.0%, 4.2% and 3.3% of our total revenue for such year or period during
the Track Record Period. During the Track Record Period, we were not subject to any material
customer concentration risk. During the Track Record Period and up to the Latest Practicable
Date, none of our Directors, their associates or any of our current Shareholders (who, to the
knowledge of our Directors, own more than 5% of our share capital) had any interest in any
of our five largest customers in each year of period during the Track Record Period that are
required to be disclosed under the Listing Rules.
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The table below sets forth the details of our five largest customers in each year or period
during the Track Record Period.
For the Y ear Ended December 31, 2021
Rank Customer Nature of Business
Y ear of
Commencement
of Business
Relationship
Registered
Capital Location
Sales
Amount
Percentage
of Our
Total Sales
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer A
(1) E-commerce platform 2018 USD1.4 billion Beijing, China 40,195 12.2
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer B Sales of toys 2016 USD19.9 million Shanghai,
China
30,253 9.2
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer C (2) Sales of children’s
products and
value-added services
2019 RMB1.1 billion Jiangsu, China 8,217 2.5
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer D Sales and distribution
of toys
2021 RMB1.1 million Shandong,
China
4,576 1.4
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer E Sales and distribution
of toys
2021 RMB1.0 million Beijing, China 4,224 1.3
Total /H1118/H1118 87,465 26.6
Notes:
(1) Customer A is a subsidiary of a leading e-commerce company listed on NASDAQ and the Hong Kong
Stock Exchange and headquartered in China.
(2) Customer C is a subsidiary of a company listed on Shenzhen Stock Exchange and headquartered in
China that primarily engages in sale of a wide range of children’s apparel, footwear, accessories, toys,
and other related products through its network of retail stores and online platforms.
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For the Y ear Ended December 31, 2022
Rank Customer Nature of Business
Y ear of
Commencement
of Business
Relationship
Registered
Capital Location
Sales
Amount
Percentage
of Our
Total Sales
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer A
(1) E-commerce platform 2018 USD1.4 billion Beijing, China 29,254 9.0
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer B Sales of toys 2016 USD19.9 million Shanghai,
China
25,893 8.0
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer C (2) Sales of children’s
products and
value-added services
2019 RMB1.1 billion Jiangsu, China 7,750 2.4
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer F
(3) Sales of toys,
animation and
amusement related
products
2022 RMB1.2 billion Fujian, China 5,699 1.8
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer E Sales and distribution
of toys
2021 RMB1.0 million Beijing, China 4,083 1.3
Total /H1118/H1118 72,679 22.5
Notes:
(1) Customer A is a subsidiary of a leading e-commerce company listed on NASDAQ and the Hong Kong
Stock Exchange and headquartered in China.
(2) Customer C is a subsidiary of a company listed on Shenzhen Stock Exchange and headquartered in
China that primarily engages in sale of a wide range of children’s apparel, footwear, accessories, toys,
and other related products through its network of retail stores and online platforms.
(3) This includes transactions with certain subsidiaries of Customer F.
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For the Y ear Ended December 31, 2023
Rank Customer Nature of Business
Ye a r o f
Commencement
of Business
Relationship
Registered
Capital Location
Sales
Amount
Percentage
of Our
Total Sales
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer B Sales of toys 2016 USD19.9 million Shanghai, China 36,409 4.2
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer G Sales and distribution
of toys
2022 RMB1.0 million Henan, China 26,777 3.1
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer A
(1) E-commerce platform 2018 USD1.4 billion Beijing, China 26,133 3.0
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer H Sales and distribution
of toys
2022 RMB10.0 million Zhejiang, China 24,725 2.8
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer F (2) Sales of toys,
animation and
amusement related
products
2022 RMB1.2 billion Fujian, China 19,455 2.2
Total /H1118/H1118/H1118/H1118 133,499 15.3
Notes:
(1) Customer A is a subsidiary of a leading e-commerce company listed on NASDAQ and the Hong Kong
Stock Exchange and headquartered in China.
(2) This includes transactions with certain subsidiaries of Customer F.
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For the Six Months Ended June 30, 2024
Rank Customer Nature of Business
Ye a r o f
Commencement
of Business
Relationship
Registered
Capital Location
Sales
Amount
Percentage
of Our
Total Sales
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer G Sales and distribution
of toys
2022 RMB1.0 million Henan, China 34,995 3.3
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer I and
its related
entity
(1)
Sales and distribution
of toys
2023 RMB10.0 million Zhejiang, China 24,576 2.3
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer J and
its related
entities
(2)
Sales and distribution
of toys
2023 RMB3.0 million Anhui, China 23,633 2.3
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer B Sales of toys 2016 USD19.9 million Shanghai, China 23,131 2.2
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Customer K and
its related
entity
(3)
Sales and distribution
of toys
2022 RMB0.5 million Hunan, China 21,324 2.0
Total /H1118/H1118/H1118/H1118 127,659 12.1
Notes:
(1) The related entity is under the same control as Customer I.
(2) The related entities are under the same control as Customer J.
(3) The related entity is under the same control as Customer K.
RA W MATERIALS AND SUPPLY CHAIN
Key Raw Materials Procurement
The key raw materials for our products are ABS and paper materials. Raw materials are
of vital importance as they can directly affect the quality, appearance and texture of finished
toys. Our partner factories are responsible for the procurement of key raw materials from
qualified suppliers designated or approved by us. During the Track Record Period, we or our
partner factories did not experience any material incidents of supply interruption or failure to
secure sufficient quantities of raw materials. See “— Quality Control.”
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Logistics and Inventory Management
To support our extensive sales network in China and overseas, we have established our
storage and logistics capabilities.
Warehouse
As of June 30, 2024, we leased and operated two central warehouses with a total GFA of
approximately 14,163 sq.m. in China. We also engage with three third-party warehouse service
providers for the storage of our products overseas. We typically enter into agreements with our
warehouse service providers for a term of three years. Our warehouse service providers bear
the risks associated with the storage of our products.
We have a dedicated team responsible for the management of the storage of our products.
See “— Quality Control.”
Logistics
To transport our products within our extensive sales network efficiently, we engage
third-party logistics services providers to deliver our products.
We usually enter into agreements with our logistics service providers on an annual basis.
Our logistics service providers bear the risks associated with the delivery of our products and
are required to have necessary insurance coverage. For any ad hoc product transport needs, we
may use other temporary logistics service providers. During the Track Record Period and up
to the Latest Practicable Date, we had not experienced any material disruption in the delivery
of our products or suffered any material loss due to late delivery or mishandling of products
by our logistics service providers. See “— Quality Control.”
Inventory Management
During the Track Record Period, most of our inventories were finished goods. We initiate
production order based on internal sales forecast, so as to optimize inventory turnover. We have
implemented stringent inventory management measures to maintain an optimal level of
inventory. We also set inventory turnover rate management indicators that we monitor and
optimize, to assess the efficiency of our inventory management. As of December 31, 2021,
2022 and 2023 and June 30, 2024, we had inventories of RMB69.8 million, RMB61.2 million,
RMB76.3 million and RMB151.3 million, respectively. In 2021, 2022, 2023 and the six months
ended June 30, 2024, our inventory turnover days were 137 days, 130 days, 62 days and 46
days, respectively.
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OUR SUPPLIERS
Our suppliers primarily include specialized partner factories and IP proprietors and
licensors. Purchases from our partner factories accounted for the majority of our purchases
during the Track Record Period. See “Risk Factors — Risks Relating to Our Business and
Industry — The use of third-party partner factories to produce products presents risks to our
business” for the associated risks. In 2021, 2022 and 2023 and the six months ended June 30,
2024, purchases from our five largest suppliers in each year or period during the Track Record
Period accounted for 82.3%, 82.2%, 90.5% and 71.6% of our total purchases for such year or
period during the Track Record Period. In 2021, 2022, 2023 and the six months ended June 30,
2024, purchases from our largest supplier in each year or period during the Track Record
Period accounted for 46.4%, 40.6%, 34.4% and 30.4% of our total purchases for such year or
period during the Track Record Period. During the Track Record Period and up to the Latest
Practicable Date, to the best knowledge of our Directors, none of our Directors, their associates
or any of our current Shareholders (who, to the knowledge of our Directors, own more than 5%
of our share capital) had any interest in our five largest suppliers in each year or period during
the Track Record Period that are required to be disclosed under the Listing Rules. The table
below sets forth the details of our five largest suppliers in each year or period during the Track
Record Period.
For the Y ear Ended December 31, 2021
Rank Supplier Nature of Business
Y ear of
Commencement
of Business
Relationship
Registered
Capital Location
Purchase
Amount
Percentage
of Our
Total
Purchases
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier A
and its related
entities
(1)
Manufacturing and
sales of molds and
plastic products
2017 RMB76.1
million
Jiangsu, China 95,704 46.4
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier B Manufacturing and
sales of molds and
plastic products
2017 USD42.5 million Guangdong,
China
27,403 13.3
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier C Manufacturing and
sales of molds and
plastic products
2018 RMB10.0
million
Jiangsu, China 19,218 9.3
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier D Manufacturing and
sales of plastic
products
2020 RMB100.0
million
Zhejiang,
China
14,509 7.0
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier E Manufacturing and
sales of molds and
plastic products
2021 RMB28.0
million
Guangdong,
China
12,959 6.3
Total /H1118/H1118 169,793 82.3
Note:
(1) The related entities are under the same control as Supplier A.
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For the Y ear Ended December 31, 2022
Rank Supplier Nature of Business
Y ear of
Commencement
of Business
Relationship
Registered
Capital Location
Purchase
Amount
Percentage
of Our
Total
Purchases
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier A
and its related
entities
(1)
Manufacturing and
sales of molds and
plastic products
2017 RMB76.1
million
Jiangsu, China 82,061 40.6
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier E Manufacturing and
sales of molds and
plastic products
2021 RMB28.0
million
Guangdong,
China
39,739 19.7
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier C Manufacturing and
sales of molds and
plastic products
2018 RMB10.0
million
Jiangsu, China 17,046 8.4
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier B Manufacturing and
sales of molds and
plastic products
2017 USD42.5 million Guangdong,
China
16,997 8.4
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier F IP licensing 2021 RMB5.0 million Shanghai,
China
10,387 5.1
Total /H1118/H1118 166,230 82.2
Note:
(1) The related entities are under the same control as Supplier A.
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For the Y ear Ended December 31, 2023
Rank Supplier Nature of Business
Y ear of
Commencement
of Business
Relationship
Registered
Capital Location
Purchase
Amount
Percentage
of Our
Total
Purchases
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier A
and its related
entities
(1)
Manufacturing and
sales of molds and
plastic products
2017 RMB76.1
million
Jiangsu, China 158,821 34.4
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier E Manufacturing and
sales of molds and
plastic products
2021 RMB28.0
million
Guangdong,
China
149,065 32.3
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier F IP licensing 2021 RMB5.0 million Shanghai,
China
53,104 11.5
4 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier C Manufacturing and
sales of molds and
plastic products
2018 RMB10.0
million
Jiangsu, China 41,621 9.0
5 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier G
(2) IP licensing 2021 USD7.0
million (3)
United
Kingdom
15,426 3.3
Total /H1118/H1118 418,037 90.5
Notes:
(1) The related entities are under the same control as Supplier A.
(2) Supplier G is a subsidiary of a leading US-based NASDAQ listed toy and game company.
(3) Being the registered capital of supplier G’s PRC subsidiary.
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For the Six Months Ended June 30, 2024
Rank Supplier Nature of Business
Y ear of
Commencement
of Business
Relationship
Registered
Capital Location
Purchase
Amount
Percentage
of Our
Total
Purchases
(RMB’000) (%)
1 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier E Manufacturing and
sales of molds and
plastic products
2021 RMB28.0
million
Guangdong,
China
149,684 30.4
2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier A
and its related
entities
(1)
Manufacturing and
sales of molds and
plastic products
2017 RMB76.1
million
Jiangsu, China 101,632 20.6
3 /H1118/H1118/H1118/H1118/H1118/H1118/H1118Supplier F IP licensing 2021 RMB5.0 million Shanghai,
China
63,105 12.8
4 /H1118/H1118/H1118/H1118/H1118/H1118Supplier G
(2) IP licensing 2021 USD7.0
million (3)
United
Kingdom
19,642 4.0
5 /H1118/H1118/H1118/H1118/H1118/H1118Supplier C Manufacturing and
sales of molds and
plastic products
2018 RMB10.0
million
Jiangsu, China 18,901 3.8
Total /H1118/H1118 352,964 71.6
Notes:
(1) The related entities are under the same control as Supplier A.
(2) Supplier G is a subsidiary of a leading US-based NASDAQ listed toy and game company.
(3) Being the registered capital of supplier G’s PRC subsidiary.
INTELLECTUAL PROPERTIES
We operate our business under the brand of Blokees ( ̺ኁ̙). As of the Latest Practicable
Date, we had 590 patents granted or under application (including 75 granted invention patents),
1,913 trademarks, 1,418 copyrights and 120 domain names in China. As of the same date, we
had 26 patents granted or under application and 158 trademarks overseas. See “Appendix IV
— Statutory and General Information — B. Further Information about the Business —
Intellectual Property.”
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any material infringement of patents, trademarks, copyrights, trade secret,
know-how and proprietary rights of third parties.
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IP Licensing Arrangements
We entered into license agreement with the IP proprietors or licensors. As of December
31, 2021, 2022 and 2023 and June 30, 2024, we had seven, 10, 13 and 18 IP licensing
agreements in effect with seven, 10, 11 and 12 IP proprietors or licensors. As of the Latest
Practicable date, we had 23 IP licensing agreements in effect with 10 IP proprietors and three
licensors. Below set forth the key terms of the license agreements:
 Licensing rights : The IP proprietors or licensors grant us the non-exclusive rights to
design, develop, produce and sell products as specified in the agreements in specific
regions based on their IPs as specified under the agreements during the term of the
agreements.
 Product type : Generally we have the rights to design, develop, produce and sell our
assembly character toys and, to a lesser extent, our brick-based toys. Under certain
agreements, we can also sell collectibles such as collectible coins, cards, posters and
key chains with our assembly character toys.
 Use of logo and trademark : We are authorized to use the official logo and trademark
of the licensed IPs on the packaging of our products.
 Sub-license : We are generally not allowed to sub-license the IPs under the license
agreement.
 Duration : The initial term of our license agreements is generally from one year to
three years. The agreements are generally not automatically renewable, do not
provide predetermined conditions for renewal, and can be renewed or extended upon
mutual agreement. Depending on the terms and conditions of the agreement, we may
have priority in renewing the license under the same conditions when the agreement
is about to expire. During the Track Record Period, we did not encounter any
difficulties in renewing licensing agreements with IP proprietors or licensors.
 Fee agreements : For each year, we generally pay IP proprietors or licensors the
higher of a minimum guarantee and an amount predetermined by formulas based on
sales performance or production volume of the products developed under the IPs.
According to Frost & Sullivan, our fee arrangements with IP proprietors or licensors
are in line with industry standards.
 Sell-off period: We are typically allowed to sell the unsold products developed under
the IPs within three to six months after the termination of the license agreement.
 V alidity of IP rights and Infringement : The IP proprietors or licensors represent that
they have the relevant intellectual property rights or full authorization in relation to
the IPs. If we incur losses as a result of defects in the IP proprietor’s or licensor’s
intellectual property rights, the IP proprietor or licensor shall be held liable for
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breach of contract. Typically, the IP proprietors or licensors provided us with
indemnity or agreed to pay liquidated damages in the event of infringement of
third-party IP rights relating to the licensed IPs. Separately, we conduct thorough
checks to ensure the legitimacy of the rights held by IP proprietors or licensors. See
“— Our Product Approach — Our IP Portfolio — IP Protection.”
 Liability : We are responsible for all product liabilities, after-sale customer service,
claims, complaints, product returns and exchanges.
To mitigate our reliance on any single IP , we have been actively expanding our IP
portfolio. As of the Latest Practicable Date, we had approximately 50 licensed IPs in our
portfolio. As of the same date, we were negotiating IP licensing arrangements for more than
25 IPs. In addition, we have been dedicated to offering products under our self-developed IPs.
As of the Latest Practicable Date, we had two self-developed IPs. As we continue to roll out
new products under our expanding IP portfolio, we will be able to reduce reliance on any single
IP .
 Termination : Either we or the IP proprietors or licensors are entitled to terminate the
agreement upon the occurrence of certain specified events, such as a material
breach, bankruptcy, revocation of business license or insolvency of the counterparty.
We and the IP proprietors or licensors can also terminate the agreement in writing
upon mutual agreement.
QUALITY CONTROL
We place strong emphasis on product quality and have a dedicated quality control team.
We adopt a comprehensive quality control system that covers product design and development,
raw material suppliers, production, warehousing and logistics.
We take into account product quality at design and development stage. We apply DFM
design method to prevent potential issues in molding and production processes to ensure
product quality. Through the extensive use of standard components, we reduce the risk of
defects arising from complex production processes. We also take into account product quality
when designing the prototype and molds for our products, ensuring consistency of quality
across all our product offering.
To ensure stable supply and consistent quality of key raw materials, we require our
partner factories to procure only from qualified suppliers designated or approved by us. We
adopted strict criteria for evaluating the qualifications of our raw material suppliers. We
prioritize industry leaders with production capacity at scale and automation capabilities, to
ensure we obtain raw materials with exceptional quality and competitive pricing. To guarantee
the long-term stable supply of our key raw materials, we maintain a list of competent raw
material suppliers and sufficient back-up suppliers.
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For production, we select our partner factories with strict processes based on factors such
as qualification, product quality, production capacity, pricing, automation capability, mold and
injection equipment, reputation and compliance with applicable laws and regulations. We
require our suppliers to have comprehensive quality control systems and quality control
experience in large-scale production. We have formulated stringent toy safety standards for our
specialized partner factory network to safeguard the quality of our products. We assess the toys
produced with strict domestic and global quality standards including GB6675-2014, ASTM
F963 and EN71. The specifications of our products, including the size of the blocks and
components, are in line with the aforementioned applicable domestic and global quality
standards, according to Frost & Sullivan. In addition, we have staff stationed at the partner
factories to oversee the entire production process in order to make sure that our products are
produced according to our quality standards. We require our partner factories to strictly follow
applicable laws and regulations.
For product storage, we have a dedicated team that manages our central warehouses with
an ERP system to ensure proper storage. For logistics, strict criteria are used to select
third-party logistics services providers, with ongoing performance evaluation to avoid physical
damage of our products during transportation.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any major customer complaints on product quality or any product liability claims,
product recalls or legal consequences, which, individually or taken together, resulted in a
material and adverse effect on us.
COMPETITION
The global and China’s assembly character toy markets are highly concentrated, with the
top three players having 81.7% and 65.1% of the market share in terms of GMV in 2023. The
top two industry players in the global assembly character toy market are multinational
companies that are well-known in the toy industry, the combined market share of which was
approximately 75.4% in 2023, according to Frost & Sullivan. We ranked third and first in the
global and China’s assembly character toy market in 2023 in terms of GMV , respectively. To
prevail in the competitive assembly character toy market, we must continue to innovate and
launch products that are popular among consumers and meet their needs, which in turn depends
on our ability to execute various aspects of our business including product innovations,
IP-related capabilities such as selection, development, operation and commercialization,
product craftsmanship and quality, production capacity of our partner factories, and the
effectiveness of our sales and marketing efforts. Some of our competitors may have greater
financial resources or stronger capability than us in one or many of these areas. See “Risk
Factors — Risks Relating to Our Business and Industry — Demand for our products is affected
by changing social and economic circumstances and evolving consumer preferences, as well as
our ability to design and develop products to meet these preferences” and “Industry Overview”
for more information about the market where we operate and the competition we face.
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USER PRIV ACY AND DATA SECURITY
In the ordinary course of business, we from time to time collect, store and use certain
personal information, including phone numbers and addresses for the purpose of online account
registration and sales through e-commerce platforms.
There are various laws and regulations, such as the Cybersecurity Law of the PRC and the
Personal Information Protection Law of the PRC, which govern the collection, use, retention,
sharing and security of the personal data. See “Regulatory Overview — Regulations on
Cybersecurity and Data Privacy and Protection.” Given that legislation and law enforcement in
the PRC on cybersecurity, data privacy and protection are still evolving, we closely monitor
further regulatory developments and take appropriate measures in a timely manner. During the
Track Record Period and as of the Latest Practicable Date, we had complied with applicable
laws and regulations relating to cybersecurity, data privacy and protection in all material
aspects.
To safeguard user privacy and data security, we have a cyber and data security compliance
committee for user privacy led by our IT department and supported by our legal department.
Such committee is overseen by the Board. The cyber and data security compliance committee
is responsible for establishing overall network compliance strategies, implementing data
security compliance requirements, supporting the daily business processes of our business
departments and conducting data compliance assessments. The IT experts in the committee
focus on cyber and data security, while the legal experts help ensure compliance with relevant
laws and regulations.
We have formulated and implemented a set of institutional policies, including the
Employee Information Security Code of Conduct (‘), Cybersecurity
Management Regulations ( ၣഖτΌ၍ଣ஝೻‘), Data Compliance Guidelines ( ᅰኽΥ஝
ˏ‘), Personal Information Protection Policy (‘), Data Classification
and Management Regulations (‘) and Emergency Response Plan for
Network and Data Security Incidents (‘). These policies serve as a
framework to govern and guide our employees’ actions in safeguarding data protection and
security. These policies are enforced by our cyber and data security compliance committee.
We have also employed a range of technical measures to strengthen the security of our
information systems. This includes using virtual environments to host our systems, distributing
workloads to optimize performance, and keeping different system components separate. In
addition, we implemented a robust backup system, stringent identity authentication and access
control protocols to ensure data security. All data operations are equipped with data
desensitization technology and are subject to rigorous compliance auditing, ensuring strict
adherence to regulatory standards.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We are committed to ESG alongside our pursuit of a sustainable growth. We have
implemented a set of ESG policies that align with applicable laws, regulations and policies.
These policies set out our internal practices for corporate governance, environmental
protection, social responsibilities, labor protection and business integrity, among other things.
We have established a comprehensive ESG management framework that assigns specific
ESG responsibilities at various organizational level throughout our business operations,
thereby improving our management and execution capabilities in these areas. The ultimate
responsibility for setting ESG strategies, objectives, and managing related risks resides with
our senior management. This encompasses the identification, assessment and management of
ESG initiatives and the evaluation of our progress in achieving the defined ESG goals. We have
established an ESG Committee responsible for reviewing and evaluating the implementation of
our ESG strategies, systems, work plans and risk management approaches. Chaired by Mr. Zhu,
our founder, chairman of the Board and chief executive officer, the ESG Committee regularly
reports to the Board, ensuring effective oversight of ESG issues. In addition, we have formed
an ESG task force to further implement our ESG strategy. Our ESG task force comprises senior
management from various business departments and oversees the execution of our ESG-related
work plans, as well as monitors and evaluates the effectiveness of the implementation.
We strive to maintain active communication with various stakeholders, including
employees, partner factories, suppliers, customers and regulators and continuously improve our
ESG practices to address stakeholders’ ESG-related considerations. During the Track Record
Period and up to the Latest Practicable Date, we were not exposed to any significant risks or
issues related to ESG. Looking forward, we will dedicate more internal resources and
management supervision to further strengthen our ESG practices and strategies, enhance our
risk identification and management procedures, and ensure transparent and regular ESG
reporting.
Environment
We proactively monitor changes in laws, regulations and policies, continuously assess
compliance risks and promptly adjust our practices to ensure alignment with evolving
environmental focus areas. We promptly adjust to changes in laws, regulations and policies to
ensure our compliance with environmental focus topics. We have an environmental
management framework in place with a focus on reducing environmental impact, improving
resource efficiency and reduction of overall carbon emissions. Considering the potential impact
of our business on the climate and the environment, we take various measures in our business
operations to minimize the impact of our operations on the environment, including the
following:
 Our Bloks System . We believe that our Bloks System makes our products and our
business operations more friendly to the environment. For example, our patents for
standard components such as the overall assembling structure and key joints
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facilitate more efficient use of resources through standardized production which
reduces waste and promotes production efficiency to save energy during production
processes. More specifically, the use of standard components in our product design
enables us to reduce the variety and quantity of molds, thereby saving production
resources. Also, our proprietary automated production techniques lead to waste
reduction and energy saving by optimizing material use, reducing defects and
minimizing rework. We use ABS, a non-renewable and non-biodegradable material,
in our products. The production and disposal of ABS contribute to plastic waste,
pollution and resource depletion. To mitigate the environmental impact of ABS, we
continuously improve production efficiency through our Bloks System to reduce the
usage and the waste resulting from using of such material. For example, we
upgraded molds with hot runner systems to allow reuse of leftover ABS material in
the hot runners, thereby improving the utilization efficiency of ABS. We also
optimized product structure to reduce the thickness of certain components, which
reduces the usage of ABS in our products while ensuring our product strength,
endurability or assembling experience are not compromised. We also plan to
increase the use of degradable, environmentally friendly raw materials for product
production. Moreover, we primarily use recyclable and degradable packaging
materials.
 Partner factory management . We work with our partner factories to minimize the
environmental impact of the production process. We require our partner factories to
obtain ISO14000 certification which encompasses a range of standards addressing
various aspects of environmental management, such as environmental management
systems, environmental auditing and environmental performance evaluation.
Furthermore, we (i) require our partner factories to adhere to the requirements set
out in the standards across various production stages such as injection, printing and
packaging; and (ii) have staff stationed at the partner factories to oversee the entire
production process in order to make sure that production process is in accordance
with the environmental management standards. Moreover, we require our partner
factories to prioritize the use of UV printing for product printing purposes, provided
that quality and craftsmanship requirements can be met. UV printing requires less
ink for complex application of colors as compared with traditional printing methods,
thereby reducing resource consumption. Additionally, UV printing reduces
pollutants discharged to the environment during the production process and
therefore reduce our carbon footprint.
 Energy conservation and green office . We focus on energy and resource
conservation in our daily operating activities. Our energy and resource usage
remained relatively stable despite our rapid growth during the Track Record Period.
In 2021, 2022, 2023 and the six months ended June 30, 2024, (i) our electricity
consumption was approximately 0.51GWh, 0.51GWh, 0.56GWh and 0.29GWh,
respectively; and (ii) our water consumption was approximately 0.67 thousand, 0.50
thousand, 0.54 thousand and 0.27 thousand tonnes, respectively. We have
established an office administration policy designed to implement the low-carbon
office concept, which requires the implementation of the office energy-saving and
safety measures. For example, we require our employees to promptly turn off lights
and air conditioners in unoccupied office areas.
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The classification of our greenhouse gas emission was determined based on our
understanding of Greenhouse Gas Protocol published by the World Resources Institute and the
World Business Council for Sustainable Development and the 2006 IPCC Guidelines for
National Greenhouse Gas Inventories issued by IPCC.
The table below sets forth our greenhouse gas emission for the periods indicated.
Unit
Y ear Ended December 31,
Six Months
Ended
June 30,
2021 2022 2023 2024
Greenhouse Gas
Emission (1)
Scope 2 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118tCo2 — (2) 369.0 387.1 237.5
Notes:
(1) We do not engage in Scope 1 greenhouse gas emission because we do not carry out any production
activities and have no direct emission from our business operations. We intend to initiate the assessment
of our Scope 3 greenhouse gas emission after the Listing.
(2) The Scope 2 emission data for 2021 for our leased warehouse was not available, and therefore we are
not able to calculate our total Scope 2 emission for 2021.
Our Scope 2 greenhouse gas emission remained relatively stable in 2022 and 2023. In the
six months ended June 30, 2024, the Scope 2 greenhouse gas emission increased due to the
increase in usage of electricity in our central warehouses.
While we are committed to achieving sustainable growth in the long run, we expect our
energy consumption to increase as a result of our business expansion in the near term, which
involves establishing our self-operated factory, purchasing more office equipment and
potentially expanding our office space. To minimize the environmental impact of our growth,
we have implemented a series of environmentally-friendly initiatives in our office area,
including adopting shared office space models and collaborating with specialized agencies for
recycling. We have also established a paperless office system, utilizing online working
software to reduce the use of paper and enhance efficiency. Additionally, we promote
low-carbon commuting and business travel, provide internal training on carbon neutrality, and
post posters in office spaces to raise awareness of our low-carbon initiatives. For our planned
self-operated factory, we aim to use environmentally-friendly construction materials and
implement green production protocols in the future. We are at a preliminary stage of studying
the environmental impact of our operations and planned production and establishing ESG
targets. We intend to implement achievable ESG targets upon Listing that align with our
expansion while minimizing environmental impact and risks.
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Social Responsibilities and Corporate Governance
We are committed to promoting corporate social responsibility and sustainable
development. Corporate social responsibility is viewed as part of our core corporate philosophy
that will be crucial to our ability to create sustainable value for our stakeholders by embracing
diversity and addressing public interests.
Consumer Protection
We place strong emphasis on consumer protection and product safety. Our consumer
protection efforts primarily include that (i) we use comprehensible and accurate language on
the packaging of our products to mitigate the risks of misrepresentation and misunderstanding;
and (ii) we include clear warning labels and safety instructions on our packaging to inform
consumers about appropriate age ranges and any potential hazards. In particular, we prioritize
the safety and well-being of children by adhering to rigorous standards from product design
and development to production, so as to ensure our products are safe and meet global safety
regulations, including China’s toy safety standard GB6675-2014, the United States toy safety
standard ASTM F963, and the European Union toy safety standard EN71. For product design
and development, we take product quality and safety into account when designing the
prototype and molds, ensuring that product safety is addressed across all our product offerings
from the beginning. Moreover, we use safe materials and undergo comprehensive testing for
potential hazards, such as choking risks, sharp edges, chemicals and endurability to ensure our
products meet the aforementioned toy safety standards. For production, we have formulated
strict Bloks toy safety standards for our partner factory network, and we have staff stationed
at the partner factories to oversee the entire production process in order to make sure that our
products are produced according to such standards.
Employee Caring Initiatives
We have designed employee caring initiatives including employee welfare systems,
workplace safety guidance, diversity policies and self-development opportunities which our
human resource department is responsible for implementing and supervising. We set a series
of internal guidelines regarding the remuneration and incentive mechanism. We promote
comprehensive employee welfare systems to look after employees’ health and well-being, such
as general health benefits, and holiday and birthday benefits.
We proactively carry out trainings for workplace injury prevention despite that our
premises are mostly offices and warehouses with lower work safety risk. During the Track
Record Period and up to the Latest Practicable Date, we had not experienced any major
accidents involving personal injury or property damage.
We are committed to creating an equal, diverse and non-discriminatory workplace. We
provide equal career opportunities for employees of different background, ages and genders. As
of June 30, 2024, we had 184 female employees, accounting for 35.5% of our total employees.
We design and offer various training programs for employees of different departments and
positions, covering subjects from operations, research and development, branding and
marketing, career advancement, as well as general management, in order to enhance their
professional skill sets and understanding of our company and the industry. See “— Our
Employees.”
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Charitable Efforts
We are committed to charity and have actively contributed to various causes since our
inception. On February 20, 2020, we donated approximately 50,000 units of toys to frontline
healthcare professionals and their children. On August 30, 2022, we donated goods valued at
RMB11.6 million to provide support to frontline healthcare professionals and their families.
Business Integrity
We have implemented a series of strict internal rules regarding business integrity to
prevent corruption, bribery, extortion, fraud and money laundering. In addition, we make
known our internal integrity policies to our suppliers and partner factories. We require our
suppliers and partner factories to sign integrity agreements in which they make written
commitment to comply with our anti-corruption and anti-bribery requirements. We also carry
out anti-corruption training activities for employees to strengthen employees’ awareness. We
encourage our employees to report on non-compliance and have formulated a whistleblower
policy. Employees can report through various channels such as Weixin, hotlines and e-mail
addresses. Our legal team and internal control team are responsible for handling the reports of
fraud or bribery incidents. We maintain strict confidentiality of all whistleblowers.
During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any instances of corruption and malpractice that had a material adverse effect on
our business or were likely to have a material adverse effect on our business.
INSURANCE
We have purchased property insurance and product liability insurance policies which
comprehensively covered major business interruptions and accidental loss, such as fire, water
and malicious damage. See “Risk Factors — Risks Relating to Our Business and Industry —
We are subject to the risks associated with force majeure events, natural disasters, public health
incidents, acts of war, terrorism or other factors beyond our control.” Our Directors believe that
our insurance coverage is in line with industry practice. During the Track Record Period and
up to the Latest Practicable Date, we had not received any material insurance claims against
us.
PROPERTIES
As of the Latest Practicable Date, we did not own any real property. As of June 30, 2024,
we had no single property with a carrying amount of 15% or more of our total assets, and on
this basis, we are not required by Rule 5.01A of the Listing Rules to include in this prospectus
any valuation report. Pursuant to section 6(2) of the Companies Ordinance (Exemption of
Companies and Prospectuses from Compliance with Provisions) Notice, this prospectus is
exempted from compliance with the requirements of section 342(1)(b) of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the
Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance,
which requires a valuation report with respect to all of our interests in land or buildings.
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Leased Properties
As of the Latest Practicable Date, we entered into agreements to lease nine properties
with a GFA of 60,240 sq.m. from third parties in the PRC, mainly as our offices and
warehouses. The leases generally have a term ranging from one to three years. We will consider
renewing the leases upon their expiry.
As of the Latest Practicable Date, two out of the nine leased properties used as our
warehouses with a GFA of 16,806 sq.m. had not been registered and filed with relevant land
and real estate administration bureaus in the PRC. As advised by our PRC Legal Advisor,
failure to complete the registration and filing of lease agreements will not affect the validity
of such lease agreements nor the lawful and effective use of leased properties pursuant to the
lease agreements. However, the relevant authorities may require us to rectify such non-
compliance within a prescribed period and we may be subject to a fine ranging from RMB1,000
to RMB10,000 for each of such properties if we fail to rectify such non-compliance within the
prescribed period. During the Track Record Period, we have not been subject to any
administrative penalties imposed by the competent authorities for failing to complete the
registration and filing of the lease agreements. Based on the above, our PRC Legal Advisor and
we believe that the failure to register and file the leased properties will not have any material
adverse effect on our operation and financial condition.
OUR EMPLOYEES
As of June 30, 2024, we had a total number of 519 full-time employees. Most of our
employees were located in China. The following table sets forth our full-time employees by
functions as of June 30, 2024.
Function
Number of
employees
Sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111899
Marketing /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111831
Research and development /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118331
Management and administration /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111858
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118519
Our success, to a considerable extent, depends upon our ability to attract, motivate and
retain a sufficient number of qualified employees. We use various methods for our recruitment,
including online recruitment, internal recommendation and recruitment through headhunter
firms or agents, to satisfy our demand for different types of talents. We believe we offer our
employees competitive compensation packages and an environment that encourages self-
development and creativity. In addition, we design and offer various training programs for
employees of different departments and positions, covering subjects from operation, research
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and development, branding and marketing, career advancement, as well as general
management, in order to enhance their professional skill sets and understanding of our
company and the industry. We place special emphasis on legal knowledge and awareness. We
provide specific training sessions on legal topics such as intellectual property rights and trade
secrets regularly.
For key positions and critical personnel, we provide specialized training programs each
year, aligning them with the company’s strategic development with both in-house and external
trainers. We run a Product Manager Training Camp (຾ଣ৅ᇖᐄ), which combines
insights from both in-house and external experts, covering topics such as project management,
project review and business and strategic development. We also conduct specialized offline
training sessions for regional sales management personnel to strengthen their understanding of
our management philosophies and corporate culture and improve their management skills.
We enter into employment contracts and confidentiality agreements with all of our
employees. We have developed an evaluation system to assess the performance of our
employees annually, which forms the basis for determining their compensation. We believe that
we have complied with the relevant national and local labor and social welfare laws and
regulations in all material respects. We believe we have maintained a positive relationship with
our employees. We had not experienced any significant labor disputes during the Track Record
Period and up to the Latest Practicable Date which have adversely affected or are likely to have
adverse effects on our business operations.
LICENSES, PERMITS AND APPROV ALS
During the Track Record Period and up to the Latest Practicable Date, we had obtained
all requisite licenses, permits, approvals and certificates from the relevant government
authorities that are material for our business operations.
We had not experienced any material difficulties in renewing material licenses, permits
or certificates during the Track Record Period and up to the Latest Practicable Date and do not
expect there to be any material difficulties in renewing them upon their expiry, if applicable,
as long as we comply with the relevant legal requirements and all necessary steps to submit the
relevant applications in accordance with the requirements and schedule prescribed by the
applicable laws and regulations.
During the Track Record Period and up to the Latest Practicable Date, we had not been
penalized by any government authorities for non-compliance relating to material licenses,
permits or certificates.
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LEGAL PROCEEDINGS AND NON-COMPLIANCE
We may from time to time be subject to various legal or administrative claims and
proceedings arising in the ordinary course of business involving employment, copyrights,
contract disputes and other matters. See “Risk Factors — Risks Relating to Our Business and
Industry — We may from time to time become a party to litigation, other legal and contractual
disputes, claims and administrative proceedings that may materially and adversely affect our
business and reputation.” Our Directors, as advised by our PRC Legal Advisor, confirm that
during the Track Record Period and up to the Latest Practicable Date, we had not been and
were not a party to any material legal, arbitral, administrative proceedings or non-compliance
incidents that led to fines, enforcement actions or other penalties, which could, individually or
in the aggregate, have a material adverse effect on our business, financial condition and results
of operations. Particularly, during the Track Record Period and up to the Latest Practicable
Date, we had not experienced any material (i) infringements, counterfeit products or knockoffs,
or (ii) failure to make adequate contributions for employees’ benefits. Our Directors are of the
view that, we had complied, in all material respects, with all relevant laws and regulations in
the PRC during the Track Record Period and up to the Latest Practicable Date.
RISK MANAGEMENT AND INTERNAL CONTROL
We have developed and implemented risk management policies and internal control
measures in relation to our business operations, financial reporting and general compliance.
 For our risk management, we design a comprehensive set of policies to identify,
analyze, categorize, mitigate and monitor various risks. We periodically assess and
update our risk management policies. Our risk management policies also set forth
the reporting hierarchy of risks identified in our operations. Our Board is
responsible for overseeing the overall risk management.
 For our internal control system, we carry out regular internal evaluation and training
to ensure that our employees are equipped with sufficient knowledge on our internal
control measures and relevant laws and regulations.
In January 2024, we engaged an independent consulting firm to perform a review over our
internal control. The key areas of inspection include financial reporting and disclosure,
research and development management, management policies over sales, supply chain
controls, distributor management, trade receivables and payables management, product safety
control, inventory management, intangible assets management, human resource and
remuneration management, capital management, tax management, insurance management,
contract control and information system control.
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To monitor the ongoing implementation of our risk management policies and corporate
governance measures after the Global Offering, we have adopted or will continue to adopt,
among other things, the following internal control measures:
 establish an Audit Committee to review and supervise our financial reporting
process and internal control system. For the qualifications and experience of the
committee members, see “Directors and Senior Management”;
 adopt various policies to ensure compliance with the Listing Rules, including but not
limited to aspects related to risk management, connected transactions and
information disclosure;
 provide anti-corruption and anti-bribery compliance training periodically to our
senior management and employees to enhance their knowledge and compliance with
applicable laws and regulations, and include relevant policies against non-
compliance in employee handbooks;
 organize training session for our Directors and senior management in respect of the
relevant requirements of the Listing Rules and duties of directors of companies
listed in Hong Kong;
 enhance our reporting and record system, including records in relation to
procurement and sales;
 establish a set of emergency procedures in the event of major quality-related issues;
and
 provide enhanced training programs for responsible staff on quality assurance and
product safety procedures.
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OVERVIEW
The Board currently consists of seven Directors, including two executive Directors, two
non-executive Directors and three independent non-executive Directors. The Board is
responsible for and has the general power over the management and operation of the Group’s
business, including determining the business strategies and investment plans, implementing
resolutions passed at the shareholders’ general meetings, and exercising other powers,
functions and duties as conferred by the Memorandum and Articles of Association. The Board
also assumes the responsibilities for developing and reviewing the policies and practices of the
Company on corporate governance, risk management and internal control and compliance with
legal and regulatory requirements.
The senior management is currently comprised of six members who are responsible for
the day-to-day management and operation of the Group.
DIRECTORS
The following table sets forth the key information about the Directors as at the Latest
Practicable Date.
Name Age Position Responsibilities
Date of
Appointment
as a Director
Date of Joining
the Group
Mr. Zhu Weisong
(ؒ)
42 Chairman, executive
Director and chief
executive officer
Responsible for the
overall strategy,
business
development,
operation and
management of the
Group
July 28, 2021 December 24,
2014
Mr. Sheng
Xiaofeng
(ࢤ)
46 Executive Director
and president
Responsible for the
operation and
management and
overseas markets of
the toy business of
the Group
July 25, 2022 June 1, 2015
Mr. Chang Kaisi
(੬௱౶)
43 Non-executive
Director
Providing advice on the
business operations
and major decisions
of the Group
July 25, 2022 July 30, 2020
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Name Age Position Responsibilities
Date of
Appointment
as a Director
Date of Joining
the Group
Mr. Chen Rui
(௓๿)
51 Non-executive
Director
Providing advice on the
business operations
and major decisions
of the Group
December 27,
2023
December 27,
2023
Mr. Gao Pingyang
(৷̻ජ)
45 Independent non-
executive Director
Supervising and
providing
independent
judgement to
the Board
May 9, 2024 December 31,
2024
Ms. Huang Rong
(රႂ)
46 Independent non-
executive Director
Supervising and
providing
independent
judgement to
the Board
May 9, 2024 December 31,
2024
Mr. Shang Jian
(਄)
57 Independent non-
executive Director
Supervising and
providing
independent
judgement to
the Board
May 9, 2024 December 31,
2024
Executive Directors
Mr. Zhu Weisong (ؒ)aged 42, our founder, is the Chairman, an executive Director,
chief executive officer of the Company. Mr. Zhu is primarily responsible for the overall
strategy, business development, operation and management of the Group. Mr. Zhu has served
as an executive director and the chairman of the board of directors of Bloks Technology since
December 2014.
Mr. Zhu has extensive experience in business management by founding our Group in
December 2014. Prior to this, Mr. Zhu co-founded Shanghai Y oozoo Information Technology
Limited (ʮ̡) in May 2009, where he acted as chief technology officer
since its establishment until February 2015, primarily responsible for the management of
research and development; in May 2014, the business of Shanghai Y oozoo Information
Technology Limited was listed on the Shenzhen Stock Exchange by way of a major asset
restructuring of Y oozoo Interactive Co., Ltd. (ʮ̡) (stock code: 002174),
where Mr. Zhu served as the chairman of the board of supervisors from June 2014 to April
2016. Mr. Zhu keeps attaching great importance to product research and development and has
deep insights in industry trends, products innovation, business development and cooperation.
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Mr. Zhu received a doctorate degree in business administration from Shanghai Advanced
Institute of Finance of Shanghai Jiao Tong University (ፄኪ৫)
(PRC) — Arizona State University (the United States) in June 2023 and a master’s degree in
business administration from Cheung Kong Graduate School of Business (Ϫਠኪ৫)i nt h e
PRC in September 2019, and graduated from Shanghai Jiao Tong University ( ɪऎʹஷɽኪ)
in the PRC in January 2013 after completion of online courses majoring in business
administration.
Mr. Sheng Xiaofeng (ࢤ)aged 46, is our executive Director and president. Mr.
Sheng is responsible for the operation and management and overseas markets of the toy
business of the Group. Mr. Sheng has served as the president of Bloks Technology since
September 2015.
Mr. Sheng has over 20 years of profound experience in consumer insights, product
innovation and commercialization. Prior to joining the Group, Mr. Sheng worked at Intel
Technology Development (Shanghai) Co., Ltd. (तဧҦஔක೯(ɪऎ)ʮ̡) and Intel
Asia Pacific Research and Development Ltd. (ʮ̡) under the Intel Group
from April 2005 to May 2015, where he was responsible for the design and development of
educational products, and received the Intel Achievement Award twice for his outstanding
contributions to the research and development of educational products.
Mr. Sheng obtained a master’s degree in industrial design engineering from Shanghai Jiao
Tong University ( ɪऎʹஷɽኪ) in the PRC in March 2009 and a bachelor’s degree in
industrial design from Tongji University ( Ν᏶ɽኪ) in the PRC in July 2001.
Non-executive Directors
Mr. Chang Kaisi ( ੬௱౶), aged 43, is our non-executive Director, and is responsible for
providing advice on the business operations and major decisions of the Group. Mr. Chang also
served as a director of Bloks Technology from July 2020 to July 2022.
Mr. Chang joined Beijing Source Code Capital Co., Ltd. (ʮ̡)a t
September 2016 and has served as a partner since October 2021, and is mainly responsible for
venture capital investment.
Mr. Chang received a doctorate degree in engineering from the University of Cambridge
in the U.K. in June 2008 and a bachelor’s degree in automation from Tsinghua University ( ૶
ശɽኪ) in the PRC in July 2003.
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Mr. Chen Rui ( ௓๿), aged 51, is our non-executive Director and is responsible for
providing advice on the business operations and major decisions of the Group.
Mr. Chen has more than 23 years of experience in investment and management. Since
February 2005, he has held multiple positions at Legend Capital Management Co., Ltd. ( ёᑌ
ʮ̡), including co-chief investment officer since April 2021, managing
director from April 2015 to March 2021, executive director from October 2013 to March 2015,
director from October 2010 to September 2013, vice president of the investment team from
April 2008 to September 2010 and associate from February 2005 to March 2008. From June
1999 to November 2002, he successively worked as an engineer, manager of the engineering
technology department and then deputy general manager at Shenzhen Linker Industrial Co.,
Ltd (ʮ̡).
Mr. Chen has served as a non-executive director of Gambol Pet Group Co., Ltd. ( ԩᘒᕻ
ʮ̡) since October 2023, the shares of which are listed on the Shenzhen
Stock Exchange (stock code: 301498), and a non-executive director of Renrui Human
Resources Technology Holdings Limited (ʮ̡) since December 2019,
the shares of which are listed on the Stock Exchange (stock code: 6919).
Mr. Chen obtained a master’s degree in business administration from Fordham University
in the United States in February 2005 and a bachelor’s degree in science majoring in
electronics and information systems from Shanxi University ( ʆГɽኪ) in the PRC in July
1997.
Independent Non-executive Directors
Mr. Gao Pingyang ( ৷̻ජ), aged 45, is our independent non-executive Director. He is
responsible for supervising and providing independent judgement to the Board.
Mr. Gao has served as a professor and an associate dean at the Business School of the
University of Hong Kong since June 2020, engaged in teaching, research, and management
activities. Prior to that, he successively served as an assistant professor and associate professor
at the Booth School of Business of the University of Chicago from July 2008 to June 2020,
engaged in teaching and research in accounting. Mr. Gao’s research focus on capital markets
and corporate governance and he has published extensively in top tier international academic
journals.
Mr. Gao has served as an independent non-executive director of Zhongyuan Bank Co.,
Ltd. (ʮ̡) since November 2023, the shares of which are listed on the Stock
Exchange (stock code: 1216).
Mr. Gao obtained a PhD degree in accounting from Y ale University in the United States
in December 2008, a master’s degree in finance from Peking University ( ̏ԯɽኪ) in the PRC
in June 2004 and a bachelor’s degree in accounting from Renmin University of China ( ʕ਷ɛ
͏ɽኪ) in the PRC in July 2002.
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Ms. Huang Rong ( රႂ), aged 46, is our independent non-executive Director. She is
responsible for supervising and providing independent judgement to the Board.
Ms. Huang currently serves as a professor and a Li Dak-sum Chair Professor ( ҽ༺ɧᑺ
઺બ) at the School of Management of Fudan University ( ూ͇ɽኪ) since October 2019.
Prior to her current position, Ms. Huang served as an associate professor at Cheung Kong
Graduate School of Business from July 2018 to September 2019, and an associate professor
(tenured position) in accounting from September 2013 to June 2018 and an assistant professor
in accounting from September 2006 to August 2013, at Baruch College of the City University
of New Y ork.
Ms. Huang has served as an independent director, the convener of the audit committee and
a member of the nomination committee at Shandong Hualu Hengsheng Chemical Co., Ltd. ( ʆ
ʮ̡) since April 2024, the shares of which are listed on the Shanghai
Stock Exchange (stock code: 600426) and an independent director at Bank of Communications
Financial Leasing Co., Ltd. (ப΂ʮ̡) since March 2023. She also served
as an independent director at Guizhou Gas Group Corporation Ltd. (ʮ̡)
from May 2022 to August 2023, the shares of which are listed on the Shanghai Stock Exchange
(stock code: 600903).
Ms. Huang obtained a doctorate degree in management science (accounting) and a
master’s degree in accounting from University of Texas at Dallas in the United States in August
2006, a master’s degree in economy from Mississippi State University in the United States in
December 2001, a bachelor’s degree in industrial foreign trade and a bachelor’s degree in
computer science from Donghua University (ശɽኪ) in the PRC in July 1999.
Mr. Shang Jian (਄), aged 57, is our independent non-executive Director. He is
responsible for supervising and providing independent judgement to the Board.
Mr. Shang has over 25 years of experience in China’s capital markets. Mr. Shang founded
Hong Shang Asset Management Co., Ltd. (ʮ̡) in July 2013 and has
been the chairman of the board of director since then. Prior to that, he held several senior
management positions at various financial institutions, including a general manager of UBS
SDIC Fund Management Co., Ltd. (ʮ̡) from September 2006 to
November 2012, a general manager of Yin Hua Fund Management Co., Ltd. (ٰ
ʮ̡) from January 2004 to June 2006, a deputy general manager of HuaAn Fund
Management Co., Ltd. (ʮ̡) from January 2002 to December 2003, and an
executive officer of Shanghai Stock Exchange from January 2001 to December 2001, whereby
Mr. Shang also accumulated extensive experience in financial management.
DIRECTORS AND SENIOR MANAGEMENT
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Mr. Shang has been an independent non-executive director of Shanghai Realway Capital
Assets Management Co., Ltd. (ʮ̡) since October 2018, the
shares of which are listed on the Stock Exchange (stock code: 1835), and an independent
director and chairman of audit committee of H World Group Limited (ʮ̡) since
May 2014, the shares of which are listed on the Stock Exchange (stock code: 1179) and on the
Nasdaq Stock Market (ticker symbol: HTHT).
Mr. Shang obtained a doctorate degree in business administration (finance) and a master’s
degree in economics from University of Connecticut in the United States in December 1997
and December 1994, respectively, and a bachelor’s degree of engineering from Shanghai Jiao
Tong University in the PRC in July 1989.
Mr. Shang possesses appropriate professional accounting or related financial management
expertise required under Rule 3.10(2) of the Listing Rules and confirms that he has gained such
expertise through his previous experiences, including (i) serving as an independent director and
a chairman and member of the audit committee of companies listed on the Stock Exchange
including Shanghai Realway Capital Assets Management Co., Ltd. and H World Group
Limited, during which Mr. Shang has been responsible for, among other things, reviewing the
financial statements and accounting policies, monitoring and evaluating the external and
internal audit work and internal control of the listed companies, making recommendations on
the appointment and replacement of external audit firms through deliberations at the periodic
board meetings and committee meetings reviewing and approving annual and interim financial
statements, and discussions with the management, other members of the audit committee as
well as the external auditors of such companies from time to time, and (ii) as a founder and
senior executive of reputable asset management companies such as Hong Shang Asset
Management Co., Ltd., UBS SDIC Fund Management Co., Ltd., Yin Hua Fund Management
Co., Ltd. and HuaAn Fund Management Co., Ltd., Mr. Shang has been involved in, among
other things, formulating, implementing and evaluating the investment strategies for portfolio
companies (through, among other things, analysing and reviewing the financial statements of
these portfolio companies) and overseeing the financial management of these asset
management companies. Based on the foregoing, Mr. Shang has accumulated in-depth practical
knowledge and extensive experience in supervising and monitoring the financial reporting,
internal control and other accounting-related matters of listed issuers, and gained accounting
or related financial management expertise for the purpose of Rule 3.10(2) of the Listing Rules.
DIRECTORS AND SENIOR MANAGEMENT
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SENIOR MANAGEMENT
The following table sets forth the key information about the senior management of the
Company as at the Latest Practicable Date.
Name Age Position Responsibilities
Date of First
Appointment
Date of Joining
the Group
Mr. Zhu Weisong
(ؒ)
42 Chairman, executive
Director and chief
executive officer
Responsible for the
overall strategy, the
business
development,
operation and
management of the
Group
Appointed as the
chief executive
officer on
December 24,
2014
December 24,
2014
Mr. Sheng
Xiaofeng ( ସወ
ࢤ)
46 Executive Director
and president
Responsible for the
operation and
management and
overseas markets of
the toy business of
the Group
Appointed as a
president on
September 10,
2015
June 1, 2015
Mr. Xie Lei ( ᑽᆾ) 47 Vice president Responsible for product
research and
development and
design
Appointed as a
vice president
on July 1, 2015
July 1, 2015
Mr. Huang Zheng
(݁)
44 Vice president Responsible for human
resources
management and
administration of the
Group
Appointed
as a vice
president on
December 1,
2016
December 1,
2016
Ms. Fu Yifang
(˹඀˙)
50 Chief financial officer Responsible for the
accounting and
finance management
of the Group
Appointed as the
chief financial
officer on
December 21,
2023
December 21,
2023
Mr. Zhu Y uancheng
(ϡʩϓ)
39 Vice president and
Board secretary
Responsible for the
board affairs,
investor relationship
and legal affairs of
the Group
Appointed as a
vice president
and the Board
secretary on
December 17,
2020
December 17,
2020
For the biographical details of Mr. Zhu Weisong and Mr. Sheng Xiaofeng, please refer to
“— Directors” above.
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Mr. Xie Lei ( ᑽᆾ), age 47, is our vice president. Mr. Xie is responsible for product
research and development and design. Mr. Xie joined the Group in July 2015 and has served
as the vice president since then.
Mr. Xie has over 20 years of experience in the field of product design. Prior to joining
the Group, from March 2011 to June 2015, Mr. Xie engaged in consecutive entrepreneurship
in the field of hardware products. Previously, Mr. Xie worked as a design director of Speck
Design Ltd. (ࠇ(ɪऎ)ʮ̡) from October 2005 to December 2008 and a
design director at Electrolux (China) Home Appliances Co., Ltd. ( ͺഺд౶(ʕ਷)ʮ
̡) from February 2003 to January 2005. Mr. Xie has served as an IIDE (International
Industrial Design Engineering) Enterprise Mentor of Shanghai Jiao Tong School of Design ( ɪ
ኪ৫) since 2021.
Mr. Xie received a bachelor’s degree in industrial design in June 1999 from Shanghai Jiao
Tong University in the PRC.
Mr. Huang Zheng (݁)aged 44, is our vice president and responsible for human
resources management and administration of the Group. Mr. Huang joined the Group in
December 2016 and has served as the vice president since then.
Mr. Huang has over 20 years of experience in human resource management and
administration. Prior to joining the Group, from June 2012 to December 2016, Mr. Huang
worked at Oriental Pearl Media Co., Ltd. (ʮ̡) , the shares of which
are listed on the Shanghai Stock Exchange (stock code: 600637), and held positions including
the administration general manager, and from July 2001 to June 2012, Mr. Huang worked at
Shanghai Media Group ( ɪऎᄿᅧཥൖ̨) and its subsidiaries and held positions including the
head of the human resource department and office director of kids channel.
Mr. Huang obtained a master’s degree in journalism and communication from Shanghai
Jiao Tong University in the PRC in March 2013 and a bachelor’s degree in law from China
Y outh University of Political Studies (ኪ৫) in the PRC in June 2001. Mr. Huang
obtained an economics professional qualification (human resource) in November 2007.
Ms. Fu Yifang ( ˹඀˙, formerly known as ௩඀˙), aged 50, is the chief financial officer
of the Group and responsible for the accounting and finance management of the Group. Ms. Fu
joined the Group in December 2023 and has served as the chief financial officer of the Group
since then.
Ms. Fu has extensive experience in accounting and financial management. Prior to joining
the Group, Ms. Fu served as a vice president of finance at Luckin Coffee (Shanghai) Co., Ltd.
(դਥ(ɪऎ)ʮ̡) and Luckin Coffee Technology (Hainan) Co., Ltd. (Ҧ
(ی)ʮ̡) from November 2020 to January 2023. Ms. Fu also served as a senior finance
director at Shanghai Bilibili Technology Co., Ltd. (ʮ̡), a subsidiary
of Bilibili Inc., from January 2018 to October 2020. The shares of Bilibili Inc. are listed on the
Stock Exchange (stock code: 9626) and the Nasdaq Stock Market (ticker symbol: BILI). Ms.
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Fu served as a senior finance director at Chuanxian Network Technology (Shanghai) Co., Ltd.
(Ҧ(ɪऎ)ʮ̡) from September 2013 to July 2017 and Heyi Internet
Technology (Beijing) Co., Ltd. ( ΥɓၣഖҦஔ(̏ԯ)ʮ̡) from September 2010 to
September 2013, both companies are subsidiaries of Y ouku Tudou Inc, the shares of which are
listed on the New Y ork Stock Exchange (ticker symbol: YOKU).
Ms. Fu obtained a master’s degree in accounting from Kent State University in the United
States in December 2001 and a bachelor’s degree of arts from Sichuan University ( ̬ʇɽኪ)
in the PRC in July 1998. Ms. Fu obtained the membership qualification of American Institute
of Certified Public Accountants in the United States in October 2013.
Mr. Zhu Yuancheng ( ϡʩϓ), aged 39, is our vice president, Board secretary and joint
company secretary. He is responsible for the board affairs, investor relationship and legal
affairs of the Group. Mr. Zhu Y uancheng joined the Group in December 2020 and has served
as the vice president and the Board secretary since then.
Mr. Zhu Y uancheng has extensive experience in corporate legal affairs and corporate
investment and financing. Prior to joining the Group, Mr. Zhu Y uancheng served as the general
manager of a business department of Sichuan Trust Co., Ltd. (ʮ̡) from June
2019 to December 2020, the head of the financial cooperation department of CPI Xianrong
(Shanghai) Asset Management Co., Ltd. ( ʕཥҳ΋ፄ(ɪऎ)ʮ̡), a subsidiary of
State Power Investment Corporation Limited (ʮ̡), from May 2016 to
March 2019 and a senior trust manager of Zhongtai Trust Co., Ltd. (ப΂ʮ̡)
from August 2014 to April 2016.
Mr. Zhu Y uancheng obtained a master’s degree in law from Fudan University in the PRC
in June 2010 and a bachelor’s degree in law from China University of Mining and Technology
(ʕ਷ᘤุɽኪ) in the PRC in July 2007. Mr. Zhu Y uancheng obtained the Legal Professional
Qualification Certificate (ᗇ) in February 2009.
Save as disclosed in this prospectus, none of the Directors or senior management has held
any directorship in any public company the securities of which are listed on any securities
market in Hong Kong or overseas during the three years immediately preceding the Latest
Practicable Date.
As at the Latest Practicable Date:
(i) none of the Directors or members of the senior management of the Company is
related to any other Directors and members of the senior management;
(ii) save as disclosed in the sections headed “Substantial Shareholders” and “Appendix
IV — Statutory and General Information”, none of the Directors or members of the
senior management holds any interest in the Shares which would be required to be
disclosed pursuant to Part XV of the Securities and Futures Ordinance; and
DIRECTORS AND SENIOR MANAGEMENT
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(iii) there is no additional matter with respect to the appointment of the Directors that
needs to be brought to the attention of the Shareholders, and there is no additional
information relating to the Directors that is required to be disclosed pursuant to Rule
13.51(2) of the Listing Rules.
JOINT COMPANY SECRETARIES
Mr. Zhu Yuancheng ( ϡʩϓ) is one of the joint company secretaries of the Company.
For the biographical details of Mr. Zhu Y uancheng, please refer to “— Senior Management”
above.
Ms. Yu Wing Sze ( Я൘་), aged 41, is one of the joint company secretaries of the
Company. She is a manager of the listing services division at TMF Hong Kong Limited, a
company providing corporate accounting and corporate secretarial services in Hong Kong. She
has over 15 years of experience in company secretarial profession and has been serving as the
company secretary of several listed companies in Hong Kong.
Ms. Y u is an associate member of both The Hong Kong Chartered Governance Institute
and The Chartered Governance Institute (formerly known as the Institute of Chartered
Secretaries and Administrators) in the United Kingdom.
Ms. Y u received a bachelor’s degree in business administration from the Chinese
University of Hong Kong in Hong Kong in December 2005.
BOARD COMMITTEES
The Company has established three Board committees, namely the Audit Committee, the
Remuneration Committee and the Nomination Committee.
Audit Committee
The Audit Committee consists of three Directors, namely Mr. Gao Pingyang, Ms. Huang
Rong and Mr. Shang Jian, with Mr. Gao Pingyang serving as the chairman of the committee.
Mr. Shang Jian has the appropriate professional experiences as required under Rules 3.10(2)
and 3.21 of the Listing Rules. The Audit Committee is mainly responsible for reviewing and
overseeing the financial reporting procedure and internal control system of the Group.
Remuneration Committee
The Remuneration Committee consists of three Directors, namely Mr. Shang Jian, Ms.
Huang Rong and Mr. Zhu Weisong, with Mr. Shang Jian serving as the chairman of the
committee. The Remuneration Committee is mainly responsible for evaluating the
remuneration polices for Directors and senior management of the Group and making
recommendations thereon to the Board.
DIRECTORS AND SENIOR MANAGEMENT
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Nomination Committee
The Nomination Committee consists of three Directors, namely Mr. Zhu Weisong, Mr.
Gao Pingyang and Mr. Shang Jian, with Mr. Zhu Weisong serving as the chairman of the
committee. The Nomination Committee is mainly responsible for identifying, screening and
recommending to the Board qualified candidates to serve as the Directors and monitoring the
procedures for evaluating the performance of the Board.
CONFIRMATION FROM OUR DIRECTORS
Rule 8.10 of the Listing Rules
Each of our Directors confirms that as of the Latest Practicable Date, he or she did not
have any interest in a business which competes or is likely to compete, either directly or
indirectly, with our Company’s business which would require disclosure under Rule 8.10 of the
Listing Rules.
Rule 3.09D of the Listing Rules
Each of our Directors confirms that he or she (i) has obtained the legal advice referred
to under Rule 3.09D of the Listing Rules on May 9, 2024, and (ii) understands his or her
obligations as a director of a listed issuer under the Listing Rules.
Rule 3.13 of the Listing Rules
Each of the independent non-executive Directors has confirmed (i) his/her independence
as regards each of the factors referred to in Rules 3.13(1) to (8) of the Listing Rules, (ii) he/she
has no past or present financial or other interest in the business of the Company or its
subsidiaries or any connection with any core connected person of the Company under the
Listing Rules as of the Latest Practicable Date, and (iii) that there are no other factors that may
affect his/her independence at the time of his/her appointments.
DIVERSITY
The Company has adopted the board diversity policy which sets out the objective and
approach for achieving and maintaining diversity of the Board in order to enhance its
effectiveness. In accordance with the board diversity policy, the Company seeks to achieve
board diversity by taking into account a number of factors, including but not limited to gender,
age, cultural and educational background, professional experience, skills, knowledge and/or
length of service.
The Board currently consists of six male and one female members, with two executive
Directors, two non-executive Directors and three independent non-executive Directors of age
ranging from 42 to 57 with diversified backgrounds and experience. The Board considers it has
DIRECTORS AND SENIOR MANAGEMENT
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a balanced mix of skill-set, experience, expertise, and diversity which enhances decision-
making capability and the overall effectiveness of the Board in achieving sustainable business
operation and enhancing shareholder value.
Our Nomination Committee is responsible for ensuring the diversity of our Board
members. Upon the Listing, the Nomination Committee will from time to time (i) discuss and
agree on expected goals to ensure board diversity, and (ii) review and, where necessary, update
the board diversity policy to ensure that the policy remains effective. The Company will (i)
disclose the biographical details of each Director and (ii) report on the implementation of the
board diversity policy (including whether we have achieved board diversity) in its annual
corporate governance report.
REMUNERATION OF THE DIRECTORS AND SENIOR MANAGEMENT
The Directors and senior management members who receive remuneration from the
Company are paid in forms of salaries, allowances, discretionary bonuses and other benefits in
kind. The remuneration of the Directors and senior management members is determined with
reference to the remuneration paid by relevant companies in the same industry and the
achievement of major operating indicators of the Company.
The aggregate amount of remuneration (including salaries, allowances, contribution to
pension schemes and discretionary bonuses) and other benefits in kind paid to the Directors for
each of the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024 amounted to RMB1.28 million, RMB1.70 million, RMB2.54 million and RMB362.86
million, respectively. The aggregate amount of remuneration (including salaries, allowances
and discretionary bonuses) and other benefits in kind paid to the five highest paid individuals
for each of the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024 amounted to RMB8.07 million, RMB8.33 million, RMB14.87 million and
RMB367.48 million (including bonus of shares settled in equities), respectively.
Under the arrangement currently in force, the Company estimates that the aggregate fixed
remuneration (before tax) payable to the Directors for the year ending December 31, 2024 is
approximately RMB1.53 million.
During the Track Record Period, no fee was paid by the Company to any of the Directors
(or former Directors) or the five highest paid individuals as an inducement to join the Company
or as compensation for loss of office. None of the Directors waived their remuneration during
the Track Record Period.
SHARE INCENTIVE SCHEME
In order to incentivize employees for their contribution to the Group and to attract and
retain suitable personnel to the Group, the Company adopted the Share Incentive Scheme. For
further details, see “Appendix IV — Statutory and General Information — E. The Share
Incentive Scheme”.
DIRECTORS AND SENIOR MANAGEMENT
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COMPLIANCE ADVISOR
The Company has appointed Gram Capital Limited as its compliance advisor in
compliance with Rules 3A.19 of the Listing Rules. The material terms of the compliance
advisor’s agreement are as follows:
(i) Gram Capital Limited shall act as our compliance advisor for the purpose of Rule
3A.19 of the Listing Rules for a period commencing on the Listing Date and ending
on the date on which the Company complies with Rule 13.46 of the Listing Rules
in respect of the financial results for the first full financial year commencing after
the Listing Date;
(ii) the compliance advisor will provide the Company with certain services, including
proper guidance and advice as to compliance with the requirements under the
Listing Rules and applicable laws, regulations and rules;
(iii) the compliance advisor will, as soon as reasonably practicable, inform the Company
of any amendment or supplement to the Listing Rules announced by the Stock
Exchange from time to time, and of any amendment or supplement to the applicable
laws, regulations and rules in Hong Kong applicable to the Company; and
(iv) the compliance advisor will act as one of the key channels of communication of the
Company with the Stock Exchange.
CODE PROVISION C.2.1 OF THE CORPORATE GOVERNANCE CODE
Pursuant to C.2.1 of the Corporate Governance Code, the roles of chairman and chief
executive should be separate and should not be performed by the same individual. Mr. Zhu is
currently the Chairman and the chief executive officer of the Company. He is the founder of
the Group and has been operating and managing the Group since its establishment. The Board
believes that Mr. Zhu has been instrumental to the growth and business expansion of the Group.
The Board is of the view that the vesting the roles of the Chairman and chief executive officer
on him is beneficial to the management of the Company and therefore currently do not propose
to separate the roles of chairman and chief executive officer.
While this will constitute a deviation from Code Provision C.2.1 of the Corporate
Governance Code as set out in Appendix C1 to the Listing Rules, the Board believes that this
structure will not impair the balance of power and authority between the Board and the
management of the Company, given that:
(i) there is sufficient check and balance in the Board as the decision to be made by the
Board requires approval by at least a majority of the Directors, and the Board has
two non-executive Director as well as three independent non-executive Directors out
of the seven Directors, which is in compliance with the Listing Rules;
DIRECTORS AND SENIOR MANAGEMENT
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(ii) Mr. Zhu and the other Directors are aware of and undertake to fulfill their fiduciary
duties as Directors, which require, among other things, that they act for the benefit
and in the best interest of the Company and make decisions for the Company
accordingly;
(iii) the balance of power and authority is ensured by the operations of the Board which
comprises experienced and high caliber individuals who meet regularly to discuss
issues affecting the operations of the Company; and
(iv) the overall strategic and other key business, financial, and operational policies of the
Company are made collectively after thorough discussion at both Board and senior
management levels. The Board will continue to review the effectiveness of the
corporate governance structure of the Company to assess whether separation of the
roles of the chairman of the Board and the chief executive officer of the Company
is necessary.
Save as disclosed above, the Company has complied with all the code provisions of the
Corporate Governance Code set out in Appendix C1 to the Listing Rules.
DIRECTORS AND SENIOR MANAGEMENT
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OVERVIEW
Upon the completion of the Global Offering (assuming that the Offer Size Adjustment
Option and the Over-allotment Option are not exercised), Mr. Zhu, our chairman and executive
Director, will be interested in and control an aggregate of approximately 49.47% of our
enlarged issued share capital. Next Bloks, which owns 45.82% of our enlarged issued share
capital, is owned as to 99% by Wit Bright Limited under the Wise Global Trust and as to 1%
by Playcreation Holding Limited. Playcreation Holding Limited is wholly-owned by Mr. Zhu.
The Wise Global Trust is a discretionary trust established by Mr. Zhu (as the settlor) for the
benefit of Mr. Zhu and his family members. In addition, Smart Bloks, which owns 3.65% of
our enlarged issued share capital, is wholly-owned by Mr. Zhu. Therefore, Mr. Zhu will control
the exercise of the voting rights of the Shares held by Next Bloks and Smart Bloks in our
Company.
Mr. Zhu, Next Bloks, Smart Bloks, Wit Bright Limited and Playcreation Holding Limited
will be the Controlling Shareholders of our Company after Listing.
DISCLOSURE UNDER RULE 8.10 OF THE LISTING RULES
Each of our Controlling Shareholders confirms that, as of the Latest Practicable Date, he
or it did not have any interest in a business, apart from the business of our Group, which
competes or is likely to compete, directly or indirectly, with our business that would require
disclosure under Rule 8.10 of the Listing Rules.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Having considered the following factors, our Directors are satisfied that we are capable
of carrying on our business independently from our Controlling Shareholders and their close
associates after the Listing.
Management Independence
Our business is managed and conducted by our Board and senior management. Upon
Listing, our Board will consist of seven Directors comprising two executive Directors, two
non-executive Directors and three independent non-executive Directors. For more information,
see “Directors and Senior Management.” Notwithstanding that Mr. Zhu, our executive
Director, is also one of our Controlling Shareholders, our Directors are of the view that our
Company is capable of maintaining management independence due to the following reasons:
(i) save for Mr. Zhu, our executive Directors and all our senior management members,
who does not hold any management position and/or directorship in our Controlling
Shareholders as of the Latest Practicable Date, are responsible for the day-to-day
management and operation of our Company;
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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(ii) each Director is aware of his or her fiduciary duties as a Director which require,
among other things, that he or she acts for the benefit and in the interest of our
Company and does not allow any conflict between his/her duties as a Director and
his/her personal interests;
(iii) we have three independent non-executive Directors and certain matters of our
Company must always be referred to the independent non-executive Directors for
review;
(iv) in the event that there is a potential conflict of interest arising out of any transaction
to be entered into between our Group and our Directors or their respective close
associates, the interested Director(s) is/are required to declare the nature of such
interest before voting at the relevant Board meetings of our Company in respect of
such transactions;
(v) our Board has a balanced composition of executive Directors, non-executive
Directors and independent non-executive Directors which ensures the independence
of the Board in making decisions affecting our Company. Specifically: (a) our
independent non-executive Directors are not associated with the members of the
Controlling Shareholders or their respective associates; (b) our independent
non-executive Directors account for no less than one-third of the Board; and (c) our
independent non-executive Directors individually and collectively possess the
requisite knowledge and experience, and all of them have experience as independent
directors of listed companies and will be able to provide professional and
experienced advice to our Company. In conclusion, the Directors believe that our
independent non-executive Directors are able to bring impartial and sound judgment
to the decision-making process of our Board and protect the interest of our Company
and our Shareholders as a whole; and
(vi) we have adopted a series of corporate governance measures to manage conflicts of
interest, if any, between our Group and our Controlling Shareholders which would
support our independent management. See “— Corporate Governance Measures” in
this section for further information.
Based on the above, our Directors are satisfied that they are able to perform their
managerial roles in our Company independently, and our Directors are of the view that we are
capable of managing our business independently from the Controlling Shareholders after the
Listing.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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Operational Independence
We have full rights to make business decisions and to carry out our business
independently from our Controlling Shareholders and their respective close associates. On the
basis of the following reasons, our Directors consider that our Company will continue to be
operationally independent from our Controlling Shareholders and their respective close
associates after the Listing:
(i) we have sufficient capital, facilities, equipment and employees to operate our
business independently from our Controlling Shareholders;
(ii) we have independent access to our customers and suppliers;
(iii) we have our own administrative and corporate governance infrastructure, including
our own accounting, legal and human resources departments; and
(iv) none of our Controlling Shareholders or their respective associates have any
interests in any business which competes or is likely to compete with the business
of our Group.
Based on the above, our Directors believe that we are able to operate independently from
our Controlling Shareholders.
Financial Independence
We have independent internal control and accounting systems. We also have an
independent finance department responsible for discharging the financial management,
accounting, reporting, funding and treasury function. We are capable of obtaining financing
from third parties, if necessary, without reliance on our Controlling Shareholders and their
respective close associates.
As of the Latest Practicable Date, we did not have any outstanding loans granted or
guaranteed by any of our Controlling Shareholders or their respective close associates to us.
Based on the above, our Directors are of the view that we are capable of carrying on our
business independently from, and do not place undue reliance on, our Controlling Shareholders
and their respective close associates after the Listing.
CORPORATE GOVERNANCE MEASURES
Our Company and Directors recognize the importance of protecting the rights and
interests of all Shareholders, including the rights and interests of our minority Shareholders.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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We have adopted the following measures to ensure good corporate governance standards
and to avoid potential conflicts of interest between our Group and our Controlling
Shareholders:
(i) where a Shareholders’ meeting is to be held for considering proposed transactions
in which our Controlling Shareholders or any of their respective associates have a
material interest, the relevant Controlling Shareholders or associates will not vote
on the relevant resolutions;
(ii) our Company has established internal control mechanisms to identify connected
transactions. Upon the Listing, if our Company enters into connected transactions
with our Controlling Shareholders or any of their associates, our Company will
comply with the applicable Listing Rules;
(iii) the independent non-executive Directors will review, on an annual basis, whether
there are any conflicts of interests between the Group and our Controlling
Shareholders and provide impartial and professional advice to protect the interests
of our minority Shareholders;
(iv) our Controlling Shareholders will undertake to provide all information necessary,
including all relevant financial, operational and market information and any other
necessary information as required by the independent non-executive Directors for
the purpose of their annual review;
(v) our Company will disclose decisions on matters reviewed by the independent
non-executive Directors either in its annual reports or by way of announcements as
required by the Listing Rules;
(vi) where our Directors reasonably request the advice of independent professionals,
such as financial advisors, the appointment of such independent professionals will
be made at our Company’s expense;
(vii) we have appointed Gram Capital Limited as our Compliance Adviser to provide
advice and guidance to us in respect of compliance with the applicable laws and
regulations, as well as the Listing Rules, including various requirements relating to
corporate governance; and
(viii) we have established our Audit Committee, Nomination Committee and
Remuneration Committee with written terms of reference in compliance with the
Listing Rules and the Corporate Governance Code in Appendix C1 to the Listing
Rules.
Based on the above, our Directors are satisfied that sufficient corporate governance
measures have been put in place to manage conflicts of interest that may arise between our
Group and our Controlling Shareholders, and to protect our minority Shareholders’ interests
after the Listing.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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SHARE CAPITAL
The following is a description of the authorized and issued share capital of the Company
in issue and to be issued as fully paid or credited as fully paid immediately before and
following completion of the Global Offering (assuming that the Offer Size Adjustment Option
and the Over-allotment Option are not exercised):
1. Share capital as of the date of this prospectus
Number Description
Aggregate
Par Value
(US$)
Authorized share capital:
425,724,240 Ordinary Shares of nominal or par value of
US$0.0001 each
42,572.424
35,192,300 Series Angel Preferred Shares of nominal or par
value of US$0.0001 each
3,519.23
13,161,290 Series Pre-A Preferred Shares of nominal or par
value of US$0.0001 each
1,316.129
25,922,170 Series A Preferred Shares of nominal or par value
of US$0.0001 each
2,592.217
500,000,000 Total 50,000
Issued share capital:
148,844,005 Ordinary Shares of nominal or par value of
US$0.0001 each
14,884.4005
35,192,300 Series Angel Preferred Shares of nominal or par
value of US$0.0001 each
3,519.23
13,161,290 Series Pre-A Preferred Shares of nominal or par
value of US$0.0001 each
1,316.129
20,154,350 Series A Preferred Shares of nominal or par value
of US$0.0001 each
2,015.435
217,351,945 Total 21,735.1945
SHARE CAPITAL
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2. Share capital immediately after the completion of the Global Offering
Number Description
Aggregate
par value
(US$)
Authorized share capital:
500,000,000 Ordinary Shares of nominal or par value of
US$0.0001 each
50,000
500,000,000 Total 50,000
Issued share capital:
217,351,945 Ordinary Shares in issue immediately before the
Global Offering of nominal or par value of
US$0.0001 each
21,735.1945
24,120,300 Ordinary Shares of US$0.0001 each to be issued
pursuant to the Global Offering (assuming the
Offer Size Adjustment Option and the Over-
allotment Option are not exercised)
2,412.03
241,472,245 Total 24,147.2245
ASSUMPTIONS
The above table assumes the Global Offering becomes unconditional and the issue of
Shares pursuant to the Global Offering is made as described herein. It does not take into
account of any Shares which may be issued upon the exercise of the Offer Size Adjustment
Option and the Over-allotment Option or any Shares which may be allotted and issued or
repurchased by the Company under the general mandates for the allotment and issue or
repurchase of Shares granted to the Directors as described below.
RANKING
The Offer Shares will rank pari passu in all respects with all Shares in issue or to be
issued as mentioned in this prospectus, and will qualify and rank equally for all dividends or
other distributions declared, made or paid on the Shares on a record date which falls after the
date of this prospectus.
SHARE CAPITAL
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CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS ARE REQUIRED
Pursuant to the Cayman Companies Act and the terms of the Memorandum and Articles
of Association, the Company may from time to time by ordinary resolution of Shareholders (i)
increase its share capital; (ii) consolidate and divide its share capital into Shares of larger
amount; (iii) divide its Shares into several classes; and (iv) cancel any Shares which have not
been taken or agreed to be taken. In addition, the Company may, subject to the provisions of
the Cayman Companies Act, reduce its share capital or capital redemption reserve by its
Shareholders passing a special resolution. See “Appendix III — Summary of the Constitution
of the Company and Cayman Islands Company Law”.
THE SHARE INCENTIVE SCHEME
We adopted the Share Incentive Scheme on January 12, 2023 and amended and restated
on March 29, 2024. See the section headed “Appendix IV — Statutory and General Information
— E. The Share Incentive Scheme” in this prospectus for further details.
GENERAL MANDATES TO ALLOT AND ISSUE SHARES
Subject to the Global Offering becoming unconditional, the Directors have been granted
a general unconditional mandate to allot, issue and deal with Shares with the total nominal
value of not more than the sum of:
(a) 20% of the total number of Shares in issue immediately following completion of the
Global Offering (excluding any treasury shares); and
(b) the total number of Shares repurchased by the Company (if any) pursuant to the
general mandate to repurchase Shares granted to the Directors referred below.
The allotment and issue of Shares under a rights issue, scrip dividend scheme or similar
arrangement in accordance with the Memorandum and Articles of Association, or under the
Global Offering, do not generally require the approval of the Shareholders in general meeting
and the total number of Shares which the Directors are authorized to allot and issue under this
mandate will not be reduced by the allotment and issue of such Shares.
This general mandate will expire at the earliest of:
 the conclusion of the Company’s next annual general meeting;
 the expiration of the period within which the Company is required by law or the
Memorandum and Articles of Association to hold our next annual general meeting;
or
 when varied, revoked or renewed by an ordinary resolution of the Shareholders in
general meeting.
SHARE CAPITAL
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For further details of these general mandates, see “Appendix IV — Statutory and General
Information — A. Further Information about the Company — 3. Resolutions in Writing of the
Shareholders of the Company Passed on December 18, 2024”.
GENERAL MANDATES TO REPURCHASE SHARES
Subject to the Global Offering becoming unconditional, the Directors have been granted
a general unconditional mandate to exercise all the powers of the Company to repurchase
Shares with a total nominal value of not more than 10% of the total number of Shares of the
Company in issue immediately following the completion of the Global Offering (excluding any
treasury shares).
This mandate only relates to repurchases made on the Stock Exchange, or on any other
stock exchange on which the Shares are listed (and which is recognized by the SFC and the
Stock Exchange for this purpose), and which are in accordance with all applicable laws and the
requirements of the Listing Rules. A summary of the relevant Listing Rules is set out in
“Appendix IV — Statutory and General Information — A. Further Information about the
Company — 5. Repurchase of Our Own Securities” to this prospectus.
The general mandate to issue and repurchase Shares will expire:
 at the conclusion of the next annual general meeting of the Company;
 at the expiration of the period within which the next annual general meeting of the
Company is required by any applicable law of the Cayman Islands or the Articles to
be held; or
 when varied, revoked or renewed by an ordinary resolution of the Shareholders in
general meeting,
whichever is the earliest.
Any reference to an allotment, issue, grant, offer or disposal of Shares shall include the
sale or transfer of treasury shares in the capital of the Company (including to satisfy any
obligation upon the conversion or exercise of any convertible securities, options, warrants or
similar rights to subscribe for Shares) to the extent permitted by, and subject to the provisions
of the Listing Rules and applicable laws and regulations.
SHARE CAPITAL
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So far as is known to the Directors as at the Latest Practicable Date, immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are not exercised), each of following persons will have an
interest and/or short position (as applicable) in the Shares or underlying Shares which would
fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions
2 and 3 of Part XV of the SFO, or will be, directly or indirectly, interested in 10% or more of
the Shares, once the Shares are listed on the Stock Exchange:
Name of Shareholder Nature of Interest
Number of Shares
Held or Interested
Approximate
Percentage of
Shareholding in the
Total Issued Share
Capital Immediately
following the
Completion of the
Global Offering
(Assuming the
Offer Size Adjustment
Option and the Over-
allotment Option are
not exercised)
(%)
Mr. Zhu Weisong (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Settlor of a discretionary trust 110,639,460 45.82
Interest in controlled corporation 8,805,846 3.65
Wit Bright Limited (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 110,639,460 45.82
Next Bloks (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beneficial owner 110,639,460 45.82
Smart Bloks (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beneficial owner 8,805,846 3.65
Trident Trust Company (HK)
Limited (1)(2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Trustee 110,639,460
21,321,255
45.82
8.83
First Prosperity (2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beneficial owner 21,321,255 8.83
Suzhou Junjunde (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
Beijing Junlian (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
Legend Capital (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
Juncheng Hezhong (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
Junqi Jiarui (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
Tianjin Huizhi No.1 Business
Management Consulting
Partnership (Limited
Partnership)
(3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Interest in controlled corporation 14,601,680 6.05
Tianjin Junlian Jieyou Business
Management Consulting
Partnership (Limited
Partnership)
(3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Interest in controlled corporation 14,601,680 6.05
Mr. Chen Hao (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
Mr. Zhu Linan (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 14,601,680 6.05
SUBSTANTIAL SHAREHOLDERS
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Name of Shareholder Nature of Interest
Number of Shares
Held or Interested
Approximate
Percentage of
Shareholding in the
Total Issued Share
Capital Immediately
following the
Completion of the
Global Offering
(Assuming the
Offer Size Adjustment
Option and the Over-
allotment Option are
not exercised)
(%)
Idea Great (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beneficial owner 14,601,680 6.05
All Direct Holdings
Limited (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Interest in controlled corporation 12,258,535 5.08
Hainan Y uanke (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Nanjing Y uanxin (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Nanjing Y uankai (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Nanjing Y uanju (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Hangzhou Yiqian (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Suzhou Y uanming (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Nanjing Y uanling (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Nanjing Y uanheng (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Beijing Y uanwei (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Beijing Y uanxin (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Suzhou Y uanqi (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Ningbo Y uanzhang (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Xizang Y uanding (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Lhasa Y uanchi (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Hangzhou Y uanwei (4) /H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
Mr. Charlie Cao (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Interest in controlled corporation 12,258,535 5.08
BlueCo (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Beneficial owner 12,258,535 5.08
Notes:
(1) As at the Latest Practicable Date, Next Bloks directly holds 110,639,460 Shares in our Company and is owned
99% by Wit Bright Limited under the Wise Global Trust and 1% by Playcreation Holding Limited, and Smart
Bloks holds 8,805,846 Shares in our Company and is wholly owned by Mr. Zhu. The Wise Global Trust is a
discretionary trust established by Mr. Zhu as the settlor on June 16, 2022, for the benefit of Mr. Zhu and his
family members with Trident Trust Company (HK) Limited as the trustee. Trident Trust Company (HK)
Limited holds the entire share capital of Wit Bright Limited. As such, by virtue of the SFO, the deemed interest
of Mr. Zhu consists of (i) 110,639,460 Shares in our Company held by Next Bloks , and (ii) 8,805,846 Shares
in our Company held by Smart Bloks. Trident Trust Company (HK) Limited is deemed to have interest in
110,639,460 Shares held by Next Bloks in our Company.
SUBSTANTIAL SHAREHOLDERS
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(2) First Prosperity is a platform holding the underlying incentive Shares under the Share Incentive Scheme. As
at the Latest Practicable Date, First Prosperity is legally owned by Trident Trust Company (HK) Limited as
trustee of the Bloks First Trust, which was established by the Company as the settlor for the purpose of the
Share Incentive Scheme. As such, Trident Trust Company (HK) Limited is deemed to be interested in the
21,321,255 Shares held by First Prosperity. See “Appendix IV — Statutory and General Information — E. The
Share Incentive Scheme” in this prospectus for further details.
(3) As at the Latest Practicable Date, Idea Great is owned 56.05% by Suzhou Junjunde and 43.95% by Beijing
Junlian. Both Suzhou Junjunde and Beijing Junlian are controlled by their general partner Lhasa Junqi
Enterprise Management Co., Ltd. (ʮ̡), a wholly owned subsidiary of Legend Capital,
which is in turn owned as to 80.00% by Juncheng Hezhong. The general partner of Juncheng Hezhong is
Beijing Junqi Jiarui Enterprise Management Co., Ltd. (ʮ̡,“ Junqi Jiarui ”), a
company owned as to 40.00% by Mr. Chen Hao ( ௓ख). Juncheng Hezhong is also owned as to 58.12% by
Tianjin Huizhi No.1 Business Management Consulting Partnership (Limited Partnership) (ි౽ఠ໮Άุ
၍ଣፔ༔ΥྫΆุ(Υྫ)), which is in turn owned as to 34.68% by Mr. Zhu Linan (یand as to
41.87% by Tianjin Junlian Jieyou Business Management Consulting Partnership (Limited Partnership)
(ёᑌ௫СΆุ၍ଣፔ༔ΥྫΆุ(Υྫ)), which is in turn owned 33.36% by Mr. Chen Hao. Beijing
Junlian is also owned as to 35.71% by National Council for Social Security Fund of People’s Republic of China
(ଣԫึ). As such, by virtue of the SFO, each of Suzhou Junjunde, Beijing Junlian, Legend
Capital, Juncheng Hezhong, Junqi Jiarui, Tianjin Huizhi No.1 Business Management Consulting Partnership
(Limited Partnership), Tianjin Junlian Jieyou Business Management Consulting Partnership (Limited
Partnership), Mr. Chen Hao, Mr. Zhu Linan and National Council for Social Security Fund of People’s
Republic of China is deemed to be interested in the Shares held by Idea Great.
(4) As at the Latest Practicable Date, BlueCo is managed by its general partner All Direct Holdings Limited, which
is wholly owned by Mr. Charlie Cao. BlueCo is wholly owned by Hainan Y uanke, which is managed by its
general partner Nanjing Y uanxin Management Consulting Co., Ltd. (ʮ̡ “Nanjing
Yuanxin ”), which is wholly owned by Nanjing Y uanju Technology Co., Ltd. (ʮ̡,
“Nanjing Yuanju ”) through Nanjing Y uankai Management Consulting Group Co., Ltd (ԯ๕௱၍ଣፔ༔ණ
ʮ̡,“ Nanjing Yuankai ”), and Nanjing Y uanju is owned 82.18% by Hangzhou Yiqian Enterprise
Management Consulting Co., Ltd. (ʮ̡,“ Hangzhou Yiqian ”), a company wholly
owned by Mr. Charlie Cao. Hainan Y uanke is also owned 67.97% by Suzhou Y uanming and 31.99% by Suzhou
Y uanqi. Suzhou Y uanming is owned 44.44% by Nanjing Y uanling Equity Investment Partnership Enterprise
(Limited Partnership)(ᛆҳ༟ΥྫΆุ(Υྫ), “ Nanjing Yuanling ”) and 39.43% by Beijing
Y uanwei Equity Investment Partnership Enterprise (Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υ
ྫ), “ Beijing Yuanwei ”). Nanjing Y uanheng Equity Investment Management Partnership Enterprise (Limited
Partnership) (ᛆҳ༟၍ଣΥྫΆุ(Υྫ), “ Nanjing Yuanheng ”) owns 69.97% of Nanjing
Y uanling’s equity interests and 79.00% of Beijing Y uanwei’s equity interests. Nanjing Y uanxin is the general
partner of both Nanjing Y uanling and Nanjing Y uanheng. Beijing Y uanxin Investment Management Co., Ltd.
(ʮ̡ “Beijing Yuanxin ”) is the general partner of Beijing Y uanwei, and is owned
72.68% by Mr. Charlie Cao through its sole shareholder Lhasa Y uanchi Investment Management Co., Ltd (ז
ʮ̡,“ Lhasa Yuanchi ”). Suzhou Y uanqi is managed by Ningbo Y uanzhang Investment
Management Partnership Enterprise (Limited Partnership) (๕௝ҳ༟၍ଣΥྫΆุ(Υྫ), “ Ningbo
Yuanzhang ”), who is managed by its general partner Hangzhou Y uanwei Management Consulting Co., Ltd.
(ʮ̡,“ Hangzhou Yuanwei ”), which is wholly owned by Nanjing Y uankai. Ningbo
Y uanzhang is owned 85.35%% by Xizang Y uanding Enterprise Management Co., Ltd (ࠢ
ʮ̡,“ Xizang Yuanding ”), which is wholly owned by Nanjing Y uankai. As such, by virtue of the SFO, each
of All Direct Holdings Limited, Hainan Y uanke, Nanjing Y uanxin, Nanjing Y uankai, Nanjing Y uanju,
Hangzhou Yiqian, Suzhou Y uanming, Nanjing Y uanling, Nanjing Y uanheng, Beijing Y uanwei, Beijing Y uanxin,
Suzhou Y uanqi, Ningbo Y uanzhang, Xizang Y uanding, Lhasa Y uanchi, Hangzhou Y uanwei and Mr. Charlie Cao
is deemed to be interested in the Shares held by BlueCo.
Save as disclosed above, the Directors are not aware of any person who will, immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are not exercised), have an interest or short position in the
Shares or underlying shares of the Company which would be required to be disclosed to the
Company and the Stock Exchange under Divisions 2 and 3 of Part XV of the SFO or will,
directly or indirectly, be interested in 10% or more of the nominal value of any class of share
capital carrying rights to vote in all circumstances at any general meeting of the Company.
SUBSTANTIAL SHAREHOLDERS
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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial statements and
the related notes included in the Accountants’ Report in Appendix I to this prospectus.
Our consolidated financial statements have been prepared in accordance with IFRS.
The following discussion and analysis contain forward-looking statements that
involve risks and uncertainties. These statements are based on assumptions and analysis
made by us in light of our experience and perception of historical trends, current
conditions and expected future developments, as well as other factors we believe are
appropriate under the circumstances. You should not place undue reliance on any such
statements. Our actual future results and timing of selected events could differ materially
from those anticipated in these forward-looking statements as a result of various factors,
including those set forth under “Risk Factors,” “Forward-Looking Statements” and
elsewhere in this prospectus.
For the purpose of this section, unless the context otherwise requires, reference to
the years of 2021, 2022 and 2023 refer to the years ended December 31, 2021, 2022 and
2023, respectively.
OVERVIEW
We are a leader of assembly character toys in China. Leveraging our portfolio of more
than 500 patents, in-house IP development capability and cooperative relationships with
approximately 50 renowned non-exclusive IP franchises, we are dedicated to providing
consumers with a wide range of quality-for-money assembly character toys and have achieved
rapid growth. Our assembly character toys recreate the essence of IP characters. Through the
combination of our product strength and supply chain capabilities, we are able to maintain cost
advantages and continuously expand product categories. We have established a multi-channel
sales network in China with a comprehensive and extensive consumer reach. We pivoted to
offline sales channel with a focus on distributors as we began to offer assembly character toys
in 2022. According to Frost & Sullivan, we are China’s largest and leading player in the
assembly character toy segment with a GMV of approximately RMB1.8 billion in 2023. We are
also a fast-growing toy company with a GMV growth of over 170% in 2023.
We achieved significant growth during the Track Record Period. We recorded revenue of
RMB329.8 million, RMB325.6 million, RMB876.7 million and RMB1,046.2 million in 2021,
2022 and 2023 and the six months ended June 30, 2024, respectively, with a CAGR of 63.0%
from 2021 to 2023 and a period-over-period growth of 237.6% in the six months ended June
30, 2024. We recorded gross profit of RMB123.4 million, RMB123.4 million, RMB414.9
million and RMB553.7 million in 2021, 2022 and 2023 and the six months ended June 30,
2024, respectively, with a CAGR of 83.4% from 2021 to 2023 and a period-over-period growth
of 306.5% in the six months ended June 30, 2024. Our gross margin continued to grow during
the Track Record Period, from 37.4% in 2021 to 37.9% in 2022 and further to 47.3% in 2023
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and 52.9% in the six months ended June 30, 2024. In the six months ended June 30, 2024, we
recorded adjusted profit for the period (a non-IFRS measure) of RMB292.2 million,
representing an increase of 300.9% from the year ended December 31, 2023.
SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our business, results of operations and financial condition are affected by a number of
general factors influencing the overall global toy market. These factors include macro-
economic trends, industry development and competitive landscape in the market. Any adverse
development can have a negative impact on our results of operations.
In addition to these general factors, our results of operations are affected by the following
specific factors:
Global Consumers’ Demand for Assembly Character Toys
Our results of operations have been and are expected to be affected by the global
consumers’ demand for assembly character toys. We began to offer assembly character toys in
January 2022, which have since gained wide-spread popularity and driven our rapid revenue
growth. In 2023 and the six months ended June 30, 2024, we generated a substantial majority
of our revenue from sales of assembly character toys. In 2022 and 2023 and the six months
ended June 30, 2023 and 2024, our revenue from sales of assembly character toys was
RMB117.7 million, RMB769.0 million, RMB241.4 million and RMB1,023.1 million,
accounting for 36.1%, 87.7%, 77.9% and 97.8% of our total revenue, respectively. The growth
rate of our revenue from sales of assembly character toys was 553.5% from 2022 to 2023 and
323.8% from the six months ended June 30, 2023 to the six months ended June 30, 2024.
Assembly character toy is the fastest growing segment in the global and China’s toy
market and enjoys significant growth potential. Global consumers have a strong demand for
toys that combine assembling experience, consistent quality and great value-for-money.
Assembly character toys that recreate the IP characters and simulate their poses can meet the
consumers’ needs. On the supply side, a standardized assembling system helps bring global
consumers a large variety of products with consistent quality and great value-for-money.
Furthermore, proprietors of renowned IPs increasingly favor assembly character toys to
efficiently commercialize numerous IPs. These factors together are expected to propel the
long-term growth of the assembly character toy segment.
According to Frost & Sullivan, the size of the global and China’s character toy market in
terms of GMV was RMB345.8 billion and RMB40.3 billion in 2023, and is expected to grow
at a CAGR of 9.3% and 17.7% to reach RMB540.7 billion and RMB91.1 billion in 2028,
respectively. As a subset, the size of the global and China’s assembly character toy segment in
terms of GMV was RMB27.8 billion and RMB5.8 billion in 2023, and is expected to grow at
FINANCIAL INFORMATION
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a CAGR of 29.0% and 41.3% to reach RMB99.6 billion and RMB32.5 billion in 2028,
respectively. The penetration rate of global and China’s assembly character toy segment in the
character toy market is expected to increase from 8.0% and 14.3% in 2023 to 18.4% and 35.6%
in 2028, respectively.
As a leader in the global assembly character toy market, we believe we have the
capabilities in continuously adapting to changing market trends and meeting the evolving
consumer needs by further building up differentiated competitive strengths, broadening our IP
portfolio and expanding our product offering. We have achieved rapid growth in the past, and
we believe we are capable of grasping the significant growth opportunities in the future.
Product Iterations and Launches
The development of an optimal product offering is essential to our success. We
strategically diversified our product offering to include assembly character toys in 2022 as we
saw enormous growth potential in the demand for and profitability in this product category.
Through our Bloks System that combines standardization and individuality elements, together
with our rich IP portfolio, we have quickly built an extensive matrix-style product offering with
continuous iterations, which enabled us to achieve rapid revenue growth during the Track
Record Period.
Our growing IP portfolio is crucial to the expansion of our product offering. We have built
a rich IP portfolio based on our self-developed IPs and licensed IPs, and continuously
optimized and accumulated our capabilities in IP commercialization and management.
Leveraging our successful products and leading IP commercialization capabilities, we have
become a preferred partner of various proprietors of renowned IPs. As of the Latest Practicable
Date, we had two self-developed IPs and approximately 50 renowned licensed IPs. Based on
our rich IP portfolio, we have established an extensive product offering that covers wide
demographics and price segments. As of June 30, 2024, we had a total of 431 SKUs available
for sale, designed to attract consumers under the age of six, between the ages of six and 16,
and those over the age of 16, with suggested retail prices of mainstream products ranging from
RMB19.9 to RMB399. Our extensive and growing product offering not only facilitated us in
achieving rapid revenue growth, but also improved our profitability as we scaled up. During
the Track Record Period, as assembly character toys with a high-degree of standardization
carry a higher gross profit margin as compared to that of our brick-based toys, their growing
revenue contribution had a positive impact on our profitability.
We intend to continuously enrich our IP portfolio to meet the diverse needs of consumers
and fans, and to further expand our product offering to cover wider consumer groups and price
ranges. We believe our ability to efficiently and successfully launch high-quality new products
is crucial for our revenue growth and profitability in the future.
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Expansion of Sales Network
We have established a multi-channel sales network, which consists of (i) offline sales
channels, including distributors and consignment sales, and (ii) online sales channels,
including various mainstream e-commerce platforms.
As of December 31, 2021, 2022 and 2023 and June 30, 2024, we had 225, 354, 415 and
511 distributors. In 2021, 2022, 2023 and the six months ended June 30, 2024, our offline
distribution sales amounted to RMB112.8 million, RMB157.0 million, RMB732.7 million and
RMB957.9 million, accounting for 34.2%, 48.2%, 83.6% and 91.6% of our total revenue for
the respective periods. As of June 30, 2024, we had more than 450 offline distributors in China.
As of June 30, 2024, we had also entered various overseas markets including the United States,
Southeast Asia and Europe.
We also sell our products offline through consignment sales. In 2021, 2022 and 2023 and
the six months ended June 30, 2024, revenue from offline consignment sales was RMB37.9
million, RMB32.9 million, RMB36.4 million and RMB13.6 million, accounting for 11.5%,
10.1%, 4.1% and 1.3% of our total revenue in the respective periods.
We have established our online channels, primarily through (i) the opening of flagship
stores on Tmall, JD.com, Douyin, Pinduoduo and other e-commerce platforms in China, and
(ii) our Weixin mini program Bloks Club. To a much lesser extent, we also sell our products
to certain e-commerce platforms on arrangements either similar to those for offline
consignment sales partners, or those for offline distributors. In 2021, 2022 and 2023 and the
six months ended June 30, 2024, our revenue from online sale channels was RMB171.0
million, RMB134.4 million, RMB106.2 million and RMB74.6 million, respectively,
accounting for 51.8%, 41.3%, 12.1% and 7.1% of our total revenue for the respective periods.
Going forward, we plan to continue to grow our network of offline retail outlets, with a
focus on strengthening our presence in the lower-tier markets in China and establishing
cooperation with more overseas channel partners. In addition, we plan to further develop our
DTC online and offline channels.
Ability to Control Cost of Sales
Cost of goods sold is the major component of our cost of sales, accounting for
approximately 85.8%, 87.7%, 93.3% and 94.3% of our cost of sales for 2021, 2022 and 2023
and the six months ended June 30, 2024, respectively.
Our ability to control our cost of goods sold is crucial in maintaining a desirable
profitability. We have established long-term category exclusive collaboration with industry-
leading third-party partner factories. By collaborating with our partner factories, we have
created a specialized factory network for assembly character toys by integrating our know-how
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in assembly character toy production and various patents to curate proprietary production
techniques and customized equipment, which is crucial for our profitability. In addition, our
gross profit margin experienced a notable increase as we expanded our business significantly
during the Track Record Period.
In 2021, 2022 and 2023 and the six months ended June 30, 2024, our cost of sales was
RMB206.4 million, RMB202.2 million, RMB461.8 million and RMB492.5 million,
respectively, while our gross profit margin for the respective periods was 37.4%, 37.9%, 47.3%
and 52.9%.
We believe that as our business scales, we will increasingly benefit from the economies
of scale. We intend to continue optimizing production techniques, automation technologies and
production resources to further improve our ability to control cost of sales.
The Effectiveness of Marketing Efforts
The effectiveness of our marketing efforts is crucial to our results of operations and our
profitability. We reach and maintain a large base of consumers, fans and BFCs through a
content-driven online marketing strategy, facilitating effective product launches and
promotion.
In 2021, 2022 and 2023 and the six months ended June 30, 2024, our selling and
distribution expenses was RMB388.6 million, RMB232.9 million, RMB189.3 million and
RMB120.8 million, accounting for 117.9%, 71.5%, 21.6% and 11.5% of our total revenue in
the respective periods. The significant decrease in selling and distribution expenses as a
percentage of our total revenue was primarily attributable to the economies of scale from our
rapid growth and the fact that assembly character toys were gradually becoming our major
products. Our assembly character toys are naturally suitable for content-driven marketing due
to the consumer connection from the assembling process, and the fact that IP characters are
closely associated with rich contents that can be widely disseminated. As such, we were able
to pivot to a highly-effective content-driven marketing strategy to promote our assembly
character toys during the Track Record Period and significantly reduce our expenditure on
branding and promotional advertisement. Our marketing and promotion expenses within the
selling and distribution expenses as a percentage of our total revenue decreased from 82.6% in
2021 to 8.4% in 2023, and further to 4.6% in the six months ended June 30, 2024.
As our business continues to grow, we plan to devote more marketing resources to deepen
consumer awareness of our brand and products and to continuously promote our products
efficiently. However, we do not expect our selling and distribution expenses to increase
significantly as a percentage of our total revenue in the short term.
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BASIS OF PREPARATION
Our financial information during the Track Record Period has been prepared in
accordance with IFRSs, which comprise all standards and interpretations approved by the
International Accounting Standards Board. All IFRSs effective for the accounting period
commencing from January 1, 2024 including relevant transitional provisions, have been early
adopted by us in the preparation of our historical financial information throughout the Track
Record Period.
Our financial information during the Track Record Period has been prepared under the
historical cost convention, except for financial assets at fair value through profit or loss and
convertible redeemable preferred shares, which have been measured at fair value.
See note 2.2 to “Appendix I — Accountants’ Report.”
MATERIAL ACCOUNTING POLICIES AND ESTIMATES
Note 2.4 to “Appendix I — Accountants’ Report” to this prospectus sets forth certain
material accounting policy information, which are important for understanding our financial
conditions and results of operations.
Some of our accounting policies require us to apply estimates and assumptions as well as
complex judgments relating to accounting items. The estimates and assumptions we use and the
judgments we make in applying our accounting policies have a significant impact on our
financial position and results of operations. Our management continually evaluates such
estimates, assumptions, and judgments based on past experiences and other factors, including
industry practices and expectations of future events that are believed to be reasonable under the
circumstances. There has not been any material deviation between our management’s estimates
or assumptions and actual results, and we have not made any material changes to these
estimates or assumptions during the Track Record Period. We do not expect any material
changes in these estimates and assumptions in the foreseeable future. See note 3 to “Appendix
I — Accountants’ Report.”
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--- page 277 ---
RESULTS OF OPERATIONS
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Cost of sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(206,371) (62.6)% (202,155) (62.1)% (461,764) (52.7)% (173,731) (56.1)% (492,467) (47.1)%
Gross profit /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9% 414,922 47.3% 136,208 43.9% 553,736 52.9%
Selling and distribution expenses /H1118/H1118(388,646) (117.9)% (232,885) (71.5)% (189,280) (21.6)% (86,401) (27.9)% (120,764) (11.5)%
Research and development
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(83,016) (25.2)% (98,444) (30.2)% (94,657) (10.8)% (41,953) (13.5)% (76,016) (7.3)%
Administrative expenses /H1118/H1118/H1118/H1118/H1118/H1118(58,287) (17.7)% (51,002) (15.7)% (49,230) (5.6)% (22,069) (7.1)% (403,946) (38.6)%
Other income, other gains and
losses, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11189,507 2.9% 12,416 3.8% 5,987 0.7% 2,499 0.8% 3,905 0.4%
Other expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(20,938) (6.3)% (17,896) (5.5)% (695) (0.1)% (221) (0.1)% (1,241) (0.1)%
Reversal of/(Provision for)
impairment losses on financial
assets, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118669 0.2% 226 0.1% (1,100) (0.1)% (389) (0.1)% (506) (0.0)%
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,323) (0.7)% (1,574) (0.5)% (1,654) (0.2)% (1,323) (0.4)% (891) (0.1)%
Fair value changes on convertible
redeemable preferred shares /H1118/H1118/H1118(144,201) (43.7)% (191,031) (58.7)% (274,132) (31.3)% (188,611) (60.9)% (157,033) (15.1)%
Loss before tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(563,834) (171.0)% (456,771) (140.3)% (189,839) (21.7)% (202,260) (65.3)% (202,756) (19.4)%
Income tax expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111856,981 17.3% 34,066 10.5% (17,642) (2.0)% (528) (0.1)% (52,135) (5.0)%
Loss for the year/period /H1118/H1118/H1118/H1118/H1118(506,853) (153.7)% (422,705) (129.8)% (207,481) (23.7)% (202,788) (65.4)% (254,891) (24.4)%
Attributable to /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Owners of the parent /H1118/H1118/H1118/H1118/H1118/H1118/H1118(502,594) (152.4)% (419,886) (129.0)% (206,100) (23.5)% (201,866) (65.1)% (257,894) (24.7)%
Non-controlling interests /H1118/H1118/H1118/H1118/H1118(4,259) (1.3)% (2,819) (0.8)% (1,381) (0.2)% (922) (0.3)% 3,003 0.3%
FINANCIAL INFORMATION
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NON-IFRS MEASURE
To supplement our consolidated financial statements that are presented in accordance
with IFRS, we also use adjusted profit/(loss) for the year/period (a non-IFRS measure) and
adjusted net margin (a non-IFRS measure), as additional financial measures, which are not
required by, or presented in accordance with IFRS. We believe that these non-IFRS measures
facilitate comparisons of operating performance from period to period by eliminating potential
impact of certain items. We believe that these measures provide useful information to investors
and others in understanding and evaluating our consolidated financial statements in the same
manner as they help our management. However, our presentation of adjusted profit/(loss) for
the year/period (a non-IFRS measure) and adjusted net margin (a non-IFRS measure) may not
be comparable to similar item measures presented by other companies. The use of these
non-IFRS measures has limitations as an analytical tool, and you should not consider them in
isolation from, or as substitute for analysis of, our consolidated financial statements or
financial condition as reported under IFRS. We define adjusted profit/(loss) for the year/period
(a non-IFRS measure) as profit/(loss) for the year/period adjusted for fair value changes on
convertible redeemable preferred shares (a non-cash item), listing expenses and share-based
compensations (a non-cash item). In particular, convertible redeemable preferred shares will be
reclassified from liabilities to equity as a result of the conversion of convertible redeemable
preferred shares into Ordinary Shares upon Listing. We define adjusted net margin (a non-IFRS
measure) as adjusted profit/(loss) for the year/period (a non-IFRS measure) as a percentage of
our total revenue.
Y ear Ended December 31,
Six Months Ended
June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Loss for the year/period /H1118/H1118/H1118(506,853) (422,705) (207,481) (202,788) (254,891)
Add:
Fair value changes on
convertible redeemable
preferred shares /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118144,201 191,031 274,132 188,611 157,033
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – 15,355
Share-based compensations /H1118/H11186,863 6,337 6,231 3,071 374,670
(1)
Adjusted profit/(loss) for
the year/period (a non-
IFRS measure) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(355,789) (225,337) 72,882 (11,106) 292,167
Adjusted net margin
(a non-IFRS measure) /H1118/H1118/H1118(107.9)% (69.2)% 8.3% (3.6)% 27.9%
Note:
(1) In April 2024, the Board granted share options to certain employees under the Share Incentive Scheme and the
vast majority of such share options were vested immediately after the grant. See note 32 to “Appendix I —
Accountants’ Report.”
FINANCIAL INFORMATION
– 268 –


