F-1 1 ea0200138-02.htm REGISTRATION STATEMENT

As filed with the U.S. Securities and Exchange Commission on May 10, 2024.

Registration No. 333-[            ]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

–––––––––––––––––––––––––––––

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

______________________________

Lianhe Sowell International Group Ltd
(Exact name of Registrant as specified in its charter)

–––––––––––––––––––––––––––––

Not Applicable

(Translation of Registrant’s name into English)

______________________________

Cayman Islands

 

7372

 

Not Applicable

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification Number)

Shenzhen Integrated Circuit Design Application Industry Park, Unit 505-3
Chaguang Road No. 1089
Nanshan District, Shenzhen, China
Tel: +86-400-616-9629

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

–––––––––––––––––––––––––––––

Cogency Global Inc.
122 East 42
nd Street, 18th Floor, New York, NY 10168
Telephone: (212) 947-7200
(Name, address, including zip code, and telephone number, including area code, of agent for service)

______________________________

Arila E. Zhou, Esq.
Anna J. Wang, Esq.
Robinson & Cole LLP
Chrysler East Building
666 Third Avenue, 20
th Floor
New York, NY 10017
Tel: (212) 451
-2942

 

Richard I. Anslow, Esq.
Wei Wang, Esq.

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Telephone: (212) 370
-1300
Fax: (212) 370
-7889

–––––––––––––––––––––––––––––

Approximate date of commencement of proposed sale to the public:
as soon as practicable after the effective date of this registration statement.

______________________________

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)of the Securities Act. 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION, DATED May 10, 2024

LIANHE SOWELL INTERNATIONAL GROUP LTD
[          ] Ordinary Shares

This is the initial public offering on a firm commitment basis of [          ] ordinary shares, par value $0.0001 per share (each, an “Ordinary Share,” collectively, the “Ordinary Shares”), of Lianhe Sowell International Group Ltd (the “Company,” “Sowell,” or “we”), a Cayman Islands exempted company with limited liability whose principal place of business is in the People’s Republic of China (“China” or the “PRC”). We expect that the initial public offering price will be in the range of $[            ] to $[            ] per Ordinary Share. Prior to this offering, there has been no public market for our Ordinary Shares. We will apply to list our Ordinary Shares on the Nasdaq Capital Market under the symbol “LHSW” for the Ordinary Shares we are offering. However, there is no assurance that this offering will be closed and our Ordinary Shares will be trading on Nasdaq Capital Market. We will not complete this offering unless we are so listed.

We are an “emerging growth company” as defined in the Jumpstart Our Business Act of 2012, as amended, and, as such, will be subject to reduced public company reporting requirements.

Lianhe Sowell International Group Ltd, which we refer to as “Sowell,” the “Company,” or “Cayman Islands holding company,” is a holding company with no material operations of its own, and conducts substantially all of its operations through Shenzhen Sowell Technology Development Co., Ltd. (“Shenzhen Sowell”) and its subsidiaries, Hezhi Rongtong (Shenzhen) Technology Co., Ltd. (“Hezhi Rongtong”), Shenzhen Sowell Digital Energy Technology Co., Ltd. (“Shenzhen Sowell Digital”), Wuxi Sowell Information Technology Co., Ltd. (“Wuxi Sowell”), Shenzhen Aiyin Digital Technology Co., Ltd. (“Shenzhen Aiyin”), and Suzhou Sowell Vision Technology Co., Ltd. (“Suzhou Sowell,” which we collectively refer to as “PRC subsidiaries, “PRC operating entities,” or “PRC operating subsidiaries.” The Ordinary Shares offered in this offering are shares of Sowell, our Cayman Islands holding company, instead of shares of any PRC operating entities. Investors in our Ordinary Shares should be aware that they may never hold equity interests in any PRC operating entities.

We indirectly hold 100% equity interests in Shenzhen Sowell, through our BVI subsidiary, Lianhe Sowell International Holding Group Ltd., which we will refer to as “Sowell BVI,” and our Hong Kong subsidiary, Lianhe Sowell International Group Limited, which we will refer to as “Sowell HK,” and another PRC subsidiary, Lianhe Sowell Enterprise Management (Shanwei) Co., Ltd., which we refer to as “Sowell Shanwei.” Sowell Shanwei holds 100% equity interests in Shenzhen Sowell. For more details, see “Corporate History and Structures” on page 77 of this prospectus. We do not have a variable interest entity structure. Each of the PRC operating entities was organized in the PRC and their operations are governed by the PRC laws.