--- page 279 ---
In the six months ended June 30, 2024, we recorded an adjusted profit for the period (a
non-IFRS measure) of RMB292.2 million and an adjusted net margin (a non-IFRS measure) of
27.9%, as compared with an adjusted loss for the period (a non-IFRS measure) of RMB11.1
million and a negative adjusted net margin (a non-IFRS measure) of 3.6% in the six months
ended June 30, 2023. This is primarily due to our successful strategic diversification of our
product offering to include assembly character toys. More specifically, we continued to scale
up our business and execute a content driven market strategy, which resulted in a gradual
increase in our gross profit margin and gradual decrease in our various operating expenses as
a percentage of our total revenue starting from 2022.
As the revenue contribution from assembly character toys that carry a higher gross profit
margin increased and our business scale grew, our gross profit margin grew from 43.9% in the
six months ended June 30, 2023 to 52.9% in the six months ended June 30, 2024. In particular,
the revenue contribution from assembly character toy sales increased from 77.9% in the six
months ended June 30, 2023 to 97.8% in the six months ended June 30, 2024, and the sales
volume of our assembly character toys grew significantly from 11.0 million units in the six
months ended June 30, 2023 to 56.2 million units in the six months ended June 30, 2024.
The successful execution of a content driven market strategy, coupled with our significant
revenue growth, resulted in a significant decrease in our selling and distribution expenses as
a percentage of our revenue starting from 2022. In particular, our selling and distribution
expenses as a percentage of our total revenue decreased from 27.9% in the six months ended
June 30, 2023 to 11.5% in the six months ended June 30, 2024.
The economies of scale also resulted in our research and development expenses as a
percentage of our total revenue decreased from 13.5% in the six months ended June 30, 2023
to 7.3% in the six months ended June 30, 2024.
PRINCIPAL COMPONENTS OF RESULTS OF OPERATIONS
Revenue
During the Track Record Period, we primarily generated revenue from sales of toys,
including assembly character toys and brick-based toys, as well as from other businesses to a
much lesser extent. Our revenue was recorded net of discount and rebate.
FINANCIAL INFORMATION
– 269 –


--- page 280 ---
By Business Nature
The table below sets forth the breakdown of our revenue by business nature for the
periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Toys
Assembly character toys /H1118/H1118/H1118 – – 117,673 36.1% 769,038 87.7% 241,429 77.9% 1,023,082 97.8%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118321,663 97.5% 206,651 63.5% 106,282 12.1% 68,075 22.0% 22,965 2.2%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118321,663 97.5% 324,324 99.6% 875,320 99.8% 309,504 99.9% 1,046,047 100.0%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,109 2.5% 1,250 0.4% 1,366 0.2% 435 0.1% 156 0.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Note:
(1) Others primarily include other non-toy revenue, such as certain revenue generated from advertisements shown
before, during or after the play of our animations on online platforms.
During the Track Record Period, we generated a substantial majority of our revenue from
sales of toys, which accounted for over 97% of our total revenue during each of 2021, 2022,
2023 and the six months ended June 30, 2023 and 2024.
The table below sets forth the sales volume and average selling price of our toy products
for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Sales
volume
Average
Selling
Price (1)
Sales
volume
Average
Selling
Price (1)
Sales
volume
Average
Selling
Price (1)
Sales
volume
Average
Selling
Price (1)
Sales
volume
Average
Selling
Price (1)
(Unit’000) (RMB) (Unit’000) (RMB) (Unit’000) (RMB) (Unit’000) (RMB) (Unit’000) (RMB)
Assembly character toys /H1118/H1118 – – 6,291 19 36,474 21 11,004 22 56,225 18
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H11183,594 89 2,154 96 926 115 531 128 236 97
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H11183,594 89 8,445 38 37,400 23 11,535 27 56,461 19
Note:
(1) Average selling price is calculated through dividing revenue by the relevant sales volume during the same
year/period, which represented the average price at which our products were sold to our direct customers.
FINANCIAL INFORMATION
– 270 –


--- page 281 ---
We began to offer assembly character toys in January 2022 on the back of the Bloks
System, which comprises the standardization of product design, research and development and
production, a self-compatible product system and a consumer ecosystem. More specifically,
our successful commercialization of an expanding and diversifying portfolio of self-developed
and licensed IPs and the rapid expansion of our sales network resulted in a significant increase
in the sales volume and revenue of assembly character toys from 2022 to 2023 and the six
months ended June 30, 2023 to the six months ended June 30, 2024.
During the Track Record Period, the average selling price of our toy products, being the
average price at which we sold our toy products to our direct customers, continued to decrease
due to the increase in the sales volume of our assembly character toys as a portion of our total
sales volume, which typically have lower price per unit as compared with brick-based toys.
By Sales Channel
During the Track Record Period, we established a multi-channel sale network, consisting
of (i) offline sales channels, including distributors and consignment sales, and (ii) online sales
channels, including various e-commerce platforms.
The table below sets forth the breakdown of our revenue by sales channel for the periods
indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Offline sales
Distribution sales /H1118/H1118/H1118/H1118/H1118112,837 34.2% 157,004 48.2% 732,700 83.6% 238,111 76.8% 957,859 91.6%
Consignment sales /H1118/H1118/H1118/H1118/H111837,869 11.5% 32,908 10.1% 36,371 4.1% 19,447 6.3% 13,572 1.3%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118150,706 45.7% 189,912 58.3% 769,071 87.7% 257,558 83.1% 971,431 92.9%
Online sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118170,957 51.8% 134,412 41.3% 106,249 12.1% 51,946 16.8% 74,616 7.1%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,109 2.5% 1,250 0.4% 1,366 0.2% 435 0.1% 156 0.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Note:
(1) Others primarily include other non-toy revenue, such as certain revenue generated from advertisements shown
before, during or after the play of our animations on online platforms, which do not fall under offline or online
sales channel.
FINANCIAL INFORMATION
– 271 –


--- page 282 ---
We pivoted to offline sales channel as we began to offer assembly character toys in 2022.
As such, our revenue from offline sales continued to increase in both absolute terms and as a
percentage of our total revenue, which accounted for a substantial majority of our total revenue
in 2023 and the six months ended June 30, 2024.
By Region
The table below sets forth the breakdown of our revenue by region for the periods
indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
China /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118324,808 98.5% 317,296 97.5% 866,297 98.8% 305,201 98.5% 1,035,046 99.0%
Overseas
Asia (excluding China) /H1118/H1118 212 0.1% 912 0.3% 3,958 0.5% 2,434 0.8% 7,592 0.7%
North America /H1118/H1118/H1118/H1118/H1118/H11184,029 1.2% 5,305 1.6% 4,675 0.5% 1,492 0.5% 1,915 0.2%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118723 0.2% 2,061 0.6% 1,756 0.2% 812 0.2% 1,650 0.1%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,964 1.5% 8,278 2.5% 10,389 1.2% 4,738 1.5% 11,157 1.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 100.0% 325,574 100.0% 876,686 100.0% 309,939 100.0% 1,046,203 100.0%
Apart from China, we also sell our products in overseas markets. Our revenue from
overseas sales increased by 66.8% from RMB5.0 million in 2021 to RMB8.3 million in 2022,
and further by 25.5% to RMB10.4 million in 2023. Our revenue from overseas sales increased
by 135.5% from RMB4.7 million in the six months ended June 30, 2023 to RMB11.2 million
in the six months ended June 30, 2024.
Cost of Sales
Our cost of sales primarily consists of (i) cost of goods sold, which primarily include
costs for outsourced production of goods and procurement of raw materials, and, to a lesser
extent, licensing fees paid for the licensed IPs, (ii) logistics costs for delivering products, and
(iii) depreciation of fixed assets for molds. In particular, the licensing fees increased from
RMB2.5 million in 2021 to RMB73.0 million in 2023, and increased from RMB20.2 million
in the six months ended June 30, 2023 to RMB91.2 million in the six months ended June 30,
2024, primarily due to a continuous increase in the sales volume of our products based on
licensed IPs.
FINANCIAL INFORMATION
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--- page 283 ---
The table below sets forth the breakdown of our cost of sales for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Cost of goods sold
Outsourced production and
procurement costs /H1118/H1118/H1118174,624 84.6% 162,526 80.4% 357,977 77.5% 140,713 81.1% 373,232 75.8%
Licensing fees /H1118/H1118/H1118/H1118/H1118/H11182,501 1.2% 14,850 7.3% 72,979 15.8% 20,239 11.6% 91,229 18.5%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118177,125 85.8% 177,376 87.7% 430,956 93.3% 160,952 92.7% 464,461 94.3%
Logistics costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111817,363 8.4% 15,824 7.9% 18,309 4.0% 7,316 4.2% 16,335 3.3%
Depreciation of fixed assets /H1118 11,883 5.8% 8,955 4.4% 12,499 2.7% 5,463 3.1% 11,671 2.4%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118206,371 100.0% 202,155 100.0% 461,764 100.0% 173,731 100.0% 492,467 100.0%
Gross Profit and Gross Profit Margin
By Business Nature
The table below sets forth the breakdown of our gross profit and the gross profit margin
by business nature for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
(unaudited)
Toys
Assembly character toys /H1118/H1118 – – 43,290 36.8% 372,389 48.4% 106,874 44.3% 544,832 53.3%
Brick-based toys /H1118/H1118/H1118/H1118/H1118118,518 36.8% 78,879 38.2% 41,167 38.7% 28,899 42.5% 8,748 38.1%
Sub-total/Overall /H1118/H1118/H1118/H1118/H1118/H1118118,518 36.8% 122,169 37.7% 413,556 47.2% 135,773 43.9% 553,580 52.9%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,883 60.2% 1,250 100.0% 1,366 100.0% 435 100.0% 156 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9% 414,922 47.3% 136,208 43.9% 553,736 52.9%
Note:
(1) Others primarily include other non-toy gross profit, such as certain gross profit generated from advertisements
shown before, during or after the play of our animations on online platforms, which is generally not directly
associated with any cost of sales.
FINANCIAL INFORMATION
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--- page 284 ---
During the Track Record Period, our gross profit margin was primarily affected by our
product mix and economies of scale. As the revenue contribution from the sales of our
assembly character toys that carry a higher gross profit margin increased and our business scale
grew, our gross profit margin grew from 37.4% in 2021 to 52.9% in the six months ended June
30, 2024. The trend is particularly pronounced in view of (i) the increasing revenue
contribution from assembly character toy sales from 77.9% in the six months ended June 30,
2023 to 87.7% in 2023 and 97.8% in the six months ended June 30, 2024, and (ii) the rapidly
growing sales volume of our assembly character toys from 11.0 million units in the six months
ended June 30, 2023 to 56.2 million units in the six months ended June 30, 2024.
Furthermore, we do not expect assembly vehicle toys and assembly scenery toys to have
a significant difference in cost structure and gross profit margin as compared with assembly
character toys. As such, we do not expect the addition of assembly vehicle toys and assembly
scenery toys in our product offering and the resulting change of product mix to have a material
impact on our overall gross profit margin.
By Sales Channel
The table below sets forth the breakdown of our gross profit and the gross profit margin
by sales channel for the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
(unaudited)
Offline sales
Distribution sales /H1118/H1118/H1118/H1118/H111838,114 33.8% 49,838 31.7% 341,226 46.6% 101,216 42.5% 500,511 52.3%
Consignment sales /H1118/H1118/H1118/H1118/H111813,356 35.3% 12,240 37.2% 15,326 42.1% 8,081 41.6% 6,845 50.4%
Sub-total/Overall /H1118/H1118/H1118/H1118/H1118/H111851,470 34.2% 62,078 32.7% 356,552 46.4% 109,297 42.4% 507,356 52.2%
Online sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111867,048 39.2% 60,091 44.7% 57,004 53.7% 26,476 51.0% 46,224 61.9%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,883 60.2% 1,250 100.0% 1,366 100.0% 435 100.0% 156 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9% 414,922 47.3% 136,208 43.9% 553,736 52.9%
Note:
(1) Others primarily include other non-toy gross profit, such as certain gross profit generated from advertisements
shown before, during or after the play of our animations on online platforms, which do not fall under offline
or online sales channel.
FINANCIAL INFORMATION
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--- page 285 ---
We pivoted to offline sales channel as we began to offer assembly character toys in 2022.
The gross profit margin from online sales channel, which is largely direct to consumers in
nature, was generally higher than that from our offline sales channel during the Track Record
Period. Going forward, we plan to continue to focus on offline sales channel for our assembly
character toys, and we do not expect a significant change in our channel mix that will result
in a material impact on our overall gross profit margin.
Selling and Distribution Expenses
Our selling and distribution expenses primarily include (i) salaries, compensations and
benefits for personnel engaging in the sales and marketing function, (ii) marketing and
promotion, mainly including e-commerce platform marketing fees, TV and traditional
advertising fees, (iii) service fees for various e-commerce platforms, (iv) office and traveling,
(v) depreciation and amortization for properties and equipment related to selling and
distribution function, and (vi) share-based compensations.
The table below sets forth the breakdown of our selling and distribution expenses for the
periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Salaries, compensations
and benefits /H1118/H1118/H1118/H1118/H1118/H1118/H111877,824 20.0% 76,995 33.1% 82,559 43.6% 37,461 43.4% 53,338 44.2%
Marketing and promotion /H1118 272,518 70.1% 120,180 51.6% 73,706 38.9% 32,427 37.5% 48,037 39.8%
Service fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815,477 4.0% 11,702 5.0% 10,732 5.7% 5,483 6.4% 6,747 5.6%
Office and traveling /H1118/H1118/H1118/H11188,086 2.1% 8,549 3.7% 8,430 4.5% 3,573 4.1% 5,749 4.8%
Depreciation and
amortization /H1118/H1118/H1118/H1118/H1118/H1118/H11188,116 2.1% 8,176 3.5% 7,459 3.9% 4,147 4.8% 2,395 2.0%
Share-based compensations /H1118 2,863 0.7% 2,680 1.2% 2,664 1.4% 1,305 1.5% 3,591 3.0%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,762 1.0% 4,603 1.9% 3,730 2.0% 2,005 2.3% 907 0.6%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118388,646 100.0% 232,885 100.0% 189,280 100.0% 86,401 100.0% 120,764 100.0%
as % of total revenue /H1118/H1118/H1118 117.9% 71.5% 21.6% 27.9% 11.5%
Our selling and distribution expenses decreased in both absolute amount and as a
percentage of our total revenue from 2021 to 2023, primarily due to a change in our sales and
marketing strategy. In 2021, we incurred significant marketing and promotion expenses in
connection with various types of advertising and promotion activities for the sales of our
brick-based toys. Since 2022, as we began to offer assembly character toys, we pivoted our
sales and marketing strategy to a highly effective content-driven one. Our assembly character
toys are naturally suitable for content-driven marketing due to the consumer connection from
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the assembling process, and the fact that IP characters are closely associated with rich contents
that can be widely disseminated. This resulted in a significant decrease in our selling and
distribution expenses in absolute amount. As our revenue also grew significantly, our selling
and distribution expenses continued to decrease as a percentage of our total revenue.
Research and Development Expenses
Our research and development expenses primarily include (i) salaries, compensations and
benefits for personnel engaging in research and development function, (ii) service fees for
certain professional services associated with our IP development, (iii) depreciation and
amortization for properties and equipment related to research and development function, and
(iv) share-based compensations.
The table below sets forth the breakdown of the research and development expenses for
the periods indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Salaries, compensations and
benefits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111856,843 68.5% 71,164 72.3% 65,260 68.9% 29,200 69.6% 52,410 69.0%
Service fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187,404 8.9% 8,182 8.3% 9,353 9.9% 3,501 8.3% 7,206 9.5%
Depreciation and
amortization /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810,180 12.3% 10,511 10.7% 12,399 13.1% 5,893 14.0% 6,711 8.8%
Share-based compensations /H1118/H1118 1,251 1.5% 1,009 1.0% 1,008 1.1% 494 1.2% 5,874 7.7%
Others (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187,338 8.8% 7,578 7.7% 6,637 7.0% 2,865 6.9% 3,815 5.0%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111883,016 100.0% 98,444 100.0% 94,657 100.0% 41,953 100.0% 76,016 100.0%
as % of total revenue /H1118/H1118/H1118/H1118 25.2% 30.2% 10.8% 13.5% 7.3%
Note:
(1) Others primarily include expenses for materials and traveling expenses.
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Administrative Expenses
Our administrative expenses primarily include (i) salaries, compensations and benefits for
personnel engaging in administrative function, (ii) listing expenses, (iii) service fees mainly for
professional services and IT services, (iv) office and traveling, (v) depreciation and
amortization for properties and equipment related to administrative function, and (vi)
share-based compensations.
The table below sets forth the breakdown of the administrative expenses for the periods
indicated.
Y ear Ended December 31, Six Months Ended June 30,
2021 2022 2023 2023 2024
(in RMB thousands, except for percentages)
(unaudited)
Salaries, compensations and
benefits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111831,599 54.2% 27,022 53.0% 30,755 62.5% 14,768 66.9% 11,791 2.9%
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – – – – 15,355 3.8%
Service fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111811,495 19.7% 9,539 18.7% 5,944 12.1% 1,795 8.1% 5,962 1.5%
Office and traveling
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,652 9.7% 5,500 10.8% 6,216 12.6% 2,062 9.4% 3,578 0.9%
Depreciation and
amortization /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,982 10.3% 6,162 12.1% 3,346 6.8% 1,922 8.7% 1,828 0.4%
Share-based compensations /H1118/H1118 2,749 4.7% 2,648 5.2% 2,559 5.2% 1,272 5.8% 365,205 90.4%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118810 1.4% 131 0.2% 410 0.8% 250 1.1% 227 0.1%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111858,287 100.0% 51,002 100.0% 49,230 100.0% 22,069 100.0% 403,946 100.0%
as % of total revenue /H1118/H1118/H1118/H1118 17.7% 15.7% 5.6% 7.1% 38.6%
Our administrative expenses increased significantly from RMB22.1 million in the six
months ended June 30, 2023 to RMB403.9 million in the six months ended June 30, 2024, with
percentage as of total revenue increased from 7.1% to 38.6% during the same periods,
primarily due to a significant increase in share-based compensations of RMB363.9 million
mainly for share options granted under the Share Incentive Scheme. In April 2024, the Board
granted share options to certain employees under the Share Incentive Scheme and the vast
majority of such share options were vested immediately after the grant. See note 32 to
“Appendix I — Accountants’ Report.”
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Other Income, Other Gains and Losses, Net
Our other income, other gains and losses, net primarily include (i) interest income from
our bank deposits, (ii) government grants, and (iii) fair value changes of cash management
products. There are no unfulfilled conditions or contingencies relating to the government
grants.
In 2021, 2022, 2023 and the six months ended June 30, 2023 and 2024, our other income,
other gains and losses, net amounted to RMB9.5 million, RMB12.4 million, RMB6.0 million,
RMB2.5 million, and RMB3.9 million, representing 2.9%, 3.8%, 0.7%, 0.8%, and 0.4% of our
total revenue for the respective periods.
Other Expenses
Our other expenses primarily include (i) impairment of non-current assets for molds no
longer in use, (ii) charitable donations in 2022, and (iii) others, which mainly include bank
charges and foreign exchange losses.
In 2021, 2022, 2023 and the six months ended June 30, 2023 and 2024, our other expenses
amounted to RMB20.9 million, RMB17.9 million, RMB0.7 million, RMB0.2 million and
RMB1.2 million, representing 6.3%, 5.5%, 0.1%, 0.1% and 0.1% of our total revenue for the
respective periods.
Fair Value Changes on Convertible Redeemable Preferred Shares
During the Track Record period, our fair value changes on convertible redeemable
preferred shares represented changes in the fair value of our convertible redeemable preferred
shares. See note 29 to “Appendix I — Accountants’ Report,” and “History, Development and
Reorganization — Pre-IPO Investments.” We recorded fair value changes on convertible
redeemable preferred shares of RMB144.2 million, RMB191.0 million, RMB274.1 million,
RMB188.6 million and RMB157.0 million in 2021, 2022 and 2023 and the six months ended
June 30, 2023 and 2024, respectively. They represented the increases in valuation of the
Company.
Income Tax Expense
Our income tax expense comprise current tax and deferred tax. See note 12 to “Appendix
I — Accountants’ Report.”
We are subject to income tax on an entity basis on profits arising in or derived from the
tax jurisdictions in which the members of our Group are domiciled and operate. One of our
PRC subsidiaries, Bloks Bricks, is accredited as “High and New Technology Enterprise” and
was therefore entitled to a preferential income tax rate of 15% for the years ended December
FINANCIAL INFORMATION
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31, 2021, 2022 and 2023 and the six months ended June 30, 2024 and such rate remains
effective until November 2024. Such qualification is subject to review by the relevant tax
authority in the PRC every three years.
As of the Latest Practicable Date and during the Track Record Period, we had fulfilled all
our tax obligations and did not have any unresolved tax disputes.
PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Revenue
Six Months Ended
June 30,
2023 2024 % Change
(in RMB thousands, except for percentages)
(unaudited)
Revenue
Toys
Assembly character toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118241,429 1,023,082 323.8%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111868,075 22,965 (66.3)%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118309,504 1,046,047 238.0%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118435 156 (64.1)%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118309,939 1,046,203 237.6%
Our revenue increased by 237.6% from RMB309.9 million in the six months ended June
30, 2023 to RMB1,046.2 million in the six months ended June 30, 2024 primarily due to a
323.8% increase in revenue from sales of assembly character toys from RMB241.4 million in
the six months ended June 30, 2023 to RMB1,023.1 million in the six months ended June 30,
2024, which was partially offset by a 66.3% decrease in revenue from sales of brick-based toys
from RMB68.1 million in the six months ended June 30, 2023 to RMB23.0 million in the six
months ended June 30, 2024.
Assembly Character Toys
Our revenue from assembly character toy sales increased by 323.8% from RMB241.4
million in the six months ended June 30, 2023 to RMB1,023.1 million in the six months ended
June 30, 2024, primarily due to a 411.0% increase in the sales volume of our assembly
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character toys from 11.0 million units in the six months ended June 30, 2023 to 56.2 million
units in the six months ended June 30, 2024, which in turn was primarily attributable to the
growing popularity of our assembly character toys and our efforts in launching new products
and expanding sales network.
Brick-based Toys
Our revenue from brick-based toy sales decreased by 66.3% from RMB68.1 million in the
six months ended June 30, 2023 to RMB23.0 million in the six months ended June 30, 2024,
primarily due to (i) a 55.6% decrease in the sales volume of our brick-based toys from 0.5
million units in the six months ended June 30, 2023 to 0.2 million units in the six months ended
June 30, 2024 as we continued our focus on developing our assembly character toys business,
and (ii) a 24.1% decrease in the average selling price of our brick-based toys primarily
attributable to larger revenue contribution from sales of Brick Buckets at a lower price range.
Cost of Sales
Six Months Ended
June 30,
2023 2024 % Change
(in RMB thousands, except for percentages)
(unaudited)
Cost of goods sold
Outsourced production and procurement
costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118140,713 373,232 165.2%
Licensing fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,239 91,229 350.8%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118160,952 464,461 188.6%
Logistics costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187,316 16,335 123.3%
Depreciation of fixed assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,463 11,671 113.6%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118173,731 492,467 183.5%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111856.1% 47.1%
Our cost of sales increased by 183.5% from RMB173.7 million in the six months ended
June 30, 2023 to RMB492.5 million in the six months ended June 30, 2024 primarily due to
a 411.0% increase in the sales volume of our assembly character toys from 11.0 million units
in the six months ended June 30, 2023 to 56.2 million units in the six months ended June 30,
2024.
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Gross Profit and Gross Profit Margin
Six Months Ended June 30,
2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
(unaudited)
Toys
Assembly character toys /H1118/H1118/H1118/H1118/H1118/H1118106,874 44.3% 544,832 53.3%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111828,899 42.5% 8,748 38.1%
Sub-total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118135,773 43.9% 553,580 52.9%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118435 100.0% 156 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118136,208 43.9% 553,736 52.9%
Our gross profit increased by 306.5% from RMB136.2 million in the six months ended
June 30, 2023 to RMB553.7 million in the six months ended June 30, 2024, primarily due to
a 409.8% increase in gross profit from assembly character toy sales from RMB106.9 million
in the six months ended June 30, 2023 to RMB544.8 million in the six months ended June 30,
2024. Our gross profit margin increased from 43.9% in the six months ended June 30, 2023 to
52.9% in the six months ended June 30, 2024 primarily due to strong increases in revenue
contribution and gross profit margin from assembly character toy sales.
Assembly Character Toys
Our gross profit from assembly character toy sales increased by 409.8% from RMB106.9
million in the six months ended June 30, 2023 to RMB544.8 million in the six months ended
June 30, 2024, primarily due to the significant increase in the sales volume of our assembly
character toys. Our gross profit margin from assembly character toy sales increased from
44.3% in the six months ended June 30, 2023 to 53.3% in the six months ended June 30, 2024
primarily as we enjoyed stronger economies of scale as our business grew.
Brick-based Toys
Our gross profit from brick-based toy sales decreased by 69.7% from RMB28.9 million
in the six months ended June 30, 2023 to RMB8.7 million in the six months ended June 30,
2024, primarily due to a decrease in the sales volume of our brick-based toys. Our gross profit
margin from sales of brick-based toys decreased from 42.5% in the six months ended June 30,
2023 to 38.1% in the six months ended June 30, 2024, primarily due to a decrease in average
selling price of our brick-based toys.
FINANCIAL INFORMATION
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Selling and Distribution Expenses
Six Months Ended
June 30,
2023 2024 % Change
(in RMB thousands, except for percentages)
(unaudited)
Selling and distribution expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111886,401 120,764 39.8%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111827.9% 11.5%
Our selling and distribution expenses increased by 39.8% from RMB86.4 million in the
six months ended June 30, 2023 to RMB120.8 million in the six months ended June 30, 2024,
primarily due to (i) an increase in salaries, compensations and benefits of RMB15.9 million as
a result of an increase in the number of personnel engaging in selling and distribution function
in line with our growth, and (ii) an increase in marketing and promotion expenses of RMB15.6
million mainly for promoting our new products in line with our business growth. Our selling
and distribution expenses as a percentage of our total revenue decreased from 27.9% in the six
months ended June 30, 2023 to 11.5% in the six months ended June 30, 2024 primarily due to
the economies of scale we achieved along with our growth.
Research and Development Expenses
Six Months Ended
June 30,
2023 2024 % Change
(in RMB thousands, except for percentages)
(unaudited)
Research and development expenses /H1118/H1118/H1118/H1118/H1118/H1118/H111841,953 76,016 81.2%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813.5% 7.3%
Our research and development expenses increased by 81.2% from RMB42.0 million in the
six months ended June 30, 2023 to RMB76.0 million in the six months ended June 30, 2024,
primarily due to (i) an increase in salaries, compensations and benefits of RMB23.2 million as
a result of an increase in number of personnel engaging in research and development function,
which in turn was driven by our commitment to research and development, and (ii) an increase
in share-based compensations of RMB5.4 million mainly for share options granted under our
Share Incentive Scheme in April 2024. Our research and development expenses as a percentage
of our total revenue decreased from 13.5% in the six months ended June 30, 2023 to 7.3% in
the six months ended June 30, 2024 primarily due to the economies of scale we achieved along
with our growth.
FINANCIAL INFORMATION
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Administrative Expenses
Six Months Ended
June 30,
2023 2024 % Change
(in RMB thousands, except for percentages)
(unaudited)
Administrative expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822,069 403,946 1,730.4%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187.1% 38.6%
Our administrative expenses increased by 1,730.4% from RMB22.1 million in the six
months ended June 30, 2023 to RMB403.9 million in the six months ended June 30, 2024,
primarily due to (i) an increase in share-based compensations of RMB363.9 million mainly for
share options granted under our Share Incentive Scheme in April 2024, and (ii) the listing
expenses of RMB15.4 million we incurred in the six months ended June 30, 2024. In April
2024, the Board granted share options to certain employees under the Share Incentive Scheme
and the vast majority of such share options were vested immediately after the grant. See note
32 to “Appendix I — Accountants’ Report.” As such, our administrative expenses as a
percentage of our total revenue increased from 7.1% in the six months ended June 30, 2023 to
38.6% in the six months ended June 30, 2024.
Other Income, Other Gains and Losses, Net
Other income, other gains and losses, net increased by 56.3% from RMB2.5 million in the
six months ended June 30, 2023 to RMB3.9 million in the six months ended June 30, 2024,
primarily due to an increase in interest income from our bank deposits of RMB2.1 million.
Other Expenses
Other expenses increased from RMB0.2 million in the six months ended June 30, 2023
to RMB1.2 million in the six months ended June 30, 2024, primarily due to an increase in
foreign exchange losses.
Fair V alue Changes on Convertible Redeemable Preferred Shares
We recorded loss for fair value changes on convertible redeemable preferred shares of
RMB188.6 million in the six months ended June 30, 2023 and RMB157.0 million in the six
months ended June 30, 2024, primarily due to the increase in the valuation of the Company.
Loss for the Period
As a result of the foregoing, we recorded loss for the period of RMB202.8 million and
RMB254.9 million in the six months ended June 30, 2023 and 2024, respectively.
FINANCIAL INFORMATION
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Y ear Ended December 31, 2023 Compared to Y ear Ended December 31, 2022
Revenue
Y ear Ended December 31,
2022 2023 % Change
(in RMB thousands, except for percentages)
Revenue
Toys
Assembly character toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118117,673 769,038 553.5%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118206,651 106,282 (48.6)%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118324,324 875,320 169.9%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,250 1,366 9.3%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118325,574 876,686 169.3%
Our revenue increased by 169.3% from RMB325.6 million in 2022 to RMB876.7 million
in 2023 primarily due to a 553.5% increase in the revenue from assembly character toy sales
from RMB117.7 million in 2022 to RMB769.0 million in 2023, which was partially offset by
a 48.6% decrease in revenue from brick-based toy sales from RMB206.7 million in 2022 to
RMB106.3 million in 2023.
Assembly Character Toys
Our revenue from assembly character toy sales increased by 553.5% from RMB117.7
million in 2022 to RMB769.0 million in 2023, primarily due to a 479.8% increase in the sales
volume of our assembly character toys from 6.3 million units in 2022 to 36.5 million units in
2023, which in turn was mainly attributable to the successful commercialization of an
expanding and diversifying portfolio of self-developed and licensed IPs and the rapid
expansion of our sales network. As a percentage of our total revenue, our revenue from
assembly character toy sales increased from 36.1% in 2022 to 87.7% in 2023.
Brick-based Toys
Our revenue from brick-based toy sales decreased by 48.6% from RMB206.7 million in
2022 to RMB106.3 million in 2023, primarily due to a 57.0% decrease in the sales volume of
our brick-based toys from 2.2 million units in 2022 to 0.9 million units in 2023, primarily as
we focused on the growth of assembly character toys which we began to offer in January 2022.
As a percentage of our total revenue, our revenue from brick-based toy sales decreased from
63.5% in 2022 to 12.1% in 2023.
FINANCIAL INFORMATION
– 284 –


--- page 295 ---
Cost of Sales
Y ear Ended December 31,
2022 2023 % Change
(in RMB thousands, except for percentages)
Cost of goods sold
Outsourced production and procurement
costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118162,526 357,977 120.3%
Licensing fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814,850 72,979 391.4%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118177,376 430,956 143.0%
Logistics costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815,824 18,309 15.7%
Depreciation of fixed assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,955 12,499 39.6%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118202,155 461,764 128.4%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111862.1% 52.7%
Our cost of sales increased by 128.4% from RMB202.2 million in 2022 to RMB461.8
million in 2023, primarily due to a 143.0% increase in cost of goods sold from RMB177.4
million in 2022 to RMB431.0 million in 2023, which in turn was primarily attributable to a
479.8% increase in the sales volume of our assembly character toys from 6.3 million units in
2022 to 36.5 million units in 2023.
Gross Profit and Gross Profit Margin
Y ear Ended December 31,
2022 2023
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
Toys
Assembly character toys /H1118/H1118/H1118/H1118/H1118/H111843,290 36.8% 372,389 48.4%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111878,879 38.2% 41,167 38.7%
Sub-total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118122,169 37.7% 413,556 47.2%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,250 100.0% 1,366 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,419 37.9% 414,922 47.3%
FINANCIAL INFORMATION
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--- page 296 ---
Our gross profit increased by 236.2% from RMB123.4 million in 2022 to RMB414.9
million in 2023, primarily due to a 760.2% increase in gross profit from assembly character toy
sales from RMB43.3 million in 2022 to RMB372.4 million in 2023, which was partially offset
by a 47.8% decrease in gross profit from brick-based toy sales from RMB78.9 million in 2022
to RMB41.2 million in 2023. Our gross profit margin increased from 37.9% in 2022 to 47.3%
in 2023, primarily due to increases in revenue contribution and gross profit margin from
assembly character toy sales.
Assembly Character Toys
Our gross profit from assembly character toy sales increased by 760.2% from RMB43.3
million in 2022 to RMB372.4 million in 2023, primarily due to an increase in the sales volume
of our assembly character toys. Our gross profit margin for assembly character toy sales
increased from 36.8% in 2022 to 48.4% in 2023, primarily due to the economies of scale we
achieved through the rapid growth in our assembly character toy sales.
Brick-based Toys
Our gross profit from brick-based toy sales decreased by 47.8% from RMB78.9 million
in 2022 to RMB41.2 million in 2023, primarily due to the decrease in the sales volume of our
brick-based toys. Our gross profit margin for brick-based toy sales remained relatively stable
at 38.2% in 2022 and at 38.7% in 2023.
Selling and Distribution Expenses
Y ear Ended December 31,
2022 2023 % Change
(in RMB thousands, except for percentages)
Selling and distribution expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118232,885 189,280 (18.7)%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111871.5% 21.6%
Our selling and distribution expenses decreased by 18.7% from RMB232.9 million in
2022 to RMB189.3 million in 2023, primarily due to a decrease in marketing and promotion
expenses of RMB46.5 million, primarily attributable to the successful execution of our
content-driven marketing strategy that we started to implement in 2022 when we began to offer
assembly character toys, whereby we significantly reduced our spending on various
advertisements to promote the sales of our brick-based toys. Such decrease in our selling and
distribution expenses in absolute amount, coupled with our rapid revenue growth, resulted in
a significant decrease in our selling and distribution expenses as a percentage of our total
revenue from 71.5% in 2022 to 21.6% in 2023.
FINANCIAL INFORMATION
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--- page 297 ---
Research and Development Expenses
Y ear Ended December 31,
2022 2023 % Change
(in RMB thousands, except for percentages)
Research and development expenses /H1118/H1118/H1118/H1118/H1118/H1118/H111898,444 94,657 (3.8)%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830.2% 10.8%
Our research and development expenses remained relatively stable at RMB98.4 million
in 2022 and RMB94.7 million in 2023. Our research and development expenses as a percentage
of our total revenue decreased from 30.2% in 2022 to 10.8% in 2023 primarily due to the
economies of scale we achieved along with our growth.
Administrative Expenses
Y ear Ended December 31,
2022 2023 % Change
(in RMB thousands, except for percentages)
Administrative expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111851,002 49,230 (3.5)%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815.7% 5.6%
Our administrative expenses remained relatively stable at RMB51.0 million in 2022 and
RMB49.2 million in 2023. Our administrative expenses as a percentage of our total revenue
decreased from 15.7% in 2022 to 5.6% in 2023, primarily due to the economies of scale we
achieved along with our growth.
Other Income, Other Gains and Losses, Net
Other income, other gains and losses, net decreased by 51.8% from RMB12.4 million in
2022 to RMB6.0 million in 2023, primarily due to a decrease in government grants of RMB4.3
million.
Other Expenses
Other expenses decreased by 96.1% from RMB17.9 million in 2022 to RMB0.7 million
in 2023, primarily because (i) we made a charitable donation of RMB11.6 million in 2022, and
(ii) we recorded impairment of non-current assets of RMB6.2 million for molds no longer in
use in 2022.
FINANCIAL INFORMATION
– 287 –


--- page 298 ---
Fair V alue Changes on Convertible Redeemable Preferred Shares
We recorded loss for fair value changes on convertible redeemable preferred shares of
RMB191.0 million in 2022 and RMB274.1 million in 2023 primarily due to the increase in the
valuation of the Company.
Loss for the Y ear
As a result of the foregoing, our loss for the year decreased by 50.9% from RMB422.7
million in 2022 to RMB207.5 million in 2023.
Y ear Ended December 31, 2022 Compared to Y ear Ended December 31, 2021
Revenue
Y ear Ended December 31,
2021 2022 % Change
(in RMB thousands, except for percentages)
Revenue
Toys
Assembly character toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 117,673 –
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118321,663 206,651 (35.8)%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118321,663 324,324 0.8%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11188,109 1,250 (84.6)%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118329,772 325,574 (1.3)%
We strategically diversified our product offering to include assembly character toys in
2022, and we recorded revenue of RMB117.7 million from assembly character toy sales in
2022. However, our revenue from brick-based toy sales decreased by 35.8% from RMB321.7
million in 2021 to RMB206.7 million in 2022, which resulted in a 1.3% decrease in our revenue
from RMB329.8 million in 2021 to RMB325.6 million in 2022.
Assembly Character Toys
We began to offer assembly character toys in January 2022, and generated revenue of
RMB117.7 million, which accounted for 36.1% of our total revenue in the same year.
Brick-based Toys
Our revenue from brick-based toy sales decreased by 35.8% from RMB321.7 million in
2021 to RMB206.7 million in 2022, primarily due to a 40.1% decrease in the sales volume of
our brick-based toys from 3.6 million units in 2021 to 2.2 million units in 2022 mainly
FINANCIAL INFORMATION
– 288 –


--- page 299 ---
attributable to (i) our strategic focus on the growth of assembly character toys which we began
to offer in January 2022 and (ii) the impact of COVID-19. Revenue from brick-based toy sales
as a percentage of our total revenue decreased from 97.5% in 2021 to 63.5% in 2022.
Cost of Sales
Y ear Ended December 31,
2021 2022 % Change
(in RMB thousands, except for percentages)
Cost of goods sold
Outsourced production and procurement
costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118174,624 162,526 (6.9)%
Licensing fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,501 14,850 493.8%
Sub-total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118177,125 177,376 0.1%
Logistics costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111817,363 15,824 (8.9)%
Depreciation of fixed assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111811,883 8,955 (24.6)%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118206,371 202,155 (2.0)%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111862.6% 62.1%
Our cost of sales remained relatively stable at RMB206.4 million in 2021 and RMB202.2
million in 2022.
Gross Profit and Gross Profit Margin
Y ear Ended December 31,
2021 2022
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(in RMB thousands, except for percentages)
Toys
Assembly character toys /H1118/H1118/H1118/H1118/H1118/H1118– – 43,290 36.8%
Brick-based toys /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118118,518 36.8% 78,879 38.2%
Sub-total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118118,518 36.8% 122,169 37.7%
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,883 60.2% 1,250 100.0%
Total/Overall /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,401 37.4% 123,419 37.9%
Our gross profit remained relatively stable at RMB123.4 million in 2021 and 2022, with
relatively stable gross profit margin of 37.4% in 2021 and 37.9% in 2022.
FINANCIAL INFORMATION
– 289 –


--- page 300 ---
Assembly Character Toys
We recorded gross profit from assembly character toy sales of RMB43.3 million in 2022.
Our assembly character toys have a high degree of standardization, which enabled us to achieve
a gross profit margin of 36.8% in 2022 when we began to offer our assembly character toys and
was still growing in scale.
Brick-based Toys
Our gross profit from brick-based toy sales decreased by 33.4% from RMB118.5 million
in 2021 to RMB78.9 million in 2022, primarily due to the decrease in the sales volume of our
brick-based toys, which in turn was attributable to our strategic focus on the growth of
assembly character toys that we began to offer in January 2022 and the impact of COVID-19.
Our gross profit margin for brick-based toy sales remained relatively stable at 36.8% in 2021
and 38.2% in 2022.
Selling and Distribution Expenses
Y ear Ended December 31,
2021 2022 % Change
(in RMB thousands, except for percentages)
Selling and distribution expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118388,646 232,885 (40.1)%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118117.9% 71.5%
Our selling and distribution expenses decreased by 40.1% from RMB388.6 million in
2021 to RMB232.9 million in 2022, primarily due to a decrease in marketing and promotion
expenses of RMB152.3 million, and our selling and distribution expenses as a percentage of
our total revenue decreased from 117.9% in 2021 to 71.5% in 2022. In 2021, we incurred
significant marketing and promotion expenses in connection with various types of advertising
and promotion activities for the sales of our brick-based toys. Since 2022, as we began to offer
assembly character toys, we pivoted our sales and marketing strategies to a highly effective
content-driven one. The change in marketing strategy resulted in the decrease in our selling and
distribution expenses both in absolute terms and as a percentage of our total revenue.
Research and Development Expenses
Y ear Ended December 31,
2021 2022 % Change
(in RMB thousands, except for percentages)
Research and development expenses /H1118/H1118/H1118/H1118/H1118/H1118/H111883,016 98,444 18.6%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825.2% 30.2%
FINANCIAL INFORMATION
– 290 –


--- page 301 ---
Our research and development expenses increased by 18.6% from RMB83.0 million in
2021 to RMB98.4 million in 2022, primarily due to an increase in our salaries, compensations
and benefits of RMB14.3 million for an increase in number of personnel engaging in research
and development function. As our revenue remained stable in 2021 and 2022 and we continued
to devote resources in research and development, our research and development expenses as a
percentage of our total revenue increased from 25.2% in 2021 to 30.2% in 2022.
Administrative Expenses
Y ear Ended December 31,
2021 2022 % Change
(in RMB thousands, except for percentages)
Administrative expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111858,287 51,002 (12.5)%
as % of total revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111817.7% 15.7%
Our administrative expenses decreased by 12.5% from RMB58.3 million in 2021 to
RMB51.0 million in 2022, primarily due to a decrease in our salaries, compensations and
benefits for personnel engaging in administrative function of RMB4.6 million. As such, our
administrative expenses as a percentage of our total revenue decreased from 17.7% in 2021 to
15.7% in 2022.
Other Income, Other Gains and Losses, Net
Other income, other gains and losses, net increased by 30.6% from RMB9.5 million in
2021 to RMB12.4 million in 2022, primarily due to an increase in government grants of
RMB5.3 million.
Other Expenses
Other expenses decreased by 14.5% from RMB20.9 million in 2021 to RMB17.9 million
in 2022, primarily attributable to the decrease in impairment of non-current assets of RMB14.5
million as we recorded more impairment of molds no longer in use in 2021, which was partially
offset by the charitable donation of RMB11.6 million we made in 2022.
Fair V alue Changes on Convertible Redeemable Preferred Shares
We recorded loss for fair value changes on convertible redeemable preferred shares of
RMB144.2 million in 2021 and RMB191.0 million in 2022 primarily due to the increase in the
valuation of the Company.
FINANCIAL INFORMATION
– 291 –


--- page 302 ---
Loss for the Y ear
As a result of the foregoing, our loss for the year decreased by 16.6% from RMB506.9
million in 2021 to RMB422.7 million in 2022.
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period, we financed our operations primarily through proceeds
from issuance of Preferred Shares and cash generated from our operating activities. As of June
30, 2024 and October 31, 2024, we had cash and cash equivalents of RMB554.1 million and
RMB600.9 million, respectively.
Going forward, we believe our liquidity requirements will be satisfied by using funds
from a combination of cash generated from our operating activities, bank facilities and net
proceeds from the Global Offering. As of October 31, 2024, we had bank loan facilities of
RMB200.0 million, of which RMB106.8 million remained unutilized.
Taking into account the net proceeds from the Global Offering and cash generated from
our operating activities available to us, our Directors believe that we have sufficient working
capital to meet our present and future cash requirements for at least the next 12 months from
the date of publication of this prospectus.
Net Current Assets/Liabilities
The table below sets forth our current assets and liabilities as of the dates indicated.
As of December 31,
As of
June 30,
As of
October 31,
2021 2022 2023 2024 2024
(in RMB thousands)
(unaudited)
Current assets:
Inventories /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111869,769 61,208 76,294 151,334 286,195
Trade and notes receivables /H1118/H111824,917 15,299 38,256 63,298 72,907
Prepayments, other
receivables and other
current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,946 10,901 14,477 37,686 84,159
Financial assets at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118272,785 1,251 1,251 – –
Pledged deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,719 9,064 8,141 8,587 38,129
Cash and cash equivalents /H1118/H1118/H111876,153 188,972 360,837 554,092 600,921
Receivables in connection
with the Reorganization /H1118/H1118/H11181,759,480 1,377,000 183,000 – –
Total current assets /H1118/H1118/H1118/H1118/H1118/H1118/H11182,231,769 1,663,695 682,256 814,997 1,082,311
FINANCIAL INFORMATION
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--- page 303 ---
As of December 31,
As of
June 30,
As of
October 31,
2021 2022 2023 2024 2024
(in RMB thousands)
(unaudited)
Current liabilities:
Trade and notes payables /H1118/H1118/H1118/H111892,879 118,533 259,671 514,705 606,464
Interest-bearing bank
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 5,000 – – –
Contract liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111829,569 30,629 66,325 84,144 73,596
Other payables and accruals /H1118/H1118109,298 112,655 169,373 144,603 194,764
Tax payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 118 6,228 3,383
Amounts due to related
parties /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818,735 44,694 25,913 – –
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111827,289 19,168 21,969 21,442 30,195
Payables in connection with
the Reorganization /H1118/H1118/H1118/H1118/H1118/H11181,759,480 1,407,338 187,520 – –
Total current liabilities /H1118/H1118/H1118/H11182,037,250 1,738,017 730,889 771,122 908,402
Net current
assets/(liabilities) /H1118/H1118/H1118/H1118/H1118/H1118/H1118194,519 (74,322) (48,633) 43,875 173,909
Comparison between October 31, 2024 and June 30, 2024
Our net current assets increased from RMB43.9 million as of June 30, 2024 to RMB173.9
million as of October 31, 2024, primarily due to increases in certain current assets items,
including an increase in inventories of RMB134.9 million, an increase in prepayments, other
receivables and other current assets of RMB46.5 million and an increase in cash and cash
equivalents of RMB46.8 million, partially offset by increases in certain current liability items,
including an increase in trade and notes payables of RMB91.8 million.
Comparison between June 30, 2024 and December 31, 2023
Our net current liabilities of RMB48.6 million as of December 31, 2023 turned into net
current assets of RMB43.9 million as of June 30, 2024, primarily due to increases in certain
current assets items, including an increase in cash and cash equivalents of RMB193.3 million,
an increase in inventories of RMB75.0 million, an increase in trade and notes receivables of
RMB25.0 million and an increase in prepayments, other receivables and other current assets of
RMB23.2 million, partially offset by an increase in trade and notes payables of RMB255.0
million. See “— Selected Balance Sheet Items” for further details.
FINANCIAL INFORMATION
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--- page 304 ---
Comparison between December 31, 2023 and December 31, 2022
Our net current liabilities decreased from RMB74.3 million as of December 31, 2022 to
RMB48.6 million as of December 31, 2023, primarily due to increases in certain current assets
items, including an increase in cash and cash equivalents of RMB171.9 million, an increase in
trade and notes receivables of RMB23.0 million and an increase in inventories of RMB15.1
million, partially offset by increases in current liability items, including an increase in trade
and notes payables of RMB141.1 million and an increase in other payables and accruals of
RMB56.7 million. See “— Selected Balance Sheet Items” for further details.
Comparison between December 31, 2022 and December 31, 2021
Our net current assets of RMB194.5 million as of December 31, 2021 turned into net
current liabilities of RMB74.3 million as of December 31, 2022, primarily due to a decrease
in financial assets at fair value through profit or loss of RMB271.5 million, an increase in
amounts due to related parties of RMB26.0 million and an increase in trade and notes payables
of RMB25.7 million, partially offset by an increase in cash and cash equivalents of RMB112.8
million. See “— Selected Balance Sheet Items” for further details.
Effect of Reorganization
We recorded receivables and payables in connection with the Reorganization during the
Track Record Period. Specifically, we recorded receivables in connection with the
Reorganization of RMB1,759.5 million, RMB1,377.0 million, RMB183.0 million and nil as of
December 31, 2021, 2022, 2023 and June 30, 2024, respectively, and payables in connection
with the Reorganization of RMB1,759.5 million, RMB1,407.3 million, RMB187.5 million and
nil as of December 31, 2021, 2022, 2023 and June 30, 2024, respectively. The Reorganization
has not resulted in any change of economic substance. As a result of the Reorganization, the
Company became the holding company of the companies now comprising the Group. See
Notes 2.1 and 28 to “Appendix I — Accountants’ Report” and “History, Development and
Reorganization — Reorganization.”
FINANCIAL INFORMATION
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--- page 305 ---
SELECTED BALANCE SHEET ITEMS
Inventories
Our inventories include finished goods, raw materials and goods in transit. The table
below sets forth the breakdown of our inventories as of the dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Finished goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111861,288 46,344 55,524 124,941
Raw materials /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,081 10,955 20,207 22,318
Goods in transit /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,400 3,909 563 4,075
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111869,769 61,208 76,294 151,334
During the Track Record Period, the finished goods were the largest component of our
inventories. As of December 31, 2021, 2022 and 2023 and June 30, 2024, we had finished
goods of RMB61.3 million, RMB46.3 million, RMB55.5 million and RMB124.9 million,
accounting for 87.8%, 75.7%, 72.7% and 82.6% of our total inventories, respectively.
Our inventories decreased from RMB69.8 million as of December 31, 2021 to RMB61.2
million as of December 31, 2022, primarily due to (i) a reduction in order for brick-based toys
to our partner factories as we strategically focused on the growth of assembly character toys,
and (ii) the popularity of our assembly character toys that generally have faster turnover. Our
inventories increased from RMB61.2 million as of December 31, 2022 to RMB76.3 million as
of December 31, 2023 and further to RMB151.3 million as of June 30, 2024 as our business
grew.
Aging Analysis
The table below sets forth an aging analysis of our inventories as of the dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Within one year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111858,603 61,208 76,294 151,334
Over one year but within
two years /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111811,16 6–––
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111869,769 61,208 76,294 151,334
FINANCIAL INFORMATION
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--- page 306 ---
Turnover Days
The table below sets forth the turnover days of our inventories for the periods indicated.
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
Overall inventory turnover
days (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118137 130 62 46
Note:
(1) Inventory turnover days for each year/period equals the average of the beginning and ending balances
of inventory for that period divided by cost of sales for that year/period and multiplied by 365 days for
the year ended December 31, and 182 days for the six months ended June 30.
Our inventory turnover days decreased from 137 days in 2021 to 62 days in 2023 and
further to 46 days in the six months ended June 30, 2024, primarily due to the increasing
revenue contribution from our highly popular assembly character toys.
Subsequent Utilization
As of October 31, 2024, 74.9% of our total inventories as of June 30, 2024, or RMB120.6
million, were utilized or sold.
Trade and Notes Receivables
Our trade and notes receivables primarily arise from sales of our products on credit.
Advance payment is normally required except we granted credits to certain distributors with
good track record and liquidity position, and consignment sales partners. The credit period
granted is generally one to three months.
FINANCIAL INFORMATION
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--- page 307 ---
The table below sets forth the breakdown of our trade and notes receivables as of the dates
indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825,562 15,647 38,964 63,920
Notes receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1 0 0––
Less: allowance for
impairment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(645) (448) (708) (622)
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,917 15,299 38,256 63,298
We seek to maintain strict control over our outstanding receivables and have a credit
control department to minimize credit risk. Overdue balances are reviewed regularly by our
senior management. We do not hold any collateral or other credit enhancements over our trade
receivable balances. The balances of trade receivables are non-interest-bearing. See note 21 to
“Appendix I — Accountants’ Report.”
Our trade and notes receivables decreased from RMB24.9 million as of December 31,
2021 to RMB15.3 million as of December 31, 2022, primarily due to the slight decrease in the
sales of our products in 2022 as we only began to offer assembly character toys in January
2022. Our trade and notes receivables increased from RMB15.3 million as of December 31,
2022 to RMB38.3 million as of December 31, 2023, and further to RMB63.3 million as of
June 30, 2024, primarily due to the expansion of our sales network and the sales growth of our
assembly character toys.
Aging Analysis and Impairment
The table below sets forth an aging analysis of our trade receivables as of the dates
indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Within three months /H1118/H1118/H1118/H1118/H1118/H1118/H111822,812 14,114 36,428 62,635
Three to six months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,563 692 1,600 477
Six to nine months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118322 195 110 43
Nine months to one year /H1118/H1118/H1118/H111888 232 34 84
Over one year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118132 66 84 59
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,917 15,299 38,256 63,298
FINANCIAL INFORMATION
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--- page 308 ---
As of December 31, 2021, 2022 and 2023 and June 30, 2024, our allowance for
impairment of trade receivables was RMB0.6 million, RMB0.4 million, RMB0.7 million and
RMB0.6 million, respectively. See note 21 to “Appendix I — Accountants’ Report.”
Turnover Days
The table below sets forth the turnover days of our trade and notes receivables for the
periods indicated.
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
Trade and notes receivables
turnover days (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111831 23 11 9
Note:
(1) Trade receivables turnover days for each year/period equals the average of the beginning and ending
balances of trade and notes receivables for that year/period divided by revenue for that period and
multiplied by 365 days for the year ended December 31, and 182 days for the six months ended June 30.
Our trade and notes receivables turnover days decreased from 31 days in 2021 to 23 days
in 2022, and further decreased to 11 days in 2023 and 9 days in the six months ended June 30,
2024, primarily due to (i) the high popularity of our assembly character toys among consumers,
which led to a larger portion of distributors making payment at or before delivery of our
products and decreasing turnover days from distributors with credit terms throughout the Track
Record Period, and (ii) our significant revenue growth during the Track Record Period,
compounded with the decreasing percentages of distributors with credit terms as of December
31, 2021, 2022 and 2023 and June 30, 2024.
Subsequent Settlement
As of October 31, 2024, 98.2% of our total trade and notes receivables as of June 30,
2024, or RMB62.8 million, were settled.
Prepayments, Other Receivables and Other Current Assets
The current portion of our prepayments, other receivables and other current assets
primarily includes (i) value-added tax recoverable, (ii) prepayments for marketing and
promotion activities and prepaid license fees, (iii) deposits to various e-commerce and
online-payment platforms, and (iv) deferred issuance costs, which represent the portion of
listing expenses that is expected to be capitalized.
FINANCIAL INFORMATION
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--- page 309 ---
The table below sets forth the breakdown of the current portion of our prepayments, other
receivables and other current assets as of the dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
V alue-added tax recoverable /H1118 14,486 3,558 5,082 15,341
Prepayments /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187,271 4,917 7,592 11,522
Deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,556 1,534 1,573 1,992
Deferred issuance costs /H1118/H1118/H1118/H1118/H1118– – – 8,267
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,217 1,447 1,014 1,736
Less: allowance for
impairment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(584) (555) (784) (1,172)
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,946 10,901 14,477 37,686
The current portion of our prepayments, other receivables and other current assets
decreased from RMB23.9 million as of December 31, 2021 to RMB10.9 million as of
December 31, 2022, primarily due to a decrease in value-added tax recoverable of RMB10.9
million mainly due to timing differences in recognition of certain expenses. The current portion
of our prepayments, other receivables and other current assets increased from RMB10.9
million as of December 31, 2022 to RMB14.5 million as of December 31, 2023, primarily due
to the increase in prepayments to our suppliers as our business grew and an increase in
value-added tax recoverable. The current portion of our prepayment, other receivables and
other current assets increased from RMB14.5 million as of December 31, 2023 to RMB37.7
million as of June 30, 2024, primarily due to an increase in value-added tax recoverable and
the deferred issuance costs incurred as of June 30, 2024.
Subsequent Utilization
As of October 31, 2024, 65.7% of our current portion of prepayment, other receivables
and other current assets as of June 30, 2024, or RMB25.5 million, were utilized.
FINANCIAL INFORMATION
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--- page 310 ---
Financial Assets at Fair Value through Profit or Loss
The table below sets forth our financial assets at fair value through profit or loss, which
were cash management products we purchased from reputable commercial banks in China, as
of the dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Cash management products 272,785 1,251 1,251 –
Our cash management products were mandatorily classified as financial assets at fair
value through profit or loss as their contractual cash flows are not solely payments of principal
and interest. Our financial assets at fair value through profit or loss decreased from RMB272.8
million as of December 31, 2021 to RMB1.3 million as of December 31, 2022, as we redeemed
the cash management products to satisfy the capital needs for our Reorganization in 2022. We
redeemed all our cash management products in January 2024.
We form our portfolio of financial assets with the view of achieving (i) a relatively low
level of risk, (ii) good liquidity and (iii) an enhanced yield. Our investment decisions are made
on a case-by-case basis and after due and careful consideration of a number of factors,
including but not limited to our overall financial condition, market and investment conditions,
economic developments, investment cost, duration of investment, and the expected returns and
potential risks of such investment.
We have also established internal policy to safeguard our exposure to investment risks in
connection with the purchase of cash management products and structured deposits. Such
measures include: (i) our investment in financial assets shall be authorized and approved by our
financial department and our chief executive officer, (ii) our financial department is
responsible for ensuring that the financial assets are properly recorded in our financial
statements and monitoring the performance of our financial assets, and any significant or
adverse fluctuation in the financial assets shall be reported to our management in a timely
manner. Any proposed investment in financial assets which are not made in compliance with
our internal policy shall be subject to the approval from our Board.
After Listing, we intend to continue our investments in the financial assets strictly in
accordance with our internal policies and measures and the requirements under Chapter 14 of
the Listing Rules.
FINANCIAL INFORMATION
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--- page 311 ---
Trade and Notes Payables
Our trade and notes payables primarily comprise payables to our suppliers, mainly our
partner factories. Our trade and notes payables are non-interest bearing and normally settled on
terms of three to seven months.
The table below sets forth the breakdown of our trade and notes payables as of the dates
indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Trade payables 73,873 101,623 198,871 371,963
Notes payables 19,006 16,910 60,800 142,742
Total 92,879 118,533 259,671 514,705
As of December 31, 2021, 2022 and 2023 and June 30, 2024, we recorded trade and notes
payables of RMB92.9 million, RMB118.5 million, RMB259.7 million, and RMB514.7 million.
Such continuous increase in our trade and notes payables during the Track Record Period was
primarily due to the continuous growth of our business.
Aging Analysis
The table below sets forth the breakdown of the aging analysis of the trade and notes
payables.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Within three months /H1118/H1118/H1118/H1118/H1118/H1118/H111862,653 62,484 169,638 332,736
Three to six months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111829,827 54,770 85,613 156,156
Six months to one year /H1118/H1118/H1118/H1118/H1118– 880 4,001 25,272
Over one year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118399 399 419 541
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111892,879 118,533 259,671 514,705
FINANCIAL INFORMATION
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--- page 312 ---
Turnover Days
The table below sets forth the turnover days for the trade and notes payables for the
periods indicated.
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
Trade and notes payables
turnover days (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118176 191 149 143
Note:
(1) Trade and notes payables turnover days for each year/period equals the average of the beginning and
ending balances of trade and notes payables for that year/period divided by cost of sales for that
year/period and multiplied by 365 days for the year ended December 31, and 182 days for the six months
ended June 30.
Our trade and notes payables turnover days increased from 176 days in 2021 to 191 days
in 2022, as we increased our procurement with our production partners in anticipation of a
strong sales of our assembly character toys. Our trade and notes payables turnover days
decreased from 191 days in 2022 to 149 days in 2023, and further to 143 days in the six months
ended June 30, 2024, primarily due to the shorter credit terms from one to three months from
certain of our new suppliers.
Subsequent Settlement
As of October 31, 2024, 59.3% of our total trade and notes payables as of June 30, 2024,
or RMB305.3 million, were settled.
Contract Liabilities
Our contract liabilities comprise (i) advances received from our customers, (ii) sales
rebates granted to our distributors for satisfaction of sales target as set out in the distribution
agreements, and (iii) customer loyalty program credits granted to our registered members
which could be used to offset future purchase price of our products subject to certain terms and
conditions. See “Business — Marketing and Consumer Engagement — Consumer
Engagement.” We typically require our customers to pay the consideration for their purchases
from us prior to the shipment of our products.
FINANCIAL INFORMATION
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--- page 313 ---
The table below sets forth the breakdown of the contract liabilities as of the dates
indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Advances received from
customers /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,215 6,945 22,281 19,521
Sales rebates /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118976 2,019 20,704 39,309
Customer loyalty program /H1118/H1118/H111824,378 21,665 23,340 25,314
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111829,569 30,629 66,325 84,144
Our contract liabilities remained relatively stable at RMB29.6 million and RMB30.6
million as of December 31, 2021 and 2022, respectively. Our contract liabilities increased from
RMB30.6 million as of December 31, 2022 to RMB66.3 million as of December 31, 2023,
primarily due to an increase in advances received from our distributors and sales rebates, which
in turn was mainly attributable to an increase in the sales volume of our products in line with
our business growth. Our contract liabilities increased from RMB66.3 million as of
December 31, 2023 to RMB84.1 million as of June 30, 2024, primarily due to an increase in
sales rebates, which was mostly attributable to a change in our rebate policy to customers.
Subsequent Recognition
As of October 31, 2024, 70.3% of our total contract liabilities as of June 30, 2024, or
RMB59.1 million, were recognized as revenue.
Other Payables and Accruals
The current portion of our other payables and accruals primarily comprises (i) accrued
expenses for marketing and promotion activities, procurement and various professional
services, (ii) salaries, compensations and benefits payables, (iii) payables for purchase of
non-current assets mainly for molds, (iv) tax payable other than corporate income tax, (v)
customer deposits, (vi) payables for acquisition of non-controlling interest equity, and (vii)
accrued listing expenses.
FINANCIAL INFORMATION
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--- page 314 ---
The table below sets forth the breakdown of our other payables and accruals as of the
dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Accrued expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111879,352 70,825 55,703 38,886
Salaries and benefits
payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,020 21,852 33,782 33,659
Payables for purchase of non-
current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 11,693 26,596 43,444
Tax payable other than
corporate income tax /H1118/H1118/H1118/H1118/H11183,562 4,615 17,704 18,213
Accrued listing expenses /H1118/H1118/H1118/H1118– – – 5,366
Customer deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,719 2,084 4,140 4,924
Payables for acquisition of
non-controlling interest
equity /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 30,000 –
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,645 1,586 1,448 111
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118109,298 112,655 169,373 144,603
The current portion of our other payables and accruals remained relatively stable at
RMB109.3 million and RMB112.7 million as of December 31, 2021 and 2022, respectively.
The current portion of our other payables and accruals increased from RMB112.7 million as of
December 31, 2022 to RMB169.4 million as of December 31, 2023, primarily due to (i) an
increase in payables for acquisition of non-controlling interest equity from one of our
Shareholders of RMB30.0 million, and (ii) an increase in salaries, compensations and benefits
payables of RMB11.9 million attributable to an increase in the number of our employees in line
with our business growth. Our other payables and accruals decreased from RMB169.4 million
as of December 31, 2023 to RMB144.6 million as of June 30, 2024, primarily due to the
decrease in payables for the acquisition of non-controlling interest equity of RMB30.0 million.
FINANCIAL INFORMATION
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Amounts in Connection with the Reorganization
The table below sets forth the breakdown of the amounts in connection with the
reorganization as of the dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Receivables in connection
with the Reorganization /H1118/H1118/H11181,759,480 1,377,000 183,000 –
Payables in connection with
the Reorganization /H1118/H1118/H1118/H1118/H1118/H1118/H11181,759,480 1,407,338 187,520 –
We underwent the Reorganization pursuant to which the Company became the holding
company and listing entity of the Group. Pursuant to a series of agreements of Reorganization,
the then shareholders of Bloks Technology shall mirror their equity interests as the
shareholders of the Company, including Onshore Withdrawn Investors of RMB1,543.5 million,
Y unfeng Warrant of RMB183.0 million and the Other Shareholders of RMB33.0 million,
representing RMB1,759.5 million in total.
Payables in connection with the Reorganization represents the amount needs to be paid
by Bloks Technology to the relevant shareholders. Receivables in connection with the
Reorganization represents the amount needs to be received by the Company from the relevant
shareholders.
In August 2021, we entered into a reorganization agreement with our shareholders. Under
the agreement, Bloks Technology bought back from Onshore Withdrawn Investors a total of
RMB13,800,835 registered capital with total cash consideration of RMB1,726.5 million. In
September 2022, Bloks Technology issued registered capital of RMB311,345 to Gaintex with
a total consideration of RMB330,000. In November 2022, China Bloks purchased 100% of the
total equity interests in Bloks Technology from the then shareholders of Bloks Technology (the
“Other Shareholders ”) with a cash consideration of RMB33.0 million.
As part of the Reorganization, we issued 223,119,765 shares to the Onshore Withdrawn
Investors and/or their respective designated affiliates and the Other Shareholders of Bloks
Technology and raised gross proceeds of RMB1,759.2 million including RMB1,726.5 million
from the Onshore Withdrawn Investors and/or their respective designated affiliates and
RMB32.7 million from the Other Shareholders of Bloks Technology.
FINANCIAL INFORMATION
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--- page 316 ---
The continuous decrease in the balances of receivables and payables in connection with
the Reorganization as of December 31, 2021, 2022 and 2023 was due to the subsequent
settlement of funds between us and the relevant shareholders. The Group repaid RMB183.0
million to the subscriber of Y unfeng Warrant in April 2024.
See “History, Development and Reorganization — Reorganization” and note 28 to the
“Appendix I — Accountants’ Report.”
Convertible Redeemable Preferred Shares
As of December 31, 2021, 2022 and 2023 and as of June 30, 2024, we had convertible
redeemable preferred shares of RMB1,382.9 million, RMB1,573.9 million, RMB1,848.0
million and RMB1,822.0 million, respectively. Our convertible redeemable preferred shares
were primarily related to the redemption right granted to Pre-IPO Investors in the Pre-IPO
investments, which enables Pre-IPO Investors to redeem all or part of their outstanding
convertible redeemable preferred shares under circumstances as specified in the shareholder’s
agreement, and thus constitutes our redemption liability. We designate such redemption
liability to the convertible redeemable preferred shares as financial liabilities measured as fair
value through profit or loss. Changes in the fair value of the convertible redeemable preferred
shares were recorded as fair value changes on convertible redeemable preferred shares in the
consolidated statements of profit or loss, and the fair value was determined using certain
valuation techniques. The convertible redeemable preferred shares will be reclassified from
liabilities to equity as a result of the conversion of convertible redeemable preferred shares into
Ordinary Shares upon listing. See notes 3 and 29 to the “Appendix I — Accountants’ Report.”
CASH FLOWS
The table below sets forth our cash flows for the periods indicated.
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
(in RMB thousands)
Operating cash flows before
movements in working
capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(355,919) (208,964) 138,040 367,593
Changes in working capital /H1118/H1118 62,591 40,232 146,888 143,521
Income tax paid /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5) (5) (36) (3,082)
Net cash flows (used in)/from
operating activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118(293,333) (168,737) 284,892 508,032
FINANCIAL INFORMATION
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--- page 317 ---
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
(in RMB thousands)
Net cash flows (used in)/from
investing activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118(230,683) 250,662 (43,269) (41,217)
Net cash flows from/(used in)
financing activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118579,432 31,475 (70,146) (273,014)
Net increase in cash and
cash equivalents /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111855,416 113,400 171,477 193,801
Cash and cash equivalents at
beginning of year/period /H1118/H1118 20,813 76,153 188,972 360,837
Effects of foreign exchange
rate changes, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(76) (581) 388 (546)
Cash and cash equivalents
at end of year/period /H1118/H1118/H1118/H111876,153 188,972 360,837 554,092
Operating Activities
In the six months ended June 30, 2024, we had net cash generated from operating
activities of RMB508.0 million, primarily due to our loss before tax of RMB202.8 million, as
adjusted for items mainly including (i) non-cash and non-operating items, primarily comprising
(a) fair value losses on convertible redeemable preferred shares of RMB157.0 million, and (b)
the share-based compensations of RMB374.7 million, and (ii) changes in working capital,
primarily comprising an increase in trade and notes payables of RMB255.0 million, which was
partially offset by an increase inventories of RMB76.0 million.
In 2023, we had net cash generated from operating activities of RMB284.9 million,
primarily due to our loss before tax of RMB189.8 million, as adjusted for items mainly
including (i) non-cash and non-operating items, primarily comprising fair value losses on
convertible redeemable preferred shares of RMB274.1 million, and (ii) changes in working
capital, primarily comprising (a) an increase in trade and notes payables of RMB141.1 million,
and (b) an increase in contract liabilities of RMB35.7 million, which was partially offset by an
increase in trade and notes receivables of RMB23.8 million.
FINANCIAL INFORMATION
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--- page 318 ---
In 2022, we had net cash used in operating activities of RMB168.7 million, primarily due
to our loss before tax of RMB456.8 million, as adjusted for items mainly including (i) non-cash
and non-operating items, primarily comprising fair value losses on convertible redeemable
preferred shares of RMB191.0 million, and (ii) changes in working capital, primarily
comprising (a) an increase in trade and notes payables of RMB25.7 million, and (b) a decrease
in prepayments, other receivables and other current assets of RMB13.1 million, which was
partially offset by a decrease in other payables and accruals of RMB7.8 million.
In 2021, we had net cash used in operating activities of RMB293.3 million, primarily due
to our loss before tax of RMB563.8 million, as adjusted for items mainly including (i) non-cash
and non-operating items, primarily comprising (a) fair value losses on convertible redeemable
preferred shares of RMB144.2 million, (b) depreciation of right-of-use assets of RMB21.3
million, and (c) impairment of property, plant and equipment of RMB20.6 million, and (ii)
changes in working capital, primarily comprising an increase in other payables and accruals of
RMB64.0 million, which was partially offset by a decrease in trade and notes payables of
RMB13.0 million.
Investing Activities
In the six months ended June 30, 2024, we had net cash used in investing activities of
RMB41.2 million, primarily due to (i) purchase of items of property, plant and equipment of
RMB22.1 million, and (ii) purchase of items of intangible assets of RMB20.8 million.
In 2023, we had net cash used in investing activities of RMB43.3 million, primarily due
to (i) purchase of items of property, plant and equipment of RMB24.3 million, and (ii) purchase
of items of intangible assets of RMB19.0 million.
In 2022, we had net cash generated from investing activities of RMB250.7 million,
primarily due to the proceeds from the redemption of cash management products of RMB273.2
million, which was partially offset by purchases of items of property, plant and equipment of
RMB16.9 million.
In 2021, we had net cash used in investing activities of RMB230.7 million, primarily due
to the purchase of cash management products of RMB1,199.1 million, which was partially
offset by the proceeds from the redemption of cash management products of RMB1,000.0
million.
FINANCIAL INFORMATION
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--- page 319 ---
Financing Activities
In the six months ended June 30, 2024, we had net cash used in financing activities of
RMB273.0 million, primarily due to (i) payment for termination of Y unfeng Warrant of
RMB183.0 million, (ii) acquisition of non-controlling interest equity of RMB32.4 million, and
(iii) repayment of amounts due to a related party of RMB25.9 million.
In 2023, we had net cash used in financing activities of RMB70.1 million, primarily due
to (i) the payment in connection with the Reorganization of RMB1,219.8 million, (ii)
repayment of bank borrowings of RMB889.2 million, (iii) lease payment of RMB19.3 million,
and (iv) repayment of amounts due to a related party of RMB19.0 million, which was partially
offset by (i) the proceeds from issuance of Preferred Shares of RMB1,194.0 million, and (ii)
the proceeds from bank borrowings of RMB884.2 million.
In 2022, we had net cash generated from financing activities of RMB31.5 million,
primarily due to (i) the proceeds from issuance of Preferred Shares of RMB350.6 million, and
(ii) borrowings from a related party of RMB25.0 million, which was partially offset by (i) the
payment in connection with the Reorganization of RMB351.8 million, and (ii) lease payments
of RMB28.9 million.
In 2021, we had net cash generated from financing activities of RMB579.4 million,
primarily due to capital contribution from series A preferred shareholders of RMB600.0
million, which was partially offset by lease payments of RMB22.4 million. See “History,
Development and Reorganization — Pre-IPO Investments.”
INDEBTEDNESS
The table below sets forth the indebtedness as of the dates indicated.
As of December 31,
As of
June 30,
As of
October 31,
2021 2022 2023 2024 2024
(in RMB thousands)
(unaudited)
Interest-bearing bank
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 5,000 – – –
Amounts due to related
parties /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818,735 44,694 25,913 – –
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111845,405 23,268 56,931 46,266 62,498
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111864,140 72,962 82,844 46,266 62,498
FINANCIAL INFORMATION
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--- page 320 ---
Interest-bearing Bank Borrowings
As of December 31, 2022, we had unsecured bank borrowings of RMB5.0 million with
fixed interests of 3.35%. Such bank loans were primarily used for general corporate purposes.
See note 26 to “Appendix I — Accountants’ Report.”
Amounts Due to Related Parties
The table below sets forth the amounts due to related parties as of the dates indicated.
As of December 31,
As of
June 30,
As of
October 31,
2021 2022 2023 2024 2024
(in RMB thousands)
(unaudited)
Loan payables
Ningbo Shengteng
Investment Management
Partnership /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 25,000 25,000 – –
Mr. Zhu Weisong /H1118/H1118/H1118/H1118/H1118/H1118/H111817,913 18,797 – – –
Wise Creation Investment
Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118822 897 913 – –
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818,735 44,694 25,913 – –
As of December 31, 2021, 2022 and 2023, we recorded amounts due to related parties as
loan payables of RMB18.7 million, RMB44.7 million and RMB25.9 million, respectively,
which were unsecured, interest-free and repayable on demand. Those loans were mainly used
for general corporate purposes and were of non-trade nature, which was fully repaid in April
2024.
FINANCIAL INFORMATION
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--- page 321 ---
Lease Liabilities
The table below sets forth the lease liabilities as of the dates indicated.
As of December 31,
As of
June 30,
As of
October 31,
2021 2022 2023 2024 2024
(in RMB thousands)
(unaudited)
Current
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111827,289 19,168 21,969 21,442 30,195
Non-current
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818,116 4,100 34,962 24,824 32,303
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111845,405 23,268 56,931 46,266 62,498
Our lease liabilities decreased from RMB45.4 million as of December 31, 2021 to
RMB23.3 million as of December 31, 2022, as we made rental payments. Our lease liabilities
increased from RMB23.3 million as of December 31, 2022 to RMB56.9 million as of December
31, 2023, primarily due to the renewal of our office building lease in 2023. Our lease liabilities
decreased from RMB56.9 million as of December 31, 2023 to RMB46.3 million as of June 30,
2024, as we made rental payments. Our lease liabilities increased from RMB46.3 million as of
June 30, 2024 to RMB62.5 million as of October 31, 2024, primarily due to the additional
warehouses we leased.
Contingent Liabilities
As of December 31, 2021, 2022 and 2023 and as of June 30 and October 31, 2024, and
up to the Latest Practicable Date, we did not have any contingent liabilities.
Save as disclosed above, we did not have any bank and other loan, or any loan capital
issued and outstanding or agreed to be issued, bank overdraft, borrowing or similar
indebtedness, liabilities under acceptance (other than normal trade notes) or acceptance credits,
debentures, mortgages, charges, hire purchases or finance lease commitments, guarantees or
other material contingent liabilities as of the Latest Practicable Date for our indebtedness
statement. Our Directors confirm that as of the Latest Practicable Date, there was no breach of
any covenant during the Track Record Period and up to the Latest Practicable Date. Our
Directors further confirm that our Group did not experience any difficulty in obtaining bank
loans and other borrowings, default in payment of bank loans and other borrowings or breach
of covenants during the Track Record Period and up to the Latest Practicable Date. Our
Directors confirm that there has not been any material change in our indebtedness since
October 31, 2024 up to the date of this prospectus.
FINANCIAL INFORMATION
–3 1 1–