The PRC government recently initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”) and relevant supporting guidelines (collectively with the Trial Administrative Measures, the “New Administrative Rules Regarding Overseas Listings”), which came into effect on March 31, 2023. According to the New Administrative Rules Regarding Overseas Listings, among other things, a domestic company in the PRC that seeks to offer and list securities in overseas markets shall fulfill the filing procedure with the CSRC as per requirement of the Trial Administrative Measures. Where a domestic company seeks to indirectly offer and list securities in overseas markets, the issuer shall designate a major domestic operating entity, which shall, as the domestic responsible entity, file with the CSRC. Initial public offerings or listings in overseas markets shall be filed with the CSRC within 3 working days after the relevant application is submitted overseas. Further, an overseas securities company that serves as a sponsor or lead underwriter for overseas securities offering and listing by domestic companies shall file with the CSRC within 10 working days after signing its first engagement agreement for such business, and submit to the CSRC, no later than January 31 each year, an annual report on its business activities in the previous year associated with overseas securities offering and listing by domestic companies. Our PRC counsel, Guangdong Zhuojian Law Firm, has advised us that, based on its understanding of the current PRC laws and regulations, our offering will be identified as an indirect overseas issuance

 

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and listing under the New Administrative Rules Regarding Overseas Listings. We are therefore subject to the approval, filing or other requirements of the CSRC in connection with this offering. We have timely submitted the filing with the CSRC as per requirement of the New Administrative Rules Regarding Overseas Listings, which is currently under review. However, since the New Administrative Rules Regarding Overseas Listings are newly promulgated, we cannot assure that we will be able to complete the relevant filings in a timely manner or fulfil all the regulatory requirements thereunder.

On February 24, 2023, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality and Archives Administration Provisions”), which also became effective on March 31, 2023. The Confidentiality and Archives Administration Provisions provide, among others, that domestic companies that carry out overseas offering and listing (either in direct or indirect means) and the securities companies and securities service providers (either incorporated domestically or overseas) that undertake relevant businesses shall not leak any state secret and working secret of government agencies, or harm national security and public interest, and a domestic company shall first obtain approval from competent authorities according to law, and shall file with the secrecy administrative department at the same level, if it plans to, either directly or through its overseas listed entity, publicly disclose or provide any documents and materials that contain state secrets or working secrets of government agencies. Working papers produced in the Chinese mainland by securities companies and securities service providers in the process of undertaking businesses related to overseas offering and listing by domestic companies shall be retained in the Chinese mainland. Where such documents need to be transferred or transmitted to outside the Chinese mainland, relevant approval procedures stipulated by regulations shall be followed. While we believe we do not involve leaking any state secret and working secret of government agencies, or harming national security and public interest in connection with provision of documents, materials and accounting archives, we may be required to perform additional procedures in connection with the provision of accounting archives. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our Ordinary Shares to significantly decline in value or become worthless. See “Risk Factor — Risks Related to Doing Business in China — With the promulgation of the new filing-based administrative rules for overseas offering and listing by domestic companies in China, or if the PRC government were to impose new requirements for approval from the PRC authorities to issue our Ordinary Shares to foreign investors or list on a foreign exchange, failure to comply with the relevant requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.” on page 35 of this prospectus.

Our Ordinary Shares may be prohibited to trade on a national exchange or “over-the-counter” markets under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (the “PCAOB”) is unable to inspect our auditors for three consecutive years beginning in 2021. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years. Pursuant to the HFCA Act, the PCAOB issued a Determination Report on December 16, 2021 (the “Determination Report”) which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China, and (2) Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. On August 26, 2022, a Statement of Protocol was signed by the PCAOB, the CSRC and the Ministry of Finance of the PRC governing inspections and investigations of audit firms based in mainland China and Hong Kong (the “Statement of Protocol”). Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. On December 29, 2022, the Consolidated Appropriations Act, 2023 (the “CAA”) was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. Our auditor, WWC, P.C., is headquartered in San Mateo, California, and has been inspected by the PCAOB on a regular basis. WWC, P.C. is not headquartered in mainland China or Hong Kong and was not identified in the Determination Report as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit WWC, P.C. to provide audit workpapers to the PCAOB for inspection or investigation, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, you may be deprived of the benefits of such inspection which

 

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could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities on a national exchange or “over-the-counter” markets may be prohibited under the HFCA Act. See “Risk Factors — Risks Related to Doing Business in China — Recent joint statement by the SEC and the PCAOB, proposed rule changes submitted by Nasdaq, and an act passed by the US Senate all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.” on page 51 of this prospectus.

Neither Sowell nor its subsidiaries have maintained cash management policies which dictate the purpose, amount and procedure of cash transfers between the entities. Each entity needs to comply with applicable laws or regulations with respect to transfer of funds, dividends, and distributions with other entities. As a holding company, Sowell may rely on transfer of funds, dividends and other distributions on equity paid by its subsidiaries for its cash and financing requirements. If any of our subsidiaries incur debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends and our cash and financing requirement may not be fully satisfied.

As of the date of this prospectus, there has been no cash flows, including dividends, transfers, and distributions, between Sowell and its subsidiaries. In the future, cash proceeds from overseas financing activities, including this offering, will be transferred by Sowell to its subsidiaries via capital contribution or shareholder loans, as the case may be.

As of the date of this prospectus, none of our subsidiaries have made any dividends or distributions to Sowell, and no dividends or distributions have been made to any investors by Sowell or any of its subsidiaries. We intend to keep any future earnings to re-invest in and finance the expansion of the business of our PRC subsidiaries, and we do not anticipate that any cash dividends will be paid in the foreseeable future to the U.S. investors immediately following the consummation of this offering. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of profits of the company or its share premium amount or a combination of both, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. In order for us to pay dividends to our shareholders, we may rely on the distribution of profits of the PRC operating entities to the Hong Kong subsidiary. PRC regulations currently permit the payment of dividends only out of accumulated profits, as determined in accordance with accounting standards and PRC regulations. To the extent any funds or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong, due to the interventions in or the imposition of restrictions and limitations by PRC governments which may limit our ability to transfer funds, pay dividends or make distribution. See “Risk Factors — Risks Related to Doing Business in China — We must remit the offering proceeds to our PRC operating subsidiaries before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner.” on page 42 of this prospectus. In addition, the PRC government imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland China. See “Risk Factors — Risks Related to Doing Business in China — Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” On page 45 of this prospectus. Furthermore, if our subsidiaries in mainland China incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. Furthermore, the PRC 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 companies in mainland China to enterprises outside of mainland China unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the enterprises outside of mainland China are tax resident. Based on our understanding of the Hong Kong laws and regulations, as of the date of this prospectus, there is no restriction imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to mainland China), except transfer of funds involving money laundering and criminal activities. Notwithstanding the foregoing, we cannot assure that there will not be any changes in the future in the economic, political and legal environment in Hong Kong and that the PRC government will not in the future exert influence over changes to laws and regulations of Hong Kong to impose restrictions on the transfer of capital within, into and out of Hong Kong. Based on our understanding of the BVI laws and regulations, as of the date of this prospectus, there is no restriction on the transfer of capital within, into and out of BVI. See “Risk Factors — Risks Related to Doing Business in China — The transfer of funds, dividends and other distributions between us and our subsidiaries is subject to restriction.” On page 41 of this prospectus; and “Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability

 

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of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.” on page 45 of this prospectus. See also “Prospectus Summary — Dividend Distributions or Assets Transfer among the Holding Company and Subsidiaries” on page 7 of this prospectus.

Sowell is a Cayman Islands company and conduct substantially all of its operations in China and substantially all of its assets are located in China. In addition, other than our independent director nominee, Ms. Qinghe Liu, all of our directors and officers are nationals or residents of countries other than the United States whose assets are all located outside the United States. As a result, service of process required under foreign laws cannot guarantee that you will ultimately be able to serve legal proceedings on these individuals within the United States. Enforcement required under foreign laws cannot guarantee that you will ultimately be able to enforce judgments obtained in U.S. courts including judgments based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not nationals or residents of the United States. See “Risk Factors — Risks Related to Doing Business in China — You may experience some difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in foreign country against us or our management named in the prospectus.” on page 44 of this prospectus.

This prospectus does not constitute, and there will not be, an offering of securities to the public in the Cayman Islands.