--- page 322 ---
CAPITAL EXPENDITURE AND COMMITMENTS
Capital Expenditure
The table below sets forth the capital expenditure for the periods indicated.
Y ear Ended December 31,
Six
Months
Ended
June 30,
2021 2022 2023 2024
(in RMB thousands)
Purchase of items of
property, plant and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,852 16,889 24,311 22,068
Purchase of items of
intangible assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187,815 5,700 19,030 20,762
Total capital expenditure /H1118/H1118/H111831,667 22,589 43,341 42,830
During the Track Record Period, our capital expenditure was primarily for (i) the
purchase of items of property, plant and equipment, primarily including mold equipment, and
(ii) the purchase of items of intangible assets, primarily including licensed IPs.
Capital Commitments
The table below sets forth the capital commitments as of the dates indicated.
As of December 31,
As of
June 30,
2021 2022 2023 2024
(in RMB thousands)
Mold equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,497 453 16,941
Licensed IP /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,738 5,618 4,585 39,294
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,738 8,115 5,038 56,235
FINANCIAL INFORMATION
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--- page 323 ---
KEY FINANCIAL RATIOS
Y ear Ended/As of December 31,
Six
Months
Ended/
As of
June 30,
2021 2022 2023 2024
Gross profit margin (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111837.4% 37.9% 47.3% 52.9%
Adjusted net margin
(non-IFRS measure) (2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(107.9)% (69.2)% 8.3% 27.9%
Current ratio (3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.1 1.0 0.9 1.1
Quick ratio (4) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.1 0.9 0.8 0.9
Notes:
(1) Gross profit margin equals gross profit for the year/period divided by revenue for the year/period and
multiplied by 100%.
(2) Adjusted profit/(loss) for the year/period (a non-IFRS measure) divided by revenue for the year/period and
multiplied by 100%, which is a non-IFRS measure. See “— Non-IFRS Measure.”
(3) Current ratio is calculated based on the total current assets divided by the total current liabilities as at the end
of the respective year/period.
(4) Quick ratio is calculated as total current assets less inventories divided by the total current liabilities as at the
end of the respective year/period.
DISCLOSURE ABOUT FINANCIAL RISK
The main risks arising from our financial instruments are foreign currency risk, credit risk
and liquidity risk.
Foreign Currency Risk
We have transactional currency exposures. Such exposures arise from sales or purchases
by operating units in currencies other than the units’ functional currencies. In addition, we have
currency exposures from our cash and cash equivalent. Our management considers our
exposure to foreign currency risk not significant. See note 39 to “Appendix I — Accountants’
Report.”
Credit Risk
The carrying amounts of cash and cash equivalents, trade receivables, and financial assets
that are included in prepayments, other receivables and other current assets represent our
maximum exposure to credit risk in relation to our financial assets as of December 31, 2021,
FINANCIAL INFORMATION
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--- page 324 ---
2022 and 2023 and June 30, 2024. We classify financial instruments on the basis of shared
credit risk characteristics, such as instrument types and credit risk ratings for the purpose of
determining significant increases in credit risk and calculation of impairment. See note 39 to
“Appendix I — Accountants’ Report.”
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting financial obligations
due to shortage of funds. Our exposure to liquidity risk arises primarily from mismatches of
the maturities of financial assets and liabilities. Our objective is to maintain a balance for
continuity of funding to finance our working capital needs as well as capital expenditure. See
note 39 to “Appendix I — Accountants’ Report.”
Capital Management
The primary objectives of our capital management are to safeguard our ability to continue
as a going concern and to maintain healthy capital ratios in order to support our business and
maximize shareholders’ value.
We manage our capital structure and make adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust
the capital structure, we may determine whether to make dividend payment to shareholders,
return capital to shareholders or issue new shares. We are not subject to any externally imposed
capital requirement. No change was made in the objectives, policies or processes for managing
capital during the years ended December 31, 2021, 2022 and 2023 and the six months ended
June 30, 2024.
We monitor our capital structure on the basis of certain financial ratio. See note 39 to
“Appendix I — Accountants’ Report.”
RELATED PARTY TRANSACTIONS
Related party transactions are set out in note 36 to “Appendix I — Accountants’ Report.”
Our Directors confirm that these transactions were conducted at arm’s length basis.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into, nor do we expect to enter into, any off-balance sheet
arrangements. We also have not entered into any financial guarantees or other commitments to
guarantee the payment obligations of manufacturing partners. In addition, we have not entered
into any derivative contracts that are indexed to our equity interests and classified as owners’
equity. We do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing or hedging or
research and development services with us.
FINANCIAL INFORMATION
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--- page 325 ---
DIVIDEND POLICY
No dividends have been paid or declared by our Company during the Track Record
Period.
We are a holding company incorporated under the laws of the Cayman Islands. As a result,
we will rely to some extent on any dividends distributed by our PRC subsidiaries. Any dividend
distributions from our PRC subsidiaries to us will be subject to PRC withholding tax. In
addition, regulations in the PRC currently permit payment of dividends of a PRC company only
out of accumulated distributable after-tax profits as determined in accordance with its articles
of association and the accounting standards and regulations in the PRC. See “Risk Factors —
Risks Relating to Doing Business in China — We principally rely on dividends and other
distributions on equity paid by our PRC subsidiaries to fund any cash and financing
requirements we may have.”
Our Board has the discretion to pay interim dividends and to recommend to Shareholders
to pay final dividends. Any declaration and payment as well as the amount of dividends will
be subject to our Articles and the Cayman Companies Act. Under the Cayman Islands law, our
Company may pay a dividend out of either profit or share premium account, provided that in
no circumstances may a dividend be paid if this would result in our Company being unable to
pay its debts as they fall due in the ordinary course of business. As advised by our Cayman
Islands counsel, subject to the above, there is no restriction under the Cayman Islands law for
our Company to declare and pay a dividend despite our accumulated losses. A decision to
declare or to pay any dividends in the future, and the amount of any such dividends, will
depend on a number of factors, including our results of operations, cash flows, financial
condition, payments by our subsidiaries of cash dividends to us, business prospects, statutory,
regulatory and contractual restrictions on our declaration and payment of dividends and other
factors that our Board may consider important. We do not have a pre-determined dividend
payout ratio. There can be no assurance that dividends of any amount will be declared or
distributed in any year.
DISTRIBUTABLE RESERVE
As of June 30, 2024, the Company did not have any distributable reserves.
DISCLOSURE REQUIRED UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, they were not aware of any
circumstances that would give rise to a disclosure requirement under Rules 13.13 to Rules
13.19 of the Listing Rules.
FINANCIAL INFORMATION
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--- page 326 ---
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma statement of adjusted consolidated net tangible assets
has been prepared in accordance with Rule 4.29 of the Listing Rules and with reference to
Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants for
illustration purposes only, and is set out here to illustrate the effect of the Global Offering on
our consolidated net tangible assets attributable to owners of the parent as of June 30, 2024 as
if the Global Offering had taken place on June 30, 2024.
Our unaudited pro forma statement of adjusted consolidated net tangible assets
attributable to owners of the parent has been prepared for illustrative purposes only and
because of its hypothetical nature, it may not give a true picture of the financial position of us
had the Global Offering been completed as of June 30, 2024 or at any future date. It is prepared
based on our consolidated net tangible assets as of June 30, 2024 as set out in the Accountants’
Report as set out in Appendix I to this prospectus and adjusted as described below. The
unaudited pro forma adjusted consolidated net tangible assets do not form part of the
Accountants’ Report as set out in Appendix I to this prospectus.
Consolidated
net tangible
assets/(liabilities)
attributable to
owners of the
parent
Estimated net
proceeds from
the Global
Offering
Estimated impact
related to the
changes of terms
of convertible
redeemable
preferred shares
upon Listing
Unaudited Pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of the
parent
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of the
parent per share
(in RMB thousands) RMB HK$
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
Based on an Offer Price of
HK$55.65 per Offer Share (1,507,512) 1,162,469 1,822,049 1,477,006 6.12 6.61
Based on an Offer Price of
HK$58.00 per Offer Share (1,507,512) 1,212,696 1,822,049 1,527,233 6.32 6.83
Based on an Offer Price of
HK$60.35 per Offer Share (1,507,512) 1,262,924 1,822,049 1,577,461 6.53 7.06
Notes:
(1) Our consolidated net tangible liabilities attributable to owners of the parent as of June 30, 2024 was
equal to the net liabilities attributable to owners of the parent as at June 30, 2024 of RMB1,492.5 million
after deducting of other intangible assets of RMB15.1 million as at June 30, 2024 set out in the
Accountants’ Report in Appendix I to this prospectus.
(2) The estimated net proceeds from the Global Offering are based on estimated Offer Price of HK$55.65
per Offer Share, HK$58.00 per Offer Share and HK$60.35 per Offer Share, after deduction of the
underwriting fees and other related expenses payable by us (excluding the listing expense that have been
FINANCIAL INFORMATION
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charged to profit or loss during the Track Record Period) and 24,120,300 shares expected to be issued
under the Global Offering, taking no account of any Shares which may be issued upon the exercise of
the Offer Size Adjustment Option and the Over-allotment Option.
(3) Upon the Listing and the completion of the Global Offering, 39,582,875 convertible redeemable
preferred shares will be automatically converted into 39,582,875 Ordinary Shares. The convertible
redeemable preferred shares will then be transferred from liabilities to equity. Accordingly, for the
purpose of the unaudited pro forma financial information, the unaudited pro forma adjusted net tangible
assets attributable to owners of the parent will be increased by RMB1,822.0 million, the carrying
amount of the convertible redeemable preferred shares as at June 30, 2024.
(4) The unaudited pro forma adjusted consolidated net tangible assets per share is arrived at after
adjustments referred in preceding paragraph and on the basis of 241,472,245 Shares are in issue,
assuming that the conversion of Preferred Shares into the ordinary shares and the Global Offering has
been completed.
(5) For the purpose of this unaudited pro forma statement of adjusted net tangible assets attributable to the
owners of the parent, the balances stated in RMB are converted into HK$ at the rate of RMB1.00 to
HK$1.08056.
(6) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets
attributable to owners of the parent to reflect any trading results or other transactions of us entered into
subsequent to June 30, 2024.
LISTING EXPENSES
Listing expenses represent professional fees, underwriting commission, and fees incurred
in connection with the Listing and the Global Offering. Our listing expenses are estimated to
be approximately HK$105.2 million (including underwriting commission) accounting for 7.5%
of the gross proceeds of the Global Offering (assuming an Offer Price of HK$58.00 per Share,
being the mid-point of the Offer Price range stated in this prospectus, and no exercise of the
Offer Size Adjustment Option and the Over-allotment Option). Among our listing expenses,
approximately HK$71.8 million is directly attributable to the issuance of Shares and will be
charged to equity upon completion of the Listing, and approximately HK$33.4 million has been
or will be charged to our consolidated statements of profit or loss. The listing expenses we
incurred in the Track Record Period and expect to incur would consist of approximately
HK$54.0 million underwriting related expenses and fees (including but not limited to
commissions and fees), approximately HK$33.4 million non-underwriting-related expenses
and fees of the Joint Sponsors, legal advisors and reporting accountant and approximately
HK$17.8 million for other non-underwriting-related fees and expenses. During the Track
Record Period, we incurred RMB23.7 million of listing expenses, among which, RMB8.3
million was included in prepayments, other receivables and other current assets and will be
subsequently charged to our equity upon completion of the Listing and RMB15.4 million was
charged to our consolidated statements of profit or loss.
The listing expenses above are the latest practicable estimate for reference only, and the
actual amount may differ from this estimate.
NO MATERIAL ADVERSE CHANGE
Our Directors confirmed that, as of the date of this prospectus, there has been no material
adverse change in our financial position since June 30, 2024, and there has been no event since
June 30, 2024 that would materially affect the information as set out in the Accountants’ Report
in Appendix I to this prospectus.
FINANCIAL INFORMATION
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THE CORNERSTONE PLACING
The Company, the Joint Sponsors and the Overall Coordinators have entered into
cornerstone investment agreements (each a “ Cornerstone Investment Agreement ” and
collectively, the “ Cornerstone Investment Agreements ”) with the cornerstone investors set
out below (each a “ Cornerstone Investor ” and collectively, the “ Cornerstone Investors ”),
pursuant to which the Cornerstone Investors have agreed to, subject to certain conditions,
subscribe, or cause their designated entities to subscribe, at the Offer Price for such number of
Offer Shares (rounded down to the nearest whole board lot of 300 Shares) that may be
purchased for an aggregate amount of US$50.00 million (or approximately HK$388.47 million,
calculated based on an exchange rate of US$1.00 to HK$7.76930) (exclusive of the brokerage,
SFC transaction levy, AFRC transaction levy and Stock Exchange trading fee) (the
“Cornerstone Placing ”).
Assuming an Offer Price of HK$55.65 per Share, being the low-end of the indicative
Offer Price range set out in this prospectus, the total number of Offer Shares to be subscribed
by the Cornerstone Investors would be 6,980,100 Offer Shares, representing (i) approximately
28.94% of the Offer Shares pursuant to the Global Offering and approximately 2.89% of the
total issued share capital of the Company immediately following the completion of the Global
Offering (assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised); or (ii) approximately 21.88% of the Offer Shares pursuant to the Global Offering
and approximately 2.80% of the total issued share capital of the Company immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are exercised in full).
Assuming an Offer Price of HK$58.00 per Share, being the mid-point of the indicative
Offer Price range set out in this prospectus, the total number of Offer Shares to be subscribed
by the Cornerstone Investors would be 6,697,200 Offer Shares, representing (i) approximately
27.77% of the Offer Shares pursuant to the Global Offering and approximately 2.77% of the
total issued share capital of the Company immediately following the completion of the Global
Offering (assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised); or (ii) approximately 21.00% of the Offer Shares pursuant to the Global Offering
and approximately 2.69% of the total issued share capital of the Company immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are exercised in full).
CORNERSTONE INVESTORS
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Assuming an Offer Price of HK$60.35 per Share, being the high-end of the indicative
Offer Price range set out in this prospectus, the total number of Offer Shares to be subscribed
by the Cornerstone Investors would be 6,436,200 Offer Shares, representing (i) approximately
26.68% of the Offer Shares pursuant to the Global Offering and approximately 2.67% of the
total issued share capital of the Company immediately following the completion of the Global
Offering (assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised); or (ii) approximately 20.18% of the Offer Shares pursuant to the Global Offering
and approximately 2.58% of the total issued share capital of the Company immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are exercised in full).
The Company is of the view that, leveraging on the Cornerstone Investors’ investment,
the cornerstone investment will help raise the profile of the Company and to signify that such
investors have confidence in the Group’s business and prospect. The Company became
acquainted with the Cornerstone Investors or through introduction by the Overall Coordinators
for the purpose of the Global Offering.
The Cornerstone Placing will form part of the International Offering, and, save as
otherwise obtained consent from the Stock Exchange, the Cornerstone Investors will not
acquire any Offer Shares under the Global Offering other than pursuant to the Cornerstone
Investment Agreements. The Offer Shares to be subscribed by the Cornerstone Investors will
rank pari passu in all respects with the fully paid Shares in issue and all the Shares to be
subscribed by the Cornerstone Investors will be counted towards the public float for the
purpose of Rule 8.08 of the Listing Rules. Immediately following the completion of the Global
Offering, the Cornerstone Investors will not have any Board representation in the Company;
and none of the Cornerstone Investors will become a Substantial Shareholder. The Cornerstone
Investors do not have any preferential rights in the Cornerstone Investment Agreements
compared with other public Shareholders, other than a guaranteed allocation of the relevant
Offer Shares at the Offer Price.
As confirmed by each of the Cornerstone Investors, there are no side agreements or
arrangements between the Company and the Cornerstone Investors, or any benefit, direct or
indirect, conferred on the Cornerstone Investors by virtue of or in relation to the Global
Offering other than a guaranteed allocation of the relevant Offer Shares at the Offer Price.
Certain Cornerstone Investors have agreed that the Company and the Overall
Coordinators in their sole discretion may defer the delivery of all or part of the Offer Shares
it will subscribe to on a date later than the Listing Date. Such delayed delivery arrangement
is in place to facilitate the over-allocation in the International Offering. There will be no
delayed delivery if there is no over-allocation in the International Offering. All Cornerstone
Investors have agreed to pay for the relevant Offer Shares that they have subscribed before
dealings in the Company’s Shares commence on the Stock Exchange.
CORNERSTONE INVESTORS
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To the best of the knowledge, information and belief of the Company, (i) each of the
Cornerstone Investors and its ultimate beneficial owners is an Independent Third Party; (ii)
none of the Cornerstone Investors is accustomed to take and has not taken instructions from the
Company, the Directors, chief executive, Controlling Shareholders, substantial Shareholders,
existing Shareholders or any of its subsidiaries or their respective close associates in relation
to the acquisition, disposal, voting or other disposition of the Offer Shares; and (iii) none of
the subscription of the Offer Shares by the Cornerstone Investors is financed by the Company,
the Directors, chief executive, Controlling Shareholders, substantial Shareholders, existing
Shareholders or any of its subsidiaries or their respective close associates. In addition, to the
best knowledge of our Company, save that Fullgoal HK is a wholly-owned subsidiary of
Fullgoal Fund, each of the Cornerstone Investors is independent from each other and makes
independent investment decisions.
To the best knowledge of the Company and as confirmed by each of the Cornerstone
Investors, (i) each of the Cornerstone Investors’ subscription under the Cornerstone Investment
Agreements would be financed by their own internal resources or the assets managed for its
investors (in the case of Cornerstone Investors which are funds or investment managers); and
(ii) all necessary approvals have been obtained with respect to the Cornerstone Placing, and
that no specific approval from any stock exchange (if relevant) or its shareholders is required
for the relevant cornerstone investment.
The number of Offer Shares to be subscribed by the Cornerstone Investors pursuant to the
Cornerstone Placing may be affected by reallocation of the Offer Shares between the
International Offering and the Hong Kong Public Offering in the event of over-subscription
under the Hong Kong Public Offering as described in the section headed “ Structure of the
Global Offering — The Hong Kong Public Offering — Reallocation .” The Company and
Overall Coordinators have the absolute discretion, but not obliged, to deduct the number of
Offer Shares to be subscribed by the Cornerstone Investors on a pro rata basis under the Hong
Kong Public Offering pursuant to Practice Note 18 of the Listing Rules. Details of the actual
number of Offer Shares to be allocated to the Cornerstone Investors will be disclosed in the
allotment results announcement of the Company to be published on or around January 9, 2025.
CORNERSTONE INVESTORS
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The table below sets forth the details of the Cornerstone Placing:
Assuming the Offer Size Adjustment Option is not exercised
Cornerstone Investors
Total
Investment
Amount
Indicative
Offer Price
Number
of Offer
Shares to be
subscribed (1)
Assuming the Over-allotment Option is not exercised Assuming the Over-allotment Option is fully exercised
Approximate
%o ft h e
International
Offer Shares
Approximate
%o ft h e
Offer Shares
Approximate % of
the total issued share
capital of the Company
immediately following
the completion of the
Global Offering
Approximate
%o ft h e
International
Offer Shares
Approximate
%o ft h e
Offer Shares
Approximate % of
the total issued share
capital of the Company
immediately following
the completion of the
Global Offering
(US$ in million) (HK$)
Greenwoods 20.00 55.65 2,792,100 12.86% 11.58% 1.16% 11.02% 10.07% 1.14%
58.00 2,679,000 12.34% 11.11% 1.11% 10.58% 9.66% 1.09%
60.35 2,574,600 11.86% 10.67% 1.07% 10.17% 9.28% 1.05%
UBS AM Singapore 20.00 55.65 2,792,100 12.86% 11.58% 1.16% 11.02% 10.07% 1.14%
58.00 2,679,000 12.34% 11.11% 1.11% 10.58% 9.66% 1.09%
60.35 2,574,600 11.86% 10.67% 1.07% 10.17% 9.28% 1.05%
Fullgoal Investors
Fullgoal Fund 7.00 55.65 977,100 4.50% 4.05% 0.40% 3.86% 3.52% 0.40%
58.00 937,500 4.32% 3.89% 0.39% 3.70% 3.38% 0.38%
60.35 900,900 4.15% 3.74% 0.37% 3.56% 3.25% 0.37%
Fullgoal HK 3.00 55.65 418,800 1.93% 1.74% 0.17% 1.65% 1.51% 0.17%
58.00 401,700 1.85% 1.67% 0.17% 1.59% 1.45% 0.16%
60.35 386,100 1.78% 1.60% 0.16% 1.52% 1.39% 0.16%
Notes:
(1) Subject to rounding down to the nearest whole board lot of 300 Shares. Calculated based on the exchange rate set out in the section headed “ Information about this Prospectus
and the Global Offering — Exchange Rate Conversion .”
CORNERSTONE INVESTORS
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--- page 332 ---
Assuming the Offer Size Adjustment Option is exercised in full
Cornerstone Investors
Total
Investment
Amount
Indicative
Offer Price
Number
of Offer
Shares to be
subscribed (1)
Assuming the Over-allotment Option is not exercised Assuming the Over-allotment Option is fully exercised
Approximate
%o ft h e
International
Offer Shares
Approximate
%o ft h e
Offer Shares
Approximate % of
the total issued share
capital of the Company
immediately following
the completion of the
Global Offering
Approximate
%o ft h e
International
Offer Shares
Approximate
%o ft h e
Offer Shares
Approximate % of
the total issued share
capital of the Company
immediately following
the completion of the
Global Offering
(US$ in million) (HK$)
Greenwoods 20.00 55.65 2,792,100 11.02% 10.07% 1.14% 9.47% 8.75% 1.12%
58.00 2,679,000 10.58% 9.66% 1.09% 9.09% 8.40% 1.07%
60.35 2,574,600 10.17% 9.28% 1.05% 8.73% 8.07% 1.03%
UBS AM Singapore 20.00 55.65 2,792,100 11.02% 10.07% 1.14% 9.47% 8.75% 1.12%
58.00 2,679,000 10.58% 9.66% 1.09% 9.09% 8.40% 1.07%
60.35 2,574,600 10.17% 9.28% 1.05% 8.73% 8.07% 1.03%
Fullgoal Investors
Fullgoal Fund 7.00 55.65 977,100 3.86% 3.52% 0.40% 3.31% 3.06% 0.39%
58.00 937,500 3.70% 3.38% 0.38% 3.18% 2.94% 0.38%
60.35 900,900 3.56% 3.25% 0.37% 3.06% 2.82% 0.36%
Fullgoal HK 3.00 55.65 418,800 1.65% 1.51% 0.17% 1.42% 1.31% 0.17%
58.00 401,700 1.59% 1.45% 0.16% 1.36% 1.26% 0.16%
60.35 386,100 1.52% 1.39% 0.16% 1.31% 1.21% 0.15%
Notes:
(1) Subject to rounding down to the nearest whole board lot of 300 Shares. Calculated based on the exchange rate set out in the section headed “ Information about this Prospectus
and the Global Offering — Exchange Rate Conversion .”
CORNERSTONE INVESTORS
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--- page 333 ---
THE CORNERSTONE INVESTORS
The information about the Cornerstone Investors set forth below has been provided by the
Cornerstone Investors in connection with the Cornerstone Placing.
Greenwoods
Greenwoods Asset Management Hong Kong Limited (“ Greenwoods ”) is a private fund
management company incorporated in Hong Kong with limited liability. Established in 2005,
Greenwoods is one of the largest and earliest China-focused asset managers mainly
specializing in investing into companies in the Greater China region. Greenwoods focuses on
fundamental research, value investments, and local due diligence. Investors of funds and
accounts managed by Greenwoods includes institutional investors and high-net-worth
individuals professional investors. Mr. Jiang Jinzhi is the Chairman, a major shareholder and
an ultimate beneficial owner of Greenwoods. As confirmed by Greenwoods, the subscription
of the Offer Shares as a cornerstone investor will be made by Greenwoods in its capacity as
the investment manager of Golden China Master Fund and no single ultimate beneficial owner
holds 30% or more interests in Golden China Master Fund.
UBS AM Singapore
UBS Asset Management (Singapore) Ltd. (“ UBS AM Singapore ”), a company
incorporated in Singapore in December 1993, has entered into a cornerstone investment
agreement with the Company, the Joint Sponsors and the Overall Coordinators, in its capacity
as the delegate of the investment manager for and on behalf of the following fund(s): (i) UBS
(Lux) Equity Fund — Greater China, (ii) UBS (Lux) Equity Fund — China Opportunity, (iii)
UBS (HK) Fund Series — China Opportunity Equity, (iv) UBS (Lux) Equity SICA V — All
China, (v) UBS (LUX) INVESTMENT SICA V — CHINA A OPPORTUNITY , (vi) UBS (CAY)
— CHINA A OPPORTUNITY , (vii) UBS (Lux) Key Selection SICA V — China Allocation
Opportunity, and (viii) certain other segregated accounts and mandates. As confirmed by UBS
AM Singapore, no single ultimate beneficial owner holds 30% or more interests in those funds.
UBS AM Singapore is a wholly owned subsidiary of UBS Asset Management AG, an
investment management company, which is wholly ultimately owned by UBS Group AG,
which is a company organized under Swiss law as a corporation that has issued shares of
common stock to investors. UBS Group AG’s shares are listed on the SIX Swiss Exchange
(stock code: UBSG) and the New Y ork Stock Exchange (stock code: UBS).
Fullgoal Investors
Fullgoal Fund Management Co., Ltd. (“ Fullgoal Fund ”) and Fullgoal Asset Management
(HK) Limited (“ Fullgoal HK ”, together with Fullgoal Fund, the “ Fullgoal Investors ”) have,
respectively, entered into cornerstone investment agreements with the Company, the Joint
Sponsors and the Overall Coordinators.
CORNERSTONE INVESTORS
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Fullgoal Fund
Fullgoal Fund is a fund management company established in China in April 1999, and is
one of the first ten fund management companies authorized by the CSRC and other regulatory
authorities to receive full license to provide asset management services in the PRC. Fullgoal
Fund has a registered capital of RMB520 million and its main scope of business includes the
provision of traditional fund management services, fund raising, fund sale and asset
management solutions to both domestic and overseas clients. Fullgoal Fund is also the first
fund management company with foreign equity participation among the first 10 fund
management companies in China. The average monthly scale of non-monetary market mutual
funds under the management of Fullgoal Fund was approximately RMB610 billion for the third
quarter of 2024. As confirmed by Fullgoal Fund, the relevant funds proposed to subscribe for
the Offer Shares under the management of Fullgoal Fund are all open-ended publicly raised
securities investment funds registered with the CSRC.
The shareholders of Fullgoal Fund include (i) Haitong Securities Company Limited ( ऎ
ʮ̡) (listed on the Shanghai Stock Exchange with stock code 600837.SH and
Hong Kong Stock Exchange with stock code 6837.HK), holding 27.775% in Fullgoal Fund; (ii)
Shenwan Hongyuan Securities Co., Ltd. (ʮ̡), a wholly-owned subsidiary
of Shenwan Hongyuan Group Co., Ltd. (ʮ̡) (listed on the Shenzhen
Stock Exchange with stock code 000166.SZ and Hong Kong Stock Exchange with stock code
6806.HK), holding 27.775% in Fullgoal Fund; (iii) Bank of Montreal (listed on the Toronto
Stock Exchange with stock code BMO), holding 27.775% in Fullgoal Fund, and (iv) Shandong
Financial Asset Management Co., Ltd. (ʮ̡), holding 16.675%
in Fullgoal Fund.
Fullgoal HK
Established in 2012 in Hong Kong SAR, Fullgoal HK is a wholly owned subsidiary of
Fullgoal Fund. Fullgoal HK has Type 1 (Dealing in Securities), Type 4 (Advising on Securities)
and Type 9 (Asset Management) licenses issued by the SFC. As confirmed by Fullgoal HK, the
subscription of the Offer Shares as a cornerstone investor will be made by Fullgoal HK in its
capacity as the sole management shareholder or investment manager of certain funds under its
management, and no single ultimate beneficial owner holds 30% or more interests in such
funds except for one individual underlying professional investor who, to the best knowledge
of Fullgoal HK, is an Independent Third Party of the Company.
CLOSING CONDITIONS
The obligation of each Cornerstone Investor to subscribe for the Offer Shares under the
respective Cornerstone Investment Agreement is subject to, among other things, the following
closing conditions:
CORNERSTONE INVESTORS
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(i) the underwriting agreements for the Hong Kong Public Offering and the
International Offering being entered into and having become effective and
unconditional (in accordance with their respective original terms or as subsequently
waived or varied by agreement of the parties thereto) by no later than the time and
date as specified in these underwriting agreements, and neither of the aforesaid
underwriting agreements having been terminated;
(ii) the Offer Price having been agreed upon between the Company and the Overall
Coordinators (for themselves and on behalf of the underwriters of the Global
Offering);
(iii) the Listing Committee of the Stock Exchange having granted the approval for the
listing of, and permission to deal in, the Shares (including the Shares under the
Cornerstone Placing) as well as other applicable waivers and approvals and such
approval, permission or waiver having not been revoked prior to the commencement
of dealings in the Shares on the Stock Exchange;
(iv) no laws shall have been enacted or promulgated by any governmental authorities
which prohibits the consummation of the transactions contemplated in the Global
Offering or the respective Cornerstone Investment Agreement, and there being no
orders or injunctions from a court of competent jurisdiction in effect precluding or
prohibiting consummation of such transactions; and
(v) the respective agreements, representations, warranties, undertakings, confirmations
and acknowledgements of the Cornerstone Investors under the respective
Cornerstone Investment Agreement are accurate and true in all respects and not
misleading and that there is no breach of the respective Cornerstone Investment
Agreement on the part of the relevant Cornerstone Investor.
RESTRICTIONS ON THE CORNERSTONE INVESTORS
Each Cornerstone Investor has agreed that without the prior written consent of the
Company, the Joint Sponsors and the Overall Coordinators, it will not, and will cause its
affiliates not to, whether directly or indirectly, at any time during the period of six months
following the Listing Date (the “ Lock-up Period ”), dispose of, in any way, any of the Offer
Shares it has purchased, pursuant to the respective Cornerstone Investment Agreement, save for
certain limited circumstances, such as transfers to any of its wholly-owned subsidiaries who
will be bound by the same obligations of the Cornerstone Investor, including the Lock-up
Period restriction.
CORNERSTONE INVESTORS
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FUTURE PLANS
For a detailed description of our future plans, see “Business — Strategies.”
USE OF PROCEEDS
Assuming an Offer Price of HK$58.00 per Offer Share (being the midpoint of the range
of the Offer Price stated in this prospectus), we estimate that we will receive net proceeds of
approximately HK$1,294 million from the Global Offering after deducting the underwriting
commissions and other estimated expenses in connection with the Global Offering (assuming
the Offer Size Adjustment Option and the Over-allotment Option are not exercised). We intend
to use our proceeds for the purposes and in the amounts set forth below.
 Approximately 25%, or HK$323 million, will be used to enhance our research and
development capabilities in relation to product design and development. Our
efficient research and development laid a solid foundation for our product strength,
and enabled us to obtain an extensive patent portfolio which includes but not limited
to patents related to our production techniques, toy assembly structure and toy
connecting mechanism. Having strong research and development capabilities is
therefore crucial to the future expansion of our product offering. As of June 30,
2024, approximately 64% of our employees were engaged in research and
development, of which approximately 84% were focused on product-related
research and development functions. We follow a consumer-centric research and
development philosophy, with a particular focus on consumer feedback and
consumer experience, and we apply our consumer insights throughout the entire
process, from product design to launch. Going forward, we plan to continue to
strengthen and enhance our research and development capabilities in areas including
product conceptualization, toy mechanical design, commercialization planning and
production technologies such as multi-color molding techniques and packaging
automation, and recruit, retain and train talents for product research and
development. In particular, we plan to expand our research and development team
to include product design talents such as those who are experienced in toy or
relevant product structural design or proficient in various design software, and
product development talents such as those who are experienced in the development
of IP-based toys, as well as international talents that have a combination of
experiences in product research and development and overseas markets, so as to
better support our overseas business expansion. In particular, we plan to hire an
additional of approximately 400 research and development employees by 2027 with
competitive compensation package. See “Business — Strategies — Build a team of
high quality global talents.”
 Approximately 25%, or HK$323 million, will be used to invest in core production
resources such as molds and our own scaled factories specializing in the production
of assembly character toys to implement our growth strategy of capturing all
demographics, all price segments and global consumers and to expand and optimize
FUTURE PLANS AND USE OF PROCEEDS
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our production resources. See “Business — Strategies — Solidify our leadership
position in assembly character toys by continuously capturing growth opportunities
across all demographics, all price segments and global consumers.” In particular:
o Approximately 15%, or HK$194 million, will be used to invest in molds, a core
production resource. Molds are essential and key tools for producing the
various standard and customized components of assembly character toys. The
quality of components and production efficiency largely depend on molding
accuracy and the technique, and our past capital expenditure were mainly for
molds. As such, we consider investment in molds to be important in ensuring
the high quality standard, consistency in quality and consumer experience,
efficiency of product launch and cost advantages of our products. We plan to
procure more molds (particularly molds with high accuracy and multi-cavity
molds), so as to satisfy the growing market demand for our quality-for-money
products brought by our business expansion.
o Approximately 10%, or HK$129 million, will be used to partially fund the
establishment of our own production capacity. Having our own production
capacity is important for us to solidify the efficiency and cost advantages of
scaled production. We plan to realize the best business and financial returns
with the optimal balance between the self-operated production capacity and
partner factories’ production capacity. Specifically, we seek to achieve
economies of scale efficiently by considering a range of factors related to the
potential self-operated factory, including cost, quality control, production
capacity, production delivery and logistics. We expect to complete the
self-operated factory by or around the end of 2026 with a designed capacity of
approximately nine million units per month. We will provide our self-operated
factory with advanced toy production equipment, and realize a high degree of
standardization and automation. Our own factories help establish our own
production capabilities for products, and would effectively complement our
partner factory network.
 Approximately 20%, or HK$259 million, will be used to further enrich our IP
portfolio to carry out our growth strategies. See “Business — Strategies — Solidify
our leadership position in assembly character toys by continuously capturing growth
opportunities across all demographics, all price segments and global consumers.” In
particular:
o Character toy market is the largest segment of the global toy market by form,
which has a market size of RMB345.8 billion in 2023, and is expected to grow
at a CAGR of 9.3% from 2023 to 2028, much higher than the 1.2% CAGR of
non-character toy segment during the same period. Wide application of IPs is
one of the key factors driving the growth of character toy segment, particularly
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the assembly character toy segment. As assembly character toys can efficiently
commercialize the IPs with products covering wide demographics, price
segments and global consumers, IP proprietors are increasingly attracted to this
product category.
o We plan to meet the needs of diverse consumers and fans and reach global
consumers across different age groups through in-house IP development and
extensive cooperation with proprietors of renowned IPs. In particular, we plan
to (i) continue to invest in content production relating to our self-developed
IPs, primarily in the form of animation, including for existing self-developed
IPs (Magic Blocks and Hero Infinity) and other potential self-developed IPs in
the future. Approximately 5%, or HK$65 million, will be used in this respect;
(ii) strengthen our efforts in IP development through collaboration, including
jointly investing in IP contents to deepen cooperation with selected proprietors
of renowned IPs who are experienced in IP development and
commercialization. Through such joint investment, we aim to establish and
enhance strategic cooperation with IP proprietors and create and develop IPs
that we can use at more favorable commercial terms. Approximately 10%, or
HK$129 million, will be used in this respect; and (iii) solidify and expand our
licensed IP portfolio by forming new licensing arrangements for high quality
and renowned IPs, as well as solidifying our existing collaboration with
proprietors of renowned IPs through extending the license periods and
expanding product categories and geographic coverage of the IPs.
Approximately 5%, or HK$65 million, will be used in this respect. We look for
IPs that are widely popular and can potentially complement our current product
offering and further expand our target consumer groups. Particularly, we take
into account factors including popularity, consumer preference, product
adaptability and product offering expansion potential when selecting IPs.
 Approximately 20%, or HK$259 million, will be used for sales and marketing
efforts, especially content-driven marketing activities, to improve brand recognition
and product popularity. See “Business — Strategies — Solidify our leadership
position in assembly character toys by continuously capturing growth opportunities
across all demographics, all price segments and global consumers” and “— Build a
team of high quality global talents.” In particular:
o Approximately 10%, or HK$129 million, will be used for marketing and
promotion in China and overseas markets. We plan to establish and enhance
our overseas presence in the United States, European and Southeast Asian
countries such as Singapore, Malaysia, and Thailand. We plan to conduct more
content-driven online marketing activities to reach and maintain our large base
of consumers, fans and BFCs, thereby establishing a deeply resonant brand
image and capturing consumers’ mind. In addition, we plan to continuously
expand domestic and overseas distribution and direct sales channels and invest
in sales network. For example, we plan to set up more product display and
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promotion counters, host and participate in more model and toy exhibitions,
and strengthen collaboration with major e-commerce and social media
platforms. We also plan to open a few flagship stores in selected major cities
in the near future. Particularly, we plan to open one flagship store in 2025 and
two to four flagship stores in 2026 in selected first-tier cities. These stores can
serve as physical touchpoints where customers can experience our products
firsthand and provide immediate reactions and opinions. Additionally, flagship
stores create a space for building stronger relationships with loyal customers,
fostering a deeper sense of community.
o Approximately 10%, or HK$129 million, will be used for expanding the sales
and marketing team and other purposes in relation to sales, marketing and
promotion. We plan to recruit and retain talents with experience in sales and
marketing, particularly those who have expertise in offline channel and
overseas market expansion, to support our further efficient expansion in China
(especially in lower-tier cities) and overseas in terms of number of retail
outlets and geographic coverage, so as to realize growth in the sales of our
diverse, quality-for-money and fun products in the global market. In particular,
we plan to hire at least an additional of 50 sales and marketing employees by
2025 with competitive compensation package.
 Approximately 10%, or HK$129 million, will be used for working capital and other
general corporate purposes.
In the event that the Offer Price is set at the maximum Offer Price or the minimum Offer
Price of the indicative Offer Price range, the net proceeds of the Global Offering will increase
or decrease by approximately HK$54 million, respectively. We intend to apply the additional
or reduced net proceeds to the above uses on a pro rata basis.
The additional net proceeds that we would receive if the Over-allotment Option and the
Offer Size Adjustment Option were exercised in full would be (i) HK$449 million (assuming
an Offer Price of HK$60.35 per Share, being the maximum Offer Price of the indicative Offer
Price range), (ii) HK$432 million (assuming an Offer Price of HK$58.00 per Share, being the
mid-point of the indicative Offer Price range) and (iii) HK$414 million (assuming an Offer
Price of HK$55.65 per Share, being the minimum Offer Price of the indicative Offer Price
range). We intend to apply the additional net proceeds to the above uses on a pro rata basis.
To the extent that the net proceeds of the Global Offering are not immediately used for
the above purposes or if we are unable to effect any part of our future development plans as
intended, we may hold such funds in short-term interest-bearing accounts at licensed
commercial banks and/or other authorized financial institutions (as defined under the
Securities and Futures Ordinance or applicable laws and regulations in other jurisdictions). In
such event, we will comply with the appropriate disclosure requirements under the Listing
Rules.
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HONG KONG UNDERWRITERS
Goldman Sachs (Asia) L.L.C.
Huatai Financial Holdings (Hong Kong) Limited
Futu Securities International (Hong Kong) Limited
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering.
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a
conditional basis. The International Offering is expected to be fully underwritten by the
International Underwriters.
The Global Offering comprises the Hong Kong Public Offering of initially 2,412,300
Hong Kong Offer Shares and the International Offering of initially 21,708,000 International
Offering Shares, subject, in each case, to reallocation on the basis as described in the section
headed “Structure of the Global Offering” in this prospectus as well as to the Offer Size
Adjustment Option and the Over-allotment Option (in the case of the International Offering).
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, the Company is offering the Hong
Kong Offer Shares for subscription on the terms and conditions set out in this prospectus and
the Hong Kong Underwriting Agreement at the Offer Price.
Subject to (a) the Listing Committee granting approval for the listing of, and permission
to deal in, the Shares (including any additional Shares that may be issued pursuant to the
exercise of the Offer Size Adjustment Option and the Over-allotment Option) on the Main
Board of the Stock Exchange and such approval not having been subsequently revoked prior
to the commencement of trading of the Shares on the Stock Exchange and (b) certain other
conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters
have agreed severally but not jointly to procure subscribers for, or themselves to subscribe for,
their respective applicable proportions of the Hong Kong Offer Shares being offered which are
not taken up under the Hong Kong Public Offering on the terms and conditions set out in this
prospectus and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on, among other things, the
International Underwriting Agreement having been executed and becoming unconditional and
not having been terminated in accordance with its terms.
UNDERWRITING
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Grounds for termination
If any of the events set out below occur at any time prior to 8:00 a.m. on the Listing Date,
the Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters) shall
be entitled by written notice to the Company to terminate the Hong Kong Underwriting
Agreement with immediate effect:
(i) there develops, occurs, exists or comes into force:
(a) any new law or regulation or any change or development involving a
prospective change in existing law or regulation, or any change or development
involving a prospective change in the interpretation or application thereof by
any court or other competent authority in or affecting Hong Kong, the PRC,
Cayman Islands, BVI, Singapore, the United States, the United Kingdom, the
European Union (or any member thereof), Japan or any other jurisdictions
relevant to the Group (each a “ Relevant Jurisdiction ”); or
(b) any change or development involving a prospective change or development, or
any event or series of events likely to result in or representing a change or
development, or prospective change or development, in local, national,
regional or international financial, political, military, industrial, economic,
currency market, fiscal or regulatory or market conditions or any monetary or
trading settlement system (including, without limitation, conditions in stock
and bond markets, money and foreign exchange markets and inter-bank
markets, a change in the system under which the value of the Hong Kong
currency is linked to that of the currency of the United States or a change of
the Hong Kong dollars or of the Renminbi against any foreign currencies) in
or affecting any Relevant Jurisdiction; or
(c) any event or series of events in the nature of force majeure (including, without
limitation, acts of government, labour disputes, strikes, lock-outs, fire,
explosion, earthquake, flooding, tsunami, civil commotion, riots, public
disorder, acts of war, acts of terrorism (whether or not responsibility has been
claimed), acts of God, accident or interruption in transportation, destruction of
power plant, outbreak of diseases or epidemics including, but not limited to,
SARS, swine or avian flu, H5N1, H1N1, H1N7, H7N9, Ebola virus, Middle
East respiratory syndrome (MERS), COVID-19 and such related/mutated
forms, economic sanction) in or directly or indirectly affecting any Relevant
Jurisdiction; or
(d) any local, national, regional or international outbreak or escalation of
hostilities (whether or not war is or has been declared) or other state of
emergency or calamity or crisis in whatever form, political change, paralysis
of government operations, interruption or delay in transportation, other
industry action in or directly or indirectly affecting any Relevant Jurisdiction;
or
UNDERWRITING
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(e) any moratorium, suspension or restriction (including, without limitation, any
imposition of or requirement for any minimum or maximum price limit or price
range) in or on trading in securities generally on the Stock Exchange, the New
Y ork Stock Exchange, the NASDAQ Global Market, the London Stock
Exchange, the Tokyo Stock Exchange, the Singapore Stock Exchange, the
Shanghai Stock Exchange, or the Shenzhen Stock Exchange; or
(f) any general moratorium on commercial banking activities in Hong Kong
(imposed by the Financial Secretary or the Hong Kong Monetary Authority or
other competent governmental authority), New Y ork (imposed at Federal or
New Y ork State level or other competent governmental authority), London,
Singapore, the PRC, the European Union (or any member thereof), Japan,
Cayman Islands or any Relevant Jurisdiction or any disruption in commercial
banking or foreign exchange trading or securities settlement or clearance
services, procedures or matters in any Relevant Jurisdiction; or
(g) any (A) change or prospective change in exchange controls, currency exchange
rates or foreign investment regulations (including, without limitation, a change
of the Hong Kong dollars or RMB against any foreign currencies, a change in
the system under which the value of the Hong Kong dollars is linked to that of
the United States dollars or RMB is linked to any foreign currency or
currencies), or (B) any change or prospective change in taxation in any
Relevant Jurisdiction adversely affecting an investment in the Shares; or
(h) the issue or requirement to issue by the Company of a supplemental or
amendment to this prospectus, preliminary offering circular or offering circular
or other documents in connection with the offer and sale of the Shares pursuant
to the Companies Ordinance or the Listing Rules or upon any requirement or
request of the Stock Exchange, the SFC or the CSRC; or
(i) any change or development involving a prospective change which has the
effect of materialisation of any of the risks set out in the section headed “Risk
Factors” in this prospectus; or
(j) any order or petition for, or any demand by creditors for repayment of
indebtedness or a petition being presented for the winding-up or liquidation of
any member of the Group, or any member of the Group making any
composition or arrangement with its creditors or entering into a scheme of
arrangement or any resolution being passed for the winding-up of any member
of the Group or a provisional liquidator, receiver or manager being appointed
over all or part of the assets or undertaking of any member of the Group or
anything analogous thereto occurs in respect of any member of the Group; or
UNDERWRITING
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(k) any proceedings of any third party being threatened or instigated against any
member of the Group or chairman, chief executive officer, president or
Director of the Company; or
(l) any of the chairman, chief executive officer, president or Director of the
Company vacating his/her office; or
(m) any contravention by any Group member or any Director of the Companies
Ordinance, the PRC Company Law, the Listing Rules or any other Law; or
(n) non-compliance of this prospectus, the CSRC Filings or any other documents
used in connection with the contemplated subscription and sale of the Offer
Shares or any aspect of the Global Offering with the Listing Rules, the CSRC
Rules or any other applicable Law; or
(o) the imposition of economic sanctions, in whatever form, directly or indirectly,
by, or for, any other Relevant Jurisdiction on the Company or any member of
the Group.
which, in any such case individually or in the aggregate, in the sole and absolute opinion of
the Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters: (A)
is or will be or may be materially adverse to, or materially and prejudicially affects, the assets,
liabilities, business, general affairs, management, shareholder’s equity, profit, losses, results of
operations, position or condition (financial or otherwise), or prospects of the Company or the
Group as a whole; or (B) has or will have or may have a material adverse effect on the success
of the Global Offering or the level of Offer Shares being applied for or accepted or subscribed
for or purchased or the distribution of Offer Shares and/or has made or is likely to make or may
make it impracticable or inadvisable or incapable for any material part of the Hong Kong
Underwriting Agreement, the Hong Kong Public Offering or the Global Offering to be
performed or implemented as envisaged; or (C) makes or will make it or may make it
impracticable or inadvisable or incapable to proceed with the Hong Kong Public Offering
and/or the Global Offering or the delivery of the Offer Shares on the terms and in the manner
contemplated by this prospectus, the formal notice, the preliminary offering circular or the
offering circular; or (D) would have or may have the effect of making a part of the Hong Kong
Underwriting Agreement (including underwriting) incapable of performance in accordance
with its terms or which prevents the processing of applications and/or payments pursuant to the
Global Offering or pursuant to the underwriting thereof.
(ii) there has come to the notice of the Joint Sponsors and the Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters):
(a) a prohibition on the Company for whatever reason from allotting, issuing or
selling the Shares (including the Offer Size Adjustment Option Shares and the
Over-allotment Option Shares) pursuant to the terms of the Global Offering; or
UNDERWRITING
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(b) that any statement contained in the Hong Kong Public Offering Documents (as
defined in the Hong Kong Underwriting Agreement), the Operative Documents
(as defined in the Hong Kong Underwriting Agreement), the preliminary
offering circular and/or any notices, announcements, advertisements,
communications issued or used by or on behalf of the Company in connection
with the Hong Kong Public Offering (including any supplement or amendment
thereto) was or has become untrue, incomplete, incorrect in any material
respects or misleading or any forecasts, estimate, expressions of opinion,
intention or expectation expressed in the Offering Documents and/or any
notices, announcements, advertisements, communications so issued or used by
or on behalf of the Company are not fair and honest and made on reasonable
grounds or, where appropriate, based on reasonable assumptions, when taken
as a whole; or
(c) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this prospectus, not having been
disclosed in the Offering Documents, constitutes a material omission
therefrom; or
(d) either (i) there has been a breach of any of the representations and warranties,
of either the Hong Kong Underwriting Agreement or the International
Underwriting Agreement by any of the Company or the Controlling
Shareholders or (ii) any of the representations and warranties given by the
Company and the Controlling Shareholders in the Hong Kong Underwriting
Agreement or the International Underwriting Agreement, as applicable, is (or
would when repeated be) untrue, incorrect or misleading; or
(e) any experts (other than the Joint Sponsors) has withdrawn its respective
consent to the issue of this prospectus with the inclusion of its reports, letters,
summaries of valuations and/or legal opinions (as the case may be) and
references to its name included in the form and context in which it respectively
appears; or
(f) any event, act or omission which gives or is likely to give rise to any liability
of the Company and the Controlling Shareholders pursuant to the indemnities
given by the Company and the Controlling Shareholders under the Hong Kong
Underwriting Agreement; or
(g) any material breach of any of the obligations of the Company and the
Controlling Shareholders under the Hong Kong Underwriting Agreement or the
International Underwriting Agreement; or
UNDERWRITING
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(h) any material adverse change or prospective material adverse change in the
earnings, results of operations, business, business prospects, financial or
trading position, conditions (financial or otherwise) or prospects of any Group
Company; or
(i) a significant portion of the orders in the book-building process at the time of
the International Underwriting Agreement is entered into, or the investment
commitments by any cornerstone investors after signing of agreements with
such cornerstone investors, have been withdrawn, terminated or cancelled; or
(j) any person (other than the Joint Sponsors) has withdrawn or subject to
withdraw its consent to being named in any of the Hong Kong Public Offering
Documents or to the issue of any of the Hong Kong Public Offering
Documents; or
(k) Admission (as defined in the Hong Kong Underwriting Agreement) is refused
or not granted, other than subject to customary conditions, on or before the
Listing Date, or if granted, the Admission is subsequently withdrawn,
cancelled, qualified (other than by customary conditions), revoked or withheld;
or
(l) the Company has withdrawn the Offering Documents (and/or any other
documents issued or used in connection with the Global Offering) or the
Global Offering,
then the Overall Coordinators may (for themselves and on behalf of the Hong Kong
Underwriters), in their sole and absolute discretion and upon giving notice in writing to the
Company, terminate the Hong Kong Underwriting Agreement with immediate effect.
Undertakings to the Stock Exchange pursuant to the Listing Rules
Undertakings by the Company
Pursuant to Rule 10.08 of the Listing Rules, the Company has undertaken to the Stock
Exchange that it will not issue any further Shares or securities convertible into equity securities
of the Company (whether or not of a class already listed) or enter into any agreement to such
issue within six months from the Listing Date (whether or not such issue of Shares or securities
will be completed within six months from the Listing Date), except pursuant to the Global
Offering, the exercise of the Offer Size Adjustment Option and the Over-allotment Option or
for the circumstances permitted under Rule 10.08 of the Listing Rules.
UNDERWRITING
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Undertakings by Our Controlling Shareholders
Pursuant to Rule 10.07(1) of the Listing Rules, each member of our Controlling
Shareholders has undertaken to the Stock Exchange and to the Company that, he/she shall not
and shall procure that the relevant registered holder(s) shall not:
(a) in the period commencing on the date by reference to which disclosure of his/her
shareholding in the Company is made in this prospectus and ending on the date
which is six months from the Listing Date, dispose of, nor enter into any agreement
to dispose of or otherwise create any options, rights, interests or encumbrances in
respect of, any of the securities in respect of which its/his/her is shown by this
prospectus to be the beneficial owner(s); and
(b) In the period of six months commencing on the date on which the period referred to
in paragraph (a) above expires, dispose of, nor enter into any agreement to dispose
of or otherwise create any options, rights, interests or encumbrances in respect of,
any of the securities referred to in paragraph (a) above if, immediately following
such disposal or upon the exercise or enforcement of such options, rights, interests
or encumbrances, that its/his/her would cease to be a controlling shareholder.
Note (2) to Rule 10.07(2) of the Listing Rules provides that Rule 10.07 does not prevent
a Controlling Shareholder from using the Shares beneficially owned by him/her as security
(including a charge or pledge) in favor of an authorized institution (as defined in the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial loan.
Pursuant to Note (3) to Rule 10.07(2) of the Listing Rules, each of our Controlling
Shareholders has further undertaken to the Stock Exchange and to the Company that within the
period commencing on the date by reference to which disclosure of its/his/her shareholding in
the Company is made in this prospectus and ending on the date which is six months from the
Listing Date, he/she shall:
(i) when it/he/she pledges or charges any securities of the Company beneficially owned
by it/him/her in favor of an authorized institution (as defined in the Banking
Ordinance, Chapter 155 of the Laws of Hong Kong) for a bona fide commercial loan
pursuant to Note (2) to Rule 10.07(2) of the Listing Rules, immediately inform the
Company of such pledge/charge together with the number of securities so
pledged/charged; and
(ii) when it/he/she receives indications, either verbal or written, from the
pledgee/chargee that any of the pledged/charged securities of the Company will be
disposed of, immediately inform the Company of such indications.
We will inform the Stock Exchange as soon as we have been informed of the matters
referred to in paragraph (i) and (ii) above (if any) by any Controlling Shareholder and subject
to the requirements of the Listing Rules disclose such matters by way of an announcement
which is published in accordance with Rule 2.07C of the Listing Rules as soon as possible.
UNDERWRITING
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Undertakings pursuant to the Hong Kong Underwriting Agreement
(A) Undertakings by the Company
Except for the offer and sale of the Offer Shares pursuant to the Global Offering
(including pursuant to the Offer Size Adjustment Option and the Over-allotment Option),
during the period commencing on the date of the Hong Kong Underwriting Agreement and
ending on, and including, the date that is six months after the Listing Date (the “ First
Six-Month Period ”), the Company has undertaken to each of the Overall Coordinators, the
Sponsor-OC, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Hong Kong Underwriters, the Capital Market Intermediaries and the Joint Sponsors not to
without the prior written consent of the Joint Sponsors and the Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters) and unless in compliance with the
requirements of the Listing Rules:
(i) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree
to allot, issue or sell, assign, mortgage, charge, pledge, hypothecate, lend, grant or
sell any option, warrant, contract or right to subscribe for or purchase, grant or
purchase any option, warrant, contract or right to allot, issue or sell, or otherwise
transfer or dispose of or create an encumbrance over, or agree to transfer or dispose
of or create an encumbrance over, either directly or indirectly, conditionally or
unconditionally, or repurchase, any legal or beneficial interest in the share capital or
any other equity securities of the Company or any interest in any of the foregoing
(including, without limitation, any equity securities convertible into or
exchangeable or exercisable for or that represents the right to receive, or any
warrants or other rights to purchase, any share capital or other equity securities of
the Company, as applicable), or deposit any share capital or other equity securities
of the Company, as applicable, with a depositary in connection with the issue of
depositary receipts; or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership (legal or beneficial) of Shares
or any other equity securities of the Company or any interest in any of the foregoing
(including, without limitation, any equity securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any warrants
or other rights to purchase, any Shares or any other equity securities of the
Company); or
(iii) enter into any transaction with the same economic effect as any transaction
described in paragraphs (i) or (ii) above; or
(iv) offer to or agree to or announce any intention to effect any transaction specified in
paragraphs (i), (ii) or (iii) above, in each case, whether any of the transactions
specified in paragraphs (i), (ii) or (iii) above is to be settled by delivery of share
capital or such other equity securities, in cash or otherwise (whether or not the issue
of such share capital or equity other securities will be completed within the First
Six-Month Period).
UNDERWRITING
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During the period of six months commencing on the date on which the First Six-Month
Period expires (the “ Second Six-Month Period ”), the Company shall not enter into any of the
transactions specified in paragraphs (i), (ii) or (iii). In the event that the Company enters into
any of the transactions specified in paragraphs (i), (ii) or (iii) above or offers to or agrees to
or announces any intention to effect any such transaction, the Company shall take all
reasonable steps to ensure that it will not create a disorderly or false market in the securities
of the Company.
(B) Undertakings by Our Controlling Shareholders
Each of our Controlling Shareholders has undertaken to each of the Company, the Joint
Sponsors, the Overall Coordinators, the Sponsor-OC, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters and the Capital Market
Intermediaries that, without the prior written consent of the Joint Sponsors and the Overall
Coordinators (for themselves and on behalf of the Hong Kong Underwriters) that except
pursuant to the Global Offering (including pursuant to the Offer Size Adjustment Option and
the Over-allotment Option) and the Stock Borrowing Agreement, and except as otherwise and
unless in compliance with the requirements of the Listing Rules (including as permitted by
Note 2 and 3 to Rule 10.07 of the Listing Rules):
(i) he or she or it will not, and will procure that none of the relevant registered
holder(s), any nominee or trustee holding on trust for it and the companies
controlled by it will, at any time during the First Six-Month Period, (a) offer, pledge,
charge, allot, issue, sell, lend, mortgage, assign, contract to allot, issue or sell, sell
any option or contract to purchase, purchase any option, or contract to sell, grant or
agree to grant any option, right or warrant to purchase, lend or otherwise transfer or
dispose of or create an encumbrance over, or agree to transfer or dispose of either
directly or indirectly, conditionally or unconditionally, any of the Shares or other
equity securities of the Company or any interest therein (including but not limited
to any securities convertible into or exercisable or exchangeable for or that represent
the right to receive any such Shares or equity securities or any interest therein)
beneficially owned by it/him/her as at the Listing Date; or (b) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership (legal or beneficial) of such Shares or equity
securities or any interest beneficially owned by it/him/her as at the Listing Date
therein, as applicable, or any interest in any of the foregoing (including, without
limitation, any securities convertible into or exchangeable or exercisable for or that
represent the right to receive, or any warrants or other rights to purchase, any
Shares), or (c) enter into any transaction with the same economic effect as any
transaction specified in (a) or (b) above, or (d) offer to or agree to do any of the
transactions specified in (a), (b) or (c) above or announce any intention to do so, in
each case, whether any of the transactions specified in (a), (b) or (c) above
transactions is to be settled by delivery of Shares or such other equity securities, in
cash or otherwise;
UNDERWRITING
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--- page 349 ---
(ii) he or she or it will not, and will procure that none of the relevant registered
holder(s), any nominee or trustee holding on trust for it and the companies
controlled by it will, during the Second Six-Month Period, enter into any transaction
described in paragraph (i) (a), (b), (c) or (d) above or offer to or agree to or announce
any intention to effect any such transaction, if immediately following such
transaction, it will cease to be a controlling shareholder (as defined in the Listing
Rules) of the Company; and
(iii) until the expiry of the Second Six-Month Period, in the event that it enters into any
such transactions specified in paragraph (i) (a), (b), (c) or (d) above, or offers to or
agrees to or announces any intention to effect any such transaction, it will take all
reasonable steps to ensure that it will not create a disorderly or false market in the
Shares or other equity securities of the Company.
For the avoidance of doubt, any Share(s) that may be acquired by any of our Controlling
Shareholders from the secondary market after Listing shall not fall within the remit of
paragraphs (i) to (iii).
Undertakings by other existing Shareholders
Each of other existing Shareholders has undertaken to the Company, the Joint Sponsors
and the Overall Coordinators, save for certain customary circumstances, it shall not, at any
time during the period ending on, and including, the date that is six months from the Listing
Date, dispose of any Relevant Shares or any interest in any company or entity holding or
controlling (directly or indirectly) any Relevant Shares or, permit or cause a change in control
of any company or entity holding or controlling (directly or indirectly) any Relevant Shares,
and it shall procure that no company or entity holding or controlling (directly or indirectly) any
Relevant Shares or any nominee or trustee holding in trust for the Shareholder will dispose of
any Relevant Shares.
For the purpose of the above undertaking, “Relevant Shares” means any and all Shares,
as reclassified, redesignated and subdivided from the Shares as held by the Shareholder on the
date thereof in the manner as set out in this prospectus as if the reclassification, redesignation
and subdivision has been completed on the date thereof; “dispose of” means:
(A) offer, pledge, charge, sell, mortgage, lend, create, transfer, assign or otherwise
dispose, grant any option, warrant or right to purchase, sell, lend or otherwise
transfer or dispose of, either directly or indirectly, conditionally or unconditionally,
or create any third party right of whatever nature over any Relevant Shares or any
other securities convertible into or exercisable or exchangeable for such Relevant
Shares, or that represent the right to receive, such Relevant Shares, or any interest
in them; or
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(B) enter into any option, swap or other arrangement that transfers to another, in whole
or in part, any beneficial ownership of the Relevant Shares or any of the economic
consequences or incidents of ownership of Relevant Shares or any other securities
of the Company or any interest therein or which transfers or derives any significant
part of its value from such Relevant Shares; or
(C) enter into any transaction, directly or indirectly, with the same economic effect as
any transaction specified in paragraph (A) or (B) above; or
(D) offer to or agree or contract to effect or publicly disclose that it will or may enter
into any transaction specified in paragraph (A), (B) or (C) above,
in each case, whether any of the transactions specified in paragraph (A), (B) or (C) above is
to be settled by delivery of Relevant Shares or such other securities convertible into or
exercisable or exchangeable for the Relevant Shares of the Company or in cash or otherwise
(whether or not the issue of Relevant Shares or such other securities will be completed within
the aforesaid period).
Hong Kong Underwriters’ interests in the Company
Save for their respective obligations under the Hong Kong Underwriting Agreement, as
of the Latest Practicable Date, none of the Hong Kong Underwriters was interested, legally or
beneficially, directly or indirectly, in any Shares or any securities of any member of the Group
or had any right or option (whether legally enforceable or not) to subscribe for or purchase, or
to nominate persons to subscribe for or purchase, any Shares or any securities of any member
of the Group.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their
respective obligations under the Hong Kong Underwriting Agreement.
International Offering
International Underwriting Agreement
In connection with the International Offering, the Company and the Controlling
Shareholders expect to enter into the International Underwriting Agreement with, among
others, the International Underwriters. Under the International Underwriting Agreement and
subject to the Offer Size Adjustment Option and the Over-allotment Option, the International
Underwriters would, subject to certain conditions set out therein, agree severally but not jointly
to procure subscribers for, or themselves to subscribe for, their respective applicable
proportions of the International Offering Shares initially being offered pursuant to the
International Offering. It is expected that the International Underwriting Agreement may be
terminated on similar grounds as the Hong Kong Underwriting Agreement. Potential investors
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should note that in the event that the International Underwriting Agreement is not entered into,
the Global Offering will not proceed. See “Structure of the Global Offering — The
International Offering” in this prospectus.
Offer Size Adjustment Option
The Company is expected to grant to the Overall Coordinators the Offer Size Adjustment
Option, exercisable by the Overall Coordinators (for themselves and on behalf of the
International Underwriters) on or before the second Business Day prior to the Listing Date and
will lapse immediately thereafter, whichever is earlier, in writing, to require our Company to
allot and issue up to an aggregate of 3,618,000 additional Shares, representing approximately
15% of the initial Offer Shares in aggregate, at the same price per Share under the International
Offering to cover, among other things, any excess demand in the International Offering at the
absolute discretion of the Overall Coordinators. The Offer Size Adjustment Option provides
flexibility for the Overall Coordinators to increase the number of Offer Shares available for
purchase under the International Offering to cover additional market demand. See “Structure
of the Global Offering — Offer Size Adjustment Option.”
Over-allotment Option
The Company is expected to grant to the International Underwriters the Over-allotment
Option, exercisable by the Overall Coordinators on behalf of the International Underwriters at
any time from the Listing Date until 30 days after the last day for lodging applications under
the Hong Kong Public Offering, pursuant to which the Company may be required to issue up
to an aggregate of 4,160,700 Shares (representing not more than 15% of the number of Offer
Shares initially available under the Global Offering assuming the Offer Size Adjustment
Option is exercised in full) or up to an aggregate of 3,618,000 Shares (representing not more
than 15% of the number of Offer Shares being offered under the Global Offering assuming the
Offer Size Adjustment Option is not exercised), at the Offer Price, to cover over-allocations in
the International Offering, if any. See “Structure of the Global Offering — Over-allotment
Option” in this prospectus.
Commissions and Expenses
The Underwriters will receive an underwriting commission of approximately 2.7625% of
the aggregate Offer Price of all the Offer Shares (including any Offer Shares to be issued
pursuant to the exercise of the Offer Size Adjustment Option and the Over-allotment Option)
(the “ Gross Proceeds ”), according to the offering size based on the indicative Offer Price
range (the “ Underwriting Commission ”).
The Company may, at its sole discretion, pay to any one or more of the Underwriters a
discretionary incentive fee of an aggregate of up to 1.4875% of the Offer Price for all the Offer
Shares (including any Offer Shares to be issued pursuant to the exercise of the Offer Size
Adjustment Option and the Over-allotment Option) (the “ Discretionary Fees ”). Assuming that
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the Discretionary Fees are paid in full, the ratio of the Fixed Fees and Discretionary Fees
payable therefore is expected to be approximately 65:35, according to the offering size based
on the indicative Offer Price range.
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering,
the underwriting commission will not be paid to the Hong Kong Underwriters but will instead
be paid, at the rate applicable to the International Offering, and such commission will be paid
to the relevant International Underwriters.
The aggregate underwriting commissions and fees together with the Stock Exchange
listing fees, the SFC transaction levy, AFRC transaction levy and the Stock Exchange trading
fee, legal and other professional fees and printing and all other expenses relating to the Global
Offering (collectively, the “ Commissions and Fees ”) are estimated to be approximately
HK$105.2 million (assuming (i) the Offer Size Adjustment Option and the Over-allotment
Option are not exercised and (ii) an Offer Price of HK$58.00 per Offer Share, being the
mid-point of the indicative Offer Price range stated in this prospectus).
Indemnity
The Company has agreed to indemnify the Joint Sponsors, the Overall Coordinators, the
Sponsor-OC, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Hong Kong Underwriters and the Capital Market Intermediaries for certain losses which
they may suffer or incur, including losses arising from their performance of their obligations
under the Hong Kong Underwriting Agreement and any breach by the Company of the Hong
Kong Underwriting Agreement.
ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering
(together, the “ Syndicate Members ”) and their affiliates may each individually undertake a
variety of activities (as further described below) which do not form part of the underwriting or
stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments of the Company
and/or persons and entities with relationships with the Company and may also include swaps
and other financial instruments entered into for hedging purposes in connection with the
Group’s loans and other debt.
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In relation to the Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of the Shares, entering into transactions with
those buyers and sellers in a principal capacity, including as a lender to initial purchasers of
the Shares (which financing may be secured by the Shares) in the Global Offering, proprietary
trading in the Shares, and entering into over the counter or listed derivative transactions or
listed or unlisted securities transactions (including issuing securities such as derivative
warrants listed on a stock exchange) which have as their underlying assets, assets including the
Shares. Such transactions may be carried out as bilateral agreements or trades with selected
counterparties. Those activities may require hedging activity by those entities involving,
directly or indirectly, the buying and selling of the Shares, which may have a negative impact
on the trading price of the Shares. All such activities could occur in Hong Kong and elsewhere
in the world and may result in the Syndicate Members and their affiliates holding long and/or
short positions in the Shares, in baskets of securities or indices including the Shares, in units
of funds that may purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities
having the Shares as their underlying securities, whether on the Stock Exchange or on any
other stock exchange, the rules of the stock exchange may require the issuer of those securities
(or one of its affiliates or agents) to act as a market maker or liquidity provider in the security,
and this will also result in hedging activity in the Shares in most cases.
All such activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering” in this prospectus. Such
activities may affect the market price or value of the Shares, the liquidity or trading volume
in the Shares and the volatility of the price of the Shares, and the extent to which this occurs
from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or any person acting for
it) must not, in connection with the distribution of the Offer Shares, effect any
transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares), whether in the open market or otherwise,
with a view to stabilizing or maintaining the market price of any of the Offer Shares
at levels other than those which might otherwise prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the provisions
prohibiting insider dealing, false trading, price rigging and stock market
manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from time
to time, and expect to provide in the future, investment banking and other services to the
Company and each of its affiliates for which such Syndicate Members or their respective
affiliates have received or will receive customary fees and commissions.
In addition, the Syndicate Members or their respective affiliates may provide financing to
investors to finance their subscriptions of Offer Shares in the Global Offering.
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part
of the Global Offering. Goldman Sachs (Asia) L.L.C. and Huatai Financial Holdings (Hong
Kong) Limited are the Overall Coordinators of the Global Offering.
The listing of the Shares on the Stock Exchange is sponsored by the Joint Sponsors. The
Joint Sponsors have made an application on behalf of the Company to the Stock Exchange for
the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in
this prospectus.
24,120,300 Offer Shares will initially be made available under the Global Offering
comprising:
(a) the Hong Kong Public Offering of initially 2,412,300 Shares (subject to
reallocation) in Hong Kong as described in “— The Hong Kong Public Offering” in
this section below; and
(b) the International Offering of initially 21,708,000 Shares (subject to reallocation, the
Offer Size Adjustment Option and the Over-allotment Option) outside the United
States (including to professional and institutional investors within Hong Kong) in
offshore transactions in reliance on Regulation S and in the United States only to
QIBs in reliance of Rule 144A or any other available exemption from registration
under the U.S. Securities Act, as described in the sub-section headed “— The
International Offering” in this section below.
Investors may either:
(i) apply for Hong Kong Offer Shares under the Hong Kong Public Offering; or
(ii) apply for or indicate an interest for International Offering Shares under the
International Offering, but may not do both.
The Offer Shares will represent approximately 10.0% of the total Shares in issue
immediately following the completion of the Global Offering, assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised. If the Over-allotment
Option is exercised in full, the Offer Shares (including Shares issued pursuant to the full
exercise of the Over-allotment Option) will represent approximately 11.3% of the total Shares
in issue (assuming the Offer Size Adjustment Option is not exercised at all) or approximately
12.8% of the total Shares in issue (assuming the Offer Size Adjustment Option is exercised in
full) immediately following the completion of the Global Offering and the issue of Offer
Shares pursuant to the Over-allotment Option.
References in this prospectus to applications, application monies or the procedure for
applications relate solely to the Hong Kong Public Offering.
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THE HONG KONG PUBLIC OFFERING
Number of Offer Shares Initially Offered
The Company is initially offering 2,412,300 Shares for subscription by the public in Hong
Kong at the Offer Price, representing approximately 10% of the total number of Offer Shares
initially available under the Global Offering. The number of Offer Shares initially offered
under the Hong Kong Public Offering, subject to any reallocation of Offer Shares between the
International Offering and the Hong Kong Public Offering, will represent approximately 1.0%
of the total Shares in issue immediately following the completion of the Global Offering
(assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised).
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to institutional and professional investors in Hong Kong. Professional investors generally
include brokers, dealers, companies (including fund managers) whose ordinary business
involves dealing in shares and other securities and corporate entities that regularly invest in
shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in “—
Conditions of the Global Offering” in this section.
Allocation
Allocation of Offer Shares to investors under the Hong Kong Public Offering will be
based solely on the level of valid applications received under the Hong Kong Public Offering.
The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly
applied for by applicants. Such allocation could, where appropriate, consist of balloting, which
could mean that some applicants may receive a higher allocation than others who have applied
for the same number of Hong Kong Offer Shares, and those applicants who are not successful
in the ballot may not receive any Hong Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available under
the Hong Kong Public Offering (after taking into account any reallocation referred to below)
will be divided equally into two pools: pool A and pool B (with any odd lot being allocated to
pool A). The Hong Kong Offer Shares in pool A will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of HK$5
million (excluding the brokerage, the SFC transaction levy, AFRC transaction levy and the
Stock Exchange trading fee payable) or less. The Hong Kong Offer Shares in pool B will be
allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares
with an aggregate price of more than HK$5 million (excluding the brokerage, the SFC
transaction levy, AFRC transaction levy and the Stock Exchange trading fee payable) and up
to the total value in pool B.
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Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If any Hong Kong Offer Shares in one (but not both) of the
pools are unsubscribed, such unsubscribed Hong Kong Offer Shares will be transferred to the
other pool to satisfy demand in that other pool and be allocated accordingly. For the purpose
of the immediately preceding paragraph only, the “price” for Hong Kong Offer Shares means
the price payable on application therefor (without regard to the Offer Price as finally
determined). Applicants can only receive an allocation of Hong Kong Offer Shares from either
pool A or pool B and not from both pools. Multiple or suspected multiple applications under
the Hong Kong Public Offering and any application for more than 1,206,000 Hong Kong Offer
Shares (being approximately 50% of the 2,412,300 Offer Shares initially available under the
Hong Kong Public Offering) is liable to be rejected.
Reallocation and clawback
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 of the
Listing Rules requires a clawback mechanism to be put in place which would have the effect
of increasing the number of Offer Shares under the Hong Kong Public Offering to a certain
percentage of the total number of Offer Shares offered under the Global Offering if certain
prescribed total demand levels are reached.
If the International Offering is fully subscribed or oversubscribed and the number of Offer
Shares validly applied for under the Hong Kong Public Offering represents (a) 15 times or
more but less than 50 times; (b) 50 times or more but less than 100 times; and (c) 100 times
or more of the total number of Offer Shares initially available under the Hong Kong Public
Offering, then Offer Shares will be reallocated to the Hong Kong Public Offering from the
International Offering. As a result of such reallocation, the total number of Offer Shares
available under the Hong Kong Public Offering will be increased to 7,236,300 Offer Shares (in
the case of (a)), 9,648,300 Offer Shares (in the case of (b)) and 12,060,300 Offer Shares (in
the case of (c)), representing approximately 30%, approximately 40% and 50% of the total
number of Offer Shares initially available under the Global Offering, respectively (before any
exercise of the Offer Size Adjustment Option and the Over-allotment Option) (the “ PN18
Clawback ”). In each case, the additional Offer Shares reallocated to the Hong Kong Public
Offering will be allocated between pool A and pool B and the number of Offer Shares allocated
to the International Offering will be correspondingly reduced in such manner as the Overall
Coordinators deem appropriate.
If the Hong Kong Public Offering is not fully subscribed for, the Overall Coordinators
have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares to the
International Offering, in such proportions as the Overall Coordinators deem appropriate. In
addition, the Overall Coordinators may in their sole discretion reallocate Offer Shares from the
International Offering to the Hong Kong Public Offering to satisfy valid applications under the
Hong Kong Public Offering. In particular, if (i) the International Offering is not fully
subscribed and the Hong Kong Public Offering is fully subscribed or oversubscribed
irrespective of the number of times; or (ii) the International Offering is fully subscribed or
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oversubscribed and the Hong Kong Public Offering is fully subscribed or oversubscribed with
the number of Offer Shares validly applied for in the Hong Kong Public Offering representing
less than 15 times of the number of Shares initially available for subscription under the Hong
Kong Public Offering, the Overall Coordinators have the authority to reallocate International
Offer Shares originally included in the International Offering to the Hong Kong Public
Offering in such number as they deem appropriate, provided that in accordance with Chapter
4.14 of the Guide for New Listing Applicants issued by the Stock Exchange, the number of
International Offer Shares reallocated to the Hong Kong Public Offering should not exceed
2,412,300 Shares, increasing the total number of Offer Shares available under the Hong Kong
Public Offering to 4,824,600 Shares, representing twice the number of the Offer Shares
initially available under the Hong Kong Public Offering and the final Offer Price shall be fixed
at the bottom end of the indicative price range (i.e. HK$55.65 per Offer Share).
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering
will be allocated between pool A and pool B and the number of Offer Shares allocated to the
International Offering will be correspondingly reduced in such manner as the Overall
Coordinators deem appropriate.
Details of any reallocation of Offer Shares between the Hong Kong Public Offering and
the International Offering will be disclosed in the results announcement of the Global Offering,
which is expected to be published on Thursday, January 9, 2025.
In the event of a reduction in the number of Offer Shares being offered under the Global
Offering, the Overall Coordinators may at their discretion reallocate the number of Offer
Shares to be offered under the Hong Kong Public Offering and the International Offering.
Applications
Each applicant under the Hong Kong Public Offering will be required to give an
undertaking and confirmation in the application submitted by him that he and any person(s) for
whose benefit he is making the application has not applied for or taken up, or indicated an
interest for, and will not apply for or take up, or indicate an interest for, any International
Offering Shares under the International Offering. Such applicant’s application is liable to be
rejected if such undertaking and/or confirmation is/are breached and/or untrue (as the case may
be) or if he has been or will be placed or allocated International Offering Shares under the
International Offering.
Applicants under the Hong Kong Public Offering are required to pay, on application
(subject to application channel), the Offer Price of HK$60.35 per Offer Share in addition to the
brokerage, the SFC transaction levy, AFRC transaction levy and the Stock Exchange trading
fee payable on each Offer Share, amounting to a total of HK$18,287.59 for one board lot of
300 Shares. Further details are set out in the section headed “How to Apply for Hong Kong
Offer Shares” in this prospectus.
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THE INTERNATIONAL OFFERING
Number of Offer Shares Initially Offered
The International Offering will consist of an offering of initially 21,708,000 Shares,
representing approximately 90% of the total number of Offer Shares initially available under
the Global Offering (subject to reallocation, the Offer Size Adjustment Option and the
Over-allotment Option). The number of Offer Shares initially offered under the International
Offering, subject to any reallocation of Offer Shares between the International Offering and the
Hong Kong Public Offering, will represent approximately 9.0% of the total Shares in issue
immediately following the completion of the Global Offering (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised).
Allocation
The International Offering will include selective marketing of Offer Shares to QIBs in the
United States and institutional and professional investors and other investors anticipated to
have a sizeable demand for such Offer Shares. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities that regularly invest in shares and other
securities. Allocation of Offer Shares pursuant to the International Offering will be effected in
accordance with the “book-building” process described in “— Pricing of the Global Offering”
in this section and based on a number of factors, including the level and timing of demand, the
total size of the relevant investor’s invested assets or equity assets in the relevant sector and
whether or not it is expected that the relevant investor is likely to buy further Shares and/or
hold or sell its Shares after the Listing. Such allocation is intended to result in a distribution
of the Shares on a basis which would lead to the establishment of a solid professional and
institutional shareholder base to the benefit of the Group and the Shareholders as a whole.
The Overall Coordinators (on behalf of the International Underwriters) may require any
investor who has been offered Offer Shares under the International Offering and who has made
an application under the Hong Kong Public Offering to provide sufficient information to the
Overall Coordinators so as to allow it to identify the relevant applications under the Hong
Kong Public Offering and to ensure that they are excluded from any allocation of Offer Shares
under the Hong Kong Public Offering.
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Reallocation
The total number of Offer Shares to be issued or sold pursuant to the International
Offering may change as a result of the clawback arrangement described in “— The Hong Kong
Public Offering — Reallocation and clawback” in this section above, the exercise of the Offer
Size Adjustment Option and the Over-allotment Option in whole or in part and/or any
reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public
Offering.
OFFER SIZE ADJUSTMENT OPTION
In order to provide flexibility for the Overall Coordinators to increase the number of
Offer Shares available for purchase under the International Offering to cover additional market
demand, the Company is expected to grant to the Overall Coordinators the Offer Size
Adjustment Option, exercisable by the Overall Coordinators (for themselves and on behalf of
the International Underwriters) on or before the second Business Day prior to the Listing Date
and will lapse immediately thereafter, whichever is earlier, in writing, to require our Company
to allot and issue up to an aggregate of 3,618,000 additional Shares, representing
approximately 15% of the initial Offer Shares in aggregate, at the same price per Share under
the International Offering to cover, among other things, any excess demand in the International
Offering at the absolute discretion of the Overall Coordinators. If the Offer Size Adjustment
Option is exercised in full, the shareholding of the Shareholders will be diluted by
approximately 13.0%.
The Offer Size Adjustment Option will not be associated with any price stabilisation
activities of our Shares in the secondary market after the listing of our Shares on the Stock
Exchange and will not be subject to the Securities and Futures (Price Stabilizing) Rules of the
SFO (Chapter 571W of the Laws of Hong Kong). No purchase of our Shares in the secondary
market will be effected to cover any excess demand in the International Offering which will
only be satisfied by the exercise of the Offer Size Adjustment Option in full or in part.
If the Offer Size Adjustment Option is exercised in full, the additional net proceeds
received from the placing of the additional Shares allotted and issued will be allocated in
accordance with the allocations as disclosed in the section headed “Future Plans and Use of
Proceeds” in this prospectus, on a pro rata basis.
Our Company will disclose in the allotment results announcement whether and to what
extent the Offer Size Adjustment Option has been exercised, and will confirm in the
announcement that, if the Offer Size Adjustment Option is not exercised by then, the Offer Size
Adjustment Option will lapse and cannot be exercised on any future date.
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OVER-ALLOTMENT OPTION
In connection with the Global Offering, the Company is expected to grant the
Over-allotment Option to the International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the International Underwriters will have the right,
exercisable by the Overall Coordinators at their sole and absolute discretion (on behalf of the
International Underwriters) at any time from the Listing Date until 30 days after the last day
for lodging applications under the Hong Kong Public Offering, to require the Company to issue
up to an aggregate of 4,160,700 additional Shares (representing not more than 15% of the total
number of Offer Shares initially available under the Global Offering assuming the Offer Size
Adjustment Option is exercised in full) or up to an aggregate of 3,618,000 Shares (representing
not more than 15% of the number of Offer Shares being offered under the Global Offering
assuming the Offer Size Adjustment Option is not exercised), at the Offer Price under the
International Offering to, among other things, cover over-allocations in the International
Offering, if any.
If the Over-allotment Option is exercised in full, the additional Offer Shares to be issued
pursuant thereto will represent approximately 1.7% of the total Shares in issue immediately
following the completion of the Global Offering and the issue of Offer Shares pursuant to the
Over-allotment Option. If the Over-allotment Option is exercised, an announcement will be
made.
Stock Borrowing Agreement
In order to facilitate the settlement of over-allocation in connection with the Global
Offering, the Stabilizing Manager, or any person acting for it may choose to borrow up to
4,160,700 Shares (representing not more than 15% of the total number of the Offer Shares
initially available under the Global Offering assuming the Offer Size Adjustment Option is
exercised in full) or up to an aggregate of 3,618,000 Shares (representing not more than 15%
of the number of Offer Shares being offered under the Global Offering assuming the Offer Size
Adjustment Option is not exercised), from Smart Bloks pursuant to the Stock Borrowing
Agreement.
The stock borrowing arrangement is not subject to the restrictions of Rule 10.07(1)(a) of
the Listing Rules, provided that the requirements set forth in Rule 10.07(3) of the Listing Rules
are complied with as follows:
 such stock borrowing arrangement is fully described in this prospectus and must be
for the sole purpose of covering any short position prior to the exercise of the
Over-allotment Option;
 the maximum number of Shares to be borrowed from Smart Bloks by the Stabilizing
Manager (or any person acting for it) is the maximum number of Shares that may
be issued upon full exercise of the Over-allotment Option;
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 the same number of Shares so borrowed must be returned to Smart Bloks or its
nominee(s) within three business days following the earlier of (a) the last day on
which the Over-allotment Option may be exercised, (b) the day on which the
Over-allotment Option is exercised in full, and (c) such earlier time as the parties to
the Stock Borrowing Agreement may from time to time agree in writing;
 the stock borrowing arrangement will be effected in compliance with all applicable
listing rules, laws and other regulatory requirements; and
 no consideration will be paid to Smart Bloks by the Stabilizing Manager (or any
person acting for it) in relation to such stock borrowing arrangement.
STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the
distribution of securities. To stabilize, the underwriters may bid for, or purchase, the securities
in the secondary market during a specified period of time, to retard and, if possible, prevent
a decline in the initial public market price of the securities below the offer price. Such
transactions may be effected in all jurisdictions where it is permissible to do so, in each case
in compliance with all applicable laws and regulatory requirements, including those of Hong
Kong. In Hong Kong, the price at which stabilization is effected is not permitted to exceed the
offer price.
In connection with the Global Offering, the Stabilizing Manager (or any person acting for
it), on behalf of the Underwriters, may over-allocate or effect transactions with a view to
stabilizing or supporting the market price of the Shares at a level higher than that which might
otherwise prevail for a limited period after the Listing Date. However, there is no obligation
on the Stabilizing Manager (or any person acting for it) to conduct any such stabilizing action.
Such stabilizing action, if taken, (a) will be conducted at the absolute discretion of the
Stabilizing Manager (or any person acting for it) and in what the Stabilizing Manager
reasonably regards as the best interest of the Company; (b) may be discontinued at any time;
and (c) is required to be brought to an end within 30 days of the last day for lodging
applications under the Hong Kong Public Offering. The number of Shares that may be
over-allocated will not exceed the number of Shares that may be sold under the Over-allotment
Option, being 4,160,700 Shares (representing approximately 15% of the Offer Shares initially
available under the Global Offering assuming the Offer Size Adjustment Option is exercised
in full) or being 3,618,000 Shares (representing approximately 15% of the number of Offer
Shares being offered under the Global Offering assuming the Offer Size Adjustment Option is
not exercised).
Stabilization action will be entered into in accordance with the laws, rules and regulations
in place in Hong Kong. Stabilization action permitted in Hong Kong pursuant to the Securities
and Futures (Price Stabilizing) Rules of the SFO includes (a) over-allocating for the purpose
of preventing or minimizing any reduction in the market price of the Shares; (b) selling or
agreeing to sell the Shares so as to establish a short position in them for the purpose of
preventing or minimizing any reduction in the market price of the Shares; (c) purchasing, or
STRUCTURE OF THE GLOBAL OFFERING
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agreeing to purchase, the Shares pursuant to the Over-allotment Option in order to close out
any position established under paragraph (a) or (b) above, (d) purchasing, or agreeing to
purchase, any of the Shares for the sole purpose of preventing or minimizing any reduction in
the market price of the Shares, (e) selling or agreeing to sell any Shares in order to liquidate
any position established as a result of those purchases, and (f) offering or attempting to do
anything as described in paragraph (b), (c), (d) or (e) above.
Specifically, prospective applicants for and investors in the Offer Shares should note that:
(a) the Stabilizing Manager (or any person acting for it) may, in connection with the
stabilizing action, maintain a long position in the Shares;
(b) there is no certainty as to the extent to which and the time or period for which the
Stabilizing Manager (or any person acting for it) will maintain such a long position;
(c) liquidation of any such long position by the Stabilizing Manager (or any person
acting for it) and selling in the open market may have an adverse impact on the
market price of the Shares;
(d) no stabilizing action can be taken to support the price of the Shares for longer than
the stabilization period, which will begin on the Listing Date, and is expected to
expire on Thursday, February 6, 2025, being the 30th day after the last day for
lodging applications under the Hong Kong Public Offering. After this date, when no
further stabilizing action may be taken, demand for the Shares, and therefore the
price of the Shares, could fall;
(e) the price of the Shares cannot be assured to stay at or above the Offer Price either
during or after the stabilization period by the taking of any stabilizing action; and
(f) stabilizing bids or transactions effected in the course of the stabilizing action may
be made at any price at or below the Offer Price and can, therefore, be done at a
price below the price paid by applicants for, or investors in, the Offer Shares.
In order to effect stabilization actions, the Stabilizing Manager will arrange cover of up
to an aggregate of 4,160,700 Shares (representing up to approximately 15% of the initial Offer
Shares assuming the Offer Size Adjustment Option is exercised in full) or up to an aggregate
of 3,618,000 Shares (representing up to approximately 15% of the number of Offer Shares
being offered under the Global Offering assuming the Offer Size Adjustment Option is not
exercised), through borrowing of Shares from the Shareholders and/or delayed delivery
arrangements with investors who have been allocated Offer Shares in the International
Offering. The delayed delivery arrangements (if specifically agreed by an investor) relate only
to the delay in the delivery of the Offer Shares to such investor and the Offer Price for the Offer
Shares allocated to such investor will be paid on the Listing Date.
The Company will ensure or procure that an announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of
the expiration of the stabilization period.
STRUCTURE OF THE GLOBAL OFFERING
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Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager (or any person acting for it) may cover such over-allocations by exercising
the Over-allotment Option in full or in part, by using Shares purchased by the Stabilizing
Manager (or any person acting for it) in the secondary market at prices that do not exceed the
Offer Price or through stock borrowing arrangements or a combination of these means.
PRICING OF THE GLOBAL OFFERING
Determining the Offer Price
The International Underwriters will be soliciting from prospective investors’ indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building,” is expected to continue up to, and to
cease on or around, the last day for lodging applications under the Hong Kong Public Offering.
Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering
will be agreed on the Price Determination Date, which is expected to be on or before
Wednesday, January 8, 2025, by agreement between the Overall Coordinators (for themselves
and on behalf of the Underwriters) and our Company and the number of Offer Shares to be
allocated under the various offerings will be determined shortly thereafter.
Offer Price Range
The Offer Price per Offer Share under the Hong Kong Public Offering will be identical
to the Offer Price per Offer Share under the International Offering based on the Hong Kong
dollar price per Offer Share, as determined by the Overall Coordinators (for themselves and on
behalf of the Underwriters) and our Company.
The Offer Price will not be more than HK$60.35 per Offer Share and is expected to be
not less than HK$55.65 per Offer Share, unless otherwise announced by the Company no later
than the morning of the last day for lodging applications under the Hong Kong Public Offering,
as further explained below. Prospective investors should be aware that the Offer Price to be
determined on the Price Determination Date may be, but is not expected to be, lower than the
indicative Offer Price range stated in this prospectus.
Price Payable on Application
Applicants under the Hong Kong Public Offering are required to pay, on application
(subject to application channel), the maximum Offer Price of HK$60.35 per each Hong Kong
Offer Share (plus 1% brokerage, 0.0027% SFC transaction levy, 0.00565% Stock Exchange
trading fee and 0.00015% AFRC transaction levy). If the Offer Price is less than HK$60.35,
appropriate refund payments (including the brokerage, SFC transaction levy, the Hong Kong
Stock Exchange trading fee and AFRC transaction levy attributable to the surplus application
monies, without any interest) will be made to successful applicants.
STRUCTURE OF THE GLOBAL OFFERING
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If, for any reason, our Company and the Overall Coordinators (for themselves and on
behalf of the Underwriters) are unable to reach agreement on the Offer Price by 12:00 noon on
Wednesday, January 8, 2025, the Global Offering will not proceed and will lapse.
Reduction in Indicative Offer Price Range and/or Number of Offer Shares
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, where
considered appropriate, based on the level of interest expressed by prospective professional
and institutional investors during the book-building process, and with the consent of our
Company, reduce the number of Offer Shares and/or the indicative Offer Price range as stated
in this prospectus at any time on or prior to the morning of the last day for lodging applications
under the Hong Kong Public Offering. In such case, we will, as soon as practicable following
the decision to make such reduction, and in any event not later than the morning of the day
which is the last day for lodging applications under the Hong Kong Public Offering, cause to
be published on the websites of the Stock Exchange at www.hkexnews.hk and the Company
at https://www.bloks.com/ , notices of the reduction. Upon issue of such a notice, the revised
number of Offer Shares and/or indicative Offer Price range will be final and conclusive and the
Offer Price, if agreed upon by the Overall Coordinators, for themselves and on behalf of the
Underwriters, and our Company, will be fixed within such a revised Offer Price range. Such
notice will also include confirmation or revision, as appropriate, of the working capital
statement and the Global Offering statistics as currently set out in the prospectus and any other
financial information which may change materially as a result of such reduction. Our Company
will also, as soon as practicable following the decision to make such change, issue a
supplemental prospectus updating investors of the change in the number of Offer Shares being
offered under the Global Offering and/or the Offer Price. The Global Offering must first be
canceled and subsequently relaunched on FINI pursuant to the supplemental prospectus.
Before submitting applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the number of Offer Shares
and/or the indicative Offer Price range may not be made until the day which is the last day for
lodging applications under the Hong Kong Public Offering. In the absence of any such notice
so published, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed
upon by the Overall Coordinators, for themselves and on behalf of the Underwriters, and our
Company, will under no circumstances be set outside the Offer Price range as stated in this
prospectus.
In the event of a reduction in the number of Offer Shares, the Overall Coordinators (for
themselves and on behalf of the Underwriters) may, at their discretion, reallocate the number
of Offer Shares to be offered in the Hong Kong Public Offering and the International Offering.
The Offer Shares to be offered in the Hong Kong Public Offering and the Offer Shares to be
offered in the International Offering may, in certain circumstances, be reallocated between
these offerings at the discretion of the Overall Coordinators (for themselves and on behalf of
the Underwriters).
STRUCTURE OF THE GLOBAL OFFERING
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--- page 365 ---
If there is any change to the offer size due to change in the number of Offer Shares offered
in the Global Offering (other than pursuant to the exercise of the Offer Size Adjustment Option
and the Over-allotment Option and/or the reallocation mechanism as disclosed in this
prospectus), or change to the Offer Price, or if the Company becomes aware that there has been
a significant change affecting any matter contained in this prospectus or a significant new
matter has arisen, the inclusion of information in respect of which would have been required
to be in this prospectus if it had arisen before this prospectus was issued, after the issue of this
prospectus and before the commencement of dealings in our Shares as prescribed under Rule
11.13 of the Listing Rules, we are required to cancel the Global Offering and relaunch the offer
on FINI and issue a supplemental prospectus or a new prospectus.
Announcement of Offer Price and Basis of Allocations
The final Offer Price, the level of indications of interest in the Global Offering, the results
of allocations and the basis of allotment of the Hong Kong Offer Shares are expected to be
announced by no later than 11:00 p.m. on Thursday, January 9, 2025 on the website of the
Stock Exchange at www.hkexnews.hk and on the website of our Company at
https://www.bloks.com/ .
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms and conditions of the Hong Kong Underwriting Agreement and is subject to,
among other things, the Overall Coordinators (for themselves and on behalf of the
Underwriters) and the Company agreeing on the Offer Price.
The Company expects to enter into the International Underwriting Agreement relating to
the International Offering on or around the Price Determination Date.
These underwriting arrangements, including the Underwriting Agreements, are
summarized in the section headed “Underwriting” in this prospectus.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares will be conditional on, among other
things:
(a) the Listing Committee granting approval for the listing of, and permission to deal in,
the Shares in issue and to be issued pursuant to the Global Offering on the Main
Board of the Stock Exchange and such approval not subsequently having been
withdrawn or revoked prior to the commencement of trading of the Shares on the
Stock Exchange;
(b) the Offer Price having been agreed between the Overall Coordinators (for
themselves and on behalf of the Underwriters) and our Company;
STRUCTURE OF THE GLOBAL OFFERING
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--- page 366 ---
(c) the execution and delivery of the International Underwriting Agreement on or about
the Price Determination Date; and
(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting
Agreement and the obligations of the International Underwriters under the
International Underwriting Agreement becoming and remaining unconditional and
not having been terminated in accordance with the terms of the respective
agreements or otherwise,
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times).
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming unconditional
and not having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the dates and times specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of
the lapse of the Hong Kong Public Offering will be published on the websites of the Company
and the Stock Exchange at https://www.bloks.com/ and www.hkexnews.hk , respectively, on
the next day following such lapse. In such a situation, all application monies will be returned,
without interest, on the terms set out in the section headed “How to Apply for Hong Kong Offer
Shares – D. Despatch/Collection of Share Certificates and Refund of Application Monies” in
this prospectus. In the meantime, all application monies will be held in separate bank
account(s) with the receiving banks or other bank(s) in Hong Kong licensed under the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong).
Share certificates for the Offer Shares will only become valid evidence of title at 8:00
a.m. on Friday, January 10, 2025, provided that the Global Offering has become unconditional
in all respects at or before that time.
DEALINGS IN THE SHARES
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. in Hong Kong on Friday, January 10, 2025, it is expected that dealings in the Shares on
the Stock Exchange will commence at 9:00 a.m. on Friday, January 10, 2025.
The Shares will be traded in board lots of 300 Shares each and the stock code of the
Shares will be 0325.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 367 ---
IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing Information ”
section, and our website at https://www.bloks.com/ .
The contents of this prospectus are identical to the prospectus as registered
with the Registrar of Companies in Hong Kong pursuant to Section 342C of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you
are applying for:
 are 18 years of age or older; and
 have a Hong Kong address (for the White Form eIPO service only) .
Unless permitted by the Listing Rules or a waiver and/or consent has been granted by the
Stock Exchange to us, you cannot apply for any Hong Kong Offer Shares if you or the
person(s) for whose benefit you are applying for:
 are an existing Shareholder or close associates; or
 are a Director or any of his/her close associates.
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 am on Tuesday, December
31, 2024 and end at 12:00 noon on Tuesday, January 7, 2025 (Hong Kong time).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 368 ---
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application Channel Platform Target Investors Application Time
White Form eIPO
service
www.eipo.com.hk Applicants who would
like to receive a
physical Share
certificate. Hong
Kong Offer Shares
successfully applied
for will be allotted
and issued in your
own name.
From 9:00 am on
Tuesday, December
31, 2024 to 11:30
a.m. on Tuesday,
January 7, 2025,
Hong Kong time. The
latest time for
completing full
payment of
application monies
will be 12:00 noon on
Tuesday, January 7,
2025, Hong Kong
time.
HKSCC EIPO
channel
Y our broker or
custodian who is a
HKSCC Participant
will submit electronic
application
instruction(s) on your
behalf through
HKSCC’s FINI
system in accordance
with your instruction
Applicants who would
not like to receive a
physical Share
certificate. Hong
Kong Offer Shares
successfully applied
for will be allotted
and issued in the
name of HKSCC
Nominees, deposited
directly into CCASS
and credited to your
designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the
earliest and latest
time for giving such
instructions, as this
may vary by broker
or custodian .
The White Form eIPO service and the HKSCC EIPO channel are facilities subject to
capacity limitations and potential service interruptions and you are advised not to wait until the
last day of the application period to apply for Hong Kong Offer Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 369 ---
For those applying through the White Form eIPO service, once you complete payment
in respect of any application instructions given by you or for your benefit through the White
Form eIPO service to make an application for Hong Kong Offer Shares, an actual application
shall be deemed to have been made. If you are a person for whose benefit the electronic
application instructions are given, you shall be deemed to have declared that only one set of
electronic application instructions has been given for your benefit. If you are an agent for
another person, you shall be deemed to have declared that you have only given one set of
electronic application instructions for the benefit of the person for whom you are an agent and
that you are duly authorized to give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the White Form eIPO
service more than once and obtaining different application reference numbers without effecting
full payment in respect of a particular reference number will not constitute an actual
application.
If you apply through the White Form eIPO service, you are deemed to have authorized
the White Form eIPO service provider to apply on the terms and conditions in this prospectus,
as supplemented and amended by the terms and conditions of the White Form eIPO service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on
your behalf through the HKSCC EIPO channel, you (and, if you are joint applicants, each of
you jointly and severally) are deemed to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant HKSCC Participants) to apply for Hong
Kong Offer Shares on your behalf and to do on your behalf all the things stated in this
prospectus and any supplement to it.
For those applying through HKSCC EIPO channel, an actual application will be deemed
to have been made for any application instructions given by you or for your benefit to HKSCC
(in which case an application will be made by HKSCC Nominees on your behalf) provided such
application instruction has not been withdrawn or otherwise invalidated before the closing time
of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken by
HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or for any
breach of the terms and conditions of this prospectus.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 370 ---
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual/Joint Applicants For Corporate Applicants
 Full name(s) 2 as shown on your
identity document
 Identity document’s issuing country
or jurisdiction
 Identity document type, with order
of priority:
i. HKID card; or
ii. National identification
document; or
iii. Passport; and
 Identity document number
 Full name(s)
2 as shown on your
identity document
 Identity document’s issuing country
or jurisdiction
 Identity document type, with order
of priority:
i. LEI registration document; or
ii. Certificate of incorporation; or
iii. Business registration
certificate; or
iv. Other equivalent document; and
 Identity document number
Notes:
1. If you are applying through the White Form eIPO service, you are required to provide a valid e-mail
address, a contact telephone number and a Hong Kong address. Y ou are also required to declare that the
identity information provided by you follows the requirements as described in Note 2 below. In
particular, where you cannot provide a HKID number, you must confirm that you do not hold a HKID
card.
2. The applicant’s full name as shown on their identity document must be used. If an applicant’s identity
document contains both an English and Chinese name, both English and Chinese names must be used.
Otherwise, either English or Chinese names will be accepted. The order of priority of the applicant’s
identity document type must be strictly followed and where an individual applicant has a valid HKID
card, the HKID number must be used when making an application to subscribe for Hong Kong Offer
Shares. Similarly for corporate applicants, a LEI number must be used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above, will
be required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID
of the asset management company or the individual fund, as appropriate, which has opened a trading
account with the broker will be required, as above.
4. The maximum number of joint applicants on FINI is capped at 4 in accordance with market practice.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 371 ---
5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type; and (ii),
the identity document number, for each of the beneficial owners or, in the case(s) of joint beneficial
owners, for each joint beneficial owner. If you do not include this information, the application will be
treated as being made for your benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is dealing in
securities; and (ii) you exercise statutory control over that company, then the application will be treated
as being for your benefit and you should provide the required information in your application as stated
above.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange or any
other stock exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it which
carries no right to participate beyond a specified amount in a distribution of either profits or
capital).
For those applying through HKSCC EIPO channel, and making an application under a
power of attorney, we and the Overall Coordinators, as our agent, have discretion to consider
whether to accept it on any conditions we think fit, including evidence of the attorney’s
authority.
Failing to provide any required information may result in your application being rejected.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 372 ---
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 300 Shares
Permitted number of Hong Kong
Offer Shares for application and
amount payable on
application/successful allotment
: Hong Kong Offer Shares are available for application in specified board
lot sizes only. Please refer to the amount payable associated with each
specified board lot size in the table below.
The maximum Offer Price is HK$60.35 per Share.
If you are applying through the HKSCC EIPO channel, you are required
to pre-fund your application based on the amount specified by your broker
or custodian , as determined based on the applicable laws and regulations
in Hong Kong. By instructing your broker or custodian to apply for the
Hong Kong Offer Shares on your behalf through the HKSCC EIPO
channel, you (and, if you are joint applicants, each of you jointly and
severally) are deemed to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant HKSCC
Participants) to arrange payment of the final Offer Price, brokerage, SFC
transaction levy, the Stock Exchange trading fee and the AFRC transaction
levy by debiting the relevant nominee bank account at the Designated
Bank for your broker or custodian .
If you are applying through the White Form eIPO service, you may refer
to the table below for the amount payable for the number of Shares you
have selected. Y ou must pay the respective maximum amount payable on
application in full upon application for Hong Kong Offer Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 373 ---
Bloks Group Limited
(HK$60.35 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED
FOR AND PAYMENTS
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
HK$ HK$ HK$ HK$
300 18,287.59 4,500 274,313.83 24,000 1,463,007.11 150,000 9,143,794.47
600 36,575.18 6,000 365,751.78 27,000 1,645,883.00 180,000 10,972,553.35
900 54,862.77 7,500 457,189.72 30,000 1,828,758.89 210,000 12,801,312.24
1,200 73,150.36 9,000 548,627.67 45,000 2,743,138.34 240,000 14,630,071.15
1,500 91,437.94 10,500 640,065.61 60,000 3,657,517.79 270,000 16,458,830.03
1,800 109,725.53 12,000 731,503.56 75,000 4,571,897.23 300,000 18,287,588.93
2,100 128,013.12 13,500 822,941.50 90,000 5,486,276.68 600,000 36,575,177.86
2,400 146,300.71 15,000 914,379.45 105,000 6,400,656.13 900,000 54,862,766.78
2,700 164,588.30 18,000 1,097,255.34 120,000 7,315,035.56 1,206,000
(1) 73,516,107.48
3,000 182,875.89 21,000 1,280,131.23 135,000 8,229,415.02
(1) Maximum number of Hong Kong Offer Share you may apply for.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants
(as defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock
Exchange on behalf of the SFC; and in the case of the AFRC transaction levy, collected by the Stock Exchange
on behalf of the AFRC).
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying investor
in your application as required under the paragraph headed “ — A. Application for Hong Kong
Offer Shares — 3. Information Required to Apply ” in this section. If you are suspected of
submitting or cause to submit more than one application, all of your applications will be
rejected.
Multiple applications made either through (i) the White Form eIPO service, (ii) HKSCC
EIPO channel, or (iii) both channels concurrently are prohibited and will be rejected. If you
have made an application through the White Form eIPO service or HKSCC EIPO channel,
you or the person(s) for whose benefit you have made the application shall not apply for any
International Offer Shares.
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6. Terms and Conditions of An Application
By applying for Hong Kong Offer Shares through the White Form eIPO service or
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following
things on your behalf):
(i) undertake to execute all relevant documents and instruct and authorise us and/or the
Overall Coordinators, as our agents, to execute any documents for you and to do on
your behalf all things necessary to register any Hong Kong Offer Shares allocated
to you in your name or in the name of HKSCC Nominees as required by the Articles
of Association, and (if you are applying through the HKSCC EIPO channel) to
deposit the allotted Hong Kong Offer Shares directly into CCASS for the credit of
your designated HKSCC Participant’s stock account on your behalf;
(ii) confirm that you have read and understand the terms and conditions and application
procedures set out in this prospectus and the designated website of the White Form
eIPO service (or as the case may be, the agreement you entered into with your
broker or custodian ), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker
or custodian and HKSCC and observe the General Rules of HKSCC and the
HKSCC Operational Procedures for giving application instructions to apply for
Hong Kong Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out
in this prospectus and they do not apply to you, or the person(s) for whose benefit
you have made the application;
(v) confirm that you have read this prospectus and any supplement to it and have relied
only on the information and representations contained therein in making your
application (or as the case may be, causing your application to be made) and will not
rely on any other information or representations;
(vi) agree that the Relevant Persons
1, the Hong Kong Share Registrar and HKSCC will
not be liable for any information and representations not in this prospectus and any
supplement to it;
1 Relevant Persons would include the Joint Sponsors, the Overall Coordinators, the Sponsor-OC, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, any of their or the
Company’s respective directors, officers, employees, partners, agents, advisers and any other parties involved
in the Global Offering.
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(vii) agree to disclose the details of your application and your personal data and any other
personal data which may be required about you and the person(s) for whose benefit
you have made the application to us, the Relevant Persons, the Hong Kong Share
Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the SFC and any other
statutory regulatory or governmental bodies or otherwise as required by laws, rules
or regulations, for the purposes under the paragraph headed “ — G. Personal Data
— 3. Purposes and 4. Transfer of personal data ” in this section;
(viii) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
(ix) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the Hong Kong Share
Registrar by way of publication of the results at the time and in the manner as
specified in the paragraph headed “— B. Publication of Results” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed “ —
C. Circumstances In Which You Will Not Be Allocated Hong Kong Offer Shares ”i n
this section;
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of it
and the resulting contract will be governed by and construed in accordance with the
laws of Hong Kong;
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any
place outside Hong Kong that apply to your application and that neither we nor the
Relevant Persons will breach any law inside and/or outside Hong Kong as a result
of the acceptance of your offer to purchase, or any action arising from your rights
and obligations under the terms and conditions contained in this prospectus;
(xiii) confirm that (a) your application or HKSCC Nominees’ application on your behalf
is not financed directly or indirectly by the Company, any of the directors, chief
executives, substantial Shareholder(s) or existing shareholder(s) of the Company or
any of its subsidiaries or any of their respective close associates; and (b) you are not
accustomed or will not be accustomed to taking instructions from the Company, any
of the directors, chief executives, substantial shareholder(s) or existing
shareholder(s) of the Company or any of its subsidiaries or any of their respective
close associates in relation to the acquisition, disposal, voting or other disposition
of the Shares registered in your name or otherwise held by you;
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(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Overall Coordinators will rely on your
declarations and representations in deciding whether or not to allocate any Hong
Kong Offer Shares to you and that you may be prosecuted for making a false
declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated
to you under the application;
(xvii) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
(xviii) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC directly or indirectly or through the application channel of
the Hong Kong Share Registrar or by any one as your agent or by any other person;
and
(xix) (if you are making the application as an agent for the benefit of another person)
warrant that (1) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving electronic application instructions to HKSCC and (2) you
have due authority to give electronic application instructions on behalf of that other
person as its agent.
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B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through White Form eIPO service or HKSCC EIPO channel:
Website The designated results of allocation at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment ) with
a “search by ID” function.
The full list of (i) wholly or partially
successful applicants using the White
Form eIPO service and HKSCC EIPO
channel, and (ii) the number of Hong
Kong Offer Shares conditionally allotted
to them, among other things, will be
displayed on the “Allotment Results”
page of the White Form eIPO service
at www.iporesults.com.hk
(alternatively:
www.eipo.com.hk/eIPOAllotment ).
24 hours, from
11:00 p.m. on
Thursday,
January 9, 2025
to 12:00 midnight
on Wednesday,
January 15, 2025
(Hong Kong time)
The Stock Exchange’s website at
www.hkexnews.hk and our website at
https://www.bloks.com/ which will
provide links to the above mentioned
websites of the Hong Kong Share
Registrar.
No later than
11:00 p.m. on
Thursday,
January 9, 2025
(Hong Kong
time).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Platform Date/Time
Telephone +852 2862 8555 — the allocation results
telephone enquiry line provided by the
Hong Kong Share Registrar
between 9:00 a.m.
and 6:00 p.m.,
from Friday,
January 10, 2025
to Wednesday,
January 15, 2025
(Hong Kong time)
(except weekend
and public holiday
in Hong Kong)
For those applying through HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m. on Wednesday, January 8, 2025 (Hong Kong time).
HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on
Wednesday, January 8, 2025 (Hong Kong time) on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of
interest in the International Offering, the level of applications in the Hong Kong Public
Offering and the basis of allocations of Hong Kong Offer Shares on the Stock Exchange’s
website at www.hkexnews.hk and our website at https://www.bloks.com/ by no later than
11:00 p.m. on Thursday, January 9, 2025 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the Hong Kong Share Registrar and their respective agents
and nominees have full discretion to reject or accept any application, or to accept only part of
any application, without giving any reasons.
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3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer to
the paragraph headed “ — A. Application for Hong Kong Offer Shares — 5. Multiple
Applications Prohibited ” in this section on what constitutes multiple applications;
 your application instruction is incomplete;
 your payment (or confirmation of funds, as the case may be) is not made correctly;
 the Underwriting Agreements do not become unconditional or are terminated;
 we or the Overall Coordinators believe that by accepting your application, it or we
would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
Designated Bank before balloting. After balloting of Hong Kong Offer Shares, the Receiving
Bank will collect the portion of these funds required to settle each HKSCC Participant’s actual
Hong Kong Offer Share allotment from their Designated Bank.
There is a risk of money settlement failure. In the extreme event of money settlement
failure by a HKSCC Participant (or its Designated Bank), who is acting on your behalf in
settling payment for your allotted shares, HKSCC will contact the defaulting HKSCC
Participant and its Designated Bank to determine the cause of failure and request such
defaulting HKSCC Participant to rectify or procure to rectify the failure.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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However, if it is determined that such settlement obligation cannot be met, the affected
Hong Kong Offer Shares will be reallocated to the International Offering. Hong Kong Offer
Shares applied for by you through the broker or custodian may be affected to the extent of
the settlement failure. In the extreme case, you will not be allocated any Hong Kong Offer
Shares due to the money settlement failure by such HKSCC Participant. None of us, the
Relevant Persons, the Hong Kong Share Registrar and HKSCC is or will be liable if Hong
Kong Offer Shares are not allocated to you due to the money settlement failure.
D. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou will receive one Share certificate for all Hong Kong Offer Shares allotted to you
under the Hong Kong Public Offering (except pursuant to applications made through the
HKSCC EIPO channel where the Share certificates will be deposited into CCASS as described
below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
Share certificates will only become valid evidence of title at 8:00 a.m. on Friday, January
10, 2025 (Hong Kong time), provided that the Global Offering has become unconditional and
the right of termination described in the section headed “Underwriting” has not been exercised.
Investors who trade Shares prior to the receipt of Share certificates or the Share certificates
becoming valid do so entirely at their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
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The following sets out the relevant procedures and time:
White Form eIPO service HKSCC EIPO channel
Despatch/collection of Share certificate 2
For physical share certificates of
1,000,000 or more Offer Shares
issued under your own name
Collection in person from the Hong
Kong Share Registrar, Computershare
Hong Kong Investor Services Limited,
at Shops 1712-1716, 17th Floor,
Hopewell Centre, 183 Queen’s Road
East, Wanchai, Hong Kong.
Share certificate(s) will be issued in
the name of HKSCC Nominees,
deposited into CCASS and
credited to your designated
HKSCC Participant’s stock
account.
Time : from 9:00 a.m. to 1:00 p.m. on
Friday, January 10, 2025 (Hong Kong
time).
No action by you is required.
If you are an individual, you must not
authorise any other person to collect
for you. If you are a corporate
applicant, your authorised
representative must bear a letter of
authorization from your corporation
stamped with your corporation’s chop.
Both individuals and authorised
representatives must produce, at the
time of collection, evidence of
identity acceptable to the Hong Kong
Share Registrar.
Note : If you do not collect your Share
certificate(s) personally within the
time above, it/they will be sent to the
address specified in your application
instructions by ordinary post at your
own risk
For physical share certificates of
less than 1,000,000 Offer Shares
issued under your own name
Y our Share certificate(s) will be sent to
the address specified in your
application instructions by ordinary
post at your own risk
Time : Thursday, January 9, 2025
2 Except in the event of any Severe Weather Signals (as defined below) in force in Hong Kong in the morning
on the business day before the Listing Date rendering it impossible for the relevant share certificates to be
dispatched to HKSCC in a timely manner, the Company shall procure the Hong Kong Share Registrar to
arrange for delivery of the supporting documents and share certificates in accordance with the contingency
arrangements as agreed between them. Y ou may refer to “ — E. Severe Weather Arrangements ” in this section.
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Refund mechanism for surplus application monies paid by you
Date Friday, January 10, 2025 Subject to the arrangement
between you and your
broker or custodian
Responsible party Hong Kong Share Registrar Y our broker or custodian
Application monies paid
through single bank
account
White Form e-Refund
payment instructions to
your designated bank
account
Y our broker or custodian
will arrange refund to
your designated bank
account subject to the
arrangement between you
and it
Application monies paid
through multiple bank
accounts
Refund check(s) will be
despatched to the address
as specified in your
application instructions by
ordinary post at your own
risk
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Tuesday, January 7, 2025 if, there is/are:
 a tropical cyclone warning signal number 8 or above;
 a black rainstorm warning; and/or
 Extreme Conditions, (collectively, “ Severe Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, January 7,
2025.
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon on
the next business day which does not have Severe Weather Signals in force at any time between
9:00 a.m. and 12:00 noon.
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Prospective investors should be aware that a postponement of the opening/closing of the
application lists may result in a delay in the listing date. Should there be any changes to the
dates mentioned in the section headed “Expected Timetable” in this prospectus, an
announcement will be made and published on the Stock Exchange’s website at
www.hkexnews.hk and our website at https://www.bloks.com/ of the revised timetable.
If a Severe Weather Signal is hoisted on Thursday, January 9, 2025, the Hong Kong Share
Registrar will make appropriate arrangements for the delivery of the share certificates to the
CCASS Depository’s service counter so that they would be available for trading on Friday,
January 10, 2025.
If a Severe Weather Signal is hoisted on Thursday, January 9, 2025:
 for physical share certificates of less than 1,000,000 Offer Shares issued under your
own name, despatch will be made by ordinary post when the post office re-opens
after the Severe Weather Signal is lowered or cancelled (e.g. in the afternoon of
Thursday, January 9, 2025 or on Friday, January 10, 2025).
If a Severe Weather Signal is hoisted on Friday, January 10, 2025:
 for physical share certificates of 1,000,000 or more Offer Shares issued under your
own name, you may collect the physical Share certificates from the Hong Kong
Share Registrar’s office after the Severe Weather Signal is lowered or cancelled (e.g.
in the afternoon of Friday, January 10, 2025 or on Monday, January 13, 2025).
Prospective investors should be aware that if they choose to receive physical share
certificates issued in their own name, there may be a delay in receiving the share
certificates.
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the date of commencement of dealings in the Shares or any other date
HKSCC chooses. Settlement of transactions between Exchange Participants is required to take
place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
Y ou should seek the advice of your broker or other professional advisor for details of the
settlement arrangement as such arrangements may affect your rights and interests.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 384 ---
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by the Company, the Hong Kong Share Registrar, the receiving bank and the
Relevant Persons about you in the same way as it applies to personal data about applicants
other than HKSCC Nominees. This personal data may include client identifier(s) and your
identification information. By giving application instructions to HKSCC, you acknowledge
that you have read, understood and agree to all of the terms of the Personal Information
Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of the Company and the Hong Kong
Share Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
2. Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure
that personal data supplied to the Company or its agents and the Hong Kong Share Registrar
is accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the Hong Kong
Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in the delay or the inability of the
Company or the Hong Kong Share Registrar to effect transfers or otherwise render their
services. It may also prevent or delay registration or transfers of Hong Kong Offer Shares
which you have successfully applied for and/or the despatch of Share certificate(s) to which
you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform the
Company and the Hong Kong Share Registrar immediately of any inaccuracies in the personal
data supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means) for
the following purposes:
a. processing your application and refund check and White Form e-Refund payment
instruction(s), where applicable, verification of compliance with the terms and
application procedures set out in this prospectus and announcing results of
allocation of Hong Kong Offer Shares;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 385 ---
b. compliance with applicable laws and regulations in Hong Kong and elsewhere;
c. registering new issues or transfers into or out of the names of the holders of the
Shares including, where applicable, HKSCC Nominees;
d. maintaining or updating the register of members of the Company;
e. verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
f. facilitating Hong Kong Offer Shares balloting;
g. establishing benefit entitlements of holders of the Shares, such as dividends, rights
issues, bonus issues, etc.;
h. distributing communications from the Company and its subsidiaries;
i. compiling statistical information and profiles of the holder of the Shares;
j. disclosing relevant information to facilitate claims on entitlements; and
k. any other incidental or associated purposes relating to the above and/or to enable the
Company and the Hong Kong Share Registrar to discharge their obligations to
applicants and holders of the Shares and/or regulators and/or any other purposes to
which applicants and holders of the Shares may from time to time agree.
4. Transfer of personal data
Personal data held by the Company and the Hong Kong Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but the
Company and the Hong Kong Share Registrar may, to the extent necessary for achieving any
of the above purposes, disclose, obtain or transfer (whether within or outside Hong Kong) the
personal data to, from or with any of the following:
a. the Company’s appointed agents such as financial advisers, receiving bank and
overseas principal share registrar;
b. HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the Hong Kong Share Registrar for the purposes of providing its
services or facilities or performing its functions in accordance with its rules or
procedures and operating FINI and CCASS (including where applicants for the
Hong Kong Offer Shares request a deposit into CCASS);
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 386 ---
c. any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
Hong Kong Share Registrar in connection with their respective business operation;
d. the Stock Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, including for the
purpose of the Stock Exchange’s administration of the Listing Rules and the SFC’s
performance of its statutory functions; and
e. any persons or institutions with which the holders of Hong Kong Offer Shares have
or propose to have dealings, such as their bankers, solicitors, accountants or brokers
etc.
5. Retention of personal data
The Company and the Hong Kong Share Registrar will keep the personal data of the
applicants and holders of Hong Kong Offer Shares for as long as necessary to fulfil the
purposes for which the personal data were collected. Personal data which is no longer required
will be destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance
(Chapter 486 of the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
the Company or the Hong Kong Share Registrar hold their personal data, to obtain a copy of
that data, and to correct any data that is inaccurate. The Company and the Hong Kong Share
Registrar have the right to charge a reasonable fee for the processing of such requests. All
requests for access to data or correction of data should be addressed to the Company and the
Hong Kong Share Registrar, at their registered address disclosed in the section headed
“Corporate Information” in this prospectus or as notified from time to time, for the attention
of the company secretary, or the Hong Kong Share Registrar for the attention of the privacy
compliance officer.
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--- page 387 ---
The following is the text of a report received from the independent reporting
accountants, Ernst & Young, Certified Public Accountants, Hong Kong, prepared for the
purpose of incorporation in this prospectus.
⭰㰟㛪姯⸒Ṳ⋀㈧
榀㸖毩歁㵳勘䙮怺 979 噆
⤑⏋✱ᷧ⺎ 27 㧺
Tel 曢婘: +852 2846 9888
Fax ₚ䜆: +852 2868 4432
ey.com
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF BLOKS GROUP LIMITED, GOLDMAN SACHS (ASIA) L.L.C. AND
HUATAI FINANCIAL HOLDINGS (HONG KONG) LIMITED
Introduction
We report on the historical financial information of Bloks Group Limited (the
“Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-88, which
comprises the consolidated statements of profit or loss, statements of comprehensive income,
statements of changes in equity and statements of cash flows of the Group for each of the years
ended 31 December 2021, 2022 and 2023, and the six months ended 30 June 2024 (the
“Relevant Periods ”), and the consolidated statements of financial position of the Group and
the statements of financial position of the Company as at 31 December 2021, 2022 and 2023
and 30 June 2024, and material accounting policy information and other explanatory
information (together, the “ Historical Financial Information ”). The Historical Financial
Information set out on pages I-4 to I-88 forms an integral part of this report, which has been
prepared for inclusion in the prospectus of the Company dated 31 December 2024 (the
“Prospectus ”) in connection with the initial listing of the shares of the Company on the Main
Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”).
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the presentation and preparation of the
Historical Financial Information that gives a true and fair view in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively, and for such internal control as the directors determine is necessary
to enable the preparation of the Historical Financial Information that is free from material
misstatement, whether due to fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200 Accountants’ Reports on Historical Financial
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –


--- page 388 ---
Information in Investment Circulars issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). This standard requires that we comply with ethical standards and
plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountants consider internal control relevant to the entity’s
preparation of the Historical Financial Information that gives a true and fair view in accordance
with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the
Historical Financial Information, respectively, in order to design procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Our work also included evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the Historical Financial
Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountants’ report, a true and fair view of the financial position of the Group and the Company
as at 31 December 2021, 2022 and 2023 and 30 June 2024, and of the financial performance
and cash flows of the Group for each of the Relevant Periods in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively.
Review of interim comparative financial information
We have reviewed the interim comparative financial information of the Group which
comprises the consolidated statements of profit or loss, statements of comprehensive income,
statements of changes in equity and statements of cash flows for the six months ended 30 June
2023 and other explanatory information (the “ Interim Comparative Financial
Information ”). The directors of the Company are responsible for the presentation and
preparation of the Interim Financial Information in accordance with the basis of presentation
and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial Information,
respectively. Our responsibility is to express a conclusion on the Interim Financial Information
based on our review. We conducted our review in accordance with Hong Kong Standard on
Review Engagements 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity issued by the HKICPA. A review consists of making
inquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –


--- page 389 ---
conducted in accordance with Hong Kong Standards on Auditing and consequently does not
enable us to obtain assurance that we would become aware of all significant matters that might
be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review,
nothing has come to our attention that causes us to believe that the Interim Comparative
Financial Information, for the purposes of the accountants’ report, is not prepared, in all
material respects, in accordance with the basis of presentation and the basis of preparation set
out in notes 2.1 and 2.2 to the Historical Financial Information, respectively.
Report on matters under the Rules Governing the Listing of Securities on the Stock
Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to note 13 to the Historical Financial Information which states that no dividends
have been paid by the Company in respect of the Relevant Periods.
Ernst & Y oung
Certified Public Accountants
Hong Kong
31 December 2024
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –


--- page 390 ---
I HISTORICAL FINANCIAL INFORMATION
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The financial statements of the Group for the Relevant Periods, on which the Historical
Financial Information is based, were audited by Ernst & Y oung in accordance with Hong Kong
Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”) (the “ Underlying Financial Statements ”).
The Historical Financial Information is presented in Renminbi (“ RMB”) and all values
are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –


--- page 391 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Y ear ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue 5 329,772 325,574 876,686 309,939 1,046,203
Cost of sales (206,371) (202,155) (461,764) (173,731) (492,467)
Gross profit 123,401 123,419 414,922 136,208 553,736
Selling and distribution expenses (388,646) (232,885) (189,280) (86,401) (120,764)
Research and development expenses (83,016) (98,444) (94,657) (41,953) (76,016)
Administrative expenses (58,287) (51,002) (49,230) (22,069) (403,946)
Other income, other gains
and losses, net 6 9,507 12,416 5,987 2,499 3,905
Other expenses 7 (20,938) (17,896) (695) (221) (1,241)
Reversal of/(Provision for)
impairment losses on
financial assets, net 669 226 (1,100) (389) (506)
Finance costs 8 (2,323) (1,574) (1,654) (1,323) (891)
Fair value changes on convertible
redeemable preferred shares 29 (144,201) (191,031) (274,132) (188,611) (157,033)
LOSS BEFORE TAX (563,834) (456,771) (189,839) (202,260) (202,756)
Income tax expense 12 56,981 34,066 (17,642) (528) (52,135)
LOSS FOR THE YEAR/PERIOD (506,853) (422,705) (207,481) (202,788) (254,891)
Attributable to:
Owners of the parent (502,594) (419,886) (206,100) (201,866) (257,894)
Non-controlling interests (4,259) (2,819) (1,381) (922) 3,003
(506,853) (422,705) (207,481) (202,788) (254,891)
LOSS PER SHARE
ATTRIBUTABLE TO
ORDINARY EQUITY
HOLDERS OF THE PARENT
Basic and diluted (RMB) 14 (3.31) (2.82) (1.38) (1.36) (1.73)
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –


--- page 392 ---
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
LOSS FOR THE YEAR/PERIOD (506,853) (422,705) (207,481) (202,788) (254,891)
OTHER COMPREHENSIVE
INCOME/(LOSS)
Other comprehensive income/(loss) that may
be reclassified to profit or loss in
subsequent periods:
Exchange differences on translation of
foreign operations (37) 4 (12) (36) 744
Other comprehensive income/(loss) that will
not be reclassified to profit or loss in
subsequent periods:
Exchange differences on translation of the
financial statements of the Company
and its subsidiaries other than those are
foreign operations* 354 (2,132) 90 (745) (1,305)
OTHER COMPREHENSIVE
INCOME/(LOSS) FOR THE
YEAR/PERIOD, NET OF TAX 317 (2,128) 78 (781) (561)
TOTAL COMPREHENSIVE
LOSS FOR THE YEAR/PERIOD (506,536) (424,833) (207,403) (203,569) (255,452)
Attributable to:
Owners of the parent (502,277) (422,014) (206,022) (202,647) (258,455)
Non-controlling interests (4,259) (2,819) (1,381) (922) 3,003
(506,536) (424,833) (207,403) (203,569) (255,452)
* The Company and its subsidiaries whose activities are based or conducted in a country or currency same as
the Company are not foreign operations.
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –


--- page 393 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 31 December
As at
30 June
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and
equipment 15 11,146 22,785 47,672 73,328
Right-of-use assets 16(a) 44,146 27,238 58,442 49,357
Intangible assets 17 4,832 4,319 5,773 15,050
Deferred tax assets 19 187,212 221,283 203,795 160,850
Prepayments, other
receivables and other
non-current assets 22 6,871 6,531 14,718 11,951
Total non-current assets 254,207 282,156 330,400 310,536
CURRENT ASSETS
Inventories 20 69,769 61,208 76,294 151,334
Trade and notes receivables 21 24,917 15,299 38,256 63,298
Prepayments, other
receivables and other
current assets 22 23,946 10,901 14,477 37,686
Financial assets at fair value
through profit or loss 18 272,785 1,251 1,251 –
Pledged deposits 23 4,719 9,064 8,141 8,587
Cash and cash equivalents 23 76,153 188,972 360,837 554,092
Receivables in connection
with the Reorganization 28 1,759,480 1,377,000 183,000 –
Total current assets 2,231,769 1,663,695 682,256 814,997
CURRENT LIABILITIES
Trade and notes payables 24 92,879 118,533 259,671 514,705
Interest-bearing bank
borrowings 26 – 5,000 – –
Contract liabilities 27 29,569 30,629 66,325 84,144
Other payables and accruals 25 109,298 112,655 169,373 144,603
Tax payables – – 118 6,228
Amounts due to related
parties 36 18,735 44,694 25,913 –
Lease liabilities 16(b) 27,289 19,168 21,969 21,442
Payables in connection with
the Reorganization 28 1,759,480 1,407,338 187,520 –
Total current liabilities 2,037,250 1,738,017 730,889 771,122
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –


--- page 394 ---
As at 31 December
As at
30 June
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NET CURRENT
ASSETS/(LIABILITIES) 194,519 (74,322) (48,633) 43,875
TOTAL ASSETS LESS
CURRENT LIABILITIES 448,726 207,834 281,767 354,411
NON-CURRENT
LIABILITIES
Convertible redeemable
preferred shares 29 1,382,853 1,573,884 1,848,016 1,822,049
Lease liabilities 16(b) 18,116 4,100 34,962 24,824
Other payables and accruals 25 6,376 6,965 7,083 –
Total non-current liabilities 1,407,345 1,584,949 1,890,061 1,846,873
Net liabilities (958,619) (1,377,115) (1,608,294) (1,492,462)
EQUITY
Equity attributable to
owners of the parent
Share capital 30 – 112 128 128
Deficits 31 (950,528) (1,366,317) (1,606,385) (1,492,590)
(950,528) (1,366,205) (1,606,257) (1,492,462)
Non-controlling interests (8,091) (10,910) (2,037) –
Total equity (958,619) (1,377,115) (1,608,294) (1,492,462)
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –


--- page 395 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the parent
Notes
Share
capital
Share
premium*
Share
option
reserve*
Other
reserve*
Accumulated
losses* Total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 – 917,000 8,851 79 (1,043,559) (117,629) (4,465) (122,094)
Loss for the year – – – – (502,594) (502,594) (4,259) (506,853)
Other comprehensive
income for the year, net
of tax – – – 317 – 317 – 317
Total comprehensive
income/(loss) for the year – – – 317 (502,594) (502,277) (4,259) (506,536)
Transactions with
non-controlling interests 35 – – – 1,167 – 1,167 633 1,800
Recognition of share-based
payment expenses 32 – – 6,863 – – 6,863 – 6,863
Redemption rights granted
to capital swap 29 – (215,407) – (123,245) – (338,652) – (338,652)
At 31 December 2021 – 701,593 15,714 (121,682) (1,546,153) (950,528) (8,091) (958,619)
At 1 January 2022 – 701,593 15,714 (121,682) (1,546,153) (950,528) (8,091) (958,619)
Loss for the year – – – – (419,886) (419,886) (2,819) (422,705)
Other comprehensive loss
for the year, net of tax – – – (2,128) – (2,128) – (2,128)
Total comprehensive loss
for the year – – – (2,128) (419,886) (422,014) (2,819) (424,833)
Issue of shares 112 (112) – – – – – –
Recognition of share-based
payment expenses 32 – – 6,337 – – 6,337 – 6,337
At 31 December 2022 112 701,481 22,051 (123,810) (1,966,039) (1,366,205) (10,910) (1,377,115)
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –


--- page 396 ---
Attributable to owners of the parent
Notes
Share
capital
Share
premium*
Share
option
reserve*
Other
reserve*
Accumulated
losses* Total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2023 112 701,481 22,051 (123,810) (1,966,039) (1,366,205) (10,910) (1,377,115)
Loss for the year – – – – (206,100) (206,100) (1,381) (207,481)
Other comprehensive
income for the year, net
of tax – – – 78 – 78 – 78
Total comprehensive
income/(loss) for the year – – – 78 (206,100) (206,022) (1,381) (207,403)
Issue of shares 16 (16) – – – – – –
Transaction with
non-controlling interests 35 – – – (40,261) – (40,261) 10,254 (30,007)
Recognition of share-based
payment expenses 32 – – 6,231 – – 6,231 – 6,231
At 31 December 2023 128 701,465 28,282 (163,993) (2,172,139) (1,606,257) (2,037) (1,608,294)
At 1 January 2023 112 701,481 22,051 (123,810) (1,966,039) (1,366,205) (10,910) (1,377,115)
Loss for the period
(unaudited) – – – – (201,866) (201,866) (922) (202,788)
Other comprehensive loss
for the period, net of tax
(unaudited) – – – (781) – (781) – (781)
Total comprehensive loss
for the period (unaudited) – – – (781) (201,866) (202,647) (922) (203,569)
Issue of shares (unaudited) 16 (16) – – – – – –
Recognition of share-based
payment expenses
(unaudited) 32 – – 3,071 – – 3,071 – 3,071
At 30 June 2023
(unaudited) 128 701,465 25,122 (124,591) (2,167,905) (1,565,781) (11,832) (1,577,613)
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –


--- page 397 ---
Attributable to owners of the parent
Notes
Share
capital
Share
premium*
Share
option
reserve*
Other
reserve*
Accumulated
losses* Total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2024 128 701,465 28,282 (163,993) (2,172,139) (1,606,257) (2,037) (1,608,294)
Profit/(Loss) for the
period – – – – (257,894) (257,894) 3,003 (254,891)
Other comprehensive
loss for the period,
net of tax – – – (561) – (561) – (561)
Total comprehensive
income/(loss) for the
period – – – (561) (257,894) (258,455) 3,003 (255,452)
Transaction with non-
controlling interests 35 – – – (2,420) – (2,420) 20 (2,400)
Recognition of share-
based payment
expenses 32 – – 374,670 – – 374,670 – 374,670
Others – – – – – – (986) (986)
At 30 June 2024 128 701,465 402,952 (166,974) (2,430,033) (1,492,462) – (1,492,462)
* These reserve accounts comprised of deficits RMB950,528,000, RMB1,366,317,000, RMB1,606,385,000 and
RMB1,492,590,000 in the consolidated statements of financial position as at the end of each of the Relevant
Periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –


--- page 398 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y ear ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
CASH FLOWS FROM OPERA TING
ACTIVITIES
Loss before tax (563,834) (456,771) (189,839) (202,260) (202,756)
Adjustments for:
Depreciation of property, plant and
equipment 15 14,106 10,488 13,837 6,151 12,333
Impairment of property, plant and
equipment 15 20,634 6,15 9–––
Depreciation of right-of-use assets 16(a) 21,304 22,060 21,237 10,715 10,074
Amortisation of intangible assets 17 3,252 6,329 9,618 5,399 14,854
Impairment of inventories 2,474 5,752 152 – 430
Impairment/(reversal of
impairment) of trade and notes
receivables, net 9 (149) (197) 871 59 58
(Gain)/loss on disposal of items of
property, plant and equipment 9 107 (2) 22 (3) (270)
Gain on early termination of leases – – (77) (77) –
Fair value losses on convertible
redeemable preferred shares 9 144,201 191,031 274,132 188,611 157,033
Fair value changes of cash
management products 9 (6,680) (1,695) (27) (14) (2)
Share-based payment expenses 9 6,863 6,337 6,231 3,071 374,670
Finance costs 8 2,323 1,574 1,654 1,323 891
Others (520) (29) 229 330 278
(355,919) (208,964) 138,040 13,305 367,593
Decrease/(increase) in inventories 6,964 2,809 (15,238) 7,540 (76,024)
Decrease/(increase) in trade and
notes receivables 3,723 9,815 (23,828) (8,151) (27,705)
Decrease/(increase) in prepayments,
other receivables and other assets 2,048 13,074 (3,610) (9,668) (25,938)
(Increase)/decrease in pledged
deposits (4,719) (4,345) 923 (917) (446)
(Decrease)/increase in trade and
notes payables (12,995) 25,654 141,138 62,838 255,034
Increase/(decrease) in other payables
and accruals 64,047 (7,835) 11,807 (8,909) 768
Increase in contract liabilities 3,523 1,060 35,696 4,881 17,832
APPENDIX I ACCOUNTANTS’ REPORT
– I-12 –


--- page 399 ---
Y ear ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Cash (used in)/from operations (293,328) (168,732) 284,928 60,919 511,114
Income tax paid (5) (5) (36) (8) (3,082)
Net cash flows (used in)/from
operating activities (293,333) (168,737) 284,892 60,911 508,032
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from disposal of items of
property, plant and equipment 85 22 45 32 360
Purchases of items of property,
plant and equipment (23,852) (16,889) (24,311) (12,642) (22,068)
Purchases of items of intangible
assets (7,815) (5,700) (19,030) (3,701) (20,762)
Purchase of financial assets at fair
value through profit or loss (1,199,080) – (10,000) (10,000) –
Proceeds from disposal of financial
assets at fair value through profit
or loss 999,979 273,229 10,027 10,014 1,253
Net cash flows (used in)/from
investing activities (230,683) 250,662 (43,269) (16,297) (41,217)
CASH FLOWS FROM FINANCING
ACTIVITIES
Issue of ordinary shares – 31,55 3–––
Proceeds from issuance of
Preferred Shares – 350,597 1,194,000 1,117,000 –
Payment in connection with the
Reorganization in Chinese
Mainland – (351,812) (1,219,818) (1,142,818) (4,520)
Payment for Warrant settlement 29 –––– (183,000)
Lease payments (22,368) (28,853) (19,300) (6,695) (12,545)
Proceeds from bank borrowings – 5,000 884,247 884,247 –
Repayment of bank borrowings – – (889,247) (889,247) –
Repayment of loan payable to a
third party –––– (7,095)
Borrowings from a related party – 25,00 0–––
Capital contribution from series A
preferred shareholders 600,00 0––––
Capital contribution from a
non-controlling interest 1,80 0––––
Repayment of amounts due to related
parties – – (18,974) – (25,914)
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –


--- page 400 ---
Y ear ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Acquisition of non-controlling
interest equity 35 –––– (32,400)
Issuance costs paid –––– (7,540)
Interest paid – (10) (1,054) (937) –
Net cash flows from/(used in)
financing activities 579,432 31,475 (70,146) (38,450) (273,014)
NET INCREASE IN CASH AND
CASH EQUIV ALENTS 55,416 113,400 171,477 6,164 193,801
Cash and cash equivalents at
beginning of year/period 20,813 76,153 188,972 188,972 360,837
Effects of foreign exchange rate
changes, net (76) (581) 388 (91) (546)
CASH AND CASH EQUIV ALENTS
A T END OF YEAR/PERIOD 23 76,153 188,972 360,837 195,045 554,092
ANAL YSIS OF BALANCES OF
CASH AND CASH
EQUIV ALENTS
Cash and cash equivalents as stated
in the consolidated statements of
financial position and statements
of cash flows 76,153 188,972 360,837 195,045 554,092
APPENDIX I ACCOUNTANTS’ REPORT
– I-14 –


--- page 401 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
As at 31 December
As at
30 June
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Investment in a subsidiary * 1,774,864 1,781,201 1,787,432 1,802,794
Total non-current assets 1,774,864 1,781,201 1,787,432 1,802,794
CURRENT ASSETS
Prepayments, other receivables and
other current assets 22 – – 10,626 40,508
Receivables in connection with
the Reorganization 28 1,759,150 1,377,000 183,000 –
Cash and cash equivalents 23 – 11,015 62,290 22,055
Total current assets 1,759,150 1,388,015 255,916 62,563
CURRENT LIABILITIES
Other payables and accruals 25 1,759,150 1,388,264 256,328 262,106
Total current liabilities 1,759,150 1,388,264 256,328 262,106
NET CURRENT LIABILITIES – (249) (412) (199,543)
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,774,864 1,780,952 1,787,020 1,603,251
NON-CURRENT LIABILITIES
Convertible redeemable
preferred shares 29 1,382,853 1,573,884 1,848,016 1,822,049
Total non-current liabilities 1,382,853 1,573,884 1,848,016 1,822,049
Net assets/(liabilities) 392,011 207,068 (60,996) (218,798)
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –


--- page 402 ---
As at 31 December
As at
30 June
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
EQUITY
Share capital – 112 128 128
Reserves/(Deficits) 31 392,011 206,956 (61,124) (218,926)
Total equity 392,011 207,068 (60,996) (218,798)
* As at the end of each of the Relevant Periods, the Company has direct interest in Bloks Holding Limited, the
balances of the Company’s investment in a subsidiary are as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Investment, at cost 1,759,150 1,759,150 1,759,150 1,759,150
Investment arising from share-based
payment relating to intra-group
transactions 15,714 22,051 28,282 43,644
1,774,864 1,781,201 1,787,432 1,802,794
APPENDIX I ACCOUNTANTS’ REPORT
– I-16 –


--- page 403 ---
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Bloks Group Limited (the “Company”) was incorporated in the Cayman Islands on 28 July 2021 as an
exempted company with limited liability under the Companies Act (Cap. 22, Law 3 of 1961 as consolidated and
revised) of the Cayman Islands. The address of the Company’s registered office is Floor 4, Willow House, Cricket
Square, Grand Cayman KYl-9010, Cayman Islands.
The Company is an investment holding company. The Company and its subsidiaries now comprising the Group
underwent the reorganization as set out in the paragraph headed “Reorganization” in the section headed “History,
Development and Reorganization” in the Prospectus (the “Reorganization”). During the Relevant Periods, the
Company’s subsidiaries were principally engaged in the design, development and sales of toys.
As at the date of this report, the Company had direct and indirect interests in its subsidiaries, the principal
subsidiaries are as follows:
Name
Place and date of
incorporation/
registration and
place of operations
Nominal value of
issued ordinary/
registered share
capital
Percentage of
equity attributable
to the Company Principal
activitiesDirect Indirect
Bloks Holding Limited (a) BVI
10 August 2021
USD50,000 100.00% – Investment holding
China Bloks Holding Limited (a) Hong Kong
31 August 2021
HK$10,000 – 100.00% Investment holding
Shanghai Bloks Technology Group
Co., Ltd.* (Ҧණྠ
ʮ̡) (b)
Shanghai, PRC
24 December 2014
RMB300,000,000 – 100.00% Design,
development and
sales of toys
Shanghai Bloks Bricks Technology
Co., Ltd.* (Ҧ
ʮ̡) (b)
Shanghai, PRC
1 March 2019
RMB100,000,000 – 100.00% Design,
development and
sales of toys
Shanghai Puti Culture
Communication Limited*
(ʮ̡) (a)
Shanghai, PRC
27 July 2016
RMB5,000,000 – 100.00% Sales of toys
Shanghai Bloks Trading Limited*
(ʮ̡) (a)
Shanghai, PRC
1 September 2022
RMB10,000,000 – 100.00% Sales of toys
Notes:
(a) No audited financial statements have been prepared for these entities for the years ended 31 December 2021,
2022 and 2023 and the six months ended 30 June 2024.
(b) The statutory financial statements of these entities for the years ended 31 December 2021, 2022 and 2023
prepared in accordance with Accounting Standards for Business Enterprises were audited by Dahua Certified
Public Accountants LLP , certified public accountants registered in the PRC.
* The English names of the companies registered in the PRC represent the best efforts made by the management
of the Company to translate the Chinese names of these companies as no English names have been registered.
APPENDIX I ACCOUNTANTS’ REPORT
– I-17 –


--- page 404 ---
2.1 BASIS OF PRESENTATION
The Historical Financial Information has been prepared on a going concern basis notwithstanding the Group
has recorded net liabilities of RMB1,492,462,000 as at 30 June 2024. There was RMB1,822,049,000 convertible
redeemable preferred shares recorded as non-current liabilities as at 30 June 2024. The original redemption right of
these convertible redeemable preferred shares was provided in the failure to consummate a Qualified IPO by 30 June
2026 as repurchase event (as defined and detailed in Accountants’ Report, note 29). In addition, special rights granted
to convertible redeemable preferred shares have been terminated immediately before the submission of the listing
application for the Global Offering (the “Listing Application”) provided that the rights so terminated shall resume
in the event that the Listing Application is withdrawn or rejected by the Stock Exchange or the Listing has not
completed within 12 months after the Listing Application, and all other special rights will be terminated
automatically upon the Listing. Therefore, such holders will not require the Company to redeem such preferred shares
within the next 12 months from 30 June 2024.
The directors are of the opinion that the Group will have sufficient working capital to meet its financial
liabilities and obligations as and when they fall due and to sustain its operations for the next 12 months.
Pursuant to the Reorganization, as more fully explained in the sub-section headed “Our History” in the section
headed “History, Development and Reorganization” in the Prospectus, the Company was incorporated on 28 July
2021 and became the holding company of the companies now comprising the Group on 7 November 2022 after the
completion of reorganization.
The companies now comprising the Group were under the common control of the Controlling Shareholder
before and after the Reorganization. Accordingly, for the purpose of this report, the Historical Financial Information
has been prepared on a consolidated basis by applying the principles of merger accounting as if the Reorganization
had been completed on the date of the incorporation of the Company.
The consolidated statements of profit or loss, statements of comprehensive income, statements of changes in
equity and statements of cash flows of the Group for the Relevant Periods and the six months ended 30 June 2023
include the consolidated results and cash flows of the Company and its subsidiaries now comprising the Group as if
the current group structure had been in existence throughout the Relevant Periods. The consolidated statements of
financial position of the Group at the end of each of the Relevant Periods have been prepared to present the assets
and liabilities of the subsidiaries and/or businesses using the existing book values from the controlling shareholders’
perspective. No adjustments are made to reflect fair values or recognise any new assets or liabilities as a result of
the Reorganization.
Basis of consolidation
The Historical Financial Information includes the financial statements of the Company and its subsidiaries for
the Relevant Periods and the six months ended 30 June 2023. A subsidiary is an entity (including a structured entity),
directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power
over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the
investee).
Generally, there is a presumption that a majority of voting rights results in control. When the Company has
less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.
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The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains
control, and continue to be consolidated until the date that such control ceases.
Profit or loss and each component of other comprehensive income are attributed to the owners of the parent
of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit
balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control described above. A change in the ownership interest of a
subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities,
any non-controlling interest and the exchange fluctuation reserve; and recognises the fair value of any investment
retained and any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised
in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis
as would be required if the Group had directly disposed of the related assets or liabilities.
As foreign investors were prohibited from holding legal ownership over certain licenses and permits held by
Shanghai Information Technology Co., Ltd. and its subsidiaries under the Special Management Measures (Negative
List) for the Access of Foreign Investment (2021 V ersion). A wholly-owned subsidiary of the Company, Shanghai
Bloks Technology Group Co., Ltd. has entered into a series of contractual arrangements (the “Contractual
Arrangements”) with Shanghai Information Technology Co., Ltd. and its subsidiaries (the “Consolidated Affiliated
Entity”) and its respective shareholders. The Contractual Arrangements enable Shanghai Bloks Technology Group
Co., Ltd. to exercise effective control over the Consolidated Affiliated Entity and obtain substantially all economic
benefits of the Consolidated Affiliated Entity. Accordingly, Consolidated Affiliated Entity was owned through
Contractual Arrangements, while, through the period of Contractual Arrangements, the Company regards the
Consolidated Affiliated Entity as indirect subsidiary and consolidated the assets, liabilities and results of operations
of the Consolidated Affiliated Entity in the financial statements of the Group. These entities were owned through
effective period of the Contractual Arrangements, which has been terminated on 31 March 2024.
All intra-group transactions and balances have been eliminated on consolidation.
2.2 BASIS OF PREPARATION
The Historical Financial Information has been prepared in accordance with International Financial Reporting
Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”), which comprise all standards
and interpretations approved by the IASB.
All IFRSs effective for the accounting period commencing from 1 January 2024, including relevant transitional
provisions, have been early adopted by the Group in the preparation of the Historical Financial Information
throughout the Relevant Periods.
The Historical Financial Information has been prepared under the historical cost convention, except for
financial assets at fair value through profit or loss and convertible redeemable preferred shares, which have been
measured at fair value.
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2.3 ISSUED BUT NOT YET EFFECTIVE IFRSs
The Group has not applied the following revised IFRSs, that have been issued but are not yet effective, in the
Historical Financial Information. The Group intends to apply these revised IFRSs, if applicable, when they become
effective.
Amendments to IFRS 10
and IAS 28
Sale or Contribution of Assets between an Investor and its Associate or
Joint V enture
1
Amendments to IAS 21 Lack of Exchangeability 2
IFRS 18 Presentation and Disclosure in Financial Statements 3
IFRS 19 Subsidiaries without Public Accountability: Disclosures 3
Amendments to IFRS 9 and
IFRS 7
Amendments to the Classification and Measurement of Financial
Instruments 4
Annual Improvements to IFRS
Accounting Standards —
V olume 11
Amendments to:
IFRS 1 First-time Adoption of International Financial Reporting
Standards
IFRS 7 Financial Instruments: Disclosures Guidance on Implementing
IFRS 7 Financial Instruments: Disclosures
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IAS 7 Statement of Cash Flows
4
1 No mandatory effective date yet determined but available for adoption
2 Effective for annual periods beginning on or after 1 January 2025
3 Effective for annual periods beginning on or after 1 January 2027
4 Effective for annual periods beginning on or after 1 January 2026
The application of IFRS 18 has no impact on the consolidated statements of financial position of the Group,
but has impact on presentation of the consolidated statements of profit or loss. Except for the IFRS 18, the directors
of the Company anticipate that the application of these amendments to IFRSs will have no material impact on the
Group’s financial performance and financial position in foreseeable future.
2.4 MATERIAL ACCOUNTING POLICIES
Fair value measurement
The Group measures its financial products at fair value through profit or loss and convertible redeemable
preferred shares at fair value at the end of each of the Relevant Periods. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either in the principal market for the asset or liability, or in the absence of a principal market,
in the most advantageous market for the asset or liability. The principal or the most advantageous market must be
accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants act in their economic best
interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
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All assets and liabilities for which fair value is measured or disclosed in the Historical Financial Information
are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair
value measurement is observable, either directly or indirectly
Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognised in the Historical Financial Information on a recurring basis, the
Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each of
the Relevant Periods.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other
than inventories, deferred tax assets and financial assets), the asset’s recoverable amount is estimated. An asset’s
recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of
disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets, in which case the recoverable amount is determined for
the cash-generating unit to which the asset belongs.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. An
impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with
the function of the impaired asset.
An assessment is made at the end of each of the Relevant Periods as to whether there is an indication that
previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the
recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed
only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to
an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation)
had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited
to profit or loss in the period in which it arises.
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow
subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
APPENDIX I ACCOUNTANTS’ REPORT
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(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or
an entity related to the Group; and the sponsoring employers of the post-employment benefit plan;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel
services to the Group or to the parent of the Group.
Property, plant and equipment and depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less accumulated
depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase
price and any directly attributable costs of bringing the asset to its working condition and location for its intended
use.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs
and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the
recognition criteria are satisfied, the expenditure for a major inspection is capitalized in the carrying amount of the
asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at
intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them
accordingly.
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost
to their residual values over their estimated useful lives as follows:
Category Estimated useful lives
Electronic equipment 3 years
Mold equipment 3 years
Furniture 2 to 5 years
Transportation equipment 4 years
Leasehold improvements Over the shorter of lease terms
and estimated useful lives
Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least
at the end of each of the Relevant Periods.
An item of property, plant and equipment including any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal
or retirement recognised in profit or loss in the year the asset is derecognised is the difference between the net sales
proceeds and the carrying amount of the relevant asset.
Intangible assets (other than goodwill)
Intangible assets mainly include licensed intellectual property (“IP”), sponsorship and software. They are
initially recognised and measured at cost. Intangible assets with finite lives are subsequently amortised when ready
for use and on the straight-line basis over the useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
Licensed intellectual property (“Licensed IP”)
License rights are stated at historical cost less accumulated amortisation and accumulated impairment losses.
The historical costs of license rights are measured at the present values of the fixed minimum payments at the date
of purchase of the respective license rights. V ariable consideration in relation to license rights that depend on sales
or production is recognised in profit or loss in the period in which the condition that triggers those payments occurs.
APPENDIX I ACCOUNTANTS’ REPORT
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The useful lives of items of the licensed IP are determined based on shorter of the expected lifecycle of the
items of IP , and the contractual term of the respective license agreements, during which such assets can bring
economic benefits to the Group.
Amortisation methods and periods
The Group amortises intangible assets with a limited useful life using the straight-line method over the
following periods:
Category Estimated useful lives
Licensed IP 1 to 3 years
Sponsorship 2 years
Software 3 to 10 years
Research and development expenses
All research costs are charged to the statements of profit or loss as incurred. Expenditure incurred on projects
to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility
of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability
to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete
the project and the ability to measure reliably the expenditure during the development. Product development
expenditure which does not meet these criteria is expensed when incurred.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases
and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
(a) Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less accumulated depreciation and any
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at
or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a
straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:
Properties 1 to 3 years
If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
(b) Lease liabilities
Lease liabilities are recognised at the commencement date of the lease at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate,
and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for
termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. The
variable lease payments that do not depend on an index or a rate are recognised as an expense in the period
in which the event or condition that triggers the payment occurs.
APPENDIX I ACCOUNTANTS’ REPORT
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In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments
resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying
asset.
(c) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of office premises
(that is those leases that have a lease term of 12 months or less from the commencement date and do not contain
a purchase option). It also applies the recognition exemption for leases of low-value assets to leases that are
considered to be of low value.
Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a
straight-line basis over the lease term.
Group as a lessor
When the Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each
of its leases as either an operating lease or a finance lease.
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of
an asset are classified as operating leases. When a contract contains lease and non-lease components, the Group
allocates the consideration in the contract to each component on a relative stand-alone selling price basis. Rental
income is accounted for on a straight-line basis over the lease terms and is included in other income in the statement
of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease
are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to
the lessee are accounted for as finance leases.
When the Group is an intermediate lessor, a sublease is classified as a finance lease or operating lease with
reference to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which the
Group applies the on-balance sheet recognition exemption, the Group classifies the sublease as an operating lease.
Investments and other financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value
through other comprehensive income, and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash
flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has applied the practical expedient of not
adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair
value plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables
that do not contain a significant financing component or for which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS 15 in accordance with the policies set out for “Revenue
recognition” below.
In order for a financial asset to be classified and measured at amortised cost or fair value through other
comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”)
on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured
at fair value through profit or loss, irrespective of the business model.
APPENDIX I ACCOUNTANTS’ REPORT
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The Group’s business model for managing financial assets refers to how it manages its financial assets in order
to generate cash flows. The business model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held
within a business model with the objective to hold financial assets in order to collect contractual cash flows, while
financial assets classified and measured at fair value through other comprehensive income are held within a business
model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not
held within the aforementioned business models are classified and measured at fair value through profit or loss.
Purchases or sales of financial assets that require delivery of assets within the period generally established by
regulation or convention in the marketplace are recognised on the trade date, that is, the date that the Group commits
to purchase or sell the asset.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest method and are
subject to impairment. Gains and losses are recognised in the statements of profit or loss when the asset is
derecognised, modified or impaired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statements of financial position at
fair value with net changes in fair value recognised in the statements of profit or loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is primarily derecognised (i.e., removed from the Group’s consolidated statements of financial position) when:
 the rights to receive cash flows from the asset have expired; or
 the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a “pass-through”
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When
it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of
the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement.
In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the
original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or
other credit enhancements that are integral to the contractual terms.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 412 ---
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase
in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are
possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over
the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased
significantly since initial recognition. When making the assessment, the Group compares the risk of a default
occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial
instrument as at the date of initial recognition and considers reasonable and supportable information that is available
without undue cost or effort, including historical and forward-looking information.
The Group may consider a financial asset to be in default when internal or external information indicates that
the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit
enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
Financial assets at amortised cost are subject to impairment under the general approach and they are classified
within the following stages for measurement of ECLs except for trade receivables and contract assets which apply
the simplified approach as detailed below.
Stage 1 – Financial instruments for which credit risk has not increased significantly since initial
recognition and for which the loss allowance is measured at an amount equal to 12-month
ECLs
Stage 2 – Financial instruments for which credit risk has increased significantly since initial
recognition but that are not credit-impaired financial assets and for which the loss
allowance is measured at an amount equal to lifetime ECLs
Stage 3 – Financial assets that are credit-impaired at the reporting date (but that are not purchased or
originated credit-impaired) and for which the loss allowance is measured at an amount
equal to lifetime ECLs
Simplified approach
For trade receivables that do not contain a significant financing component or when the Group applies the
practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified
approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but
instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward looking factors specific
to the debtors and the economic environment.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as convertible redeemable preferred shares, loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and notes payables, other payables and accruals, amounts due
to related parties, convertible redeemable preferred shares and interest-bearing bank borrowings.
APPENDIX I ACCOUNTANTS’ REPORT
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Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Financial liabilities at amortised cost (trade and other payables, and borrowings)
After initial recognition, trade and other payables, and interest-bearing borrowings are subsequently measured
at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in
which case they are stated at cost. Gains and losses are recognised in the statements of profit or loss when the
liabilities are derecognised as well as through the effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance
costs in the statements of profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities designated upon initial
recognition as at fair value through profit or loss. The convertible redeemable preferred shares issued by the Company
were designated upon initial recognition at fair value through profit or loss. They are initially recognised at fair value.
Any directly attributable transaction costs are recognised as finance costs in profit or loss. Gains or losses on the
convertible redeemable preferred shares are recognised in the statements of profit or loss, except for the gains or
losses arising from the Company’s own credit risk which are presented in other comprehensive income with no
subsequent reclassification to the statements of profit or loss. The net fair value gain or loss recognised in the
statements of profit or loss does not include any interest charged on these financial liabilities.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or
expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as
a derecognition of the original liability and a recognition of a new liability, and the difference between the respective
carrying amounts is recognised in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average
cost basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to
completion and disposal.
Cash and cash equivalents
For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise cash on hand
and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of
cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three
months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s
cash management.
For the purpose of the consolidated statements of financial position, cash and cash equivalents comprise cash
on hand and at banks, including short-term deposits, and assets similar in nature to cash, which are not restricted as
to use.
Provisions
A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event
and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable
estimate can be made of the amount of the obligation.
APPENDIX I ACCOUNTANTS’ REPORT
– I-27 –


--- page 414 ---
When the effect of discounting is material, the amount recognised for a provision is the present value at the
end of Relevant Periods and the six months ended 30 June 2023 of the future expenditures expected to be required
to settle the obligation. The increase in the discounted present value amount arising from the passage of time is
included in finance costs in the statements of profit or loss.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss
is recognised outside profit or loss, either in other comprehensive income or directly in equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
Relevant Periods and the six months ended 30 June 2023, taking into consideration interpretations and practices
prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of Relevant Periods
and the six months ended 30 June 2023 between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
 when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible
temporary differences; and
 in respect of taxable temporary differences associated with investments in subsidiaries, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the carryforward of unused tax credits and
unused tax losses can be utilised, except:
 when the deferred tax asset relating to the deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss and does not give rise
to equal taxable and deductible temporary differences; and
 in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax
assets are only recognised to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary differences can
be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each of the Relevant
Periods and are recognised to the extent that it has become probable that sufficient taxable profit will be available
to allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the end of Relevant Periods and the six months ended 30 June 2023.
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right
to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which
intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
APPENDIX I ACCOUNTANTS’ REPORT
– I-28 –


--- page 415 ---
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be
received and all attaching conditions will be complied with. When the grant relates to an expense item, it is
recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate,
are expensed.
Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of goods or services is transferred to the
customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those
goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration is estimated to
which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable
consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the
variable consideration is subsequently resolved.
When the contract contains a financing component which provides the customer with a significant benefit of
financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present
value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing
transaction between the Group and the customer at contract inception. When the contract contains a financing
component which provides the Group with a significant financial benefit for more than one year, revenue recognised
under the contract includes the interest expense accreted on the contract liability under the effective interest method.
For a contract where the period between the payment by the customer and the transfer of the promised goods or
services is one year or less, the transaction price is not adjusted for the effects of a significant financing component,
using the practical expedient in IFRS 15.
(a) Sale of goods
Revenue from the sale of goods is recognised at the point in time when control of the assets is
transferred to the customer, generally on receipt of the goods by customer or upon the confirmation from
customer. For consignment sales, the consignment sales partners obtain goods from the Group at the same time
when they complete the sales transaction with end-customers. Revenue is recognised upon sales to
end-consumers from consignment sales partners.
(b) Rights of return
For contracts which provide a customer with a right to return the goods within a specified period, the
expected value method is used to estimate the goods that will not be returned because this method best predicts
the amount of variable consideration to which the Group will be entitled. The requirements in IFRS 15 on
constraining estimates of variable consideration are applied in order to determine the amount of variable
consideration that can be included in the transaction price. For goods that are expected to be returned, instead
of revenue, a liability is recognised. A right-of-return asset (and the corresponding adjustment to cost of sales)
is also recognised for the right to recover products from a customer.
(c) V ariable consideration: volume-based rebates
Retrospective volume rebates may be provided to certain customers once the quantity of products
purchased during the period exceeds a threshold specified in the contract. Rebates are offset against the
amounts payable by the customer. To estimate the variable consideration for the expected future rebates, the
most likely amount method is used for contracts with a single-volume threshold. The selected method that best
predicts the amount of variable consideration is primarily driven by the number of volume thresholds contained
in the contract. The requirements on constraining estimates of variable consideration are applied and a liability
for the expected future rebates is recognised.
APPENDIX I ACCOUNTANTS’ REPORT
– I-29 –


--- page 416 ---
(d) Customer loyalty programme
The Group operates a loyalty programme where retail and online customers accumulate points for
purchases made which entitle them to discounts on future purchases. A contract liability for the award points
is recognised at the time of the sale. Revenue from the award points is recognised when the points are
redeemed or expired.
Revenue from other sources
Other non-toy revenue associated with our self-developed IPs is recognized when the customer simultaneously
receives and consumes the benefits provided by the Group.
Other income
Interest income is recognised on an accrual basis using the effective interest method by applying the rate that
exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter
period, when appropriate, to the net carrying amount of the financial asset.
Contract liabilities
A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from
a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue
when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).
Other employee benefits
Pension scheme
The employees of the Group’s subsidiaries which operate in Chinese Mainland are required to participate in
a central pension scheme operated by the local municipal government. The subsidiaries operating in Chinese
Mainland are required to contribute a certain percentage of their payroll costs to the central pension scheme. The
contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension
scheme.
Housing fund and other social insurances
The Group has participated in defined social security contribution schemes for its employees pursuant to the
relevant laws and regulations of the PRC. These include housing fund, basic medical insurance, unemployment
insurance, injury insurance and maternity insurance. The Group makes monthly contributions to the housing fund and
other social insurances. The contributions are charged to profit or loss on an accrual basis. The Group has no further
obligations beyond the contributions made.
Borrowing costs
All borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing of funds.
Share-based payments
The Company operates a share award scheme. Employees (including directors) of the Group receive
remuneration in the form of share-based payments, whereby employees (including directors) and consultants render
services in exchange for equity instruments (“equity-settled transactions”). The cost of equity-settled transactions
with employees is measured by reference to the fair values of the Group’s shares at the grant date, further details of
which are given in note 32 to the Historical Financial Information.
The cost of equity-settled transactions is recognised in employee benefit expense or the expenses for the
services provided by the consultants, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled
transactions at the end of each of the Relevant Periods and the six months ended 30 June 2023 until the vesting date
APPENDIX I ACCOUNTANTS’ REPORT
– I-30 –


--- page 417 ---
reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in
the cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date
fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate
of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the
grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead
to an immediate expensing of an award unless there are also service and/or performance conditions.
For awards that do not ultimately vest because non-market performance and/or service conditions have not
been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are
treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the
terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any
modification that increases the total fair value of the share-based payments, or is otherwise beneficial to the employee
as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting
conditions within the control of either the Group or the employee are not met. However, if a new award is substituted
for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
Foreign currencies
The Historical Financial Information is presented in RMB, which is different from the Company’s functional
currency, the USD. As the major assets of the Group are derived from operations in Chinese Mainland, RMB is
chosen as the presentation currency to present the Historical Financial Information. Each entity in the Group
determines its own functional currency and items included in the financial statements of each entity are measured
using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially
recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at
the end of the each of the Relevant Periods and the six months ended 30 June 2023. Differences arising on settlement
or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on
translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss
on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised
in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss,
respectively).
In determining the exchange rate on initial recognition of the related asset, expense or income on the
derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of
initial transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary liability
arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines
the transaction date for each payment or receipt of the advance consideration.
The functional currencies of certain overseas subsidiaries are currencies other than RMB. As at the end of the
reporting period, the assets and liabilities of these entities are translated into RMB at the exchange rates prevailing
at the end of the reporting period and their statements of profit or loss are translated into RMB at the exchange rates
that approximate to those prevailing at the dates of the transactions.
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –


--- page 418 ---
The resulting exchange differences are recognised in other comprehensive income and accumulated in the
exchange fluctuation reserve, except to the extent that the differences are attributable to non-controlling interests. On
disposal of a foreign operation, the cumulative amount in the reserve relating to that particular foreign operation is
recognised in profit or loss.
3. SIGNIFICANT ACCOUNTING JUDGEMENT AND ESTIMATES
The preparation of the Group’s Historical Financial Information requires management to make judgements,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their
accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or
liabilities affected in the future.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each
of the Relevant Periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are described below.
Fair values of convertible redeemable preferred shares
The fair values of the convertible redeemable preferred shares measured at fair value through profit or loss are
determined using the valuation techniques, including the discounted cash flow method and the option-pricing method.
Such valuation is based on key parameters about risk-free rate, discounts for lack of marketability (“DLOM”) and
volatility, which are subject to uncertainty and might materially differ from the actual results. The fair values of
convertible redeemable preferred shares at the end of each of the Relevant Periods were RMB1,382,853,000,
RMB1,573,884,000, RMB1,848,016,000 and RMB1,822,049,000, respectively. Further details are included in note
29 to the Historical Financial Information.
Leases — Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental
borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value
to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have
to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter
into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for
example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable
inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such
as the subsidiary’s stand-alone credit rating).
Deferred tax assets
Deferred tax assets are recognised for unused tax losses and deductible temporary differences to the extent that
it is probable that taxable profit will be available against which the losses and deductible temporary difference can
be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can
be recognised, based upon the likely timing and level of future taxable profits together with future tax planning
strategies. Further details are included in note 19 to the Historical Financial Information.
V ariable consideration for volume rebates
The Group estimates variable consideration to be included in the transaction price for the sale of products with
volume rebates.
The Group’s expected volume rebates are analysed on a per customer basis for contracts that are subject to the
volume threshold. Determining whether a customer will likely be entitled to a rebate depends on the customer’s
historical rebate entitlement and accumulated purchases to date.
The Group updates its assessment of expected volume rebates accordingly. Estimates of expected volume
rebates are sensitive to changes in circumstances and the Group’s past experience regarding rebate entitlements may
not be representative of actual rebate entitlements in the future.
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –


--- page 419 ---
Provision for expected credit losses of trade and notes receivables
The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on
days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography, product
type, customer type and rating).
The provision matrix is initially based on the Group’s historical observed default rates. The Group will
calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if
forecast economic conditions are expected to deteriorate over the next year which can lead to an increased number
of defaults, the historical default rates are adjusted. At the end of each of the Relevant Periods, the historical observed
default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation among historical observed default rates, forecast economic conditions and
ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic
conditions. The historical credit loss experience and forecast of economic conditions may also not be representative
of a customer’s actual default in the future. The information about the ECLs on the Group’s trade and notes
receivables is disclosed in Note 21 to the Historical Financial Information.
4. OPERATING SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segment, has been identified as the executive directors of the Company. During the
Relevant Periods and the six months ended 30 June 2023, the Group was principally engaged in the design,
development and sales of toys products. Management reviews the operating results of the Group’s business as one
operating segment for the purpose of making decisions about resource allocation and performance assessment.
Therefore, the chief operating decision maker of the Company regards that there is only one segment which is used
to make strategic decisions.
Geographical information
No geographical information is presented as the Group’s revenue from the external customers is mainly
derived from its operations in Chinese Mainland and no non-current assets of the Group are located outside Chinese
Mainland.
Information about major customers
Revenue of approximately RMB40,195,000 was derived from sales to a single customer, accounting for
approximately 12.2% of the total revenue for the year ended 31 December 2021. Other than this customer, no revenue
from sales to a single customer or a group of customers under common control accounted for 10.0% or more of the
Group’s revenue for each of the Relevant Periods and the six months ended 30 June 2023.
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –


--- page 420 ---
5. REVENUE
Revenue primarily represents income from sales of toys during the Relevant Periods and the six months ended
30 June 2023.
An analysis of revenue is as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue from contracts with
customers
Offline sales 150,706 189,912 769,071 257,558 971,431
Distribution sales* 112,837 157,004 732,700 238,111 957,859
Consignment sales 37,869 32,908 36,371 19,447 13,572
Online sales 170,957 134,412 106,249 51,946 74,616
Others 8,109 1,250 1,366 435 156
329,772 325,574 876,686 309,939 1,046,203
* Distribution sales primarily include sales transactions to distributors.
The Group derives revenues at a point in time:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Timing of revenue recognition
Revenue recognised at a point
in time 329,772 325,574 876,686 309,939 1,046,203
The following table shows the amounts of revenue recognised in the Relevant Periods and the six months
ended 30 June 2023 that were included in the contract liabilities at the beginning of each of the Relevant Periods and
the six months ended 30 June 2023:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue recognised that was
included in contract
liabilities at the beginning of
the reporting period:
Sale of goods 26,046 29,569 30,629 19,797 54,655
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –


--- page 421 ---
Performance obligations:
The performance obligation of the sale of goods is recognised at the point in time when control of the
assets is transferred to the customer, generally on receipt of the goods by customer or upon the confirmation
from customer and payment in advance is normally required, except for customers with credit terms where
payment is generally due within 1 to 3 months.
6. OTHER INCOME, OTHER GAINS AND LOSSES, NET
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Other income
Bank interest income 2,233 4,911 3,864 900 3,020
Government grants (i) 365 5,644 1,379 752 210
Others 336 164 662 414 233
2,934 10,719 5,905 2,066 3,463
Other gains and losses, net
Fair value changes of cash
management products 6,680 1,695 27 14 2
Gain/(loss) on disposal of items
of property, plant and
equipment (107) 2 (22) 3 270
Others – – 77 416 170
6,573 1,697 82 433 442
9,507 12,416 5,987 2,499 3,905
(i) The government grants have been received from the PRC local government authorities to support certain
subsidiaries’ operating activities. There are no unfulfilled eligibility requirements and conditions
relating to these government grants.
7. OTHER EXPENSES
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Impairment of mold equipment 20,634 6,15 9–––
Donation (i) – 11,553 – – –
Others 304 184 695 221 1,241
20,938 17,896 695 221 1,241
(i) For the year ended 31 December 2022, the Group donated certain toy products of RMB11,553,000,
including value-added tax and freight charges, to support the China Employee Development Foundation
(ึ).
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –


--- page 422 ---
8. FINANCE COSTS
An analysis of finance costs is as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest on lease liabilities 2,323 1,564 600 386 891
Borrowings costs – 10 1,054 937 –
2,323 1,574 1,654 1,323 891
9. LOSS BEFORE TAX
The Group’s loss before tax is arrived at after charging/(crediting):
Y ear ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Cost of inventories sold (i) 206,371 202,155 461,764 173,731 492,467
Marketing and promotion expenses 272,518 120,180 73,706 32,427 48,037
Depreciation of property, plant
and equipment 15 14,106 10,488 13,837 6,151 12,333
Impairment of property, plant
and equipment 15 20,634 6,159 – – –
Depreciation of right-of-use assets 16(a) 21,304 22,060 21,237 10,715 10,074
Amortisation of intangible assets 17 3,252 6,329 9,618 5,399 14,854
Impairment of inventories 2,474 5,752 152 – 430
Lease payments not included in the
measurement of lease liabilities 2,278 483 1,173 546 402
Impairment losses recognised/(reversal
of impairment losses) on
trade and notes receivables, net 21 (149) (197) 871 59 58
Government grants 6 (365) (5,644) (1,379) (752) (210)
Donation 7 – 11,553 – – –
Employee benefit expense (including
directors’ and chief executive’s
remuneration as
set out in note 10):
Wages and salaries 108,558 113,761 113,717 57,543 86,008
Social welfare 941 767 2,026 664 1,269
Pension scheme contributions 25,344 30,278 30,017 14,680 19,421
Share-based payment expenses 6,863 6,337 6,231 3,071 374,670
141,706 151,143 151,991 75,958 481,368
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –


--- page 423 ---
Y ear ended 31 December
Six months ended
30 June
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Foreign exchange differences, net 63 (108) 143 (339) 762
Fair value changes on convertible
redeemable preferred shares 29 144,201 191,031 274,132 188,611 157,033
Fair value changes of cash
management products 6 (6,680) (1,695) (27) (14) (2)
(Gain)/loss on disposal of items of
property, plant and equipment 6 107 (2) 22 (3) (270)
Listing expenses –––– 15,355
(i) Cost of inventories sold include expenses relating to depreciation of mold equipment and amortisation of
licensed IP , which are also included in the respective total amounts disclosed separately in depreciation of
property, plant and equipment and amortisation of intangible assets above.
10. DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION
Directors’ and chief executive’s remuneration for the Relevant Periods and the six months ended 30 June 2023
are as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Fees:
Directors –––––
Other emoluments:
Salaries, bonuses,
allowances and
benefits in kind 1,100 1,464 2,239 1,103 1,107
Pension scheme
contributions 175 238 305 148 134
Share-based payment
expenses –––– 361,615
Subtotal 1,275 1,702 2,544 1,251 362,856
Total 1,275 1,702 2,544 1,251 362,856
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –


--- page 424 ---
(a) Independent non-executive directors
The fees paid to independent non-executive directors during the Relevant Periods and the six months ended
30 June 2023 were as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Mr. Gao Pingyang –––––
Ms. Huang Rong –––––
Mr. Shang Jian –––––
Total –––––
Mr. Gao Pingyang, Ms. Huang Rong and Mr. Shang Jian were appointed as independent non-executive
directors on 9 May 2024.
There were no fees and other emoluments payables to the independent non-executive directors during the
Relevant Periods.
(b) Executive directors, non-executive directors and the chief executive
Y ear ended 31 December 2021
Salaries,
bonuses,
allowances
and benefits
in kind
Pension
scheme
contributions
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and
executive director:
Mr. Zhu Weisong 267 68 – 335
Executive director:
Mr. Sheng Xiaofeng 833 107 – 940
Non-executive director:
Mr. Chang Kaisi – – – –
Total 1,100 175 – 1,275
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –


--- page 425 ---
Y ear ended 31 December 2022
Salaries,
bonuses,
allowances
and benefits
in kind
Pension
scheme
contributions
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and
executive director:
Mr. Zhu Weisong 267 68 – 335
Executive directors:
Mr. Sheng Xiaofeng 783 112 – 895
Mr. Huang Zheng (i) 414 58 – 472
Non-executive directors:
Mr. Chang Kaisi – – – –
Mr. Shao Zhenxing (ii) – – – –
Mr. Huang Xin (iii) – – – –
Total 1,464 238 – 1,702
Y ear ended 31 December 2023
Salaries,
bonuses,
allowances
and benefits
in kind
Pension
scheme
contributions
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and
executive director:
Mr. Zhu Weisong 267 67 – 334
Executive directors:
Mr. Sheng Xiaofeng 1,010 119 – 1,129
Mr. Huang Zheng (i) 962 119 – 1,081
Non-executive directors:
Mr. Chang Kaisi – – – –
Mr. Shao Zhenxing (ii) – – – –
Mr. Huang Xin (iii) – – – –
Mr. Chen Rui (iv) – – – –
Total 2,239 305 – 2,544
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 426 ---
Six months ended 30 June 2023
Salaries,
bonuses,
allowances
and benefits
in kind
Pension
scheme
contributions
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000
(unaudited) (unaudited) (unaudited) (unaudited)
Chief executive and
executive director:
Mr. Zhu Weisong 133 34 – 167
Executive directors:
Mr. Sheng Xiaofeng 504 57 – 561
Mr. Huang Zheng (i) 466 57 – 523
Non-executive directors:
Mr. Chang Kaisi – – – –
Mr. Shao Zhenxing (ii) – – – –
Mr. Huang Xin (iii) – – – –
Total 1,103 148 – 1,251
Six months ended 30 June 2024
Salaries,
bonuses,
allowances
and benefits
in kind
Pension
scheme
contributions
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and
executive director:
Mr. Zhu Weisong 133 33 359,308* 359,474
Executive directors:
Mr. Sheng Xiaofeng 638 61 2,038 2,737
Mr. Huang Zheng (i) 336 40 269 645
Non-executive directors:
Mr. Chang Kaisi – – – –
Mr. Huang Xin (iii) – – – –
Mr. Chen Rui (iv) – – – –
1,107 134 361,615 362,856
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 427 ---
(i) Mr. Huang Zheng was appointed as executive director of the Company on 25 July 2022 and resigned
on 9 May 2024.
(ii) Mr. Shao Zhenxing was appointed as non-executive director on 25 July 2022 and resigned on 27
December 2023.
(iii) Mr. Huang Xin was appointed as non-executive director on 25 July 2022 and resigned on 11 April 2024.
(iv) Mr. Chen Rui was appointed as non-executive director on 27 December 2023.
* Certain share options were granted to the chief executive and executive directors of the Group under a
share incentive scheme, in respect of their services to the Group. Further details of which are included
in the disclosures in Note 32.
There was no arrangement under which a director or the chief executive waived or agreed to waive any
remuneration during the Relevant Periods and the six months ended 30 June 2023.
11. FIVE HIGHEST PAID EMPLOYEES
The five highest paid employees during the year ended 31 December 2021, 2022 and 2023 and the six months
ended 30 June 2023 and 2024 included nil, nil, nil, nil and two of the then directors including the chief executive,
respectively, details of whose remuneration are set out in note 10 above.
Details of the remuneration of the remaining five, five, five, five and three highest paid employees who are
neither a director nor chief executive of the Company for the year ended 31 December 2021, 2022 and 2023 and the
six months ended 30 June 2023 and 2024 are as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, bonuses, allowances
and benefits in kind 3,215 3,439 10,633 2,581 1,669
Pension scheme contributions 513 550 540 273 182
Share-based payment expenses 4,341 4,341 3,693 2,132 3,418
Total 8,069 8,330 14,866 4,986 5,269
The number of non-director and non-chief executive highest paid employees whose remuneration fell within
the following bands is as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
(unaudited)
Nil to HK$1,000,000 –––2–
HK$1,000,001 to HK$2,000,000 33–31
HK$2,000,001 to HK$3,000,000 112–2
HK$3,000,001 to HK$4,000,000 112––
HK$4,000,001 to HK$5,000,000 ––1––
Total 55553
APPENDIX I ACCOUNTANTS’ REPORT
– I-41 –


--- page 428 ---
Certain non-director and non-chief executive highest paid employees were granted shares under a share
incentive scheme, in respect of their services to the Group, further details of which are included in the disclosures
in Note 32. The fair value of such shares, which has been recognized in profit or loss over the vesting period, was
determined as at the date of grant and the amounts included in the Historical Financial Information for the Relevant
Periods and the six months ended 30 June 2023 are included in the above non-director and non-chief executive
highest paid employees’ remuneration disclosures.
12. INCOME TAX EXPENSE
The Group is subject to income tax on an entity basis on profits arising in or derived from the tax jurisdictions
in which members of the Group are domiciled and operate.
Chinese Mainland
PRC corporate income tax has been provided at the rate of 25% on the taxable profits of the Group’s PRC
subsidiaries during the Relevant Periods and the six months ended 30 June 2023.
One of the Group’s PRC subsidiaries, Shanghai Bloks Bricks Technology Co., Ltd. was accredited as a “High
and New Technology Enterprise” under the relevant tax rules and regulations in November 2021, and accordingly,
was entitled to a reduced preferential CIT rate of 15% during the Relevant Periods and the six months ended 30 June
2023. This qualification is subject to review by the relevant tax authority in the PRC for every three years.
USA
The subsidiary incorporated in the USA is subject to statutory United States federal corporate income tax at
a rate of 21%.
Hong Kong
The subsidiary incorporated in Hong Kong is subject to Hong Kong profits tax at the statutory rate of 16.5%
on any estimated assessable profits arising in Hong Kong during the Relevant Periods and the six months ended 30
June 2023, except for two subsidiaries of the Group which are a qualifying entity under the two-tiered profits tax rates
regime. The first HK$2,000,000 of assessable profits of this subsidiary are taxed at 8.25% and the remaining
assessable profits are taxed at 16.5%.
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains.
In addition, upon payments of dividends by the Company to its shareholders, no withholding tax is imposed on the
Company in the Cayman Islands.
The income tax expense of the Group for the Relevant Periods and the six months ended 30 June 2023 is
analysed as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current tax 5 5 154 105 9,190
Deferred tax (56,986) (34,071) 17,488 423 42,945
(56,981) (34,066) 17,642 528 52,135
APPENDIX I ACCOUNTANTS’ REPORT
– I-42 –


--- page 429 ---
A reconciliation of tax expense applicable to loss before tax at the statutory rate for the jurisdictions in which
the Company and its subsidiaries are domiciled to the income tax expense at the effective income tax rate for each
of the Relevant Periods and the six months ended 30 June 2023 is as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Loss before tax (563,834) (456,771) (189,839) (202,260) (202,756)
Tax at statutory tax rate of
25% (140,959) (114,193) (47,459) (50,565) (50,689)
Impact of different tax rate 107 585 215 178 4,261
Effect of tax concessions 28,204 16,959 (16,197) (2,593) (35,486)
Expenses not deductible
for tax 2,205 2,350 1,969 973 93,385
Tax losses utilised from
previous years (2) (49) (90) (15) (78)
Tax losses not recognised 53,464 60,282 79,204 52,550 40,742
Tax (credit)/charge for the
year/period (56,981) (34,066) 17,642 528 52,135
13. DIVIDENDS
No dividends have been paid or declared by the Company since its date of incorporation.
14. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
The calculation of the basic loss per share amount is based on the loss attributable to ordinary equity holders
of the parent, and the weighted average number of ordinary shares of 151,985,664, 148,844,005, 148,844,005,
148,844,005 and 148,844,005 in issue during the Relevant Periods and the six months ended 30 June 2023, after
taking into account the retrospective adjustment of Reorganization as disclosed in Note 28, redemption rights granted
to capital swap as disclosed in Note 29 and share capital in Note 30.
Loss per share
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
(unaudited)
Loss
Loss attributable to
ordinary equity holders
of the parent (RMB’000) (502,594) (419,886) (206,100) (201,866) (257,894)
Shares
Weighted average number
of ordinary shares in
issue during the
year/period used in the
basic loss per share
calculation (’000) 151,986 148,844 148,844 148,844 148,844
Basic loss per share
(RMB) (3.31) (2.82) (1.38) (1.36) (1.73)
APPENDIX I ACCOUNTANTS’ REPORT
– I-43 –


--- page 430 ---
No adjustment has been made to the basic loss per share amounts presented for the Relevant Periods and the
six months ended 30 June 2023 in respect of a dilution as the impact of convertible redeemable preferred shares and
equity-settled share-based payment had an anti-dilutive effect on the basic loss per share amounts presented.
15. PROPERTY, PLANT AND EQUIPMENT
Electronic
equipment
Mold
equipment Furniture
Transportation
equipment
Leasehold
improvements Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2021
At 1 January 2021:
Cost 9,223 23,320 5,162 2,015 19,570 59,290
Accumulated
depreciation and
impairment (7,934) (4,782) (4,012) (1,728) (18,612) (37,068)
Net carrying amount 1,289 18,538 1,150 287 958 22,222
At 1 January 2021, net
of accumulated
depreciation 1,289 18,538 1,150 287 958 22,222
Additions 2,170 21,680 2 – – 23,852
Disposals (180) (8) – – – (188)
Depreciation
provided during
the year (724) (11,883) (729) (140) (630) (14,106)
Impairment – (20,634) – – – (20,634)
At 31 December 2021,
net of accumulated
depreciation and
impairment 2,555 7,693 423 147 328 11,146
At 31 December 2021:
Cost 7,946 44,903 5,164 2,015 19,570 79,598
Accumulated
depreciation (5,391) (16,576) (4,741) (1,868) (19,242) (47,818)
Impairment – (20,634) – – – (20,634)
Net carrying amount 2,555 7,693 423 147 328 11,146
31 December 2022
At 1 January 2022:
Cost 7,946 44,903 5,164 2,015 19,570 79,598
Accumulated
depreciation (5,391) (16,576) (4,741) (1,868) (19,242) (47,818)
Impairment – (20,634) – – – (20,634)
Net carrying amount 2,555 7,693 423 147 328 11,146
APPENDIX I ACCOUNTANTS’ REPORT
– I-44 –


--- page 431 ---
Electronic
equipment
Mold
equipment Furniture
Transportation
equipment
Leasehold
improvements Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2022, net
of accumulated
depreciation 2,555 7,693 423 147 328 11,146
Additions 1,048 27,305 24 – 40 28,417
Disposals (20) (111) – – – (131)
Depreciation
provided during
the year (1,163) (8,955) (135) (47) (188) (10,488)
Impairment – (6,159) – – – (6,159)
At 31 December 2022,
net of accumulated
depreciation and
impairment 2,420 19,773 312 100 180 22,785
At 31 December 2022:
Cost 8,907 72,098 5,188 2,015 19,610 107,818
Accumulated
depreciation (6,487) (25,532) (4,876) (1,915) (19,430) (58,240)
Impairment – (26,793) – – – (26,793)
Net carrying amount 2,420 19,773 312 100 180 22,785
31 December 2023
At 1 January 2023:
Cost 8,907 72,098 5,188 2,015 19,610 107,818
Accumulated
depreciation (6,487) (25,532) (4,876) (1,915) (19,430) (58,240)
Impairment – (26,793) – – – (26,793)
Net carrying amount 2,420 19,773 312 100 180 22,785
At 1 January 2023, net
of accumulated
depreciation 2,420 19,773 312 100 180 22,785
Additions 937 37,850 3 – – 38,790
Disposals (66) – – – – (66)
Depreciation
provided during
the year (1,163) (12,499) (37) – (138) (13,837)
At 31 December 2023,
net of accumulated
depreciation and
impairment 2,128 45,124 278 100 42 47,672
APPENDIX I ACCOUNTANTS’ REPORT
– I-45 –


--- page 432 ---
Electronic
equipment
Mold
equipment Furniture
Transportation
equipment
Leasehold
improvements Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 31 December 2023:
Cost 9,050 109,948 5,191 2,015 19,610 145,814
Accumulated
depreciation (6,922) (38,031) (4,913) (1,915) (19,568) (71,349)
Impairment – (26,793) – – – (26,793)
Net carrying amount 2,128 45,124 278 100 42 47,672
30 June 2024
At 1 January 2024:
Cost 9,050 109,948 5,191 2,015 19,610 145,814
Accumulated
depreciation (6,922) (38,031) (4,913) (1,915) (19,568) (71,349)
Impairment – (26,793) – – – (26,793)
Net carrying amount 2,128 45,124 278 100 42 47,672
At 1 January 2024, net
of accumulated
depreciation 2,128 45,124 278 100 42 47,672
Additions 993 36,174 – 1,147 – 38,314
Disposals (236) – – (70) (19) (325)
Depreciation
provided during
the period (578) (11,671) (16) (45) (23) (12,333)
At 30 June 2024,
net of accumulated
depreciation and
impairment 2,307 69,627 262 1,132 – 73,328
At 30 June 2024:
Cost 8,797 146,122 5,191 1,772 19,555 181,437
Accumulated
depreciation (6,490) (49,702) (4,929) (640) (19,555) (81,316)
Impairment – (26,793) – – – (26,793)
Net carrying amount 2,307 69,627 262 1,132 – 73,328
In the year ended 31 December 2021 and 2022, management identified certain molds no longer in use and
assessed the recoverable value of those molds was zero, as such molds were for obsolete brick-based toys.
Impairment of RMB20,634,000 and RMB6,159,000 has been provided in 2021 and 2022, respectively. Except above,
the Group did not identify impairment indicator may exist during the Relevant Periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-46 –


--- page 433 ---
16. LEASES
The Group as a lessee
The Group has lease contracts for items of office and warehouse properties used in its operations. Leases of
the Group generally have lease terms between 1 and 3 years.
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Right-of-use assets
– Properties 44,146 27,238 58,442 49,357
Lease liabilities
– Current 27,289 19,168 21,969 21,442
– Non-current 18,116 4,100 34,962 24,824
45,405 23,268 56,931 46,266
(a) Right-of-use assets
The carrying amounts of the Group’s right-of-use assets and the movements during the Relevant Periods are
as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period 65,450 44,146 27,238 58,442
Addition – 5,152 52,831 989
Disposal – – (390) –
Depreciation charge (21,304) (22,060) (21,237) (10,074)
At end of year/period 44,146 27,238 58,442 49,357
APPENDIX I ACCOUNTANTS’ REPORT
– I-47 –


--- page 434 ---
(b) Lease liabilities
The carrying amounts of the Group’s lease liabilities and the movements during the Relevant Periods are as
follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Carrying amount at beginning of
year/period 65,450 45,405 23,268 56,931
New leases – 5,152 52,831 989
Disposals – – (468) –
Accretion of interest recognised
during the year/period 2,323 1,564 600 891
Payments (22,368) (28,853) (19,300) (12,545)
Carrying amount at end of
year/period 45,405 23,268 56,931 46,266
Analysed into:
Current portion 27,289 19,168 21,969 21,442
Non-current portion 18,116 4,100 34,962 24,824
45,405 23,268 56,931 46,266
(c) The amounts recognised in profit or loss in relation to leases are as follows:
Y ear ended 31 December
Six months ended
30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Depreciation charge of
right-of-use assets 21,304 22,060 21,237 10,715 10,074
Interest on lease liabilities 2,323 1,564 600 386 891
Expense relating to short-
term leases not included
in lease liabilities 2,278 483 1,173 546 402
Gain arising from early
termination of leases – – (77) (77) –
25,905 24,107 22,933 11,570 11,367
(d) The total cash outflows for leases are disclosed in note 33(c) to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-48 –


--- page 435 ---
17. INTANGIBLE ASSETS
Licensed IP Sponsorship Software Total
RMB’000 RMB’000 RMB’000 RMB’000
31 December 2021
At 1 January 2021:
Cost – – 1,316 1,316
Accumulated amortisation – – (1,065) (1,065)
Net carrying amount – – 251 251
Cost at 1 January 2021, net of
accumulated amortisation – – 251 251
Additions 5,475 2,358 – 7,833
Amortisation provided during
the year (2,501) (688) (63) (3,252)
At 31 December 2021 2,974 1,670 188 4,832
At 31 December 2021:
Cost 5,475 2,358 502 8,335
Accumulated amortisation (2,501) (688) (314) (3,503)
Net carrying amount 2,974 1,670 188 4,832
Licensed IP Sponsorship Software Total
RMB’000 RMB’000 RMB’000 RMB’000
31 December 2022
At 1 January 2022:
Cost 5,475 2,358 502 8,335
Accumulated amortisation (2,501) (688) (314) (3,503)
Net carrying amount 2,974 1,670 188 4,832
Cost at 1 January 2022, net of
accumulated amortisation 2,974 1,670 188 4,832
Additions 5,513 – 303 5,816
Amortisation provided during
the year (5,073) (1,179) (77) (6,329)
At 31 December 2022 3,414 491 414 4,319
At 31 December 2022:
Cost 7,276 2,358 805 10,439
Accumulated amortisation (3,862) (1,867) (391) (6,120)
Net carrying amount 3,414 491 414 4,319
APPENDIX I ACCOUNTANTS’ REPORT
– I-49 –


--- page 436 ---
Licensed IP Sponsorship Software Total
RMB’000 RMB’000 RMB’000 RMB’000
31 December 2023
At 1 January 2023:
Cost 7,276 2,358 805 10,439
Accumulated amortisation (3,862) (1,867) (391) (6,120)
Net carrying amount 3,414 491 414 4,319
Cost at 1 January 2023, net of
accumulated amortisation 3,414 491 414 4,319
Additions 11,072 – – 11,072
Amortisation provided during
the year (8,989) (491) (138) (9,618)
At 31 December 2023 5,497 – 276 5,773
At 31 December 2023:
Cost 11,828 – 805 12,633
Accumulated amortisation (6,331) – (529) (6,860)
Net carrying amount 5,497 – 276 5,773
Licensed IP Software Total
RMB’000 RMB’000 RMB’000
30 June 2024
At 1 January 2024:
Cost 11,828 805 12,633
Accumulated amortisation (6,331) (529) (6,860)
Net carrying amount 5,497 276 5,773
Cost at 1 January 2024, net of accumulated
amortisation 5,497 276 5,773
Additions 23,007 1,124 24,131
Amortisation provided during the period (14,656) (198) (14,854)
At 30 June 2024 13,848 1,202 15,050
At 30 June 2024:
Cost 28,503 1,828 30,331
Accumulated amortisation (14,655) (626) (15,281)
Net carrying amount 13,848 1,202 15,050
APPENDIX I ACCOUNTANTS’ REPORT
– I-50 –


--- page 437 ---
18. FINANCIAL ASSETS AT FAIR V ALUE THROUGH PROFIT OR LOSS
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Current
– Cash management products 272,785 1,251 1,251 –
The cash management products were issued by banks in Chinese Mainland. They were mandatorily classified
as financial assets at fair value through profit or loss as their contractual cash flows are not solely payments of
principal and fixed interest.
19. DEFERRED TAX
The movements in deferred tax assets during the Relevant Periods are as follows:
Impairment
of assets Accruals
Losses available
for offsetting
against future
taxable profits
Lease
liabilities Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 717 21,980 107,555 9,817 140,069
Deferred tax
(charged)/credited to
profit or loss during
the year 3,066 (4,543) 58,932 (3,006) 54,449
Gross deferred tax assets at
31 December 2021 3,783 17,437 166,487 6,811 194,518
At 1 January 2022 3,783 17,437 166,487 6,811 194,518
Deferred tax
(charged)/credited to
profit or loss during
the year 1,752 (2,500) 34,920 (3,321) 30,851
Gross deferred tax assets at
31 December 2022 5,535 14,937 201,407 3,490 225,369
At 1 January 2023 5,535 14,937 201,407 3,490 225,369
Deferred tax
(charged)/credited to
profit or loss during
the year 83 3,594 (21,533) 5,049 (12,807)
Gross deferred tax assets at
31 December 2023 5,618 18,531 179,874 8,539 212,562
APPENDIX I ACCOUNTANTS’ REPORT
– I-51 –


--- page 438 ---
Impairment
of assets Accruals
Losses available
for offsetting
against future
taxable profits
Lease
liabilities Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2024 5,618 18,531 179,874 8,539 212,562
Deferred tax
(charged)/credited to
profit or loss during the
period 157 3,217 (46,081) (1,601) (44,308)
Gross deferred tax assets at
30 June 2024 5,775 21,748 133,793 6,938 168,254
The movements in deferred tax liabilities during the Relevant Periods are as follows:
Fair value
adjustments of
financial assets at
fair value through
profit or loss Right-of-use assets Total
RMB’000 RMB’000 RMB’000
At 1 January 2021 26 9,817 9,843
Deferred tax charged/(credited) to
profit or loss during the year 658 (3,195) (2,537)
Gross deferred tax liabilities at
31 December 2021 684 6,622 7,306
At 1 January 2022 684 6,622 7,306
Deferred tax credited to profit or
loss during the year (684) (2,536) (3,220)
Gross deferred tax liabilities at
31 December 2022 – 4,086 4,086
At 1 January 2023 – 4,086 4,086
Deferred tax charged to profit or
loss during the year – 4,681 4,681
Gross deferred tax liabilities at
31 December 2023 – 8,767 8,767
At 1 January 2024 – 8,767 8,767
Deferred tax credited to profit or
loss during the period – (1,363) (1,363)
Gross deferred tax liabilities at
30 June 2024 – 7,404 7,404
APPENDIX I ACCOUNTANTS’ REPORT
– I-52 –


--- page 439 ---
For presentation purposes, certain deferred tax assets and liabilities have been offset in the statements of
financial position. The following is an analysis of the deferred tax balances for financial reporting purposes:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Net deferred tax assets recognised in
the consolidated statements of
financial position 187,212 221,283 203,795 160,850
Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that
have been loss-making for some time and it is not considered probable that taxable profits will be available against
which the tax losses can be utilised.
Deferred tax assets have not been recognised in respect of the following item:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Tax losses 293,705 340,634 426,484 132,930
20. INVENTORIES
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Finished goods 61,288 46,344 55,524 124,941
Raw materials 6,081 10,955 20,207 22,318
Goods in transit 2,400 3,909 563 4,075
69,769 61,208 76,294 151,334
21. TRADE AND NOTES RECEIV ABLES
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables 25,562 15,647 38,964 63,920
Notes receivable – 100 – –
25,562 15,747 38,964 63,920
Less: allowance for impairment (645) (448) (708) (622)
Net carrying amount 24,917 15,299 38,256 63,298
APPENDIX I ACCOUNTANTS’ REPORT
– I-53 –


--- page 440 ---
Advance payment is normally required except for certain customers where credits are granted. The credit
period is generally 1 to 3 months. The Group seeks to maintain strict control over its outstanding receivables and has
a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management.
The Group does not hold any collateral or other credit enhancements over its trade receivable balances. The balances
of trade receivables are non-interest-bearing.
An aging analysis of the trade and notes receivables as at the end of each of the Relevant Periods, based on
the billing date and net of loss allowance, is as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months 22,812 14,114 36,428 62,635
3 to 6 months 1,563 692 1,600 477
6 to 9 months 322 195 110 43
9 months to 1 year 88 232 34 84
Over 1 year 132 66 84 59
24,917 15,299 38,256 63,298
The movements in the loss allowance for impairment of trade receivables are as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period 1,074 645 448 708
Impairment losses/(reversal of
impairment losses), net (149) (197) 871 58
Write-off (280) – (611) (144)
At end of year/period 645 448 708 622
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses. The provision rates are based on days past due for groupings of various customer segments with similar
loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and
supportable information that is available at the reporting date about past events, current conditions and forecasts of
future economic conditions.
The Group writes off trade receivables when there is information indicating that the counterparty is in severe
financial difficulties and there is no realistic prospect of recovery, e.g., when the counterparty has been placed under
liquidation or has entered into bankruptcy proceedings, whichever occurs sooner, also taking into account legal
advice where appropriate.
APPENDIX I ACCOUNTANTS’ REPORT
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Set out below is the information about the credit risk exposure on the Group’s trade receivables using a
provision matrix:
Within
3 months
3t o6
months
6t o9
months
9 months
to 1 year
Over
1 year Total
At 31 December 2021
Expected credit loss rate 0.48% 8.97% 26.82% 35.29% 61.85% 2.52%
Gross carrying amount (RMB’000) 22,923 1,717 440 136 346 25,562
Expected credit losses (RMB’000) 111 154 118 48 214 645
At 31 December 2022
Expected credit loss rate 0.61% 8.59% 22.31% 33.52% 65.26% 2.86%
Gross carrying amount (RMB’000) 14,100 757 251 349 190 15,647
Expected credit losses (RMB’000) 86 65 56 117 124 448
At 31 December 2023
Expected credit loss rate 0.85% 8.94% 19.12% 44.26% 69.00% 1.82%
Gross carrying amount (RMB’000) 36,739 1,757 136 61 271 38,964
Expected credit losses (RMB’000) 311 157 26 27 187 708
At 30 June 2024
Expected credit loss rate 0.55% 11.50% 23.21% 42.47% 70.05% 0.97%
Gross carrying amount (RMB’000) 62,982 539 56 146 197 63,920
Expected credit losses (RMB’000) 347 62 13 62 138 622
In the opinion of the Company’s directors, the business and customer risk portfolio of the Group remained
stable and there were no significant fluctuations in the historical credit loss incurred. In addition, there is no
significant change with regard to economic indicators based on an assessment of forward-looking information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-55 –


--- page 442 ---
22. PREPAYMENTS, OTHER RECEIV ABLES AND OTHER ASSETS
Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Non-current:
Prepaid licensed IP fee (i) 340 – 8,382 5,614
Deposits 6,531 6,531 6,336 6,337
Less: allowance for impairment ––––
6,871 6,531 14,718 11,951
Current:
Deferred issuance costs – – – 8,267
V alue-added tax recoverable 14,486 3,558 5,082 15,341
Prepayments 7,271 4,917 7,592 11,522
Deposits 1,556 1,534 1,573 1,992
Others 1,217 1,447 1,014 1,736
Less: allowance for impairment (584) (555) (784) (1,172)
23,946 10,901 14,477 37,686
30,817 17,432 29,195 49,637
(i) Prepaid licensed IP fee is related to the prepayments of the licensed IP intangible assets.
As at the end of each of the Relevant Periods, other receivables of the Group are considered to be of low credit
risk and thus the Group has assessed that the ECL for other receivables under the 12-month expected credit loss
method.
Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Current:
Deferred issuance costs – – – 8,267
Amounts due from subsidiaries – – 10,626 32,241
– – 10,626 40,508
APPENDIX I ACCOUNTANTS’ REPORT
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23. CASH AND CASH EQUIV ALENTS AND PLEDGED DEPOSITS
Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank 77,462 192,284 363,786 555,130
Cash equivalents (i) 3,410 5,752 5,192 7,549
Subtotal 80,872 198,036 368,978 562,679
Less:
Pledged deposits for letters of
guarantee (1,100) (2,300) – –
Pledged deposits for notes payable (3,619) (6,764) (8,141) (8,587)
Cash and cash equivalents 76,153 188,972 360,837 554,092
Cash and cash equivalents and pledged deposits are denominated in the following currencies:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
RMB 79,063 196,573 360,451 545,658
USD 1,790 1,288 8,493 16,881
Others 19 175 34 140
80,872 198,036 368,978 562,679
(i) Cash equivalents represent cash balances kept in third party payment platforms, such as Ali-pay and
WeChat accounts which can be withdrawn by the Group at any time.
The RMB is not freely convertible into other currencies, however, under Chinese Mainland’s Foreign
Exchange Control Regulations and Administration of Settlement, and Sale and Payment of Foreign Exchange
Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct
foreign exchange business.
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances and deposits
are deposited with creditworthy banks with no recent history of default. The carrying amounts of the cash and cash
equivalents approximated to their fair values.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 444 ---
Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash and cash equivalents – 11,015 62,290 22,055
Cash and cash equivalents are denominated in the following currencies:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
RMB – 10,675 62,132 22,043
USD – 340 149 –
Others – – 9 12
– 11,015 62,290 22,055
24. TRADE AND NOTES PAYABLES
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 73,873 101,623 198,871 371,963
Notes payable 19,006 16,910 60,800 142,742
92,879 118,533 259,671 514,705
Trade and notes payables are non-interest bearing and normally settled on terms of 3 months to 7 months.
An aging analysis of the trade and notes payables as at the end of each of the Relevant Periods, based on the
invoice date, is as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months 62,653 62,484 169,638 332,736
3 to 6 months 29,827 54,770 85,613 156,156
6 to 12 months – 880 4,001 25,272
Over 1 year 399 399 419 541
92,879 118,533 259,671 514,705
APPENDIX I ACCOUNTANTS’ REPORT
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25. OTHER PAYABLES AND ACCRUALS
Group
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Non-current:
Loan payable to a third party (i) 6,376 6,965 7,083 –
Current:
Accrued expenses 79,352 70,825 55,703 38,886
Salaries and benefits payables 23,020 21,852 33,782 33,659
Payables for purchase of non-current
assets – 11,693 26,596 43,444
Tax payables other than corporate
income tax 3,562 4,615 17,704 18,213
Accrued listing expenses – – – 5,366
Customer deposits 1,719 2,084 4,140 4,924
Payables for acquisition of
non-controlling interest equity – – 30,000 –
Others 1,645 1,586 1,448 111
109,298 112,655 169,373 144,603
115,674 119,620 176,456 144,603
(i) In February 2019, the Group entered into unsecured three-year loan agreements for USD1,000,000 with
an independent third-party individual. In February 2022, the Group and the individual reached an
supplemental agreement to extend the due date to February 2025. The loan was repaid in April 2024.
Company
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Current:
Payables of Investment to the
Subsidiaries 1,759,150 1,388,008 254,490 250,490
Accrued listing expenses – – – 5,366
Amounts due to subsidiaries – 256 1,838 6,243
Others –––7
1,759,150 1,388,264 256,328 262,106
APPENDIX I ACCOUNTANTS’ REPORT
– I-59 –


--- page 446 ---
26. INTEREST-BEARING BANK BORROWINGS
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Bank loans – unsecured – 5,000 – –
In November 2022, the Group entered into an unsecured loan facility agreement with Bank of
Communications, which agreed to provide a credit facility of RMB5,000,000 for a term of six months. On 30
November 2022, the Group fully drew down the borrowing of RMB5,000,000, bearing a fixed interest rate of 3.35%
per annum, and repaid when it was due.
In July 2023, the Group entered into a loan facility agreement with China Minsheng Bank, which agreed to
provide a credit facility of RMB5,000,000 for a term of one year. As of 30 June 2024, the Group has not yet drawn
down the borrowing. The bank loan is secured by the pledge of the intellectual property which owned by the Group.
27. CONTRACT LIABILITIES
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Advances received from customers 4,215 6,945 22,281 19,521
Sales rebates 976 2,019 20,704 39,309
Customer loyalty programme 24,378 21,665 23,340 25,314
29,569 30,629 66,325 84,144
28. AMOUNTS IN CONNECTION WITH THE REORGANIZATION
Group
Balance At
31 December
Settlement
during
Balance At
31 December
Settlement
during
Balance At
31 December
Settlement
during the
period of
six months
Balance At
30 June
2021 2022 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Receivables in
connection with the
Reorganization 1,759,480 (382,480) 1,377,000 (1,194,000) 183,000 (183,000) –
Payables in
connection with the
Reorganization 1,759,480 (352,142) 1,407,338 (1,219,818) 187,520 (187,520) –
APPENDIX I ACCOUNTANTS’ REPORT
– I-60 –


--- page 447 ---
Company
Balance At
31 December
Settlement
during
Balance At
31 December
Settlement
during
Balance At
31 December
Settlement
during the
period of
six months
Balance At
30 June
2021 2022 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Receivables in
connection with the
Reorganization 1,759,150 (382,150) 1,377,000 (1,194,000) 183,000 (183,000) –
Shanghai Bloks Technology Group Co., Ltd. was founded in 2014 in Shanghai, Chinese Mainland. The
Company was incorporated in the Cayman Islands as an exempted company with limited liability on 28 July 2021.
The details of Reorganization were set out in the sub-section headed “Reorganization” in the section headed “History,
Development and Reorganization” in the Prospectus.
Pursuant to a series of agreements of Reorganization, the then shareholders of Shanghai Bloks Technology
Group Co., Ltd. shall mirror their equity interests as the shareholders of the Company, including Onshore Withdrawn
Investors of RMB1,543,480,000, Y unfeng Warrant of RMB183,000,000 and the Selling Shareholders (as defined
below) of RMB33,000,000, representing RMB1,759,480,000 in total.
In August 2021, Shanghai Bloks Technology Group Co., Ltd., the holding company of the Group’s subsidiaries
in Chinese Mainland, entered into a reorganization agreement with Onshore Withdrawn Investors, to buy back
registered capital of RMB13,800,835, and reduce its then registered capital, at a total cash consideration of
approximately RMB1,726,480,000. Above consideration included RMB183,000,000, payable to a certain then
shareholder, which was replaced by warrant in July 2022 (the “Warrant”) as disclosed in Note 30.
On 7 November 2022, China Bloks Holding Limited, one of the Group’s subsidiaries in Hong Kong, acquired
all the equity interests in Shanghai Bloks Technology Group Co., Ltd. from the then shareholders of Shanghai Bloks
Technology Group Co., Ltd. (“Selling Shareholders”) at a total consideration of RMB33,000,000.
During the mirroring process, payables in connection with the Reorganization represents the amount needs to
be paid by Shanghai Bloks Technology Group Co., Ltd. to the relevant shareholders. Receivables in connection with
the Reorganization represents the amount needs to be received by the Company from the relevant shareholders.
Upon the completion of Reorganization activities, the Company issued 223,119,765 shares to the Onshore
Withdrawn Investors and Selling Shareholders for approximately RMB1,759,150,000, including RMB1,543,480,000
to the Onshore Withdrawn Investors, RMB32,670,000 to the Selling Shareholders and RMB183,000,000 Warrant.
On 3 April 2024, the Company entered into a warrant termination agreement with then warrant holder to
terminate the Warrant by cash settlement, details disclosed in Note 30.
29. CONVERTIBLE REDEEMABLE PREFERRED SHARES
Series Angel
In February 2018, October 2018, May 2019, November 2019 and March 2020, Shanghai Bloks Technology
Group Co., Ltd. raised up to RMB857,000,000 from shareholders and certain onshore investors. On 24 April 2021,
after 2021 April capital swap transaction as mentioned below, there was 7,038,460 shares (deemed as 35,192,300
shares with a par value of USD0.0001 each after Reorganization) of Series Angel Preferred Shares, included
1,253,447 shares (deemed as 6,267,235 shares with a par value of USD0.0001 each after Reorganization) with
redemption rights was recorded as Series Angel Convertible Redeemable Preferred Shares. 7,038,460 shares (deemed
as 35,192,300 shares with a par value of USD0.0001 each after Reorganization) was fully reclassified and
redesignated to Series Angel Preferred Shares of the Company in July 2022.
APPENDIX I ACCOUNTANTS’ REPORT
– I-61 –


--- page 448 ---
Series Pre-A
In July 2020 and November 2020, Shanghai Bloks Technology Group Co., Ltd. raised up to RMB330,000,000
from certain onshore investors and a shareholder. On 24 April 2021, there was 2,632,258 shares (deemed as
13,161,290 shares with a par value of USD0.0001 each after Reorganization) of Series Pre-A Preferred Shares with
redemption rights was fully recorded as Series Pre-A Convertible Redeemable Preferred Shares. 2,632,258 shares
(deemed as 13,161,290 shares with a par value of USD0.0001 each after Reorganization) was fully reclassified and
redesignated to Series Pre-A Preferred Shares of the Company in July 2022.
Series A
In April 2021, Shanghai Bloks Technology Group Co., Ltd. raised up to RMB599,999,631 from certain onshore
investors. On 24 April 2021, there was 3,718,661 shares (deemed as 18,593,305 shares with a par value of USD0.0001
each after Reorganization) of Series A Preferred Shares with redemption rights.
On 24 April 2021, certain investors purchased 1,465,773 shares (deemed as 7,328,865 shares with a par value
of USD0.0001 each after Reorganization) from certain shareholders and these shares was entitled with Series A
Preferred Shares (“ 2021 April capital swap ”) with redemption rights, together with 3,718,661 shares (deemed as
18,593,305 shares with a par value of USD0.0001 each after Reorganization) of Series A Preferred Shares with
redemption rights, was fully recorded as Series A Convertible Redeemable Preferred Shares.
25,922,170 Series A Preferred Shares was reclassified and redesignated to Series A Preferred Shares of the
Company in July 2022. The 25,922,170 Series A Convertible Redeemable Preferred Shares includes 5,767,820
warrant shares issued to Y unfeng Tuoyuan. Further details of Y unfeng Warrant are included in Note 30.
Presentation and classification
According to the original and amended Memorandum and Articles of Association (“MOA”), the Company does
not have an obligation to i) deliver cash or other financial assets to the holders of Series Angel Preferred Shares
(except for Series Angel Convertible Redeemable Preferred Shares); ii) to exchange financial assets or financial
liabilities with the holders of Series Angel Preferred Shares (except for Series Angel Convertible Redeemable
Preferred Shares) that are potentially unfavourable to the Company; and iii) to deliver a variable number of the
Company’s own ordinary shares. Hence, Series Angel Preferred Shares (except for Series Angel Convertible
Redeemable Preferred Shares) are recognised as equity in accordance with relevant IFRS standard, and designated
Series Angel Convertible Redeemable Preferred Shares, Series Pre-A Convertible Redeemable Preferred Shares and
Series A Convertible Redeemable Preferred Shares as financial liabilities measured at fair value through profit or
loss.
According to the MOA of the Company in July 2022, the key terms of Series Angel Convertible Redeemable
Preferred Shares, Series Pre-A Convertible Redeemable Preferred Shares and Series A Convertible Redeemable
Preferred Shares (collectively, the “ convertible redeemable preferred shares ”) are as follows:
Liquidation preference
In the event of any liquidation, dissolution or winding up, either voluntarily or involuntarily of the Company,
and any Deemed Liquidation Event (“Liquidation Event”), distributions to the members of the Company shall be
made in the following manner (after satisfaction of all creditors’ claims and claims that may be preferred by law):
(a) the Series A Preferred Shareholders shall be entitled to receive the Distributable Liquidation Assets in
preference to the other Shareholders in the amount equal to 100% of the Series A Actual Investment
Amount multiplied by the USD/RMB exchange rate of a bank on the date which is five (5) days prior
to the date on which the Series A Liquidation Preference Amount is paid by the Company, plus any
accumulated dividends or declared but undistributed dividends thereof (the “ Series A Liquidation
Preference Amount ”). If the Distributable Liquidation Assets are insufficient to pay off all the Series
A Liquidation Preference Amount, each such Series A Preferred Shareholder shall be entitled to
distribution in proportion to the Series A Liquidation Preference Amount to which they are respectively
entitled;
APPENDIX I ACCOUNTANTS’ REPORT
– I-62 –


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(b) after the full payment of the Series A Liquidation Preference Amount, the Series Pre-A Preferred
Shareholders shall be entitled to receive the Distributable Liquidation Assets in preference to the other
Shareholders other than the Series A Preferred Shareholders in the amount equal to 100% of the Series
Pre-A Actual Investment Amount multiplied by the USD/RMB exchange rate on a bank on the date
which is five (5) days prior to the date on which the Series Pre-A Liquidation Preference Amount is paid
by the Company, plus any accumulated dividends or declared but undistributed dividends thereof (the
“Series Pre-A Liquidation Preference Amount ”). If the Distributable Liquidation Assets are
insufficient to pay off all the Series Pre-A Liquidation Preference Amount, each such Series Pre-A
Preferred Shareholder shall be entitled to distribution in proportion to the Series Pre-A Liquidation
Preference Amount to which they are respectively entitled;
(c) after the full payment of the Series A Liquidation Preference Amount and the Series Pre-A Liquidation
Preference Amount, (i) the Series Angel Preferred Shareholders shall be entitled to receive Distributable
Liquidation Assets in preference to the Shareholders other than the Series A Preferred Shareholders and
the Series Pre-A Preferred Shareholders in the amount equal to 100% of the Series Angel Actual
Investment Amount multiplied by the USD/RMB exchange rate on a bank on the date which is five (5)
days prior to the date on which the Series Angel Liquidation Preference Amount is paid by the Company,
plus any accumulated dividends or declared but undistributed dividends thereof (the “ Series Angel
Liquidation Preference Amount ”, together with the Series A Liquidation Preference Amount and the
Series Pre-A Liquidation Preference Amount, the “ Liquidation Preference Amount ”). If the
Distributable Liquidation Assets are insufficient to pay off all the Series Angel Liquidation Preference
Amount, each such Series Angel Preferred Shareholder shall be entitled to distribution in proportion to
the Series Angel Liquidation Preference Amount to which they are respectively entitled;
(d) after the full payment of the Liquidation Preference Amount, with respect to any remaining assets, all
the Shareholders (including the Preferred Shareholders) shall be entitled to receive distribution out of
the remaining assets in proportion to their then shareholdings in the Company.
Deemed Liquidation Event means any transaction (treating any series of related transactions as a “transaction”)
involving (a) the merger or acquisition of any Group Company or other similar transaction of change of Control of
such Group Company, which results in the shareholding or voting right of such Group Company in the surviving
entity after such event being less than 50%; (b) all or substantially all of the assets of such Group Company are sold
or authorised, or all or substantially all or substantially all of the intellectual property of such Group Company are
exclusively licensed or sold to a third party; (c) the change of ultimate beneficial owner of such Group Company;
and (d) any other events which can be defined as the change of Control of such Group Company.
Conversion rights
(a) Conversion Rights . Unless converted earlier pursuant to section (b) below, each Preferred Shareholder shall
have the right, at such holder’s sole discretion, to convert all or any portion of the Preferred Shares (on a
fully-diluted basis) into Ordinary Shares at any time. All Preferred Shareholders claimed that they won’t
exercise the conversion rights before 30 June 2025.
The conversion rate for Preferred Shares (on a fully-diluted basis) shall be determined by dividing the
applicable Original Issue Price by the conversion price then in effect at the date of the conversion. The initial
conversion price will be the applicable Original Issue Price (i.e., a 1-to-1 initial conversion ratio), which will
be subject to adjustments to reflect stock dividends, stock splits and other events, (the “ Preferred Share
Conversion Price ”). Nothing in this section shall limit the automatic conversion rights of Preferred Shares (on
a fully-diluted basis) described in section (b) below.
(b) Automatic Conversion. Each Preferred Share (on a fully-diluted basis) shall automatically be converted into
Ordinary Shares, at the then applicable Preferred Share Conversion Price upon (i) the closing of an Initial
Public Offering, or (ii) the consents in writing by the respective holders of each series or class of Preferred
Shares (including the holders of any Warrant convertible into such series or class of Preferred Shares as if such
Warrant it holds had been exercised). In the event of the automatic conversion of the Preferred Shares (on a
fully-diluted basis) upon an Initial Public Offering as aforesaid, the Person(s) entitled to receive the Ordinary
Shares issuable upon such conversion of Preferred Shares shall not be deemed to have converted such Preferred
Shares until immediately prior to the closing of such Initial Public Offering.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 450 ---
Redemption rights
The Series A Convertible Redeemable Preferred Shares, Series Pre-A Convertible Redeemable Preferred
Shares and Series Angel Convertible Redeemable Preferred Shares shall be redeemable at the option of the holders
of the Preferred Shares as provided herein:
In the event of any of the following circumstances (the “ Repurchase Event ”), whichever is earlier: (i) the
failure to consummate a Qualified IPO by 30 June 2026, (ii) the Group Companies and/or the Founder materially
default or breach the representations, warranties, covenants, obligations, undertaking of the Transaction Documents
which default or breach has a Material Adverse Effect; (iii) the cessation of the Founder being employed by any of
the Group Companies; (iv) the occurrence of a criminal investigation by the competent governmental authorities
against the Founder due to the Founder’s violation of Laws, and results into a final, non-appealable decision that the
Founder shall bear criminal liability, except for any criminal liability of the Founder which has no Material Adverse
Effect, including but not limited to criminal liability resulting from violation of traffic rules; (v) any dispute arising
from the historical and/or then current shareholders of the Group Companies which results in all Equity Securities
of such Group Company or Equity Securities of any other Group Company directly or indirectly held by the Investors
being frozen or subject to any disposal restrictions, and which has a material adverse effect to the consummation of
a Qualified IPO by the Company or the exit of the Investor, and which fails to be properly resolved within six (6)
months from the date of occurrence thereof; and (vi) any Preferred Shareholder exercises his repurchase right
pursuant to this section.
The redemption price for each Redemption Share redeemed pursuant to Series A, Series Pre-A and Series
Angel Convertible Redeemable Preferred Shares shall b e R = I*E*(1+8%)N+D. (i) I represents the actual investment
amount in RMB paid by such shareholders; (ii) E represents the USD/RMB exchange rate of a bank on the date which
is five (5) days prior to the date on which the Redemption Price is paid by the Company; (iii) N represents a fraction,
the numerator of which is the number of calendar days from the date on which such Preferred Shareholder pays the
Actual Investment Amount pursuant to the Domestic Share Purchase Agreement, as applicable (the “Acquisition
Time”), through the date on which the Redemption Price is actually received by such Series Pre-A Preferred
Shareholder, and the denominator of which is 365; (iv) D represents t the sum of all dividends and bonus that have
been declared but unpaid to such Preferred Shareholder and/or any other accumulated but unpaid amount (if any)
corresponding to the Preferred Shares requested to be repurchased by such Preferred Shareholder.
The movements of the convertible redeemable preferred shares as at the end of each of the Relevant Periods
are set out below:
Series Angel
Convertible Redeemable
Preferred Shares
Series Pre-A
Convertible
Redeemable Preferred
Shares
Series A
Convertible Redeemable
Preferred Shares Total
Number of
shares RMB’000
Number of
shares RMB’000
Number of
shares RMB’000 RMB’000
As at 1 January 2021 – – 13,161,290 300,000 – – 300,000
Issuance of preferred shares – – – – 18,593,305 600,000 600,000
Redemption rights granted to
Series Angel Preferred
Shareholders 6,267,235 100,00 0––– – 100,000
Redemption rights granted to
2021 April capital swap – – – – 7,328,865 115,407 115,407
Accumulated fair value
change of equity instrument
on redemption rights grant
date – 18,36 2––– 104,883 123,245
Changes in fair value – 17,628 – 50,423 – 76,150 144,201
As at 31 December 2021 and
1 January 2022 6,267,235 135,990 13,161,290 350,423 25,922,170 896,440 1,382,853
Changes in fair value – 39,430 – 70,710 – 80,891 191,031
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 451 ---
Series Angel
Convertible Redeemable
Preferred Shares
Series Pre-A
Convertible
Redeemable Preferred
Shares
Series A
Convertible Redeemable
Preferred Shares Total
Number of
shares RMB’000
Number of
shares RMB’000
Number of
shares RMB’000 RMB’000
As at 31 December 2022 and
1 January 2023 6,267,235 175,420 13,161,290 421,133 25,922,170 977,331 1,573,884
Changes in fair value – 40,985 – 84,442 – 148,705 274,132
As at 31 December 2023 and
1 January 2024 6,267,235 216,405 13,161,290 505,575 25,922,170 1,126,036 1,848,016
Termination of Warrant
agreement – – – – (5,767,820) (183,000) (183,000)
Changes in fair value – 39,825 – 76,990 – 40,218 157,033
As at 30 June 2024 6,267,235 256,230 13,161,290 582,565 20,154,350 983,254 1,822,049
The Group applied the discounted cash flow method to determine the equity value of the Company and adopted
the equity allocation model to determine the fair values of the convertible redeemable preferred shares as at the end
of each of the Relevant Periods. Key valuation assumptions used to determine the fair values of the convertible
redeemable preferred shares and commitment derivatives are set below:
As at 31 December
As at
30 June
2021 2022 2023 2024
Discount rate 16.50% 15.50% 15.00% 15.00%
Risk-free interest rate 1.19% 4.17% 4.13% 4.75%
Discounts for lack of marketability
(“DLOM”) 19.05% 17.92% 14.37% 12.59%
V olatility 43.48% 45.50% 41.11% 39.96%
The Group estimated the risk-free interest rate based on the yield of the United States Government Bond with
maturity close to the expected exit timing as at the valuation date. The DLOM was estimated based on the
option-pricing method. Under the option-pricing method, the cost of redemption option, which can hedge the price
change before the privately held share can be sold, was considered as a basis to determine the lack of marketability
discount.
V olatility was estimated based on the annualised standard deviation of daily stock price return of comparable
companies for a period from the valuation date and with a similar time span to expiration.
30. SHARE CAPITAL
The Company was incorporated in the Cayman Islands on 28 July 2021 with initial authorised share capital
of USD50,000 divided into 500,000,000 Ordinary Shares of US$0.0001 each.
On 28 July, 2021, upon incorporation, the Company issued 100 Ordinary Shares to Next Bloks Limited, 100
Ordinary Shares to Smart Bloks Limited, 1 Ordinary Share to ShawnXF Limited, 1 Ordinary Share to Bloks Is
Coming Limited and 1 Ordinary Share to Way Elegance Limited, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
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On 25 July 2022, the Company reclassified and re-designated:
1) A total of 74,275,759 unissued Original Shares of US$0.0001 each as 35,192,299 Series Angel Preferred
Shares, 13,161,290 Series Pre-A Preferred Shares and 25,922,170 Series A Preferred Shares,
respectively.
2) The Company issued (i) 127,522,548 Ordinary Shares; (ii) 35,192,299 Series Angel Preferred Shares;
(iii) issued 13,161,290 Series Pre-A Preferred Shares; (iv) issued 20,154,350 Series A Preferred Shares;
(v) 1 issued Ordinary Share of US$0.0001 as 1 Series Angel Preferred Share.
On 25 July 2022, the Company also entered into the warrant agreement with Y unfeng Tuoyuan, pursuant to
which the Company has agreed to issue a warrant to Y unfeng Tuoyuan for it or its designated affiliates to subscribe
for an aggregate of 5,767,820 Series A Preferred Shares (the “Warrant”). On 3 April 2024, the Company entered into
a warrant termination agreement and then settled the Warrant in cash.
On 12 January 2023, the Company issued 21,321,255 Ordinary Shares to First Prosperity for the purpose of
the Share Incentive Scheme.
Authorised
Authorised
number of shares
Nominal value of
shares
USD
Ordinary shares of USD1 each as at 28 July 2021 (date of
incorporation) 500,000,000 50,000
Ordinary shares of USD0.0001 each as at 31 December 2021 500,000,000 50,000
Re-classification and re-designation to Series Angel Preferred Shares (35,192,300) (3,519)
Re-classification and re-designation to Series Pre-A Preferred Shares (13,161,290) (1,316)
Re-classification and re-designation to Series A Preferred Shares (25,922,170) (2,592)
Ordinary shares of USD0.0001 each as at 31 December 2022, 2023
and 30 June 2024 425,724,240 42,573
Series Angel Preferred Shares of USD0.0001 each as at
31 December 2022, 2023 and 30 June 2024 (Note 1) 35,192,300 3,519
Series Pre-A Preferred Shares of USD0.0001 each as at
31 December 2022, 2023 and 30 June 2024 (Note 2) 13,161,290 1,316
Series A Preferred Shares of USD0.0001 each as at
31 December 2022, 2023 and 30 June 2024 (Note 3) 25,922,170 2,592
Note 1: 35,192,300 Series Angel Preferred Shares includes (1) 28,925,065 shares was recorded as equity,
(2) 6,267,235 shares was recognised as Series Angel Convertible Redeemable Preferred Shares and
recorded as financial liabilities measured at fair value through profit or loss as at 31 December 2022, 2023
and 30 June 2024.
Note 2: 13,161,290 Series Pre-A Preferred Shares was fully recognised as Series Pre-A Convertible Redeemable
Preferred Shares and recorded as financial liabilities measured at fair value through profit or loss as at
31 December 2022, 2023 and 30 June 2024.
Note 3: 25,922,170 Series A Preferred Shares was fully recognised as Series A Convertible Redeemable Preferred
Shares and recorded as financial liabilities measured at fair value through profit or loss as at 31 December
2022 and 2023. Warrant with 5,767,820 shares was terminated on 3 April 2024 but still within authorised
Series A Preferred Shares and there was 20,154,350 shares recognised as Series A Convertible Redeemable
Preferred Shares as at 30 June 2024.
APPENDIX I ACCOUNTANTS’ REPORT
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Issued and fully paid
Number of
shares
Nominal value
of shares
Nominal value
of shares
USD RMB
Ordinary shares
Issuance of Ordinary shares at the date of incorporation
(28 July 2021) 203 – –
As at 31 December 2021 203 – –
Issuance of Ordinary shares 127,522,548 12,752 91,521
Re-designate to Series Angel Preferred Shares (1) – –
As at 31 December 2022 127,522,750 12,752 91,521
Ordinary shares issued for the share incentive plan 21,321,255 2,132 15,301
As at 31 December 2023 and 30 June 2024 148,844,005 14,884 106,822
Number of
shares
Nominal value
of shares
Nominal value
of shares
USD RMB
Series Angel Preferred Shares (Note)
As at 28 July 2021 (date of incorporation) – – –
As at 31 December 2021 – – –
Series Angel Preferred Shares (except for Series Angel
Convertible Redeemable Preferred Shares) issued 28,925,065 2,893 20,759
As at 31 December 2022, 2023 and 30 June 2024 28,925,065 2,893 20,759
Note: The Company does not hold an unavoidable obligation to (i) deliver cash or other financial assets to Series
Angel preferred shareholders; (ii) to exchange financial assets or financial liabilities with Series Angel
preferred shareholders that are unfavorable to the Company; and (iii) to deliver a variable number of the
Company’s own ordinary shares. Hence, Series Angel Preferred Shares (except for Series Angel Convertible
Redeemable Preferred Shares) were recognized as equity in accordance with relevant IFRS standard.
Share Capital
As at 31 December
As at
30 June
2021 2022 2023 2024
Issued and fully paid:
Nominal value of Ordinary shares (RMB) – 91,521 106,822 106,822
Nominal value of Series Angel Preferred
Shares (except for Series Angel
Convertible Redeemable Preferred
Shares) (RMB) – 20,759 20,759 20,759
Total – 112,280 127,581 127,581
APPENDIX I ACCOUNTANTS’ REPORT
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31. RESERVES
Group
The amounts of the Group’s reserves and the movements therein during the Relevant Periods and the six
months ended 30 June 2023 are presented in the consolidated statements of changes in equity.
(a) Share premium
The share premium represents the difference between the par value of the shares issued and the consideration
received.
(b) Share option reserve
The share option reserve of the Group represents the share-based payment granted by the Group.
(c) Other reserve
The other reserve represents (i) the exchange fluctuation reserve represents exchange differences arising from
the translation of the financial statements of group companies whose functional currencies are different from the
Company’s presentation currency; and (ii) the acquisition of minority interests of the Group’s subsidiaries.
Company
A summary of the Company’s reserves is as follows:
Share
premium
Share option
reserve
Other
reserve
Accumulated
losses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 – – – – –
Incorporation of the Company 859,150 8,851 – – 868,001
Total comprehensive loss for
the year – – – (144,201) (144,201)
Recognition of share-based
payment expenses – 6,863 – – 6,863
Redemption rights granted to
capital swap (215,407) – (123,245) – (338,652)
At 31 December 2021 and
1 January 2022 643,743 15,714 (123,245) (144,201) 392,011
Total comprehensive loss for
the year – – (8) (191,272) (191,280)
Issue of shares (112) – – – (112)
Recognition of share-based
payment expenses – 6,337 – – 6,337
APPENDIX I ACCOUNTANTS’ REPORT
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Share
premium
Share option
reserve
Other
reserve
Accumulated
losses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 31 December 2022 and
1 January 2023 643,631 22,051 (123,253) (335,473) 206,956
Total comprehensive loss for
the year – – (5) (274,290) (274,295)
Issue of shares (16) – – – (16)
Recognition of share-based
payment expenses – 6,231 – – 6,231
At 31 December 2023 and
1 January 2024 643,615 28,282 (123,258) (609,763) (61,124)
Total comprehensive loss for
the period – – (122) (532,350) (532,472)
Recognition of share-based
payment expenses – 374,670 – – 374,670
At 30 June 2024 643,615 402,952 (123,380) (1,142,113) (218,926)
32. EQUITY-SETTLED SHARE-BASED PAYMENT
In order to promote the Group’s development in the long run and attract and retain the senior management team
and core talents, Shanghai Bloks Technology Group Co., Ltd., the onshore holding company of the Group adopted
a share incentive scheme (the “Original Plan”) in December 2020.
In December 2020, the Board approved the Original Plan and granted 4,089,574 shares to certain employees
at an exercise price of RMB0.2 per share. According to the Original Plan agreements, the shares are vested in one
tranche within the vesting period from the grant date to the estimated date of completion of the qualified initial public
offering of the Company, subject to employees’ continuous service to the Company.
In March 2024, the Board passed a resolution to replace the Original Plan with an unmodified equity incentive
plan (the “Mirroring Plan”). The Mirroring Plan is the continuation of the Original Plan adopted by Shanghai Bloks
Technology Group Co., Ltd. in December 2020. At the meanwhile, the Company intends to amend the Scheme
(including the name of the Scheme, which will be updated to the Share Incentive Scheme), applicable both to the
participants regulated under the domestic scheme and to any eligible future participants.
In April 2024, the Board granted 17,776,888 share options to certain employees including the chief executive
and executive directors under the Share Incentive Scheme at an exercise price of RMB0.2 per share. The share options
granted to the chief executive have been vested immediately. The remaining share options shall be vested in four, six
or eight years and the share options shall be vested in yearly instalments of agreed percentage at each anniversary
date commencing from the vesting commencement date.
During the Relevant Periods and the six months ended 30 June 2023, the Group recognised share-based
payment expenses of RMB6,863,000, RMB6,337,000, RMB6,231,000, RMB374,670,000 and RMB3,071,000
(unaudited), respectively.
APPENDIX I ACCOUNTANTS’ REPORT
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The following shares were outstanding during the Relevant Periods:
Share Incentive Scheme adopted in
December 2020
Numbers of
shares
Fair value
per share
RMB
At 1 January 2021 4,089,574 7.05
Forfeited (380,158) –
At 31 December 2021 and 1 January 2022 3,709,416 7.05
Forfeited (85,712) –
At 31 December 2022 and 1 January 2023 3,623,704 7.05
Forfeited (66,387) –
At 31 December 2023 and 1 January 2024 3,557,317 7.05
Forfeited (12,950) –
At 30 June 2024 3,544,367 7.05
Share Incentive Scheme adopted in
April 2024
Numbers of
shares
Fair value
per share
RMB
At 1 January 2024 – –
Granted 17,776,888 28.57-28.60
At 30 June 2024 17,776,888 28.57-28.60
The fair value of the shares granted in December 2020 was RMB7.05 per share and the exercise price was
RMB0.2 per share. The fair value of the share options granted in April 2024 was between RMB28.57 and RMB28.60
per share and the exercise price was RMB0.2 per share.
The fair value of the Original Plan at the grant date was determined using back-solve method from most recent
transaction price, taking into account the terms and conditions upon which the shares were granted.
APPENDIX I ACCOUNTANTS’ REPORT
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The fair value of the share options granted in April 2024 was estimated as at the date of grant using a binomial
model, taking into account the terms and conditions upon which the options were granted. The following table lists
the inputs to the model used:
15 April 2024
Dividend yield (%) –
Expected V olatility (%) 41.48
Risk-free interest rate (%) 4.61
Expected life of options (years) 10.00
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which
may also not necessarily be the actual outcome.
33. NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Major non-cash transactions
During the year ended 31 December 2021 and the six months ended 30 June 2023, the Group had no major
non-cash transactions. During the years ended 31 December 2022 and 2023 and the six months ended 30 June 2024,
the Group had non-cash additions to right-of-use assets of RMB5,152,000, RMB52,831,000 and RMB989,000 and
lease liabilities of RMB5,152,000, RMB52,831,000 and RMB989,000, respectively, in respect of lease agreements.
(b) Changes in liabilities arising from financing activities
Lease
liabilities
Convertible
redeemable
preferred
shares
Interest-
bearing
bank
borrowings
Accrued
listing expense
included in
other payables
Amounts
due to
related
parties
Payables for
acquisition of
non-controlling
interest equity
Amounts
in connection
with the
Reorganization
Loan payable
to a third party Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 65,450 638,652 – – 19,196 – – 6,525 729,823
Changes from
financing cash
flows (22,368) 600,000 – – –––– 577,632
Interest expenses 2,323 – – – –––– 2,323
Effect of foreign
exchange rate
changes, net – – – – (461) – – (149) (610)
Fair value changes – 144,201 – – –––– 144,201
At 31 December
2021 and 1
January 2022 45,405 1,382,853 – – 18,735 – – 6,376 1,453,369
Changes from
financing cash
flows (28,853) – 4,990 – 25,000 – 30,338 – 31,475
New leases 5,152 – – – –––– 5,152
Interest expenses 1,564 – 10 – –––– 1,574
Effect of foreign
exchange rate
changes, net – – – – 959 – – 589 1,548
Fair value changes – 191,031 – – –––– 191,031
At 31 December
2022 and 1
January 2023 23,268 1,573,884 5,000 – 44,694 – 30,338 6,965 1,684,149
APPENDIX I ACCOUNTANTS’ REPORT
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Lease
liabilities
Convertible
redeemable
preferred
shares
Interest-
bearing
bank
borrowings
Accrued listing
expense
included in
other payables
Amounts
due to
related
parties
Payables for
acquisition of
non-controlling
interest equity
Amounts in
connection
with the
Reorganization
Loan payable
to a third party Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2023 23,268 1,573,884 5,000 – 44,694 – 30,338 6,965 1,684,149
Changes from
financing cash
flows (19,300) – (6,054) – (18,974) – (25,818) – (70,146)
New leases 52,831 – – – –––– 52,831
Lease termination (468) – – – –––– (468)
Interest expenses 600 – 1,054 – –––– 1,654
Effect of foreign
exchange rate
changes, net – – – – 193 – – 118 311
Acquisition of
non-controlling
interest equity – – – – – 30,000 – – 30,000
Fair value changes – 274,132 – – –––– 274,132
At 31 December
2023 and 1
January 2024 56,931 1,848,016 – – 25,913 30,000 4,520 7,083 1,972,463
Changes from
financing cash
flows (12,545) (183,000) – (7,540) (25,914) (32,400) (4,520) (7,095) (273,014)
Changes from
operating cash
flows – – – (10,716) –––– (10,716)
New leases 989 – – – –––– 9 8 9
Listing expenses – – – 15,355 –––– 15,355
Deferred issue
costs – – – 8,267 –––– 8,267
Acquisition of
non-controlling
interest equity – – – – – 2,400 – – 2,400
Interest expenses 891 – – – –––– 8 9 1
Effect of foreign
exchange rate
changes, net – – – – 1 – – 12 13
Fair value changes – 157,033 – – –––– 157,033
At 30 June 2024 46,266 1,822,049 – 5,366 –––– 1,873,681
APPENDIX I ACCOUNTANTS’ REPORT
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Lease
liabilities
Convertible
redeemable
preferred
shares
Interest-
bearing
bank
borrowings
Accrued listing
expense
included in
other payables
Amounts
due to
related
parties
Payables for
acquisition of
non-controlling
interest equity
Amounts in
connection
with the
Reorganization
Loan payable
to a third party Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2023 23,268 1,573,884 5,000 – 44,694 – 30,338 6,965 1,684,149
Changes from
financing cash
flows
(unaudited) (6,695) – (5,937) – – – (25,818) – (38,450)
Lease termination
(unaudited) (468) – – – –––– (468)
Interest expenses
(unaudited) 386 – 937 – –––– 1,323
Effect of foreign
exchange rate
changes, net
(unaudited) – – – – 426 – – 261 687
Fair value changes
(unaudited) – 188,611 – – –––– 188,611
At 30 June 2023
(unaudited) 16,491 1,762,495 – – 45,120 – 4,520 7,226 1,835,852
(c) Total cash outflows for leases
Y ear ended 31 December Six months ended 30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Within operating activities 2,278 483 1,173 546 402
Within financing activities 22,368 28,853 19,300 6,695 12,545
24,646 29,336 20,473 7,241 12,947
34. COMMITMENTS
Contractual commitments
Capital expenditure contracted for at the end of each of the Relevant Periods but not yet incurred is as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Mold equipment – 2,497 453 16,941
Licensed IP 6,738 5,618 4,585 39,294
6,738 8,115 5,038 56,235
APPENDIX I ACCOUNTANTS’ REPORT
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35. TRANSACTIONS WITH NON-CONTROLLING INTERESTS
(a) Acquisition of additional interests in subsidiaries
During the Relevant Periods, the Group acquired the following additional equity interests in the subsidiaries
from the non-controlling interests:
Subsidiaries
Date
Equity
interests
acquired
Cash
consideration
% RMB’000
Bloks Technology (Hangzhou) Co., Ltd. 11 March 2021 3.42 –
Shanghai Bloks Culture Communication Co., Ltd. 13 October 2023 8.70 30,007
Bloks Technology (Hangzhou) Co., Ltd. 31 March 2024 35.00 2,400
The effect of changes in the equity interests of these subsidiaries on the total equity attributable to owners of
the parent during the Relevant Periods is summarised as follows:
31 December 2021
Effect on
the total equity
RMB’000
Carrying amount of non-controlling interests acquired 1
31 December 2023
Effect on
the total equity
RMB’000
Carrying amount of non-controlling interests acquired (10,254)
Consideration payable to non-controlling interests 30,007
Excess of consideration paid over the carrying amount acquired 40,261
30 June 2024
Effect on
the total equity
RMB’000
Carrying amount of non-controlling interests acquired (20)
Consideration payable to non-controlling interests 2,400
Excess of consideration paid over the carrying amount acquired 2,420
In March 2024, the Group acquired additional equity interests in Bloks Technology (Hangzhou) Co., Ltd., a
subsidiary of the Group, from two non-controlling shareholders at cash consideration of RMB2,400,000. After the
transaction, the Group’s shareholding of Bloks Technology (Hangzhou) Co., Ltd. increased to 100% accordingly.
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Disposal of interests in subsidiaries without loss of control
In April 2021, Bloks Technology (Hangzhou) Co., Ltd., a subsidiary of the Group, obtained a capital injection
from a non-controlling shareholder amounting to RMB1,800,000. After the capital injection, the Group’s equity
interest diluted from 68.42% to 65% and the non-controlling interests in Bloks Technology (Hangzhou) Co., Ltd.
increased to RMB633,000 accordingly.
(c) Effects of transactions with non-controlling interests on the equity attributable to owners of the parent
for the Relevant Periods and the six months ended 30 June 2023:
31 December 2021
Effect on
the total equity
RMB’000
Changes in equity attributable to owners of the parent arising from:
– Acquisition of additional interests in subsidiaries 1
– Disposal of interests in subsidiaries without loss of control 1,166
Net effect for transactions with non-controlling interests on equity attributable to
owners of the parent 1,167
31 December 2023
Effect on
the total equity
RMB’000
Changes in equity attributable to owners of the parent arising from:
– Acquisition of additional interests in subsidiaries 40,261
Net effect for transactions with non-controlling interests on equity attributable to
owners of the parent 40,261
30 June 2024
Effect on
the total equity
RMB’000
Changes in equity attributable to owners of the parent arising from:
– Acquisition of additional interests in subsidiaries 2,420
Net effect for transactions with non-controlling interests on equity attributable to
owners of the parent 2,420
APPENDIX I ACCOUNTANTS’ REPORT
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36. RELATED PARTY TRANSACTIONS
(a) Name and relationship of related parties
Name Relationship
Mr. Zhu Weisong Controlling shareholder
Ningbo Shengteng Investment Management
Partnership (Limited Partnership)
Controlled by the controlling shareholder
Wise Creation Investment Limited Controlled by the controlling shareholder
Shanghai Information Technology Co., Ltd. Controlled by the controlling shareholder
Shanghai Bloks Culture Communication Co., Ltd. Controlled by the controlling shareholder
(b) Transactions with related parties
The Group had the following material transactions with related parties during the Relevant Periods and the six
months ended 30 June 2023:
Y ear ended 31 December Six months ended 30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Borrowings from a related
party – 25,00 0–––
Repayment of amounts due
to related parties – – 18,974 – 25,914
Sublease income from a
related party –––– 1 3 7
Animation production
service fees from a
related party –––– 8 3 4
(c) Outstanding balances with related parties
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Loan payables
Ningbo Shengteng Investment
Management Partnership (Limited
Partnership) – 25,000 25,000 –
Mr. Zhu Weisong 17,913 18,797 – –
Wise Creation Investment Limited 822 897 913 –
18,735 44,694 25,913 –
APPENDIX I ACCOUNTANTS’ REPORT
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As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Other receivables from sublease
income
Shanghai Information Technology
Co., Ltd. – – – 137
Prepayments for animation
production
Shanghai Bloks Culture
Communication Co., Ltd. – – – 1,366
As at the end of each of the Relevant Periods, the Group’s outstanding balances with Controlling shareholder
and companies controlled by Controlling shareholder were all unsecured, interest-free and repayable on demand.
The loan payables with related parties are non-trade in nature and the balances have been settled as at 30 June
2024. As at 30 June 2024, the outstanding balances with related parties, which is other receivables and prepayment,
are of trade nature.
(d) Compensation of key management personnel of the Group
Y ear ended 31 December Six months ended 30 June
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, bonuses,
allowances and benefits
in kind 3,198 3,129 3,740 1,821 2,906
Pension scheme
contributions 525 540 542 263 336
Share-based payment
expenses 498 498 498 245 364,573
4,221 4,167 4,780 2,329 367,815
Further details of directors’ and the chief executive’s emoluments are included in note 10 to the Historical
Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
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37. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of each of the Relevant
Periods are as follows:
Financial assets
31 December 2021
Financial
assets at fair
value through
profit or loss
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial assets included in prepayments,
other receivables and other assets – 7,503 7,503
Cash and cash equivalents – 76,153 76,153
Pledged deposits – 4,719 4,719
Trade and notes receivables – 24,917 24,917
Financial assets at fair value through profit
or loss 272,785 – 272,785
272,785 113,292 386,077
31 December 2022
Financial
assets at fair
value through
profit or loss
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial assets included in prepayments,
other receivables and other assets – 7,510 7,510
Cash and cash equivalents – 188,972 188,972
Pledged deposits – 9,064 9,064
Trade and notes receivables – 15,299 15,299
Financial assets at fair value through profit
or loss 1,251 – 1,251
1,251 220,845 222,096
APPENDIX I ACCOUNTANTS’ REPORT
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31 December 2023
Financial
assets at fair
value through
profit or loss
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial assets included in prepayments,
other receivables and other assets – 7,125 7,125
Cash and cash equivalents – 360,837 360,837
Pledged deposits – 8,141 8,141
Trade and notes receivables – 38,256 38,256
Financial assets at fair value through profit
or loss 1,251 – 1,251
1,251 414,359 415,610
30 June 2024
Financial
assets at fair
value through
profit or loss
Financial
assets at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial assets included in prepayments,
other receivables and other assets – 7,157 7,157
Cash and cash equivalents – 554,092 554,092
Pledged deposits – 8,587 8,587
Trade and notes receivables – 63,298 63,298
– 633,134 633,134
Financial liabilities
31 December 2021
Financial
liabilities at
fair value
through profit
or loss
Financial
liabilities at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities included in other payables
and accruals – 87,447 87,447
Trade and notes payables – 92,879 92,879
Amounts due to related parties – 18,735 18,735
Convertible redeemable preferred shares 1,382,853 – 1,382,853
1,382,853 199,061 1,581,914
APPENDIX I ACCOUNTANTS’ REPORT
– I-79 –


--- page 466 ---
31 December 2022
Financial
liabilities at
fair value
through profit
or loss
Financial
liabilities at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities included in other payables
and accruals – 91,567 91,567
Trade and notes payables – 118,533 118,533
Amounts due to related parties – 44,694 44,694
Interest-bearing bank borrowings – 5,000 5,000
Convertible redeemable preferred shares 1,573,884 – 1,573,884
1,573,884 259,794 1,833,678
31 December 2023
Financial
liabilities at
fair value
through profit
or loss
Financial
liabilities at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities included in other payables
and accruals – 93,522 93,522
Trade and notes payables – 259,671 259,671
Amounts due to related parties – 25,913 25,913
Convertible redeemable preferred shares 1,848,016 – 1,848,016
1,848,016 379,106 2,227,122
30 June 2024
Financial
liabilities at
fair value
through profit
or loss
Financial
liabilities at
amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities included in other payables
and accruals – 92,620 92,620
Trade and notes payables – 514,705 514,705
Convertible redeemable preferred shares 1,822,049 – 1,822,049
1,822,049 607,325 2,429,374
APPENDIX I ACCOUNTANTS’ REPORT
– I-80 –


--- page 467 ---
38. FAIR V ALUE AND FAIR V ALUE HIERARCHY OF FINANCIAL INSTRUMENTS
Management has assessed that the fair values of cash and cash equivalents, pledged deposits, trade and notes
receivables, financial assets included in prepayments, other receivables and other assets (in the current portion),
financial liabilities included in trade and other payables and lease liabilities (in the current portion) approximate to
their carrying amounts largely due to the short-term maturities of these instruments.
The Group’s finance department headed by the finance manager is responsible for determining the policies and
procedures for the fair value measurement of financial instruments. At the end of each of the Relevant Periods, the
finance department analyses the movements in the values of financial instruments and determines the major inputs
applied in the valuation. The directors review the results of the fair value measurement of financial instruments
periodically for financial reporting.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following
methods and assumptions were used to estimate the fair values:
The fair values of the non-current portion of financial assets included in prepayments, other receivables and
other assets have been calculated by discounting the expected future cash flows using rates currently available for
instruments with similar terms, credit risk and remaining maturities.
The Group invests in cash management products issued by the bank. The fair values of these products are
derived from quoted prices (unadjusted) in active market for identical assets or liabilities. The valuation techniques
based on open market transaction prices.
The fair value of the convertible redeemable preferred shares measured at FVTPL is determined using the
valuation techniques, including option-pricing method, and is within Level 3 fair value measurement. Further details
are set out in note 29 to the Historical Financial Information.
Set out below is a summary of significant unobservable inputs to the valuation of convertible redeemable
preferred shares categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity
analysis as at the end of each of the Relevant Periods.
Significant
unobservable inputs
Increase/
(decrease)
unobservable
inputs
(Decrease)/increase in the fair value
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Discount rate 5%/(5%) (62,619)/69,712 (66,964)/72,762 (69,156)/81,802 (71,186)/83,175
Risk-free interest rate 5%/(5%) (1,376)/1,379 (4,240)/3,341 (2,597)/2,617 (1,929)/3,025
DLOM 5%/(5%) (10,234)/10,234 (8,028)/8,028 (7,356)/7,356 (10,035)/10,035
V olatility 5%/(5%) (18,455)/14,736 (12,522)/8,275 (4,726)/8,262 (4,702)/5,177
APPENDIX I ACCOUNTANTS’ REPORT
– I-81 –


--- page 468 ---
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:
Assets measured at fair value
As at 31 December 2021
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Cash management products 272,785 – – 272,785
As at 31 December 2022
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Cash management product 1,251 – – 1,251
As at 31 December 2023
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Cash management product 1,251 – – 1,251
As at 30 June 2024
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Cash management product ––––
APPENDIX I ACCOUNTANTS’ REPORT
– I-82 –


--- page 469 ---
Liabilities measured at fair value
As at 31 December 2021
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Convertible redeemable preferred
shares – – 1,382,853 1,382,853
As at 31 December 2022
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Convertible redeemable preferred
shares – – 1,573,884 1,573,884
As at 31 December 2023
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Convertible redeemable preferred
shares – – 1,848,016 1,848,016
As at 30 June 2024
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
Convertible redeemable preferred
shares – – 1,822,049 1,822,049
During the Relevant Periods, there were no transfers of fair value measurements between Level 1 and Level
2 and no transfers into or out of Level 3 for both financial assets and financial liabilities.
APPENDIX I ACCOUNTANTS’ REPORT
– I-83 –


--- page 470 ---
39. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise convertible redeemable preferred shares, cash and cash
equivalents, pledged deposits and amounts due to and from related parties. The main purpose of these financial
instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities
such as trade and notes receivables and trade and notes payables, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are foreign currency risk, credit risk and
liquidity risk. The board of directors reviews and agrees policies for managing each of these risks, which are
summarised as below.
(a) Foreign currency risk
The Group has transactional currency exposures. Such exposures arise from sales or purchases by operating
units in currencies other than the units’ functional currencies. In addition, the Group has currency exposures from its
cash and cash equivalents. The management of the Company considers the Group’s exposure to foreign currency risk
not significant.
The following table demonstrates the sensitivity as at the end of each of the Relevant Periods to a reasonably
possible change in the USD exchange rate, with all other variables held constant, of the Group’s loss before tax (due
to changes in the retranslated value of monetary assets and liabilities) and the Group’s equity.
Increase/(decrease)
in USD/RMB rate
Increase/(decrease)
in loss before tax
Increase/(decrease)
in equity
% RMB’000 RMB’000
31 December 2021
If RMB weakens against USD 5 14 2
If RMB strengthens against USD (5) (14) (2)
31 December 2022
If RMB weakens against USD 5 37 6
If RMB strengthens against USD (5) (37) (6)
31 December 2023
If RMB weakens against USD 5 381 63
If RMB strengthens against USD (5) (381) (63)
30 June 2024
If RMB weakens against USD 5 792 131
If RMB strengthens against USD (5) (792) (131)
(b) Credit risk
The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all
customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable
balances are monitored on an ongoing basis and the Group’s exposure to bad debts is not significant.
Maximum exposure and staging as at 31 December 2021, 2022, 2023 and 30 June 2024
The table below shows the credit quality and the maximum exposure to credit risk based on the Group’s credit
policy, which is mainly based on past due information unless other information is available without undue cost or
effort, and year-end staging classification as at the end of each of the Relevant Periods. The amounts presented are
gross carrying amounts for financial assets.
APPENDIX I ACCOUNTANTS’ REPORT
– I-84 –


--- page 471 ---
31 December 2021
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables * – – – 25,562 25,562
Financial assets included
in prepayments, other
receivables and other
assets
** 8,08 7––– 8,087
Cash and cash equivalents 76,15 3––– 76,153
Pledged deposits 4,71 9––– 4,719
88,959 – – 25,562 114,521
31 December 2022
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables* – – – 15,647 15,647
Financial assets included
in prepayments, other
receivables and other
assets** 8,06 5––– 8,065
Cash and cash equivalents 188,97 2––– 188,972
Pledged deposits 9,06 4––– 9,064
206,101 – – 15,647 221,748
31 December 2023
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables * – – – 38,964 38,964
Financial assets included
in prepayments, other
receivables and other
assets
** 7,90 9––– 7,909
Cash and cash equivalents 360,83 7––– 360,837
Pledged deposits 8,14 1––– 8,141
376,887 – – 38,964 415,851
APPENDIX I ACCOUNTANTS’ REPORT
– I-85 –


--- page 472 ---
30 June 2024
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables* – – – 63,920 63,920
Financial assets included
in prepayments, other
receivables and other
assets** 8,32 9––– 8,329
Cash and cash equivalents 554,09 2––– 554,092
Pledged deposits 8,58 7––– 8,587
571,008 – – 63,920 634,928
* For trade receivables to which the Group applies the simplified approach for impairment, information
based on the provision matrix is disclosed in note 21 to the Historical Financial Information.
** The credit quality of the financial assets included in prepayments, other receivables and other assets is
normal as they are not past due and there is no information indicating that the financial assets had a
significant increase in credit risk since initial recognition.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to
shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities of
financial assets and liabilities. The Group’s objective is to maintain a balance for continuity of funding to finance
its working capital needs as well as capital expenditure.
The maturity profile of the Group’s financial liabilities as at the end of each of the Relevant Periods, based
on contractual undiscounted payments, is as follows:
31 December 2021
Within 1 year Over 1 year Total
RMB’000 RMB’000 RMB’000
Trade and notes payables 92,879 – 92,879
Financial liabilities included in other payables
and accruals 81,071 6,376 87,447
Lease liabilities 28,703 23,096 51,799
Convertible redeemable preferred shares – 1,382,853 1,382,853
Amounts due to related parties – 18,735 18,735
202,653 1,431,060 1,633,713
APPENDIX I ACCOUNTANTS’ REPORT
– I-86 –


--- page 473 ---
31 December 2022
Within 1 year Over 1 year Total
RMB’000 RMB’000 RMB’000
Trade and notes payables 118,533 – 118,533
Financial liabilities included in other payables
and accruals 84,602 6,965 91,567
Lease liabilities 24,221 3,425 27,646
Convertible redeemable preferred shares – 1,573,884 1,573,884
Amounts due to related parties 18,797 25,897 44,694
Interest-bearing bank borrowings 5,072 – 5,072
251,225 1,610,171 1,861,396
31 December 2023
Within 1 year Over 1 year Total
RMB’000 RMB’000 RMB’000
Trade and notes payables 259,671 – 259,671
Financial liabilities included in other payables
and accruals 93,522 – 93,522
Lease liabilities 23,752 36,471 60,223
Convertible redeemable preferred shares – 1,848,016 1,848,016
Amounts due to related parties 25,913 – 25,913
402,858 1,884,487 2,287,345
30 June 2024
Within 1 year Over 1 year Total
RMB’000 RMB’000 RMB’000
Trade and notes payables 514,705 – 514,705
Financial liabilities included in other payables
and accruals 92,620 – 92,620
Lease liabilities 23,050 25,655 48,705
Convertible redeemable preferred shares – 1,822,049 1,822,049
630,375 1,847,704 2,478,079
(d) Capital management
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as
a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’
value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions
and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject
to any externally imposed capital requirement. No change was made in the objectives, policies or processes for
managing capital during the Relevant Periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-87 –


--- page 474 ---
The Group monitors its capital structure on the basis of an adjusted net debt-to-capital ratio. For this purpose,
adjusted net debt is defined as total debt. Adjusted capital comprises all components of equity and convertible
redeemable preferred shares. The adjusted net debt-to-capital ratios as at the end of each of the Relevant Periods were
as follows:
As at 31 December
As at
30 June
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Total liabilities 3,444,595 3,322,966 2,620,950 2,617,995
Less: Convertible redeemable
preferred shares (1,382,853) (1,573,884) (1,848,016) (1,822,049)
Payables in connection with the
Reorganization (1,759,480) (1,407,338) (187,520) –
Cash and cash equivalents (76,153) (188,972) (360,837) (554,092)
Adjusted net debt 226,109 152,772 224,577 241,854
Equity attributable to owners of the
parent (950,528) (1,366,205) (1,606,257) (1,492,462)
Add: Convertible redeemable
preferred shares 1,382,853 1,573,884 1,848,016 1,822,049
Adjusted capital 432,325 207,679 241,759 329,587
Adjusted net debt-to-capital ratio 34.3% 42.4% 48.2% 42.3%
40. EVENTS AFTER THE REPORTING PERIODS
There were no significant events after the end of the Relevant Periods that require additional disclosure or
adjustments.
41. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Group or any of the companies now comprising the
Group in respect of any period subsequent to 30 June 2024.
APPENDIX I ACCOUNTANTS’ REPORT
– I-88 –


--- page 475 ---
The following information does not form part of the Accountants’ Report from Ernst &
Young, Certified Public Accountants, Hong Kong, the Company’ s reporting accountants, as set
out in Appendix I to this prospectus, and is included for information purposes only. The
unaudited pro forma financial information should be read in conjunction with the section
headed “Financial Information” in this prospectus and the Accountants’ Report set out in
Appendix I to this prospectus .
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets
of the Group has been prepared in accordance with Rule 4.29 of the Rules Governing the
Listing of Securities on the Stock Exchange of Hong Kong Limited and with reference to
Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants for
illustration purposes only, and is set out here to illustrate the effect of the Global Offering on
the consolidated net tangible assets of the Group attributable to owners of the parent as of
30 June 2024 as if the Global Offering had taken place on 30 June 2024.
The unaudited pro forma statement of adjusted consolidated net tangible assets of the
Group attributable to owners of the parent has been prepared for illustrative purposes only and
because of its hypothetical nature, it may not give a true picture of the financial position of the
Group had the Global Offering been completed as of 30 June 2024 or at any future date. It is
prepared based on our consolidated net tangible assets as of 30 June 2024 as set out in the
Accountants’ Report as set out in Appendix I to this prospectus and adjusted as described
below. The unaudited pro forma adjusted consolidated net tangible assets do not form part of
the Accountants’ Report as set out in Appendix I to this prospectus.
Consolidated
net tangible
assets/(liabilities)
attributable to
owners of the
parent
Estimated net
proceeds from
the Global
Offering
Estimated impact
related to the
changes of terms
of convertible
redeemable
preferred shares
upon Listing
Unaudited Pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of the
parent
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of the
parent per share
(RMB’000) (RMB’000) (RMB’000) (RMB’000) RMB HK$
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
Based on an Offer Price of
HK$55.65 per Offer Share (1,507,512) 1,162,469 1,822,049 1,477,006 6.12 6.61
Based on an Offer Price of
HK$58.00 per Offer Share (1,507,512) 1,212,696 1,822,049 1,527,233 6.32 6.83
Based on an Offer Price of
HK$60.35 per Offer Share (1,507,512) 1,262,924 1,822,049 1,577,461 6.53 7.06
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 476 ---
Notes:
(1) The consolidated net tangible liabilities of the Group attributable to owners of the parent as at 30 June
2024 was equal to the net liabilities attributable to owners of the parent as at 30 June 2024 of
RMB1,492,462,000 after deducting of other intangible assets of RMB15,050,000 as at 30 June 2024 set
out in the Accountants’ Report in Appendix I to this prospectus.
(2) The estimated net proceeds from the Global Offering are based on estimated Offer Price of HK$55.65
per Offer Share, HK$58.00 per Offer Share and HK$60.35 per Offer Share, after deduction of the
underwriting fees and other related expenses payable by the Company (excluding the listing expense
that have been charged to profit or loss during the Track Record Period) and 24,120,300 shares expected
to be issued under the global offering, taking no account of any Shares which may be issued upon the
exercise of the Offer Size Adjustment Option and the Over-Allotment Option.
(3) Upon the Listing and the completion of the Global Offering, 39,582,875 convertible redeemable
preferred shares will be automatically converted into 39,582,875 Ordinary Shares. The convertible
redeemable preferred shares will then be transferred from liabilities to equity. Accordingly, for the
purpose of the unaudited pro forma financial information, the unaudited pro forma adjusted net tangible
assets attributable to owners of the parent will be increased by RMB1,822,049,000, the carrying amount
of the convertible redeemable preferred shares as at 30 June 2024.
(4) The unaudited pro forma adjusted consolidated net tangible assets per share is arrived at after
adjustments referred in preceding paragraph and on the basis of 241,472,245 Shares are in issue,
assuming that the conversion of Preferred Shares into the ordinary shares and the Global Offering has
been completed.
(5) For the purpose of this unaudited pro forma statement of adjusted net tangible assets attributable to the
owners of the parent, the balances stated in RMB are converted into HK$ at the rate of RMB1.00 to
HK$1.08056.
(6) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets
attributable to owners of the parent to reflect any trading results or other transactions of the Group
entered into subsequent to 30 June 2024.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 477 ---
The following version is the text of a report, prepared for the purpose of incorporation
in this document, received from the Reporting Accountants, Ernst & Young, Certified Public
Accountants.
B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
⭰㰟㛪姯⸒Ṳ⋀㈧
榀㸖毩歁㵳勘䙮怺979噆
⤑⏋✱ᷧ⺎27㧺
Tel 曢婘: +852 2846 9888
Fax ₚ䜆: +852 2868 4432
ey.com
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hon
g Kong
To the Directors of Bloks Group Limited
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Bloks Group Limited (the “ Company ”) and its subsidiaries
(hereinafter collectively referred to as the “ Group ”) by the directors of the Company (the
“Directors”) for illustrative purposes only. The pro forma financial information consists of the
pro forma consolidated net tangible assets as at 30 June 2024, and related notes as set out on
Part A of Appendix II to the prospectus dated 31 December 2024 issued by the Company (the
“Pro Forma Financial Information”). The applicable criteria on the basis of which the Directors
have compiled the Pro Forma Financial Information are described in Part A of Appendix II to
the prospectus.
The Pro Forma Financial Information has been compiled by the Directors to illustrate the
impact of the global offering of shares of the Company on the Group’s financial position as at
30 June 2024 as if the transaction had taken place at 30 June 2024. As part of this process,
information about the Group’s financial position, has been extracted by the Directors from the
Group’s financial statements for the period ended 30 June 2024, on which an accountants’
report has been published.
Directors’ responsibility for the Pro Forma Financial Information
The Directors are responsible for compiling the Pro Forma Financial Information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting
Guideline (“ AG”) 7 Preparation of Pro Forma Financial Information for Inclusion in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (the
“HKICPA ”).
Our independence and quality management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behavior.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 478 ---
Our firm applies Hong Kong Standard on Quality Management 1 Quality Management for
Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related
Services Engagements which requires the firm to design, implement and operate a system of
quality management including policies or procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
Reporting accountants’ responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Pro Forma Financial Information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any financial
information used in the compilation of the Pro Forma Financial Information beyond that owed
to those to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus issued by the HKICPA. This standard requires
that the reporting accountants plan and perform procedures to obtain reasonable assurance
about whether the Directors have compiled the Pro Forma Financial Information in accordance
with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Pro Forma
Financial Information, nor have we, in the course of this engagement, performed an audit or
review of the financial information used in compiling the Pro Forma Financial Information.
The purpose of the Pro Forma Financial Information included in the Prospectus is solely
to illustrate the impact of the global offering of shares of the Company on unadjusted financial
information of the Group as if the transaction had been undertaken at an earlier date selected
for purposes of the illustration. Accordingly, we do not provide any assurance that the actual
outcome of the transaction would have been as presented.
A reasonable assurance engagement to report on whether the Pro Forma Financial
Information has been properly compiled on the basis of the applicable criteria involves
performing procedures to assess whether the applicable criteria used by the Directors in the
compilation of the Pro Forma Financial Information provide a reasonable basis for presenting
the significant effects directly attributable to the transaction, and to obtain sufficient
appropriate evidence about whether:
 the related pro forma adjustments give appropriate effect to those criteria; and
 the Pro Forma Financial Information reflects the proper application of those
adjustments to the unadjusted financial information.
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The procedures selected depend on the reporting accountants’ judgment, having regard to
the reporting accountants’ understanding of the nature of the Group, the transaction in respect
of which the Pro Forma Financial Information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the Pro Forma
Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion:
(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Pro Forma Financial
Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Ernst & Y oung
Certified Public Accountants
Hong Kong
31 December 2024
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SUMMARY OF THE CONSTITUTION OF THE COMPANY
1 Memorandum of Association
The memorandum of association (the “ Memorandum of Association ”) of the Company
was conditionally adopted on 18 December 2024 and states, inter alia, that the liability of the
members of the Company is limited, that the objects for which the Company is established are
unrestricted and the Company shall have full power and authority to carry out any object not
prohibited by the Cayman Companies Act or any other law of the Cayman Islands.
The Memorandum of Association is available for inspection at the address specified in
Appendix V in the section headed “Documents Delivered to the Registrar of Companies in
Hong Kong and Available on Display”.
2 Articles of Association
The articles of association (the “ Articles of Association ”) of the Company were
conditionally adopted on 18 December 2024 and include provisions to the following effect:
2.1 Classes of Shares
The share capital of the Company consists of ordinary shares. The authorized share
capital of the Company at the date of adoption of the Articles is US$50,000 divided into
500,000,000 ordinary shares of US$0.0001 each.
2.2 Directors
(a) Power to allot and issue Shares
Subject to the provisions of the Cayman Companies Act and the Memorandum and
Articles of Association, the unissued shares in the Company (whether forming part of its
original or any increased capital) shall be at the disposal of the Directors, who may offer, allot,
grant options over or otherwise dispose of them to such persons, at such times and for such
consideration, and upon such terms, as the Directors shall determine.
Subject to the provisions of the Articles of Association and to any direction that may be
given by the Company in general meeting and without prejudice to any special rights conferred
on the holders of any existing shares or attaching to any class of shares, any share may be
issued with or have attached thereto such preferred, deferred, qualified or other special rights
or restrictions, whether in regard to dividend, voting, return of capital or otherwise, and to such
persons at such times and for such consideration as the Directors may determine. Subject to the
Cayman Companies Act and to any special rights conferred on any shareholders or attaching
to any class of shares, any share may, with the sanction of a special resolution, be issued on
terms that it is, or at the option of the Company or the holder thereof, liable to be redeemed.
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(b) Power to dispose of the assets of the Company or any subsidiary
The management of the business of the Company shall be vested in the Directors who, in
addition to the powers and authorities by the Articles of Association expressly conferred upon
them, may exercise all such powers and do all such acts and things as may be exercised or done
or approved by the Company and are not by the Articles of Association or the Cayman
Companies Act expressly directed or required to be exercised or done by the Company in
general meeting, but subject nevertheless to the provisions of the Cayman Companies Act and
of the Articles of Association and to any regulation from time to time made by the Company
in general meeting not being inconsistent with such provisions or the Articles of Association,
provided that no regulation so made shall invalidate any prior act of the Directors which would
have been valid if such regulation had not been made.
(c) Compensation or payment for loss of office
Payment to any Director or past Director of any sum by way of compensation for loss of
office or as consideration for or in connection with his retirement from office (not being a
payment to which the Director is contractually entitled) must first be approved by the Company
in general meeting.
(d) Loans to Directors
There are provisions in the Articles of Association prohibiting the making of loans to
Directors or their respective close associates which are equivalent to the restrictions imposed
by the Companies Ordinance.
(e) Financial assistance to purchase Shares
Subject to all applicable laws, the Company may give financial assistance to Directors
and employees of the Company, its subsidiaries or any holding company or any subsidiary of
such holding company in order that they may buy shares in the Company or any such subsidiary
or holding company. Further, subject to all applicable laws, the Company may give financial
assistance to a trustee for the acquisition of shares in the Company or shares in any such
subsidiary or holding company to be held for the benefit of employees of the Company, its
subsidiaries, any holding company of the Company or any subsidiary of any such holding
company (including salaried Directors).
(f) Disclosure of interest in contracts with the Company or any of its subsidiaries
No Director or proposed Director shall be disqualified by his office from contracting with
the Company either as vendor, purchaser or otherwise nor shall any such contract or any
contract or arrangement entered into by or on behalf of the Company with any person, company
or partnership of or in which any Director shall be a member or otherwise interested be capable
on that account of being avoided, nor shall any Director so contracting or being any member
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or so interested be liable to account to the Company for any profit so realized by any such
contract or arrangement by reason only of such Director holding that office or the fiduciary
relationship thereby established, provided that such Director shall, if his interest in such
contract or arrangement is material, declare the nature of his interest at the earliest meeting of
the board of Directors at which it is practicable for him to do so, either specifically or by way
of a general notice stating that, by reason of the facts specified in the notice, he is to be
regarded as interested in any contracts of a specified description which may be made by the
Company.
A Director shall not be entitled to vote on (nor shall be counted in the quorum in relation
to) any resolution of the Directors in respect of any contract or arrangement or any other
proposal in which the Director or any of his close associates (or, if required by the Listing
Rules, his other associates) has any material interest, and if he shall do so his vote shall not
be counted (nor is he to be counted in the quorum for the resolution), but this prohibition shall
not apply to any of the following matters, namely:
(i) the giving to such Director or any of his close associates of any security or
indemnity in respect of money lent or obligations incurred or undertaken by him or
any of them at the request of or for the benefit of the Company or any of its
subsidiaries;
(ii) the giving of any security or indemnity to a third party in respect of a debt or
obligation of the Company or any of its subsidiaries for which the Director or any
of his close associates has himself/themselves assumed responsibility in whole or in
part and whether alone or jointly under a guarantee or indemnity or by the giving of
security;
(iii) any proposal concerning an offer of shares, debentures or other securities of or by
the Company or any other company which the Company may promote or be
interested in for subscription or purchase where the Director or any of his close
associates is/are or is/are to be interested as a participant in the underwriting or
sub-underwriting of the offer;
(iv) any proposal or arrangement concerning the benefit of employees of the Company
or any of its subsidiaries including:
(A) the adoption, modification or operation of any employees’ share scheme or any
share incentive scheme or share option scheme under which the Director or any
of his close associates may benefit; or
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(B) the adoption, modification or operation of a pension or provident fund or
retirement, death or disability benefits scheme which relates both to Directors,
their close associates and employees of the Company or any of its subsidiaries
and does not provide in respect of any Director or any of his close associates,
as such any privilege or advantage not generally accorded to the class of
persons to which such scheme or fund relates; and
(v) any contract or arrangement in which the Director or any of his close associates
is/are interested in the same manner as other holders of shares or debentures or other
securities of the Company by virtue only of his/their interest in shares or debentures
or other securities of the Company.
(g) Remuneration
The Directors shall be entitled to receive by way of remuneration for their services such
sum as shall from time to time be determined by the Directors, or the Company in general
meeting, as the case may be, such sum (unless otherwise directed by the resolution by which
it is determined) to be divided amongst the Directors in such proportions and in such manner
as they may agree, or failing agreement, equally, except that in such event any Director holding
office for less than the whole of the relevant period in respect of which the remuneration is paid
shall only rank in such division in proportion to the time during such period for which he has
held office. Such remuneration shall be in addition to any other remuneration to which a
Director who holds any salaried employment or office in the Company may be entitled by
reason of such employment or office.
The Directors shall also be entitled to be paid all expenses, including travel expenses,
reasonably incurred by them in or in connection with the performance of their duties as
Directors including their expenses of traveling to and from board meetings, committee
meetings or general meetings or otherwise incurred whilst engaged on the business of the
Company or in the discharge of their duties as Directors.
The Directors may grant special remuneration to any Director who shall perform any
special or extra services at the request of the Company. Such special remuneration may be
made payable to such Director in addition to or in substitution for his ordinary remuneration
as a Director, and may be made payable by way of salary, commission or participation in profits
or otherwise as may be agreed.
The remuneration of an executive Director or a Director appointed to any other office in
the management of the Company shall from time to time be fixed by the Directors and may be
by way of salary, commission or participation in profits or otherwise or by all or any of those
modes and with such other benefits (including share option and/or pension and/or gratuity
and/or other benefits on retirement) and allowances as the Directors may from time to time
decide. Such remuneration shall be in addition to such remuneration as the recipient may be
entitled to receive as a Director.
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(h) Retirement, appointment and removal
The number of Directors shall not be less than two.
The Directors shall have power at any time and from time to time to appoint any person
to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any
Director so appointed shall hold office only until the first annual general meeting of the
Company after his appointment and shall then be eligible for re-election at that meeting.
The Company may by ordinary resolution remove any Director (including a Managing
Director or other executive Director) before the expiration of his period of office
notwithstanding anything in the Articles of Association or in any agreement between the
Company and such Director (but without prejudice to any claim for compensation or damages
payable to him in respect of the termination of his appointment as Director or of any other
appointment of office as a result of the termination of this appointment as Director).
The Company may by ordinary resolution appoint another person in his place. Any
Director so appointed shall hold office during such time only as the Director in whose place
he is appointed would have held the same if he had not been removed. The Company may also
by ordinary resolution elect any person to be a Director, either to fill a casual vacancy or as
an addition to the existing Directors. Any Director so appointed shall hold office only until the
first annual general meeting of the Company after this appointment and shall then be eligible
for re-election but shall not be taken into account in determining the number of Directors and
which Directors who are to retire by rotation at such meeting.
No person shall, unless recommended by the Board, be eligible for election to the office
of Director at any general meeting unless, during the period, which shall be at least seven days,
commencing no earlier than the day after the dispatch of the notice of the meeting appointed
for such election and ending no later than seven days prior to the date of such meeting, there
has been given to the Secretary of the Company notice in writing by a member of the Company
(not being the person to be proposed) entitled to attend and vote at the meeting for which such
notice is given of his intention to propose such person for election and also notice in writing
signed by the person to be proposed of his willingness to be elected.
There is no shareholding qualification for Directors nor is there any specified age limit
for Directors. The office of a Director shall be vacated:
(i) if he resigns his office by notice in writing to the Company at its registered office
or its principal office in Hong Kong;
(ii) if an order is made by any competent court or official on the grounds that he is or
may be suffering from mental disorder or is otherwise incapable of managing his
affairs and the Directors resolve that his office be vacated;
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(iii) if, without leave, he is absent from meetings of the Directors (unless an alternate
Director appointed by him attends) for 12 consecutive months, and the Directors
resolve that his office be vacated;
(iv) if he becomes bankrupt or has a receiving order made against him or suspends
payment or compounds with his creditors generally;
(v) if he ceases to be or is prohibited from being a Director by law or by virtue of any
provision in the Articles of Association;
(vi) if he is removed from office by a notice in writing served upon him signed by not
less than three-fourths in number (or, if that is not a round number, the nearest lower
round number) of the Directors (including himself) for the time being then in office;
or
(vii) if he shall be removed from office by an ordinary resolution of the members of the
Company under the Articles of Association.
At every annual general meeting of the Company one-third of the Directors for the time
being, or, if their number is not three or a multiple of three, then the number nearest to, but
not less than, one-third, shall retire from office by rotation, provided that every Director
(including those appointed for a specific term) shall be subject to retirement by rotation at least
once every three years. A retiring Director shall retain office until the close of the meeting at
which he retires and shall be eligible for re-election thereat. The Company at any annual
general meeting at which any Directors retire may fill the vacated office by electing a like
number of persons to be Directors.
(i) Borrowing powers
The Directors may from time to time at their discretion exercise all the powers of the
Company to raise or borrow or to secure the payment of any sum or sums of money for the
purposes of the Company and to mortgage or charge its undertaking, property and assets
(present and future) and uncalled capital or any part thereof.
(j) Proceedings of the Board
The Directors may meet together for the dispatch of business, adjourn and otherwise
regulate their meetings and proceedings as they think fit in any part of the world. Questions
arising at any meeting shall be determined by a majority of votes. In the case of an equality
of votes, the chairman of the meeting shall have a second or casting vote.
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2.3 Alteration to constitutional documents
No alteration or amendment to the Memorandum or Articles of Association may be made
except by special resolution.
2.4 V ariation of rights of existing shares or classes of shares
If at any time the share capital of the Company is divided into different classes of shares,
all or any of the rights attached to any class of shares for the time being issued (unless
otherwise provided for in the terms of issue of the shares of that class) may, subject to the
provisions of the Cayman Companies Act, be varied or abrogated either with the consent in
writing of the holders of not less than three-fourths in nominal value of the issued shares of
that class or with the sanction of a special resolution passed at a separate meeting of the holders
of the shares of that class. To every such separate meeting all the provisions of the Articles of
Association relating to general meetings shall mutatis mutandis apply, but so that the quorum
for the purposes of any such separate meeting and of any adjournment thereof shall be a person
or persons together holding (or representing by proxy or duly authorized representative) at the
date of the relevant meeting not less than one-third in nominal value of the issued shares of that
class.
The special rights conferred upon the holders of shares of any class shall not, unless
otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be
deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
2.5 Alteration of capital
The Company may, from time to time, whether or not all the shares for the time being
authorized shall have been issued and whether or not all the shares for the time being issued
shall have been fully paid up, by ordinary resolution, increase its share capital by the creation
of new shares, such new capital to be of such amount and to be divided into shares of such
respective amounts as the resolution shall prescribe.
The Company may from time to time by ordinary resolution:
(a) consolidate and divide all or any of its share capital into shares of a larger amount
than its existing shares. On any consolidation of fully paid shares and division into
shares of larger amount, the Directors may settle any difficulty which may arise as
they think expedient and in particular (but without prejudice to the generality of the
foregoing) may as between the holders of shares to be consolidated determine which
particular shares are to be consolidated into each consolidated share, and if it shall
happen that any person shall become entitled to fractions of a consolidated share or
shares, such fractions may be sold by some person appointed by the Directors for
that purpose and the person so appointed may transfer the shares so sold to the
purchaser thereof and the validity of such transfer shall not be questioned, and so
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that the net proceeds of such sale (after deduction of the expenses of such sale) may
either be distributed among the persons who would otherwise be entitled to a
fraction or fractions of a consolidated share or shares ratably in accordance with
their rights and interests or may be paid to the Company for the Company’s benefit;
(b) cancel any shares which at the date of the passing of the resolution have not been
taken or agreed to be taken by any person, and diminish the amount of its share
capital by the amount of the shares so canceled subject to the provisions of the
Cayman Companies Act; and
(c) sub-divide its shares or any of them into shares of smaller amount than is fixed by
the Memorandum of Association, subject nevertheless to the provisions of the
Cayman Companies Act, and so that the resolution whereby any share is sub-divided
may determine that, as between the holders of the shares resulting from such
sub-division, one or more of the shares may have any such preferred or other special
rights, over, or may have such deferred rights or be subject to any such restrictions
as compared with the others as the Company has power to attach to unissued or new
shares.
The Company may by special resolution reduce its share capital or any capital redemption
reserve in any manner authorized and subject to any conditions prescribed by the Cayman
Companies Act.
2.6 Special resolution-majority required
A “special resolution” is defined in the Articles of Association to have the meaning
ascribed thereto in the Cayman Companies Act, for which purpose, the requisite majority shall
be not less than three-fourths of the votes of such members of the Company as, being entitled
to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations,
by their duly authorized representatives, at a general meeting of which notice specifying the
intention to propose the resolution as a special resolution has been duly given and includes a
special resolution signed by all members for the time being entitled to receive notice of and to
attend and vote at general meetings (or being corporations by their duly appointed
representatives), and any such resolution shall be deemed to have been passed at a meeting held
on the date on which it was signed by the last member to sign.
In contrast, an “ordinary resolution” is defined in the Articles of Association to mean a
resolution passed by a simple majority of the votes of such members of the Company as, being
entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of
corporations, by their duly authorized representatives, at a general meeting held in accordance
with the Articles of Association and includes an ordinary resolution approved in writing by all
the members of the Company aforesaid.
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2.7 V oting rights
Subject to any special rights, privileges or restrictions as to voting for the time being
attached to any class or classes of shares, at any general meeting on a poll every member
(except the holder of treasury share(s) (as defined under the Companies Act, the “Treasury
Share(s)”)) present in person (or, in the case of a member being a corporation, by its duly
authorized representative) or by proxy shall have one vote for each share registered in his name
in the register of members of the Company.
Where any member is, under the Listing Rules, required to abstain from voting on any
particular resolution or restricted to voting only for or only against any particular resolution,
any votes cast by or on behalf of such member in contravention of such requirement or
restriction shall not be counted.
In the case of joint registered holders of any share, any one of such persons may vote at
any meeting, either personally or by proxy, in respect of such share as if he were solely entitled
thereto; but if more than one of such joint holders be present at any meeting personally or by
proxy, that one of the said persons so present being the most or, as the case may be, the more
senior shall alone be entitled to vote in respect of the relevant joint holding and, for this
purpose, seniority shall be determined by reference to the order in which the names of the joint
holders stand on the register in respect of the relevant joint holding.
A member of the Company in respect of whom an order has been made by any competent
court or official on the grounds that he is or may be suffering from mental disorder or is
otherwise incapable of managing his affairs may vote by any person authorized in such
circumstances to do so and such person may vote by proxy.
Save as expressly provided in the Articles of Association or as otherwise determined by
the Directors, no person other than a member of the Company duly registered and who shall
have paid all sums for the time being due from him payable to the Company in respect of his
shares shall be entitled to be present or to vote (save as proxy for another member of the
Company), or to be reckoned in a quorum, either personally or by proxy at any general
meeting.
At any general meeting a resolution put to the vote of the meeting shall be decided by way
of a poll save that the chairman of the meeting may allow a resolution which relates purely to
a procedural or administrative matter as prescribed under the Listing Rules to be voted on by
a show of hands.
If a recognized clearing house (or its nominee(s)) is a member of the Company it may
authorize such person or persons as it thinks fit to act as its proxy(ies) or representative(s) at
any meeting of the Company (including general meeting and creditors meeting of the
Company) or at any general meeting of any class of members of the Company provided that,
if more than one person is so authorized, the authorization shall specify the number and class
of shares in respect of which each such person is so authorized. A person authorized pursuant
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to this provision shall be entitled to exercise the same rights and powers on behalf of the
recognized clearing house (or its nominee(s)) which he represents as that recognized clearing
house (or its nominee(s)) could exercise as if it were an individual member of the Company
holding the number and class of shares specified in such authorization, including, where a show
of hands is allowed, the right to vote individually on a show of hands.
All members for the time being entitled to receive notice of and to attend and vote at
general meetings (or, in the case of a member being a corporation, its duly authorised
representative), shall have the right to speak at any general meetings of the Company.
A Treasury Share shall not be voted, directly or indirectly, at any general meeting of the
Company and shall not be counted in determining the total number of issued shares at any
given time, whether for the purposes of the Articles of Association or the Companies Act.
2.8 Annual general meetings and extraordinary general meetings
The Company must hold a general meeting as its annual general meeting each financial
year. Such meeting must be held within six months after the end of the Company’s financial
year. The annual general meeting shall be specified as such in the notices calling it.
Extraordinary general meetings may be convened on the requisition of one or more
shareholders (or any one member which is a recognized clearing house (or its nominee(s))
holding, at the date of deposit of the requisition, not less than one-tenth of the paid up capital
of the Company having the right of voting at general meetings.
2.9 Accounts and audit
The Directors shall cause to be kept such books of account as are necessary to give a true
and fair view of the state of the Company’s affairs and to show and explain its transactions and
otherwise in accordance with the Cayman Companies Act.
The Directors shall from time to time determine whether, and to what extent, and at what
times and places and under what conditions or regulations, the accounts and books of the
Company, or any of them, shall be open to the inspection by members of the Company (other
than officers of the Company) and no such member shall have any right of inspecting any
accounts or books or documents of the Company except as conferred by the Cayman
Companies Act or any other relevant law or regulation or as authorized by the Directors or by
the Company in general meeting.
The Directors shall, commencing with the first annual general meeting, cause to be
prepared and to be laid before the members of the Company at every annual general meeting
a profit and loss account for the period, in the case of the first account, since the incorporation
of the Company and, in any other case, since the preceding account, together with a statement
of financial position as at the date to which the profit and loss account is made up and a
Director’s report with respect to the profit or loss of the Company for the period covered by
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the profit and loss account and the state of the Company’s affairs as at the end of such period,
an auditor’s report on such accounts and such other reports and accounts as may be required
by law. Copies of those documents to be laid before the members of the Company at an annual
general meeting shall not less than 21 days before the date of the meeting, be sent in the manner
in which notices may be served by the Company as provided in the Articles of Association to
every member of the Company and every holder of debentures of the Company provided that
the Company shall not be required to send copies of those documents to any person of whose
address the Company is not aware or to more than one of the joint holders of any shares or
debentures.
The appointment, removal and remuneration of an auditor or auditors of the Company
shall require the approval of an ordinary resolution of the members in general meeting. The
Company shall at every annual general meeting appoint an auditor or auditors of the Company
who shall hold office until the next annual general meeting and fix the remuneration of such
auditor(s) being appointed. The removal of any auditor before the expiration of his period of
office shall be approved at a general meeting; and the members shall at that meeting appoint
new auditor in its place for the remainder of the term. Subject to compliance with the Listing
Rules, the Board may fill any casual vacancy in the office of auditor, but while any such
vacancy continues, the surviving or continuing Auditor or Auditors, if any, may act.
2.10 Notice of meetings and business to be conducted thereat
An annual general meeting shall be called by not less than 21 days’ notice in writing and
any extraordinary general meeting shall be called by not less than 14 days’ notice in writing.
The notice shall be exclusive of the day on which it is served or deemed to be served and of
the day for which it is given, and shall specify the time, place (except in the case of a virtual
meeting held in accordance with the Articles of Association) and agenda of the meeting,
particulars of the resolutions and the general nature of the business to be considered at the
meeting. The notice convening an annual general meeting shall specify the meeting as such,
and the notice convening a meeting to pass a special resolution shall specify the intention to
propose the resolution as a special resolution. Notice of every general meeting shall be given
to the auditors and all members of the Company (other than those who, under the provisions
of the Articles of Association or the terms of issue of the shares they hold, are not entitled to
receive such notice from the Company).
Notwithstanding that a meeting of the Company is called by shorter notice than that
mentioned above, it shall be deemed to have been duly called if it is so agreed:
(a) in the case of a meeting called as an annual general meeting, by all members of the
Company entitled to attend and vote thereat or their proxies; and
(b) in the case of any other meeting, by a majority in number of the members having a
right to attend and vote at the meeting, being a majority together holding not less
than 95% in nominal value of the shares giving that right.
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2.11 Transfer of shares
Transfers of shares may be effected by an instrument of transfer in the usual common
form or in such other form as the Directors may approve which is consistent with the standard
form of transfer as prescribed by the Stock Exchange.
The instrument of transfer shall be executed by or on behalf of the transferor and, unless
the Directors otherwise determine, the transferee, and the transferor shall be deemed to remain
the holder of the share until the name of the transferee is entered in the register of members
of the Company in respect thereof. All instruments of transfer shall be retained by the
Company.
The Directors may, in its absolute discretion, and without assigning any reason, refuse to
register any transfer of any share which is not fully paid up or on which the Company has a
lien. The Directors may also decline to register any transfer of any shares unless:
(a) the instrument of transfer is lodged with the Company accompanied by the
certificate for the shares to which it relates (which shall upon the registration of the
transfer be canceled) and such other evidence as the Directors may reasonably
require to show the right of the transferor to make the transfer;
(b) the instrument of transfer is in respect of only one class of shares;
(c) the instrument of transfer is properly stamped (in circumstances where stamping is
required);
(d) in the case of a transfer to joint holders, the number of joint holders to whom the
share is to be transferred does not exceed four;
(e) the shares concerned are free of any lien in favor of the Company; and
(f) a fee of such amount not exceeding the maximum amount as the Stock Exchange
may from time to time determine to be payable (or such lesser sum as the Directors
may from time to time require) is paid to the Company in respect thereof.
If the Directors refuse to register a transfer of any share they shall, within two months
after the date on which the transfer was lodged with the Company, send to each of the transferor
and the transferee notice of such refusal.
The registration of transfers may, on 10 business days’ notice (or on 6 business days’
notice in the case of a rights issue) being given by advertisement published on the Stock
Exchange’s website, or, subject to the Listing Rules, by electronic communication in the
manner in which notices may be served by the Company by electronic means as provided in
the Articles of Association or by advertisement published in the newspapers, be suspended and
the register of members of the Company closed at such times for such periods as the Directors
may from time to time determine, provided that the registration of transfers shall not be
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suspended or the register closed for more than 30 days in any year (or such longer period as
the members of the Company may by ordinary resolution determine provided that such period
shall not be extended beyond 60 days in any year).
2.12 Power of the Company to purchase its own shares
The Company is empowered by the Cayman Companies Act and the Articles of
Association to purchase its own shares subject to certain restrictions and the Directors may
only exercise this power on behalf of the Company subject to the authority of its members in
general meeting as to the manner in which they do so and to any applicable requirements
imposed from time to time by the Stock Exchange and the Securities and Futures Commission
of Hong Kong. The holder of the shares being purchased shall be bound to deliver up to the
Company at its principal place of business in Hong Kong or such other place as the Directors
shall specify the certificate(s) thereof, if any, and thereupon the Company shall pay to him the
purchase or redemption monies in respect thereof. The Board shall have the discretion to cancel
such certificate(s).
Subject to the Listing Rules, the Directors may, prior to the purchase, redemption or
surrender of any share, determine that such share shall be held as a Treasury Share or cancelled,
and may resolve to cancel a Treasury Share or transfer a Treasury Share on such terms as they
think proper.
2.13 Power of any subsidiary of the Company to own shares
There are no provisions in the Articles of Association relating to the ownership of shares
by a subsidiary.
2.14 Dividends and other methods of distribution
Subject to the Cayman Companies Act and the Articles of Association, the Company in
general meeting may declare dividends in any currency but no dividends shall exceed the
amount recommended by the Directors. No dividend may be declared or paid other than out of
profits and reserves of the Company lawfully available for distribution, including share
premium.
Unless and to the extent that the rights attached to any shares or the terms of issue thereof
otherwise provide, all dividends shall (as regards any shares not fully paid throughout the
period in respect of which the dividend is paid) be apportioned and paid pro rata according to
the amounts paid up on the shares during any portion or portions of the period in respect of
which the dividend is paid. For these purposes no amount paid up on a share in advance of calls
shall be treated as paid up on the share.
The Directors may from time to time pay to the members of the Company such interim
dividends as appear to the Directors to be justified by the profits of the Company. The Directors
may also pay half-yearly or at other intervals to be selected by them any dividend which may
be at a fixed rate if they are of the opinion that the profits available for distribution justify the
payment.
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The Directors may retain any dividends or other monies payable on or in respect of a
share upon which the Company has a lien, and may apply the same in or towards satisfaction
of the debts, liabilities or engagements in respect of which the lien exists. The Directors may
also deduct from any dividend or other monies payable to any member of the Company all
sums of money (if any) presently payable by him to the Company on account of calls,
installments or otherwise.
No dividend shall carry interest against the Company.
Whenever the Directors or the Company in general meeting have resolved that a dividend
be paid or declared on the share capital of the Company, the Directors may further resolve: (a)
that such dividend be satisfied wholly or in part in the form of an allotment of shares credited
as fully paid up on the basis that the shares so allotted are to be of the same class as the class
already held by the allottee, provided that the members of the Company entitled thereto will
be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment;
or (b) that the members of the Company entitled to such dividend will be entitled to elect to
receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the
dividend as the Directors may think fit on the basis that the shares so allotted are to be of the
same class as the class already held by the allottee. The Company may upon the
recommendation of the Directors by ordinary resolution resolve in respect of any one particular
dividend of the Company that notwithstanding the foregoing a dividend may be satisfied
wholly in the form of an allotment of shares credited as fully paid without offering any right
to members of the Company to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other sum payable in cash to a holder of shares may be paid by
cheque or warrant sent through the post addressed to the registered address of the member of
the Company entitled, or in the case of joint holders, to the registered address of the person
whose name stands first in the register of members of the Company in respect of the joint
holding or to such person and to such address as the holder or joint holders may in writing
direct. Every cheque or warrant so sent shall be made payable to the order of the holder or, in
the case of joint holders, to the order of the holder whose name stands first on the register of
members of the Company in respect of such shares, and shall be sent at his or their risk and
the payment of any such cheque or warrant by the bank on which it is drawn shall operate as
a good discharge to the Company in respect of the dividend and/or bonus represented thereby,
notwithstanding that it may subsequently appear that the same has been stolen or that any
endorsement thereon has been forged. The Company may cease sending such cheques for
dividend entitlements or dividend warrants by post if such cheques or warrants have been left
uncashed on two consecutive occasions. However, the Company may exercise its power to
cease sending cheques for dividend entitlements or dividend warrants after the first occasion
on which such a cheque or warrant is returned undelivered. Any one of two or more joint
holders may give effectual receipts for any dividends or other monies payable or property
distributable in respect of the shares held by such joint holders.
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Any dividend unclaimed for six years from the date of declaration of such dividend may
be forfeited by the Directors and shall revert to the Company.
Whenever the Directors or the Company in general meeting have resolved that a dividend
may be paid or declared, the Directors may further resolve that such dividend be satisfied
wholly or in part by the distribution of specific assets of any kind, and in particular of paid up
shares, debentures or warrants to subscribe securities of any other company, and where any
difficulty arises in regard to such distribution the Directors may settle it as they think
expedient, and in particular may disregard fractional entitlements, round the same up or down
or provide that the same shall accrue to the benefit of the Company, and may fix the value for
distribution of such specific assets and may determine that cash payments shall be made to any
members of the Company upon the footing of the value so fixed in order to adjust the rights
of all parties, and may vest any such specific assets in trustees as may seem expedient to the
Directors.
No dividend may be declared or paid, and no other distribution (whether in cash or
otherwise) of the Company’s assets (including any distribution of assets to members on a
winding up) may be declared or paid in respect of a Treasury Share. Notwithstanding the
foregoing, nothing in the Articles of Association prevent an allotment of shares as fully paid
up bonus shares in respect of a Treasury Share and shares allotted as fully paid up bonus shares
in respect of a Treasury Share shall be treated as Treasury Shares.
2.15 Proxies
Any member of the Company entitled to attend and vote at a meeting of the Company
shall be entitled to appoint another person who must be an individual as his proxy to attend and
vote instead of him and a proxy so appointed shall have the same right as the member to speak
at the meeting. A proxy need not be a member of the Company.
Instruments of proxy shall be in common form or in such other form as the Directors may
from time to time approve provided that it shall enable a member to instruct his proxy to vote
in favor of or against (or in default of instructions or in the event of conflicting instructions,
to exercise his discretion in respect of) each resolution to be proposed at the meeting to which
the form of proxy relates. The instrument of proxy shall be deemed to confer authority to vote
on any amendment of a resolution put to the meeting for which it is given as the proxy thinks
fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any
adjournment of the meeting as for the meeting to which it relates provided that the meeting was
originally held within 12 months from such date.
The instrument appointing a proxy shall be in writing under the hand of the appointor or
his attorney authorized in writing or if the appointor is a corporation either under its seal or
under the hand of an officer, attorney or other person authorized to sign the same.
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The instrument appointing a proxy and (if required by the Directors) the power of
attorney or other authority (if any) under which it is signed, or a notarially certified copy of
such power or authority, shall be delivered at the registered office of the Company (or at such
other place as may be specified in the notice convening the meeting or in any notice of any
adjournment or, in either case, in any document sent therewith) not less than 48 hours before
the time appointed for holding the meeting or adjourned meeting at which the person named
in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of
a meeting or adjourned meeting, not less than 48 hours before the time appointed for the taking
of the poll and in default the instrument of proxy shall not be treated as valid. No instrument
appointing a proxy shall be valid after the expiration of 12 months from the date named in it
as the date of its execution. Delivery of any instrument appointing a proxy shall not preclude
a member of the Company from attending and voting in person at the meeting or poll concerned
and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
2.16 Calls on shares and forfeiture of shares
The Directors may from time to time make calls upon the members of the Company in
respect of any monies unpaid on their shares (whether on account of the nominal amount of the
shares or by way of premium or otherwise) and not by the conditions of allotment thereof made
payable at fixed times and each member of the Company shall (subject to the Company serving
upon him at least 14 days’ notice specifying the time and place of payment and to whom such
payment shall be made) pay to the person at the time and place so specified the amount called
on his shares. A call may be revoked or postponed as the Directors may determine. A person
upon whom a call is made shall remain liable on such call notwithstanding the subsequent
transfer of the shares in respect of which the call was made.
A call may be made payable either in one sum or by installments and shall be deemed to
have been made at the time when the resolution of the Directors authorizing the call was
passed. The joint holders of a share shall be jointly and severally liable to pay all calls and
installments due in respect of such share or other monies due in respect thereof.
If a sum called in respect of a share shall not be paid before or on the day appointed for
payment thereof, the person from whom the sum is due shall pay interest on the sum from the
day appointed for payment thereof to the time of actual payment at such rate, not exceeding
15% per annum, as the Directors may determine, but the Directors shall be at liberty to waive
payment of such interest wholly or in part.
If any call or installment of a call remains unpaid on any share after the day appointed
for payment thereof, the Directors may at any time during such time as any part thereof remains
unpaid serve a notice on the bolder of such shares requiring payment of so much of the call or
installment as is unpaid together with any interest which may be accrued and which may still
accrue up to the date of actual payment.
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The notice shall name a further day (not being less than 14 days from the date of service
of the notice) on or before which, and the place where, the payment required by the notice is
to be made, and shall state that in the event of non-payment at or before the time and at the
place appointed, the shares in respect of which such call was made or installment is unpaid will
be liable to be forfeited.
If the requirements of such notice are not complied with, any share in respect of which
such notice has been given may at any time thereafter, before payment of all calls or
installments and interest due in respect thereof has been made, be forfeited by a resolution of
the Directors to that effect. Such forfeiture shall include all dividends and bonuses declared in
respect of the forfeited shares and not actually paid before the forfeiture. A forfeited share shall
be deemed to be the property of the Company and may be re-allotted, sold or otherwise
disposed of.
A person whose shares have been forfeited shall cease to be a member of the Company
in respect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay
to the Company all monies which at the date of forfeiture were payable by him to the Company
in respect of the shares, together with (if the Directors shall in their discretion so require)
interest thereon at such rate not exceeding 15% per annum as the Directors may prescribe from
the date of forfeiture until payment, and the Directors may enforce payment thereof without
being under any obligation to make any allowance for the value of the shares forfeited, at the
date of forfeiture.
2.17 Inspection of register of members
The register of members of the Company shall be kept in such manner as to show at all
times the members of the Company for the time being and the shares respectively held by them.
The register may, on 10 business days’ notice (or on 6 business days’ notice in the case of a
rights issue) being given by advertisement published on the Stock Exchange’s website, or,
subject to the Listing Rules, by electronic communication in the manner in which notices may
be served by the Company by electronic means as provided in the Articles of Association or
by advertisement published in the newspapers, be closed at such times and for such periods as
the Directors may from time to time determine either generally or in respect of any class of
shares, provided that the register shall not be closed for more than 30 days in any year (or such
longer period as the members of the Company may by ordinary resolution determine provided
that such period shall not be extended beyond 60 days in any year).
Any register of members kept in Hong Kong shall during normal business hours (subject
to such reasonable restrictions as the Directors may impose) be open to inspection by any
member of the Company without charge and by any other person on payment of a fee of such
amount not exceeding the maximum amount as may from time to time be permitted under the
Listing Rules as the Directors may determine for each inspection.
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2.18 Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present when
the meeting proceeds to business, but the absence of a quorum shall not preclude the
appointment of a chairman which shall not be treated as part of the business of the meeting.
Two members of the Company (excluding the holder of a Treasury Share) present in
person or by proxy shall be a quorum provided always that if the Company has only one
member of record the quorum shall be that one member present in person or by proxy.
A corporation being a member of the Company shall be deemed for the purpose of the
Articles of Association to be present in person if represented by its duly authorized
representative being the person appointed by resolution of the directors or other governing
body of such corporation or by power of attorney to act as its representative at the relevant
general meeting of the Company or at any relevant general meeting of any class of members
of the Company.
The quorum for a separate general meeting of the holders of a separate class of shares of
the Company is described in paragraph 2.4 above.
2.19 Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles of Association concerning the rights of minority
shareholders in relation to fraud or oppression.
2.20 Procedure on liquidation
Subject to the Cayman Companies Act, the Company may by special resolution resolve
that the Company be wound up voluntarily.
If the Company shall be wound up, and the assets available for distribution amongst the
members of the Company as such shall be insufficient to repay the whole of the paid-up capital,
such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the
members of the Company in proportion to the capital paid up, or which ought to have been paid
up, at the commencement of the winding up on the shares held by them respectively. If in a
winding up the assets available for distribution amongst the members of the Company shall be
more than sufficient to repay the whole of the capital paid up at the commencement of the
winding up, the excess shall be distributed amongst the members of the Company in proportion
to the capital paid up at the commencement of the winding up on the shares held by them
respectively. The foregoing is without prejudice to the rights of the holders of shares issued
upon special terms and conditions.
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If the Company shall be wound up, the liquidator may with the sanction of a special
resolution of the Company and any other sanction required by the Cayman Companies Act,
divide amongst the members of the Company in specie or kind the whole or any part of the
assets of the Company (whether they shall consist of property of the same kind or not) and may,
for such purpose, set such value as he deems fair upon any property to be divided as aforesaid
and may determine how such division shall be carried out as between the members or different
classes of members of the Company. The liquidator may, with the like sanction, vest the whole
or any part of such assets in trustees upon such trusts for the benefit of the members of the
Company as the liquidator, with the like sanction and subject to the Cayman Companies Act,
shall think fit, but so that no member of the Company shall be compelled to accept any assets,
shares or other securities in respect of which there is a liability.
2.21 Untraceable members
The Company shall be entitled to sell any shares of a member of the Company or the
shares to which a person is entitled by virtue of transmission on death or bankruptcy or
operation of law if: (a) all cheques or warrants, not being less than three in number, for any
sums payable in cash to the holder of such shares have remained uncashed for a period of 12
years; (b) the Company has not during that time or before the expiry of the three month period
referred to in (d) below received any indication of the whereabouts or existence of the member;
(c) during the 12 year period, at least three dividends in respect of the shares in question have
become payable and no dividend during that period has been claimed by the member; and (d)
upon expiry of the 12 year period, the Company has caused an advertisement to be published
in the newspapers or subject to the Listing Rules, by electronic communication in the manner
in which notices may be served by the Company by electronic means as provided in the Articles
of Association, giving notice of its intention to sell such shares and a period of three months
has elapsed since such advertisement and the Stock Exchange has been notified of such
intention. The net proceeds of any such sale shall belong to the Company and upon receipt by
the Company of such net proceeds it shall become indebted to the former member for an
amount equal to such net proceeds.
SUMMARY OF CAYMAN ISLANDS COMPANY LA W AND TAXATION
1 Introduction
The Cayman Companies Act is derived, to a large extent, from the older Companies Acts
of England, although there are significant differences between the Cayman Companies Act and
the current Companies Act of England. Set out below is a summary of certain provisions of the
Cayman Companies Act, although this does not purport to contain all applicable qualifications
and exceptions or to be a complete review of all matters of corporate law and taxation which
may differ from equivalent provisions in jurisdictions with which interested parties may be
more familiar.
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2 Incorporation
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 28 July 2021 under the Cayman Companies Act. As such, its operations
must be conducted mainly outside the Cayman Islands. The Company is required to file an
annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee
which is based on the size of its authorized share capital.
3 Share Capital
The Cayman Companies Act permits a company to issue ordinary shares, preference
shares, redeemable shares or any combination thereof.
The Cayman Companies Act provides that where a company issues shares at a premium,
whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premia
on those shares shall be transferred to an account called the “share premium account”. At the
option of a company, these provisions may not apply to premia on shares of that company
allotted pursuant to any arrangement in consideration of the acquisition or cancelation of
shares in any other company and issued at a premium. The Cayman Companies Act provides
that the share premium account may be applied by a company, subject to the provisions, if any,
of its memorandum and articles of association, in such manner as the company may from time
to time determine including, but without limitation:
(a) paying distributions or dividends to members;
(b) paying up unissued shares of the company to be issued to members as fully paid
bonus shares;
(c) in the redemption and repurchase of shares (subject to the provisions of section 37
of the Cayman Companies Act);
(d) writing-off the preliminary expenses of the company;
(e) writing-off the expenses of, or the commission paid or discount allowed on, any
issue of shares or debentures of the company; and
(f) providing for the premium payable on redemption or purchase of any shares or
debentures of the company.
No distribution or dividend may be paid to members out of the share premium account
unless immediately following the date on which the distribution or dividend is proposed to be
paid the company will be able to pay its debts as they fall due in the ordinary course of
business.
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The Cayman Companies Act provides that, subject to confirmation by the Grand Court of
the Cayman Islands, a company limited by shares or a company limited by guarantee and
having a share capital may, if so authorized by its articles of association, by special resolution
reduce its share capital in any way.
Subject to the detailed provisions of the Cayman Companies Act, a company limited by
shares or a company limited by guarantee and having a share capital may, if so authorized by
its articles of association, issue shares which are to be redeemed or are liable to be redeemed
at the option of the company or a shareholder. In addition, such a company may, if authorized
to do so by its articles of association, purchase its own shares, including any redeemable
shares. The manner of such a purchase must be authorized either by the articles of association
or by an ordinary resolution of the company. The articles of association may provide that the
manner of purchase may be determined by the directors of the company. At no time may a
company redeem or purchase its shares unless they are fully paid. A company may not redeem
or purchase any of its shares if, as a result of the redemption or purchase, there would no longer
be any member of the company holding shares. A payment out of capital by a company for the
redemption or purchase of its own shares is not lawful unless immediately following the date
on which the payment is proposed to be made, the company shall be able to pay its debts as
they fall due in the ordinary course of business.
There is no statutory restriction in the Cayman Islands on the provision of financial
assistance by a company for the purchase of, or subscription for, its own or its holding
company’s shares. Accordingly, a company may provide financial assistance if the directors of
the company consider, in discharging their duties of care and to act in good faith, for a proper
purpose and in the interests of the company, that such assistance can properly be given. Such
assistance should be on an arm’s-length basis.
4 Dividends and Distributions
With the exception of section 34 of the Cayman Companies Act, there are no statutory
provisions relating to the payment of dividends. Based upon English case law which is likely
to be persuasive in the Cayman Islands in this area, dividends may be paid only out of profits.
In addition, section 34 of the Cayman Companies Act permits, subject to a solvency test and
the provisions, if any, of the company’s memorandum and articles of association, the payment
of dividends and distributions out of the share premium account (see paragraph 3 above for
details).
5 Shareholders’ Suits
The Cayman Islands courts can be expected to follow English case law precedents. The
rule in Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder to
commence a class action against or derivative actions in the name of the company to challenge
(a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud
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against the minority where the wrongdoers are themselves in control of the company, and (c)
an action which requires a resolution with a qualified (or special) majority which has not been
obtained) has been applied and followed by the courts in the Cayman Islands.
6 Protection of Minorities
In the case of a company (not being a bank) having a share capital divided into shares,
the Grand Court of the Cayman Islands may, on the application of members holding not less
than one-fifth of the shares of the company in issue, appoint an inspector to examine into the
affairs of the company and to report thereon in such manner as the Grand Court shall direct.
Any shareholder of a company may petition the Grand Court of the Cayman Islands which
may make a winding up order if the court is of the opinion that it is just and equitable that the
company should be wound up.
Claims against a company by its shareholders must, as a general rule, be based on the
general laws of contract or tort applicable in the Cayman Islands or their individual rights as
shareholders as established by the company’s memorandum and articles of association.
The English common law rule that the majority will not be permitted to commit a fraud
on the minority has been applied and followed by the courts of the Cayman Islands.
7 Disposal of Assets
The Cayman Companies Act contains no specific restrictions on the powers of directors
to dispose of assets of a company. As a matter of general law, in the exercise of those powers,
the directors must discharge their duties of care and to act in good faith, for a proper purpose
and in the interests of the company.
8 Accounting and Auditing Requirements
The Cayman Companies Act requires that a company shall cause to be kept proper books
of account with respect to:
(a) all sums of money received and expended by the company and the matters in respect
of which the receipt and expenditure takes place;
(b) all sales and purchases of goods by the company; and
(c) the assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books
as are necessary to give a true and fair view of the state of the company’s affairs and to explain
its transactions.
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9 Register of Members
An exempted company may, subject to the provisions of its articles of association,
maintain its principal register of members and any branch registers at such locations, whether
within or without the Cayman Islands, as its directors may from time to time think fit. There
is no requirement under the Cayman Companies Act for an exempted company to make any
returns of members to the Registrar of Companies of the Cayman Islands. The names and
addresses of the members are, accordingly, not a matter of public record and are not available
for public inspection.
10 Inspection of Books and Records
Members of a company will have no general right under the Cayman Companies Act to
inspect or obtain copies of the register of members or corporate records of the company. They
will, however, have such rights as may be set out in the company’s articles of association.
11 Special Resolutions
The Cayman Companies Act provides that a resolution is a special resolution when it has
been passed by a majority of at least two-thirds of such members as, being entitled to do so,
vote in person or, where proxies are allowed, by proxy at a general meeting of which notice
specifying the intention to propose the resolution as a special resolution has been duly given,
except that a company may in its articles of association specify that the required majority shall
be a number greater than two-thirds, and may additionally so provide that such majority (being
not less than two-thirds) may differ as between matters required to be approved by a special
resolution. Written resolutions signed by all the members entitled to vote for the time being of
the company may take effect as special resolutions if this is authorized by the articles of
association of the company.
12 Subsidiary Owning Shares in Parent
The Cayman Companies Act does not prohibit a Cayman Islands company acquiring and
holding shares in its parent company provided its objects so permit. The directors of any
subsidiary making such acquisition must discharge their duties of care and to act in good faith,
for a proper purpose and in the interests of the subsidiary.
13 Mergers and Consolidations
The Cayman Companies Act permits mergers and consolidations between Cayman Islands
companies and between Cayman Islands companies and non-Cayman Islands companies. For
these purposes, (a) “merger” means the merging of two or more constituent companies and the
vesting of their undertaking, property and liabilities in one of such companies as the surviving
company, and (b) “consolidation” means the combination of two or more constituent
companies into a consolidated company and the vesting of the undertaking, property and
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liabilities of such companies to the consolidated company. In order to effect such a merger or
consolidation, the directors of each constituent company must approve a written plan of merger
or consolidation, which must then be authorized by (a) a special resolution of each constituent
company and (b) such other authorization, if any, as may be specified in such constituent
company’s articles of association. The written plan of merger or consolidation must be filed
with the Registrar of Companies of the Cayman Islands together with a declaration as to the
solvency of the consolidated or surviving company, a list of the assets and liabilities of each
constituent company and an undertaking that a copy of the certificate of merger or
consolidation will be given to the members and creditors of each constituent company and that
notification of the merger or consolidation will be published in the Cayman Islands Gazette.
Dissenting shareholders have the right to be paid the fair value of their shares (which, if not
agreed between the parties, will be determined by the Cayman Islands court) if they follow the
required procedures, subject to certain exceptions. Court approval is not required for a merger
or consolidation which is effected in compliance with these statutory procedures.
14 Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations
approved by (i) a majority in number representing 75% in value of creditors, or (ii) a majority
of 75% in value of shareholders or class of shareholders, as the case may be, depending on the
circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by
the Grand Court of the Cayman Islands. Whilst a dissenting shareholder would have the right
to express to the Grand Court his view that the transaction for which approval is sought would
not provide the shareholders with a fair value for their shares, the Grand Court is unlikely to
disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith
on behalf of management and if the transaction were approved and consummated the dissenting
shareholder would have no rights comparable to the appraisal rights (i.e. the right to receive
payment in cash for the judicially determined value of his shares) ordinarily available, for
example, to dissenting shareholders of United States corporations.
15 Take-overs
Where an offer is made by a company for the shares of another company and, within four
months of the offer, the holders of not less than 90% of the shares which are the subject of the
offer accept, the offeror may at any time within two months after the expiration of the said four
months, by notice require the dissenting shareholders to transfer their shares on the terms of
the offer. A dissenting shareholder may apply to the Grand Court of the Cayman Islands within
one month of the notice objecting to the transfer. The burden is on the dissenting shareholder
to show that the Grand Court should exercise its discretion, which it will be unlikely to do
unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out minority
shareholders.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY LA W
– III-24 –


--- page 504 ---
16 Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the Cayman Islands courts to be contrary to public policy (e.g. for
purporting to provide indemnification against the consequences of committing a crime).
17 Liquidation
A company may be placed in liquidation compulsorily by an order of the court, or
voluntarily (a) by a special resolution of its members if the company is solvent, or (b) by an
ordinary resolution of its members if the company is insolvent. The liquidator’s duties are to
collect the assets of the company (including the amount (if any) due from the contributories
(shareholders)), settle the list of creditors and discharge the company’s liability to them,
ratably if insufficient assets exist to discharge the liabilities in full, and to settle the list of
contributories and divide the surplus assets (if any) amongst them in accordance with the rights
attaching to the shares.
18 Stamp Duty on Transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
19 Taxation
Pursuant to section 6 of the Tax Concessions Act (2018 Revision) of the Cayman Islands,
the Company may obtain an undertaking from the Financial Secretary of the Cayman Islands:
(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied
on profits, income, gains or appreciations shall apply to the Company or its
operations; and
(b) in addition, that no tax to be levied on profits, income, gains or appreciations or
which is in the nature of estate duty or inheritance tax shall be payable:
(i) on or in respect of the shares, debentures or other obligations of the Company;
or
(ii) by way of the withholding in whole or in part of any relevant payment as
defined in section 6(3) of the Tax Concessions Act (2018 Revision).
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY LA W
– III-25 –


--- page 505 ---
The Cayman Islands currently levy no taxes on individuals or corporations based upon
profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax
or estate duty. There are no other taxes likely to be material to the Company levied by the
Government of the Cayman Islands save certain stamp duties which may be applicable, from
time to time, on certain instruments executed in or brought within the jurisdiction of the
Cayman Islands. The Cayman Islands are not party to any double tax treaties that are applicable
to any payments made by or to the Company.
20 Exchange Control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
21 Economic Substance Requirements
Pursuant to the International Tax Cooperation (Economic Substance) Act (as revised)
(“ES Law ”) that came into force on 1 January 2019, a “relevant entity” is required to satisfy
the economic substance test set out in the ES Law. A “relevant entity” includes an exempted
company incorporated in the Cayman Islands as is the Company; however, it does not include
an entity that is tax resident outside the Cayman Islands. Accordingly, if an exempted company
incorporated in the Cayman Islands is tax resident outside the Cayman Islands, it will not be
required to satisfy the economic substance test set out in the ES Law.
22 General
Campbells, the Company’s legal advisers on Cayman Islands law, have sent to the
Company a letter of advice summarizing aspects of Cayman Islands company law. This letter,
together with a copy of the Cayman Companies Act, is available for inspection as referred to
in the section headed “Appendix V – Documents Delivered to the Registrar of Companies in
Hong Kong and Available on Display” to this prospectus. Any person wishing to have a
detailed summary of Cayman Islands company law or advice on the differences between it and
the laws of any jurisdiction with which he/she is more familiar is recommended to seek
independent legal advice.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY LA W
– III-26 –


--- page 506 ---
A. FURTHER INFORMATION ABOUT THE COMPANY
1. Incorporation
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability under the Cayman Companies Law on July 28, 2021 under the name “Bloks
Group Limitedʮ̡”. Our registered office address is at Floor 4, Willow
House, Cricket Square, Grand Cayman KYl-9010, Cayman Islands. As the Company was
incorporated in the Cayman Islands, our operations are subject to the relevant law and
regulations of the Cayman Islands and the Memorandum and Articles of Association. A
summary of the relevant laws and regulations of the Cayman Islands and of the Memorandum
and Articles of Association is set out in “Appendix III — Summary of the Constitution of the
Company and Cayman Islands Companies Law”.
The Company was registered as a registered non-Hong Kong company in Hong Kong
under Part 16 of the Companies Ordinance on May 9, 2024. Our principal place of business in
Hong Kong is at 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong
Kong. Ms. Y u Wing Sze has been appointed as the Company’s authorized representative for the
acceptance of service of process and notices in Hong Kong. The address of service of process
is 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.
As of the date of this prospectus, the Company’s head offices are located at Building 10,
1016 Tianlin Road, Minhang District, Shanghai, the PRC.
2. Changes in the Share Capital of the Company
As of the date of incorporation, the Company had an authorized share capital of US$
50,000, divided into 500,000,000 Ordinary Shares of US$0.0001 each.
The following changes in the share capital of our Company took place since its
incorporation:
(a) on July 28, 2021, upon incorporation, our Company issued 100 Ordinary Shares to
Next Bloks, 100 Ordinary Shares to Smart Bloks, 1 Ordinary Share to ShawnXF
Limited, 1 Ordinary Share to Bloks Is Coming Limited and 1 Ordinary Share to Way
Elegance, respectively;
(b) on July 25, 2022, our Company reclassified and re-designated (i) a total of
74,275,759 unissued Original Shares of US$0.0001 each as 35,192,299 Series Angel
Preferred Shares, 13,161,290 Series Pre-A Preferred Shares and 25,922,170 Series
A Preferred Shares, respectively; and (ii) 1 Ordinary Share held by Way Elegance
into 1 Series Angel Preferred Share. On the same date, our Company issued (i)
127,522,548 Ordinary Shares; (ii) 35,192,299 Series Angel Preferred
Shares; (iii) issued 13,161,290 Series Pre-A Preferred Shares; (iv) issued 20,154,350
Series A Preferred Shares. See “History, Development and Reorganization —
Reorganization” for further details;
(c) on January 12, 2023, our Company issued 21,321,255 Ordinary Shares to First
Prosperity for the purpose of the Share Incentive Scheme.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1–


--- page 507 ---
Immediately following completion of the Global Offering the authorized share capital of
the Company will be US$50,000 divided into 500,000,000 Shares, of which 241,472,245
Shares will be allotted and issued fully paid or credited as fully paid and 258,527,755 Shares
will remain unissued.
Save as disclosed above, there has been no alteration in the share capital of the Company
within two years immediately preceding the date of this prospectus up to the Latest Practicable
Date.
3. Resolutions in Writing of the Shareholders of the Company Passed on December 18,
2024
Pursuant to the general meetings held on December 18, 2024, the Shareholders resolved
that:
(a) the Company approved and adopted the Memorandum and Articles of Association
which will come into effect upon Listing;
(b) conditional on (i) the Stock Exchange granting the listing of, and permission to deal
in, the Shares in issue and Shares to be allotted and issued pursuant to the Global
Offering and Shares to be issued as mentioned in this prospectus (including any
additional Shares which may be allotted and issued pursuant to the exercise of the
options to be granted under the Offer Size Adjustment Option and the Over-
allotment Option), (ii) the Offer Price having been duly determined and the
execution and delivery of the Hong Kong Underwriting Agreement on the date as
specified in this prospectus, and (iii) the obligations of the Underwriters under the
Underwriting Agreements becoming unconditional and not being terminated in
accordance with the terms therein or otherwise, in each case on or before the dates
and times specified in the Underwriting Agreements:
(i) the Global Offering, the Offer Size Adjustment Option and the Over-allotment
Option be approved; and
(ii) the Directors be authorised to allot and issue the Offer Shares pursuant to the
Global Offering, the Offer Size Adjustment Option and the Over-allotment
Option;
(c) a general unconditional mandate was given to the Directors to exercise all powers
of the Company to allot, issue and deal with (including the power to make an offer
or agreement, or grant securities which would or might acquire Shares to be allotted
and issued), otherwise than by way of rights issue, scrip dividend schemes or similar
arrangements providing for allotment of Shares in lieu of the whole or in part of any
cash dividend in accordance with the Articles, or upon the exercise of any option(s)
which may be granted under the Global Offering, Shares with an aggregate number
of shares not exceeding the sum of (i) 20% of the aggregate number of shares of the
Company in issue (excluding any treasure shares) immediately following
completion of the Global Offering, and (ii) the aggregate number of shares of the
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2–


--- page 508 ---
Company which may be purchased by the Company pursuant to the authority
granted to the Directors as referred to in sub-paragraph (e) below, until the
conclusion of the next annual general meeting of the Company, or the date by which
the next annual general meeting of the Company is required by the Memorandum
and Articles of Association or any applicable law(s) to be held, or the passing of an
ordinary resolution by Shareholders in general meeting revoking or varying the
authority given to the Directors, whichever occurs first;
(d) a general unconditional mandate was given to the Directors to exercise all powers
of the Company to repurchase on the Stock Exchange or on any other stock
exchange on which the securities of the Company may be listed and which is
recognized by the SFC and the Stock Exchange for this purpose such number of
Shares as will represent up to 10% of the aggregate number of shares of the
Company in issue (excluding any treasure shares) immediately following
completion of the Global Offering, until the conclusion of the next annual general
meeting of the Company, or the date by which the next annual general meeting of
the Company is required by the Memorandum and Articles of Association or any
applicable law(s) to be held, or the passing of an ordinary resolution by
Shareholders in general meeting revoking or varying the authority given to the
Directors, whichever occurs first; and
(e) the general unconditional mandate mentioned in sub-paragraph (e) above was
extended by the addition to the aggregate number of shares of the Company which
may be allotted or agreed to be allotted by the Directors pursuant to such general
mandate of an amount representing the aggregate nominal value of the share capital
of the Company bought back by the Company pursuant to the mandate to repurchase
Shares as referred to in sub-paragraph (e) above, provided that such extended
amount shall not exceed 10% of the aggregate number of shares of the Company in
issue (excluding any treasure shares) immediately following completion of the
Global Offering.
4. Changes in the Share Capital of our Subsidiaries
The information about our subsidiaries is set out in the Accountant’s Report in Appendix
I to this prospectus.
The following changes in the share capital of each of our subsidiaries took place within
two years immediately preceding the date of this prospectus:
Bloks Bricks
On August 7, 2023, the registered capital of Bloks Bricks was increased from
RMB20 million to RMB100 million.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3–


--- page 509 ---
Bloks International Limited
On August 25, 2023, Bloks International Limited was established as a limited
liability company in the Cayman Islands with an authorized share capital of US$50,000
divided into 500,000,000 Shares of par value of US$0.0001 each. Upon incorporation,
Bloks International Limited allotted and issued 99 ordinary shares to the Company and 1
ordinary share to Sertus Nominees (Cayman) Limited, which was subsequently
transferred the Company on the same date.
Bloks Games Limited
On September 20, 2023, Bloks Games Limited was established as a limited liability
company in Hong Kong with an initial registered capital of HK$10,000.
Bloks Global Limited
On November 10, 2023, Bloks Global Limited was established as a limited liability
company in the Cayman Islands with an authorized share capital of US$50,000 divided
into 500,000,000 Shares of par value of US$0.0001 each. Upon incorporation, Bloks
Global Limited allotted and issued 99 ordinary shares to the Company and 1 ordinary
share to Sertus Nominees (Cayman) Limited, which was subsequently transferred to the
Company on the same date.
Bloks Singapore Pte. Ltd.
On January 8, 2024, Bloks Singapore Pte. Ltd. was established as a limited liability
company in Singapore with an initial registered capital of 1,000,000 Singapore dollars.
PT BLOKEES TOYS INDONESIA
On July 4, 2024, PT BLOKEES TOYS INDONESIA was established as a limited
liability company in Indonesia with an initial registered capital of 10,100,000,000
Indonesian Rupiah.
BLOKEES UK LIMITED
On October 2, 2024, BLOKEES UK LIMITED was established as a limited liability
company in England and Wales with an initial registered capital of 100,000 Pound
Sterling.
BLOKEES MALAYSIA SDN. BHD.
On October 22, 2024, BLOKEES MALAYSIA SDN. BHD. was established as a
limited liability company in Malaysia with an initial registered capital of 1,000 Malaysian
Ringgit.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4–


--- page 510 ---
Save as disclosed above, there was no change in the share capital (or the registered capital
for our PRC subsidiaries) of any of our subsidiary within the two years immediately preceding
the date of this prospectus.
5. Repurchases of Our Own Securities
(a) Provisions of the Listing Rules
The Listing Rules permit companies with a primary listing on the Stock Exchange to
repurchase their own securities on the Stock Exchange subject to certain restrictions, the more
important of which are summarized below:
(i) Shareholders’ Approval
All proposed repurchases of securities (which must be fully paid up in the case of
shares) by a company with a primary listing on the Stock Exchange must be approved in
advance by an ordinary resolution of the shareholders in general meeting, either by way
of general mandate or by specific approval of a particular transaction.
Pursuant to a resolution passed by our then Shareholders on December 18, 2024, a
general unconditional mandate (the “ Repurchase Mandate ”) was given to the Directors
authorizing any repurchase by the Company of Shares on the Stock Exchange or on any
other stock exchange on which the securities may be listed and which is recognized by
the SFC and the Stock Exchange for this purpose, of not more than 10% of the aggregate
number of shares of the Company in issue immediately following completion of the
Global Offering (without taking into account any Shares which may be issued pursuant
to the exercise of the Offer Size Adjustment Option and the Over-allotment Option and
excluding any treasury shares), such mandate to expire at the conclusion of our next
annual general meeting, the expiration of the period within which we are required by any
applicable laws or our Articles to hold our next annual general meeting or the date on
which the resolution is varied or revoked by an ordinary resolution of the Shareholders
in general meeting, whichever is the earliest.
(ii) Source of Funds
Repurchases must be funded out of funds legally available for the purpose in
accordance with our Memorandum and Articles of Association, the Listing Rules and the
applicable laws of the Cayman Islands.
A listed company may not repurchase its own securities on the Stock Exchange for
a consideration other than cash or for settlement otherwise than in accordance with the
trading rules of the Stock Exchange as amended from time to time. Subject to the
foregoing, any repurchases by the Company may be made out of the profits of the
Company, out of the share premium account of the Company or out of a fresh issue of
Shares made for the purpose of the repurchase or, subject to the Cayman Companies Act,
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 5–


--- page 511 ---
out of capital and, in the case of any premium payable on the purchase, out of the profits
of the Company or from sums standing to the credit of the share premium account of the
Company or, subject to the Cayman Companies Act, out of capital.
(iii) Trading Restrictions
The total number of shares which a listed company may repurchase on the Stock
Exchange is the number of shares representing up to a maximum of 10% of the aggregate
number of shares in issue (excluding any treasury shares). A company may not issue or
announce a proposed issue of new securities for a period of 30 days immediately
following a repurchase (other than an issue of securities pursuant to an exercise of
warrants, share options or similar instruments requiring the company to issue securities
which were outstanding prior to such repurchase) without the prior approval of the Stock
Exchange. In addition, a listed company is prohibited from repurchasing its shares on the
Stock Exchange if the purchase price is 5% or more than the average closing market price
for the five preceding trading days on which its shares were traded on the Stock
Exchange. The Listing Rules also prohibit a listed company from repurchasing its
securities if the repurchase would result in the number of listed securities which are in the
hands of the public falling below the relevant minimum prescribed percentage as required
by the Stock Exchange. A company is required to procure that the broker appointed by it
to effect a repurchase of securities discloses to the Stock Exchange such information with
respect to the repurchase as the Stock Exchange may require.
(iv) Status of Repurchased Shares
The Company will either (i) cancel the Shares repurchased and reduce the share
capital in issue in accordance with the applicable laws and regulations and/or (ii) hold
such Shares in treasury, subject to market conditions and the Company’s capital
management needs at the relevant time any repurchases of Shares are made.
To the extent that any treasury shares are deposited with CCASS pending resale on
the Stock Exchange, the Company will adopt appropriate measures to ensure that it does
not exercise any Shareholders’ rights or receive any entitlements which would otherwise
be suspended under the applicable laws if those Shares were registered in the Company’s
own name as treasury shares, including an approval by the Board that (i) the Company
will not (and will procure its broker not to) give any instructions to Hong Kong Securities
Clearing Company Limited to vote at general meetings for the treasury shares deposited
with CCASS; and (ii) in the case of dividends or distributions, the Company will
withdraw the treasury shares from CCASS, and either re-register them in its own name
as treasury shares or cancel them, in each case before the record date for the dividends
or distributions.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 6–


--- page 512 ---
(v) Suspension of Repurchase
A listed company may not make any repurchase of securities on the Stock Exchange
at any time after inside information has come to its knowledge until the information is
made publicly available. In particular, during the period of one month immediately
preceding the earlier of (a) the date of the board meeting (as such date is first notified to
the Stock Exchange in accordance with the Listing Rules) for the approval of a listed
company’s results for any year, half-year, quarterly or any other interim period (whether
or not required under the Listing Rules) and (b) the deadline for publication of an
announcement of a listed company’s results for any year or half-year under the Listing
Rules, or quarterly or any other interim period (whether or not required under the Listing
Rules), and ending on the date of the results announcement, the listed company may not
repurchase its shares on the Stock Exchange other than in exceptional circumstances. In
addition, the Stock Exchange may prohibit a repurchase of securities on the Stock
Exchange if a listed company has breached the Listing Rules.
(vi) Reporting Requirements
Certain information relating to repurchases of securities on the Stock Exchange or
otherwise must be reported to the Stock Exchange not later than 30 minutes before the
earlier of the commencement of the morning trading session or any pre-opening session
on the following business day. In addition, a listed company’s annual report is required
to disclose details regarding repurchases of securities made during the year, including a
monthly analysis of the number of securities repurchased, the purchase price per share or
the highest and lowest price paid for all such repurchases, where relevant, and the
aggregate prices paid.
(vii) Connected Persons
A listed company is prohibited from knowingly repurchasing securities on the Stock
Exchange from a core connected person (as defined in the Listing Rules) and a core
connected person is prohibited from knowingly selling his securities to the listed
company.
(b) Reasons for Repurchases
The Directors believe that the ability to repurchase Shares is in the interests of the
Company and our Shareholders. Repurchases may, depending on market conditions, funding
arrangements and other circumstances, result in an increase in the net assets and/or earnings
per Share. The Directors sought the grant of a general mandate to repurchase Shares to give the
Company the flexibility to do so if and when appropriate. The number of Shares to be
repurchased on any occasion and the price and other terms upon which the same are
repurchased will be decided by the Directors at the relevant time having regard to the
circumstances then pertaining. Repurchases of Shares will only be made when the Directors
believe that such repurchases will benefit the Company and our Shareholders.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 7–


--- page 513 ---
(c) Funding of Repurchases
In repurchasing securities, the Company may only apply funds lawfully available for such
purpose in accordance with its Memorandum and Articles of Association, the Listing Rules and
the applicable laws of the Cayman Islands. There could be a material adverse impact on the
working capital and/or gearing position of the Company (as compared with the position
disclosed in this prospectus) in the event that the Repurchase Mandate were to be carried out
in full at any time during the share repurchase period. However, the Directors do not propose
to exercise the general mandate to such extent as would, in the circumstances, have a material
adverse effect on the working capital requirements of the Company or the gearing levels which
in the opinion of the Directors are from time to time appropriate for the Company.
(d) General
The exercise in full of the Repurchase Mandate, on the basis of 241,472,245 Shares in
issue immediately following the completion of the Global Offering (without taking into
account any Shares which may be issued pursuant to the exercise of the Offer Size Adjustment
Option and the Over-allotment Option and excluding any treasury shares), could accordingly
result in up to approximately 24,147,225 Shares being repurchased by the Company during the
period prior to:
(i) the conclusion of our next annual general meeting; or
(ii) the expiration of the period within which we are required by any applicable law or
our Articles to hold our next annual general meeting; or
(iii) the date when the Repurchase Mandate is varied or revoked by an ordinary
resolution of our Shareholders in general meeting,
whichever is the earliest.
Any reference to an allotment, issue, grant, offer or disposal of Shares shall include the
sale or transfer of treasury shares in the capital of the Company (including to satisfy any
obligation upon the conversion or exercise of any convertible securities, options, warrants or
similar rights to subscribe for Shares) to the extent permitted by, and subject to the provisions
of the Listing Rules and applicable laws and regulations.
None of the Directors nor, to the best of their knowledge having made all reasonable
enquiries, any of their respective close associates (as defined in the Listing Rules), has any
present intention to sell any Shares to the Company or our subsidiaries.
The Directors, so far as the same may be applicable, will exercise the Repurchase
Mandate in accordance with the Listing Rules and the applicable laws in the Cayman Islands.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 8–


--- page 514 ---
No core connected person (as defined in the Listing Rules) of the Company has notified
the Company that he/she or it has a present intention to sell Shares to the Company, or has
undertaken not to do so, if the Repurchase Mandate is exercised.
If, as a result of any repurchase of Shares pursuant to the Repurchase Mandate, a
Shareholder’s proportionate interest in the voting rights of the Company is increased, such
increase will be treated as an acquisition for the purposes of the Hong Kong Code on Takeovers
and Mergers (the “ Takeovers Code ”). Accordingly, a Shareholder or a group of Shareholders
acting in concert could obtain or consolidate control of the Company and become obliged to
make a mandatory offer in accordance with Rule 26 of the Takeovers Code. Save as aforesaid,
the Directors are not aware of any consequences which would arise under the Takeovers Code
as a consequence of any repurchases pursuant to the Repurchase Mandate.
Any repurchase of Shares that results in the number of Shares held by the public falling
below 25% of the total number of Shares in issue, being the relevant minimum prescribed
percentage as required by the Stock Exchange, could only be implemented if the Stock
Exchange agreed to waive the requirement regarding the public float under Rule 8.08 of the
Listing Rules. However, the Directors have no present intention to exercise the Repurchase
Mandate to such an extent that, under the circumstances, there would be insufficient public
float as prescribed under the Listing Rules.
B. FURTHER INFORMATION ABOUT THE BUSINESS
1. Summary of Material Contracts
The Group has entered into the following contracts (not being contracts entered into in the
ordinary course of business) within the two years immediately preceding the date of this
prospectus that are or may be material:
(a) a cornerstone investment agreement dated December 24, 2024 entered into among
the Company, Greenwoods Asset Management Hong Kong Limited, Goldman Sachs
(Asia) L.L.C. and Huatai Financial Holdings (Hong Kong) Limited, with respect to
a subscription of the Offer Shares at the Offer Price in the aggregate amount of the
Hong Kong dollar equivalent of US$20,000,000;
(b) a cornerstone investment agreement dated December 24, 2024 entered into among
the Company, UBS Asset Management (Singapore) Ltd., Goldman Sachs (Asia)
L.L.C. and Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of the Offer Shares at the Offer Price in the aggregate amount of the
Hong Kong dollar equivalent of US$20,000,000;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 9–


--- page 515 ---
(c) a cornerstone investment agreement dated December 24, 2024 entered into among
the Company, Fullgoal Fund Management Co., Ltd., Goldman Sachs (Asia) L.L.C.
and Huatai Financial Holdings (Hong Kong) Limited, with respect to a subscription
of the Offer Shares at the Offer Price in the aggregate amount of the Hong Kong
dollar equivalent of US$7,000,000;
(d) a cornerstone investment agreement dated December 24, 2024 entered into among
the Company, Fullgoal Asset Management (HK) Limited, Goldman Sachs (Asia)
L.L.C. and Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of the Offer Shares at the Offer Price in the aggregate amount of the
Hong Kong dollar equivalent of US$3,000,000; and
(e) the Hong Kong Underwriting Agreement.
2. Intellectual Property
As at the Latest Practicable Date, the following intellectual property rights are material
to the Group’s business:
(a) Trademarks
As at the Latest Practicable Date, the Group had registered the following trademarks
which are material to its business:
No. Trademark Class
Registered
Owner
Place of
Registration
Registration
Number
Registration
Date Expiry Date
1
 9 Bloks
Technology
PRC 36109609 September 14,
2019
September 13,
2029
2
 35 Bloks
Technology
PRC 36244438 September 21,
2019
September 20,
2029
3
 28 Bloks
Technology
PRC 36811505 October 28,
2019
October 27,
2029
4
 41 Bloks
Technology
PRC 36813254 October 28,
2019
October 27,
2029
5
 9 Bloks
Technology
PRC 36795490 October 28,
2019
October 27,
2029
6
 41 Bloks
Technology
PRC 51519071 July 21, 2021 July 20, 2031
7
 41 Bloks
Technology
PRC 52874765 August 21,
2021
August 20,
2031
8
 28 Bloks
Technology
PRC 50880089 August 27,
2021
August 27,
2031
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 516 ---
No. Trademark Class
Registered
Owner
Place of
Registration
Registration
Number
Registration
Date Expiry Date
9
 35 Bloks
Technology
PRC 51514397 September 14,
2021
September 13,
2031
10
 9 Bloks
Technology
PRC 51526073 September 14,
2021
September 13,
2031
11
 28 Bloks
Technology
PRC 51512198 September 21,
2021
September 20,
2031
12
 9 Bloks
Technology
PRC 52890735 July 14, 2022 July 13, 2032
13
 28 Bloks
Technology
PRC 64781266 June 7, 2023 June 6, 2033
14
 9 Bloks
Technology
PRC 64775008 June 7, 2023 June 6, 2033
15
 41 Bloks
Technology
PRC 64755149 June 7, 2023 June 6, 2033
16
 41 Bloks
Technology
PRC 71838362 January 7, 2024 January 6, 2034
17
 28 Bloks
Technology
PRC 71832351 January 7, 2024 January 6, 2034
18
 9 Bloks
Technology
PRC 71840140 January 7, 2024 January 6, 2034
19 BLOKEES 9, 28,
41
Bloks
Technology
European
Union
IR1695096 October 13,
2022
October 13,
2032
20 BLOKEES 9, 28,
41
Bloks
Technology
Singapore IR1695096 October 13,
2022
October 13,
2032
21 BLOKEES 9, 28,
41
Bloks
Technology
Malaysia IR1695096 October 13,
2022
October 13,
2032
22 BLOKEES 9, 28,
41
Bloks
Technology
South Korea IR1695096 October 13,
2022
October 13,
2032
23 BLOKEES 9, 28,
41
Bloks
Technology
Brazil IR1695096 October 13,
2022
October 13,
2032
24ጐ˝ɛ 28 Bloks
Technology
PRC 71902055 October 28,
2024
October 27,
2034
25 BLOKEES 9, 28,
41
Bloks
Technology
Philippine IR1695096 October 13,
2022
October 13,
2032
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 1–


--- page 517 ---
As at the Latest Practicable Date, the Group had applied for registration of the following
trademarks which are material to its business:
No. Trademark Class
Registered
Owner
Place of
Registration
Application
Number Application Date
1ࠢ9 Bloks
Technology
PRC 74396018 October 7, 2023
2ࠢ28 Bloks
Technology
PRC 74413354 October 7, 2023
3ࠢ41 Bloks
Technology
PRC 74391482 October 7, 2023
4ඪጐ˝ɛ 28 Bloks
Technology
PRC 71829649 May 26, 2023
5 ൴ਗጐ˝ɛ 28 Bloks
Technology
PRC 71915613 May 30, 2023
6 ɧ਷ጐ˝ɛ 28 Bloks
Technology
PRC 71909304 May 30, 2023
7
 41 Bloks
Technology
PRC 77191452 March 8, 2024
8
 28 Bloks
Technology
PRC 77195178 March 8, 2024
9
 9 Bloks
Technology
PRC 77182598 March 8, 2024
10 BLOKEES 9, 28, 41 Bloks
Technology
Australia IR1695096 August 5, 2022
11 BLOKEES 9, 28, 41 Bloks
Technology
Thailand IR1695096 August 5, 2022
12 BLOKEES 9, 28, 41 Bloks
Technology
Mexico IR1695096 August 5, 2022
13 BLOKEES 9, 28, 41 Bloks
Technology
Canada IR1695096 August 5, 2022
14 BULUKE 9, 28, 41 Bloks
Technology
U.S. IR1790746 April 8, 2024
15 BULUKE 9, 28, 41 Bloks
Technology
European
Union
IR1790746 April 8, 2024
16 BULUKE 9, 28, 41 Bloks
Technology
Malaysia IR1790746 April 8, 2024
17 BULUKE 9, 28, 41 Bloks
Technology
Japan IR1790746 April 8, 2024
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 518 ---
(b) Domain Names
As at the Latest Practicable Date, the Group had registered the following domain names
which are material to its business:
No. Domain Name Registered Owner
Date of
Registration Expiry Date
1 bloks.com Bloks Technology May 10, 2024 May 10, 2029
2 botzeestoys.com Bloks Technology June 9, 2021 June 9, 2025
3 botzeestoy.com Bloks Technology July 7, 2021 July 7, 2025
4 blokees.com Bloks Technology December 3,
2021
December 3,
2025
5 botzeesglobal.com Bloks Technology June 9, 2021 June 9, 2025
6 blokees.cn Bloks Technology December 3,
2021
December 3,
2025
7 buluke.com.cn Bloks Technology January 14,
2021
January 14,
2026
8 buluke.cn Bloks Technology May 18, 2021 May 18, 2025
9 blockees.cn Bloks Technology November 29,
2021
November 29,
2025
10 blockees.net Bloks Technology November 29,
2021
November 29,
2025
11 botzees.cn Bloks Technology October 20,
2021
October 20,
2025
(c) Patents
As at the Latest Practicable Date, the Group had registered the following patents which
are material to its business:
No. Patent Name Type
Patent
Holder
Jurisdiction of
Registration Patent Number
Date of
Application Expiry Date
1e̙͍ˀ
ጐ˝
ࢁ
΁
Invention Bloks
Technology
PRC 2018103132138 April 9, 2018 April 9, 2038
2ଡ଼ༀጐ
˝࿴΁ʿଡ଼ༀጐ˝
ӻ୕
Invention Bloks
Technology
PRC 2018108299823 July 25, 2018 July 25, 2038
3ଡ଼ၣ˙
׵
ટጐ
˝
Invention Bloks
Technology
PRC 2019108829580 September 18,
2019
September 18,
2039
4ϗ
ટጐ
˝
Invention Bloks Bricks PRC 2020103984898 May 12, 2020 May 12, 2040
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 519 ---
No. Patent Name Type
Patent
Holder
Jurisdiction of
Registration Patent Number
Date of
Application Expiry Date
5ٙ
ৣ࿁ഐ࿴
Invention Bloks Bricks PRC 2020106936970 July 17, 2020 July 17, 2040
6ଡ଼
ʿӻ୕
Invention Bloks Bricks PRC 2020106944981 July 17, 2020 July 17, 2040
7 ɓ၇ชᏐකᗫᙃ೯છ
ِ
Ոԓሿʿʧሯ
Invention Bloks Bricks PRC 202010693681X July 17, 2020 July 17, 2040
8ٙ
ਅ
Invention Bloks Bricks PRC 2022101073540 January 28,
2022
January 28,
2042
9ӻ୕ Invention Bloks Bricks PRC 2021108090699 July 16, 2021 July 16, 2041
10Ո Invention Bloks Bricks PRC 2020104075680 May 14, 2020 May 14, 2040
11ጐ˝ӻ୕ Invention Bloks Bricks PRC 2021113136334 November 8,
2021
November 8,
2041
12к
ِ
Ո
Invention Bloks Bricks PRC 2021113644651 November 17,
2021
November 17,
2041
13 ̖࿸ጐ˝ʿ̖࿸ጐ˝
ӻ୕
Invention Bloks
Technology
PRC 2021114162798 November 25,
2021
November 25,
2041
14ٙ
ʿӻ୕ʿ
ጐ˝ӻ୕
Invention Bloks Bricks PRC 202111449564X November 30,
2021
November 30,
2041
15ਅ Invention Bloks Bricks PRC 2021114627047 December 2,
2021
December 2,
2041
16ೌᇞ
ၾӻ୕
Invention Bloks Bricks PRC 2021116622279 December 30,
2021
December 30,
2041
17Ո Utility
Model
Bloks Bricks PRC 2022204233585 February 28,
2022
February 28,
2032
18͙঑
Ոʿ
ج
Invention Bloks Bricks PRC 2022103347795 March 31, 2022 March 31, 2042
19Җ͙
Ո
Utility
Model
Bloks Bricks PRC 2022207337938 March 31, 2022 March 31, 2032
20ጐ˝
ഐ࿴˸ʿ͎᎘ጐ˝
Utility
Model
Bloks Bricks PRC 2023208234295 April 13, 2023 April 13, 2033
21 INTERACTIVE
TOY
Invention Bloks
Technology
U.S. 171263087 June 11, 2019 June 11, 2039
22ਅ Design Bloks Bricks,
Bloks
Technology
PRC 2023307179563 November 3,
2023
November 3,
2038
23Ո Design Bloks Bricks,
Bloks
Technology
PRC 2023307184769 November 3,
2023
November 3,
2038
24ጐ˝ഐ
Ո
Utility
Model
Bloks Bricks,
Bloks
Technology
PRC 2024201407813 January 19,
2024
January 19,
2034
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 520 ---
As at the Latest Practicable Date, the Group had applied for registration the following
patents which are material to its business:
No Patent Name Type Applicant
Jurisdiction of
Registration
Application
Number
Date of
Application
1ِ
Ո
Invention Bloks Bricks PRC 2022114814584 November 24,
2022
2ء
෧ᅼ
ʿ
෧΁
Invention Bloks Bricks PRC 2022115097856 November 29,
2022
3ऊৰеᄝ෩ᆠ
ݴࠦڌۜ
෧
ج
Invention Bloks Bricks PRC 2022116632364 December 23,
2022
4εཧ΁൴ᑊ
˙
༸ഐ࿴ʿ
ՉᅼՈ
Invention Bloks Bricks,
Bloks
Technology
PRC 2023116435587 December 1, 2023
5᎕
Ո
Utility
Model
Bloks Bricks,
Bloks
Technology
PRC 2024200239685 January 4, 2024
6 Method and
system for
determining
complete icon
Invention Bloks Bricks U.S. 18/268630 December 22,
2021
(d) Copyrights
As of the Latest Practicable Date, the Group owned the following copyrights which are
material to its business:
No. Name Owner
Registration
Number
Date of
Registration
1٤ࢻ01‘(1) Bloks Technology လЪ೮ο-2022-I-
02446788
August 24, 2022
2Ω01‘(1) Bloks Technology လЪ೮ο-2022-I-
02446794
August 24, 2022
3٤ࢻVSˬᚭˮ‘(1) Bloks Technology လЪ೮ο-2023-I-
02595750
January 13, 2023
4ΩVSเ⚖‘(1) Bloks Technology လЪ೮ο-2023-I-
02593012
January 9, 2023
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 521 ---
No. Name Owner
Registration
Number
Date of
Registration
5 ˸˦હ˦‘(2) Bloks Technology လЪ೮ο-2021-I-
02040029
July 7, 2021
6Ꮂ̈Ꮨ‘
ӻΐਗ೥ஹᚃᄌ— ⃍⃍ᜊҖ
া
(2)
Bloks Technology လЪ೮ο-2023-I-
02792299
June 29, 2023
7ཟͩ‘(2) Bloks Technology လЪ೮ο-2019-I-
01544882
December 27,
2019
8 ̺̺ԏೋ኷ɻ Bloks Bricks လЪ೮ο-2022-F-
02471016
September 22,
2022
9 ɽ଻ຒӻΐ—ஐ͛ɧԉ
Ꮂ
Bloks Technology လЪ೮ο-2020-F-
01579593
February 14,
2020
10̓— ฌʘԇᖹ Bloks Bricks လЪ೮ο-
2022-F-
02467901
September 2,
2022
11 ᜗ชჇછ൴ॴൺԓ Bloks Bricks လЪ೮ο-2023-F-
02940403
November 2,
2023
12 ̺ኁ̙(೐),
ዐᅺႦ
Bloks Technology လЪ೮ο-2024-F-
03045058
February 4, 2024
13ழ΁ Bloks Technology 2018SR473836 November 9,
2021
14 ̺ኁ̙ጐ˝୅ਗ၌ழ΁ Bloks Technology 2020SR0274876 March 19, 2020
15Ꮇ၍ଣӻ୕ Bloks Technology 2020SR1505730 September 29,
2020
16 ̺ኁ̙ጐ˝AiSழ΁ Bloks Technology 2020SR1507310 March 7, 2020
17 ̺ኁ̙ጐ˝Ꮠ͜ழ΁ Bloks Bricks 2021SRE026077 October 11, 2021
18 Botzees AR Ꮠ͜ழ΁ Bloks Technology 2023SR0198093 February 3, 2023
19 Botzees Junior Ꮠ͜ழ΁ Bloks Technology 2023SR0199884 February 6, 2023
20ภᏐ͜ழ΁ Bloks Technology 2024SR0432891 March 26, 2024
21 POCKET BLOCKS ༷Ꮥழ΁ Bloks Technology 2023SR0199698 February 3, 2023
Notes:
(1) Copyrights No.1-4 are examples of Hero Infinity self-developed IPs.
(2) Copyrights No.5-7 are examples of Magic Blocks self-developed IPs.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 522 ---
C. DISCLOSURE OF INTERESTS
1. Disclosure of Interests of Directors and Chief Executive of the Company
Immediately following the completion of the Global Offering (assuming the Over-
allotment Option is not exercised), the interests and/or short positions (as applicable) of the
Directors and the chief executive of the Company in the Shares, underlying Shares and
debentures of the Company and any interests and/or short positions (as applicable) in shares,
underlying Shares or debentures of any of the Company’s associated corporations (within the
meaning of Part XV of the SFO) which (1) will have to be notified to the Company and the
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests
and/or short positions (as applicable) which they are taken or deemed to have under such
provisions of the SFO), (2) will be required, pursuant to Section 352 of the SFO, to be entered
in the register referred to therein or (3) will be required, pursuant to the Model Code for
Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 to the Listing
Rules, to be notified to the Company and the Stock Exchange, in each case once the Shares are
listed on the Stock Exchange, will be as follows:
Interests in Shares of the Company
Name of Director Nature of Interest Number of Shares Held
Approximate Percentage of
Shareholding in the Total
Issued Share Capital
Immediately following the
Completion of the Global
Offering (assuming the
Offer Size Adjustment
Option and the Over-
allotment Option
are not exercised) (%)
Mr. Zhu Weisong (1) Settlor of a discretionary
trust
110,639,460 45.82
Interest in controlled
corporation
8,805,846 3.65
Mr. Sheng Xiaofeng (2) Interest in controlled
corporation
4,363,650 1.81
Notes:
(1) Next Bloks directly holds 110,639,460 Shares in our Company and is owned 99% by Wit Bright Limited,
and Smart Bloks holds 8,805,846 Shares in our Company and is wholly owned by Mr. Zhu. The Wise
Global Trust is a discretionary trust established by Mr. Zhu as the settlor and with Trident Trust
Company (HK) Limited as the trustee. Trident Trust Company (HK) Limited holds the entire share
capital of Wit Bright Limited.
(2) ShawnXF Limited directly holds 4,363,650 Shares in our Company and is wholly-owned by Mr. Sheng
Xiaofeng.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 523 ---
Interests in underlying Shares of equity derivatives of the Company
Name of Director Nature of Interest
Number of Underlying
Shares
Approximate Percentage of
Shareholding in the Total
Issued Share Capital
Immediately following the
Completion of the Global
Offering (assuming the
Offer Size Adjustment
Option and the Over-
allotment Option
are not exercised) (%)
Mr. Zhu Weisong Share Option (1) 12,577,685 5.21
Mr. Sheng Xiaofeng Share Option (1) 969,678 0.40
Notes:
(1) The Options were granted under the Share Incentive Scheme. See “— E. The Share Incentive Scheme”
of this section for details.
Save as disclosed above, none of the Directors or the chief executive of the Company
will, immediately following the completion of the Global Offering, have an interest and/or
short position (as applicable) in the Shares, underlying Shares or debentures of the Company
or any interests and/or short positions (as applicable) in the shares, underlying Shares or
debentures of the Company’s associated corporations (within the meaning of Part XV of the
SFO) which (i) will have to be notified to the Company and the Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they
are taken or deemed to have under such provisions of the SFO), (ii) will be required, pursuant
to Section 352 of the SFO, to be entered in the register referred to therein or (iii) will be
required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers
as set out in Appendix C3 to the Listing Rules, to be notified to the Company and the Stock
Exchange, in each case once the Shares are listed on the Stock Exchange.
2. Disclosure of Interests of Substantial Shareholders
For information on the persons who will, immediately following the completion of the
Global Offering (assuming that the Offer Size Adjustment Option and the Over-allotment
Option are not exercised), have interests or short positions in our Shares or underlying Shares
which would be required to be disclosed to us and the Stock Exchange under the provisions of
Divisions 2 and 3 of Part XV of the SFO, or who will directly or indirectly, be interested in
10% or more of the nominal value of any class of share capital carrying the rights to vote in
all circumstances at general meetings of the Company or of any member of the Group, see
“Substantial Shareholders.”
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 524 ---
D. FURTHER INFORMATION ABOUT DIRECTORS
1. Particulars of Directors’ service contracts and appointment letters
(a) Executive Directors
Each of our executive Directors has entered into a service contract with us pursuant to
which they agreed to act as executive Directors with effect from the date of the service contract
until the third annual general meeting of our Company since the Listing Date (subject always
to re-election as and when required under the Memorandum and Articles of Association). Either
party has the right to give not less than three months’ written notice to terminate the agreement.
(b) Non-executive Directors and independent non-executive Directors
Each of our non-executive Directors has entered into an appointment letter with our
Company on December 18, 2024. The initial term for their appointment letters shall commence
from the date of the service contract until the third annual general meeting of the Company
since the Listing Date (subject always to re-election as and when required under the
Memorandum and Articles of Association). Either party has the right to give not less than one
months’ written notice to terminate the agreement.
Each of our independent non-executive Directors has entered into an appointment letter
with our Company on December 18, 2024. The initial term for their appointment letters shall
be from the date of this prospectus until the third annual general meeting of the Company since
the Listing Date (subject always to re-election as and when required under the Memorandum
and Articles of Association). Either party has the right to give not less than one months’ written
notice to terminate the agreement.
Save as disclosed above, none of the Directors has entered, or has proposed to enter, a
service contract with any member of the Group (other than contracts expiring or determinable
by the employer within one year without the payment of compensation (other than statutory
compensation)).
2. Remuneration of Directors
The aggregate amount of remuneration (including salaries, allowances, contribution to
pension schemes and discretionary bonuses) and other benefits in kind paid to the Directors for
each of the years ended December 31, 2021, 2022, 2023 and the six months ended June 30,
2024 amounted to RMB1.28 million, RMB1.70 million, RMB2.54 million and RMB362.86
million, respectively. For further details of the remuneration of Directors, see Note 10 in
“Appendix I — Accountants’ Report”.
Save as the disclosed above, no other amounts have been paid or are payable by any
member of our Group to our Directors during the Track Record Period.
Under the arrangement currently in force, the Company estimates that the aggregate fixed
remuneration (before tax) payable to the Directors for the year ending December 31, 2024 is
approximately RMB1.53 million.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 525 ---
3. Disclaimers
(a) Save as disclosed in the section headed “History, Development and Reorganization”,
none of the Directors or any of the experts referred to in “F. Other Information —
Qualifications and Consents of Experts” below has any direct or indirect interest in
the promotion of, or in any assets which have been, within the two years
immediately preceding the date of this prospectus, acquired or disposed of by, or
leased to, any member of the Group, or are proposed to be acquired or disposed of
by, or leased to, any member of the Group.
(b) Save in connection with the Underwriting Agreements, none of the Directors or any
of the experts referred to in “F. Other Information — Qualifications and Consents
of Experts” below, is materially interested in any contract or arrangement subsisting
at the date of this prospectus which is significant in relation to the business of the
Group.
(c) Neither the Controlling Shareholder nor the Directors are interested in any business
apart from the Group’s business which competes or is likely to compete, directly or
indirectly, with the business of the Group.
(d) No cash, securities or other benefit has been paid, allotted or given within the two
years preceding the date of this prospectus to any promoter of the Company nor is
any such cash, securities or benefit intended to be paid, allotted or given on the basis
of the Global Offering or related transactions as mentioned.
(e) So far as is known to the Directors, none of the Directors or their respective close
associates or any Shareholders who are expected to be interested in 5% or more of
the issued share capital of the Company has any interest in the five largest customers
or the five largest suppliers of the Group.
E. THE SHARE INCENTIVE SCHEME
The below is a summary of the principal terms of the Share Incentive Scheme adopted by
the Company on January 12, 2023 and amended and restated on March 29, 2024. The Share
Incentive Scheme was mirroring and the continuation of the then share incentive scheme
adopted on December 4, 2020 by Bloks Technology, our main operating entity in the PRC. The
terms of the Share Incentive Scheme are not subject to the provisions of Chapter 17 of the
Listing Rules as it does not involve the grant of options or awards by our Company after the
Listing. Given that all the Shares underlying the options granted under the Share Incentive
Scheme have been issued and allotted to First Prosperity for future exercise of the options,
there will not be any dilutive effect to the issued Shares as a result of the operation of the Share
Incentive Scheme.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 526 ---
Purposes of the Share Incentive Scheme
The purpose of the Share Incentive Scheme is to encourage certain Directors and
employees to contribute to the Group for the long-term benefits of the Group and its
Shareholders as a whole, and provide the Group with a flexible means of either retaining,
incentivizing, rewarding, remunerating, compensating and/or providing benefits to its
Directors and employees.
Participants of the Share Incentive Scheme
The committee as duly authorised by the Board administering the Share Incentive Scheme
(the “ Committee ”) may, at its sole and absolute discretion, make an offer of the grant of option
to the Directors, employees or other persons who have contributed or will contribute to the
Group (the “ Participants ”).
Duration and Administration of the Share Incentive Scheme
The Share Incentive Scheme shall be valid and effective for the period of time
commencing on the January 12, 2023 and expiring on the day immediately after the date which
is ten years after the first date on which the Shares are listed and traded on the main board of
the Stock Exchange, after which period the provisions of the Share Incentive Scheme shall in
all respects cease to be in any force or effect.
The Share Incentive Scheme shall be subject to the administration of the Committee and
the decision of the Committee shall be final and binding on all parties. The Committee shall
be comprised of members whom shall be designated by the Board. Any decisions of the
Committee shall be approved by the majority of the members of the Committee. The
Committee shall have the sole and absolute right (i) to interpret and construe the provisions of
the Scheme, (ii) to determine the persons who will be awarded Options under the Scheme, and
the number of Options awarded thereto, (iii) to make such appropriate and equitable
adjustments to the terms of Options granted under the Scheme as it deems necessary, and (iv)
to make such other decisions or determinations as it shall deem appropriate in the
administration of the Scheme.
Grant of the Option
On and subject to the terms of the Share Incentive Scheme and applicable laws and
regulations, the Committee shall be entitled at any time during the life of the Share Incentive
Scheme to make an offer (the “ Offer ”) of the grant of a right to purchase a specified number
of Shares or interest in such Shares held and managed by First Prosperity in trust at a specified
price during specified time periods or as otherwise specified in the Offer letter (the “ Option ”)
to any Participant. Options may be granted on such terms and conditions in relation to their
vesting, exercise or otherwise (e.g., by linking their vesting to the achievement of certain
performance targets and/or their exercise to the attainment or performance of milestones by any
member of the Group, the Grantee or any group of Participants) as the Committee may in its
sole and absolute discretion determine.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 527 ---
An Offer shall be made to a Participant by letter in such form as the Committee may from
time to time at its sole and absolute discretion determine requiring the Participant to undertake
to hold and exercise the Option on the terms and conditions on which it is to be granted and
to be bound by the provisions of the Share Incentive Scheme and the relevant letter, and shall
remain open for acceptance by the Participant to whom an Offer is made for such period as the
Committee may determine, provided that no such Offer shall be open for acceptance on or after
the Listing Date or after the Participant to whom the Offer is made has ceased to be a
Participant (as determined by the Committee) for any reason.
An Offer shall be deemed to have been accepted when the duplicate letter comprising
acceptance of the Offer is duly signed by the Grantee with the number of Shares in respect of
which the Offer is accepted clearly stated therein, is received by the Company.
Maximum Number of Shares Available under the Share Incentive Scheme
The total number of Shares underlying all the Options granted under the Share Incentive
Scheme shall not in aggregate exceed 21,321,255 Shares, equivalent to 9.8096% of the Shares
of the Company in issue as at the date of approval of the Share Incentive Scheme and being
8.83% of the equity interest in the Company immediately after completion of the Global
Offering (assuming that the Offer Size Adjustment Option and the Over-allotment Option are
not exercised), which have been issued and allotted to the ESOP Platform in full. The
maximum number of Shares may be adjusted, in the event of a capitalization issue, rights issue,
consolidation, sub-division or reduction of the share capital of the Company, provided that any
such adjustment shall comply with the Listing Rules and the guidance from the Stock Exchange
from time to time. Any such adjustments shall give the Participants the same proportion of
equity capital as they were previously entitled to and no adjustments shall be made to the extent
that a Share would be issued at less than its nominal value.
Exercise Price
The exercise price of an Option shall be determined by the Committee and included in the
letter to the Grantee containing the Offer, which could be a fixed or variable figure with
reference to the fair value per Share.
Exercise of Options
A Grantee is vested with the Options during a period to be notified by the Committee to
each Grantee (the “ Option Period ”) according to the terms and conditions in the letter to the
Grantee containing the Offer and the letter comprising acceptance of the Offer, provided that
the Grantee remains to be a Participant entitled to exercise his or her Option.
Upon vesting, a Grantee by giving notice in writing to the Company (where applicable,
in a prescribed form as specified by the Company) stating that the Option is thereby exercised
and specifying the number of Shares corresponding to such exercise. The Grantee could
exercise the Option by way of net exercise (namely by tendering back to the Company some
of the exercised Shares to cover the exercise price of the Option) or in other ways as approved
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 528 ---
by the Committee, and upon the exercise, the Committee shall instruct the ESOP Platform to
(i) transfer the relevant Shares to the Grantee, (ii) hold the relevant Shares for the benefit of
the Grantee as a beneficiary under the trust, or (iii) deal with the relevant Shares as otherwise
instructed by the Committee.
The Grantee will be responsible for all tax, social security contributions or other levies
arising out of or in connection with the grant, vesting and exercise of any Option (and/or the
allotment and issuance of Shares to the Grantee pursuant to the Share Incentive Scheme), and
indemnifies the Company and each member of the Group against any liability they may have
to pay or withhold such liabilities. The Grantee will be responsible for obtaining his or her own
tax advice and agrees not to take (or omit to take) any action in reliance on any statement as
to the tax treatment of any Option granted (or purported to be granted) by or on behalf of the
Company or any member of the Group. No member of the Group will be responsible for the
tax treatment or any change in the tax treatment of any Option. Without limiting the generality
of the foregoing, upon the grant, exercise or vesting of the Option, the Company (i) may
withhold the allotted Shares and/or remittance or any part thereof for such period as may be
necessary and make such arrangements as it considers necessary for satisfying the Company’s
obligation to withhold income or meeting any other liabilities to taxes or social security
contributions incurred and (ii) has the authority to sell on behalf of the Grantee a sufficient
number of Shares to be granted to the Grantee to satisfy such tax and/or social security
contributions liabilities.
Dividend and Voting Rights
A Grantee is not entitled to vote, to receive dividends or to have any other rights of a
shareholder in respect of Shares subject to an Option until the Option is validly exercised by
the Grantee, and such Shares are transferred to the Grantee and are registered in the name of
the Grantee in accordance with the Share Incentive Scheme. The voting rights of the Shares
held by the ESOP Platform upon trust for the benefit of the Grantee who has exercised his or
her Option will be exercised by the trustee pursuant to the instructions from the advisory
committee under the trust deed and in compliance with the Listing Rules, and the ESOP
Platform shall abstain from voting on the Company’s general meeting in respect of any
unvested Shares.
Limited Transferability
An Option shall be personal to the Grantee and shall not be assignable or transferable. No
Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interests in
favour of any third party over or in relation to any Option.
Cessation of Employment, Death or Disability
An Option shall lapse automatically (to the extent that has been vested but not already
exercised or expired) in the event that the Grantee ceases to be an employee or a Director by
reason of the termination of his or her employment, appointment or directorship on the grounds
that he or she (i) has contravened any policy of any member of the Group, (ii) has been guilty
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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of serious misconduct, (iii) has disclosed without consent any trade or commercial secret
belonging to the Group, (iv) has taken any action or done anything in his/her capacity which
has (in the Company’s sole opinion) brought any member of the Group into disrepute or (v) has
been convicted of any criminal offence involving his or her integrity or honesty or (vi) on any
other ground on which an employer would be entitled to terminate his or her employment
summarily, or (vii) the Grantee appears either to be unable to pay or have no reasonable
prospect to be able to pay debts, or has become bankrupt, or a petition for bankruptcy has been
filed against him or her, or has made any arrangements or composition with his or her creditors
generally, provided that whether any one or more of the events specified in the above occur in
relation to a Grantee shall in the reasonable opinion of the Committee and be solely, absolutely
and conclusively determined by the Committee.
In the event the Grantee dies or has become totally and permanently disabled and
incapacitated before exercising the Option in full and none of the events for termination of
employment or engagement prescribed in above paragraph then exists with respect to such
Grantee, the personal representative(s) of the Grantee shall be entitled within a period of six
months (or such period as the Committee may determine and notify to the Grantee and/or the
personal representative(s) of the Grantee) from the date of death or the date of total and
permanent disability and incapacitation (provided that such exercise is during the relevant
Option Period) to exercise the Option up to the entitlement of such Grantee as at the date of
his death or becoming totally and permanently disabled and incapacitated (to the extent that he
or she is vested with and entitled to exercise at such date but not already exercised or expired),
failing which it will lapse.
In the event a Grantee ceases to be an employee or a director of any member of the Group
for any reason including but not limited to resignation, demotion, redundancy and any kind of
involuntary termination, but other than (i) his or her death or total and permanent disability and
incapacitation or (ii) on one or more of the grounds of termination of employment, appointment
or directorship specified in above paragraph, the Grantee may exercise the Option up to his or
her entitlement at the date of cessation (to the extent he or she is vested with and entitled to
exercise at the date of cessation but not already exercised or expired) within one months of the
date of such cessation (or such period as the Committee may determine and notify to the
Grantee), provided that such exercise is during the relevant Option Period and the date of
cessation shall be the last actual working day with the Group whether salary is paid in lieu of
notice or not, failing which it will lapse. In the event that such cessation is due to resignation
and such Grantee is a senior management immediately before the date of resignation, he or she
shall not offer, pledge, charge, sell or otherwise transfer or dispose of either directly or
indirectly, conditionally or unconditionally, any of the Shares transferred to him or her or
interest in the Shares held for the benefit of him or her as beneficiary under the trust.
Alternation of the Share Incentive Scheme
The Committee in its sole and absolute discretion may amend any of the provisions of the
Share Incentive Scheme at any time. Any alterations to the terms and conditions of the Share
Incentive Scheme must comply with the Cayman Companies Law.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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Termination
The Company by ordinary resolution of its shareholders, or the Board in its sole and
absolute discretion, may at any time terminate the operation of the Share Incentive Scheme,
and in such event, no further Options will be offered or granted, but in all other respects the
Share Incentive Scheme shall remain in full force and effect. Any granted but unexercised and
unexpired Options shall continue to be exercisable in accordance with their terms and
conditions after the termination of the Share Incentive Scheme.
Details of the Interests Granted under the Share Incentive Scheme
As of the Latest Practicable Date, the Options under the Share Incentive Scheme
corresponding to 21,321,255 Share, being 8.83% of the equity interest in the Company
immediately after completion of the Global Offering (assuming that the Offer Size Adjustment
Option and the Over-allotment Option are not exercised), have been granted to 74 Participants
in full, including two Directors, four senior management and 68 other employees of the Group.
The below sets out the details of the interests granted under the Share Incentive Schemes. As
of the Latest Practicable Date, all the Shares subject to the Options have been allotted and
issued, and are held by the ESOP Platform. Unvested Shares under the Share Incentive Scheme
will abstain from voting on the Shareholders’ general meetings of the Company upon Listing
in compliance with Rule 17.05A of the Listing Rules.
Name of
Grantee Address
Date of
Grant
Exercise
Price Vesting Period Option Period
Number of
Shares under
the Options
Granted
Approximate
Percentage of
Issued Share
Capital of Our
Company
Immediately
after
Completion of
the Global
Offering
(Note 1)
(RMB)
Directors
Mr. Zhu Weisong Room 1102, No.6, Lane
908, Ruining Road,
Xuhui District,
Shanghai, PRC
April 15,
2024
0.2 V ested upon
acceptance of
Options
From April 15, 2024
to April 14, 2034
12,577,685 5.21%
Mr. Sheng Xiaofeng 10D, No. 7, Lane 37,
Panyu Road, Changning
District Shanghai, PRC
April 15,
2024
0.2 Eight years
(Note 2)
From April 15, 2024
to April 14, 2034
969,678 0.40%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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Name of
Grantee Address
Date of
Grant
Exercise
Price Vesting Period Option Period
Number of
Shares under
the Options
Granted
Approximate
Percentage of
Issued Share
Capital of Our
Company
Immediately
after
Completion of
the Global
Offering
(Note 1)
(RMB)
Senior Management
Mr. Huang Zheng No. 24, Lane 460, Macau
Road, Putuo District,
Shanghai, PRC
April 15,
2024
0.2 Six years
(Note 3)
From April 15, 2024
to April 14, 2034
161,613 0.07%
Mr. Xie Lei No. 335, Hailun Road,
Hongkou District,
Shanghai, PRC
March 29,
2024
0.2 To be vested
upon listing
From March 29, 2024
to March 28, 2034
221,305 0.09%
April 15,
2024
0.2 Eight years
(Note 2)
From April 15, 2024
to April 14, 2034
484,839 0.20%
Ms. Fu Yifang Room 601, No. 72
Dujuanyuan, Lane 917
Qinzhou South Road,
Xuhui District,
Shanghai, PRC
April 15,
2024
0.2 Six years
(Note 3)
From April 15, 2024
to April 14, 2034
258,581 0.11%
Mr. Zhu Y uancheng No. 19, Lane 902,
Xikang Road,
Jing’an District,
Shanghai, PRC
March 29,
2024
0.2 To be vested
upon listing
From March 29, 2024
to March 28, 2034
66,392 0.03%
April 15,
2024
0.2 Eight years
(Note 2)
From April 15, 2024
to April 14, 2034
436,355 0.18%
A total of 68 other employees
A total of 35 other
employees
N/A March 29,
2024
0.2 To be vested
upon listing
From March 29, 2024
to March 28, 2034
3,256,670 1.35%
A total of 45 other
employees
N/A April 15,
2024
0.2 Four years
(Note 4)
From April 15, 2024
to April 14, 2034
703,018 0.29%
A total of 14 other
employees
N/A April 15,
2024
0.2 Six years
(Note 3)
From April 15, 2024
to April 14, 2034
1,344,731 0.56%
A total of 2 other
employees
N/A April 15,
2024
0.2 Eight years
(Note 2)
From April 15, 2024
to April 14, 2034
840,388 0.35%
Total 21,321,255 8.83%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-26 –


--- page 532 ---
Note 1 : Assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised.
Note 2 : 13%, 13%, 13%, 13%, 13%, 13%, 13% and 9% of the total number of the Options granted shall vest on the
first, second, third, fourth, fifth, sixth, seventh and eighth anniversary of the Option Period commencement
date, respectively. The Option Period commencement date is April 15, 2024.
Note 3 : 17%, 17%, 17%, 17%, 17%, and 15% of the total number of the Options granted shall vest on the first, second,
third, fourth, fifth and sixth anniversary of the Option Period commencement date, respectively. The Option
Period commencement date is April 15, 2024.
Note 4 : 25%, 25%, 25% and 25% of the total number of the Options granted shall vest on the first, second, third and
fourth anniversary of the Option Period commencement date, respectively. The Option Period commencement
date is April 15, 2024.
F. OTHER INFORMATION
Agency Fees or Commissions Received
The Underwriters will receive an underwriting commission in connection with the
Underwriting Agreements, as detailed in “Underwriting — International Offering —
Commissions and Expenses”. Save in connection with the Underwriting Agreements, no
commissions, discounts, brokerages or other special terms have been granted by the Group to
any person (including the Directors, promoters and experts referred to in “— Qualifications
and Consents of Experts” below) in connection with the issue or sale of any capital or security
of the Company or any member of the Group within the two years immediately preceding the
date of this prospectus.
Within the two years immediately preceding the date of this prospectus, no commission
has been paid or is payable for subscription, agreeing to subscribe, procuring subscription or
agreeing to procure subscription for any share in or debentures of the Company.
Estate Duty
The Directors have been advised that no material liability for estate duty is likely to fall
on the Group in Hong Kong and the Cayman Islands.
Litigation
As of the Latest Practicable Date, the Company was not engaged in any outstanding
litigation or arbitration which may have material adverse effect on the Global Offering and, so
far as the Directors are aware, no material litigation or claim was pending or threatened by or
against the Company.
The Joint Sponsors
The Joint Sponsors have made an application on behalf of the Company to the Listing
Committee of the Stock Exchange for the listing of, and permission to deal in, all the Shares
in issue and to be issued as mentioned in this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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Each of the Joint Sponsor confirm that it satisfies the independence criteria applicable to
sponsors set out in Rule 3A.07 of the Listing Rules. Each of the Joint Sponsors will receive
a fee of US$350,000 for acting as the sponsors for the Listing.
Promotors
The Company does not have any promoter (as defined in the Listing Rules). Within the
two years immediately preceding the date of this prospectus, no cash, securities or other benefit
has been paid, allotted or given nor are any proposed to be paid, allotted or given to any
promoters in connection with the Global Offering and the related transactions described in this
prospectus.
Preliminary Expenses
The Company has not incurred any material preliminary expenses.
Qualifications and Consents of Experts
The qualifications of the experts which have given opinions or advice which are contained
in, or referred to in, this prospectus are as follows:
Name of Expert Qualifications
Goldman Sachs (Asia) L.L.C. A licenced corporation under the SFO to
conduct type 1 (dealing in securities), type 4
(advising on securities), type 5 (advising on
futures contracts), type 6 (advising on corporate
finance) and type 9 (asset management)
regulated activities under the SFO
Huatai Financial Holdings
(Hong Kong) Limited
A licenced corporation under the SFO to
conduct type 1 (dealing in securities), type 2
(dealing in futures contracts), type 4 (advising
on securities), type 6 (advising on corporate
finance), type 7 (providing automated trading
services) and type 9 (asset management)
regulated activities under the SFO
Ernst & Y oung Certified Public Accountants and Registered
Public Interest Entity Auditor
Campbells Legal advisors as to Cayman Islands law
Jingtian & Gongcheng Legal advisors as to PRC law
Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
Independent industry consultant
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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Each of the experts listed above has given and has not withdrawn its written consent to
the issue of this prospectus with the inclusion of its report and/or letter and/or opinion and/or
references to its name included herein in the form and context in which they respectively
appear.
Binding Effect
This prospectus shall have the effect, if an application is made in pursuance hereof, of
rendering all persons concerned bound by all of the provisions (other than the penal provisions)
of Sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance so far as applicable.
Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately, in reliance upon the exemption provided in Section 4 of the Companies
Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions)
Notice (Chapter 32L of the Laws of Hong Kong).
Miscellaneous
(a) Save as disclosed in “— A. Further Information about the Company” in this section,
within the two years preceding the date of this prospectus, no share or loan capital
of the Company or any of its subsidiary has been issued or has been agreed to be
issued fully or partly paid either for cash or for a consideration other than cash.
(b) No share or loan capital of the Company or any of its subsidiary is under option or
is agreed conditionally or unconditionally to be put under option.
(c) No founder, management or deferred shares of the Company or any of its subsidiary
have been issued or have been agreed to be issued.
(d) None of the equity and debt securities of the Company or its subsidiary is presently
listed or dealt in on any other stock exchange nor is any listing or permission to deal
being or proposed to be sought.
(e) The Company has no outstanding convertible debt securities or debentures.
(f) There is no arrangement under which future dividends are waived or agreed to be
waived.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 535 ---
(g) None of the experts listed under “— Qualifications and Consents of Experts” in this
section:
(i) is interested beneficially or non-beneficially in any shares in any member of
the Group; or
(ii) has any right or option (whether legally enforceable or not) to subscribe for or
to nominate persons to subscribe for securities in any member of the Group
save in connection with the Underwriting Agreements.
(h) The English text of this prospectus shall prevail over their respective Chinese text.
(i) There has not been any interruption in the business of the Group which may have
or has had a significant effect on the financial position of the Group in the 12 months
preceding the date of this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 536 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were:
(a) a copy of each of the material contracts referred to in “ Appendix IV — Statutory and
General Information — B. Further Information about the Business — 1. Summary
of Material Contracts ”; and
(b) the written consents referred to in “ Appendix IV — Statutory and General
Information — F . Other Information — Qualifications and Consents of Experts ”.
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the website of the
Stock Exchange at www.hkexnews.hk and the website of the Company at
https://www.bloks.com/ during a period of 14 days from the date of this prospectus:
(a) the Memorandum and the Articles of Association;
(b) the Accountants’ Report and the report on the unaudited pro forma financial
information prepared by Ernst & Y oung, the texts of which are set out in “ Appendix
I — Accountants’ Report ” and “ Appendix II — Unaudited Pro Forma Financial
Information ”, respectively;
(c) the audited consolidated financial statements of the Group for the years ended
December 31, 2021, 2022 and 2023 and six months ended June 30, 2024;
(d) the PRC legal opinion issued by Jingtian & Gongcheng, our PRC Legal Advisor, in
respect of certain general corporate matters and property interests in the PRC of the
Group;
(e) the letter of advice prepared by Campbells, our legal advisor on Cayman Islands law,
summarizing certain aspects of the Cayman Islands company law referred to in
Appendix III to this prospectus;
(f) the industry report prepared by Frost & Sullivan;
(g) the written consents referred to under the section headed “ Appendix IV — Statutory
and General Information — F . Other Information — Qualifications and Consents of
Experts ”;
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND A V AILABLE ON DISPLAY
–V - 1–


--- page 537 ---
(h) the material contracts referred to in “ Appendix IV — Statutory and General
Information — B. Further Information about the Business — 1. Summary of Material
Contracts ”;
(i) the service contracts and appointment letters with the Directors referred to in
“Appendix IV — Statutory and General Information — D. Further Information about
Directors — 1. Particulars of Directors’ service contracts and appointment letters ”;
(j) the terms of the Share Incentive Scheme; and
(k) the Cayman Companies Act.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND A V AILABLE ON DISPLAY
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