 

Per Share

 

Total

Initial public offering price(1)

 

$

 

 

$

[            ]

Underwriting discounts and commissions (7%)(2)

 

 

 

 

 

[            ]

Proceeds, before expenses, to us(3)

 

$

 

 

$

 

____________

(1)      Initial public offering price per share is assumed as $[            ] per share, which is the midpoint of the price range set forth on the cover page of this prospectus. The table above assumes that the underwriters do not exercise their over-allotment option.

(2)      The underwriting discount is 7% of the public offering price provided that in the event and to the extent that purchasers are introduced to the underwriters by us, the discount shall be 6.5%. Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering, payable to the representatives of the underwriters (the “Representatives”), as well as reimbursement of certain expenses of the underwriters. In addition to the underwriting discounts listed above and the non-accountable expense allowance described in the footnote, we have agreed to issue to the representatives of the underwriters upon the closing of this offering a warrant exercisable for a period of five years from the effective date of this registration statement entitling the representatives to purchase up to 5% of the number of shares sold in this offering at a per share exercise price equal to 120% of the public offering price. The registration statement of which this prospectus is a part also covers such warrants and the shares issuable upon the exercise thereof. See “Underwriting” beginning on page 147 of this prospectus for additional disclosure regarding underwriting compensation payable by us.

We have agreed to sell to the Representatives of the underwriters, on the applicable closing date of this offering, warrants in an amount equal to 5% of the aggregate number of Ordinary Shares sold by us in this offering (the “Representatives’ Warrants”). For a description of other terms of the Representatives’ Warrants, see “Underwriting” beginning on page 147 of this prospectus.

We have granted the underwriters an option, exercisable for 30 days following the effective date of this prospectus, to purchase up to an additional 15% of the Ordinary Shares offered in this offering on the same terms to cover over-allotments, if any.

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the Ordinary Shares to purchasers on or about [          ], 2024.

THE BENCHMARK COMPANY LLC

     

AXIOM CAPITAL MANAGEMENT, INC.

The date of this prospectus is            , 2024

 

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TABLE OF CONTENTS

 

Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

iv

PROSPECTUS SUMMARY

 

1

RISK FACTORS

 

21

USE OF PROCEEDS

 

59

DIVIDEND POLICY

 

61

CAPITALIZATION

 

62

DILUTION

 

63

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

65

CORPORATE HISTORY AND STRUCTURE

 

77

INDUSTRY

 

79

BUSINESS

 

89

REGULATIONS

 

109

MANAGEMENT

 

117

PRINCIPAL SHAREHOLDERS

 

124

RELATED PARTY TRANSACTIONS

 

125

DESCRIPTION OF SHARE CAPITAL

 

127

SHARES ELIGIBLE FOR FUTURE SALE

 

136

TAXATION

 

137

SERVICE OF PROCESS AND ENFORCEABILITY OF CIVIL LIABILITIES

 

144

UNDERWRITING

 

147

EXPENSES RELATING TO THIS OFFERING

 

156

LEGAL MATTERS

 

157

EXPERTS

 

157

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

157

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

F-1

You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free-writing prospectus. We are offering to sell, and seeking offers to buy, the Ordinary Shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Ordinary Shares.

We have not taken any action to permit a public offering of the Ordinary Shares outside the United States or to permit the possession or distribution of this prospectus or any filed free writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about and observe any restrictions relating to the offering of the Ordinary Shares and the distribution of this prospectus or any filed free writing prospectus outside the United States.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information.

Until [__________], 2024 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade Ordinary Shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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COMMONLY USED DEFINED TERMS

        “AHFCAA” refers to the Accelerating Holding Foreign Companies Accountable Act.

        “China” or the “PRC” refers to the People’s Republic of China, including Hong Kong and Macau. When used in the case of laws, regulations and rules, “China” or “the PRC” refers to only such laws, regulations and rules of mainland China. When used in the case of government, governmental authorities, regulatory agencies, courts, jurisdictions, tax, entities, enterprises, individuals and residents of “China” or the “PRC” or “Chinese,” it refers to only such government, governmental authorities, regulatory agencies, courts, jurisdictions, tax, entities, enterprises, individuals and residents of mainland China.

        Depending on the context, “we,” “us,” “our company,” “our,” the “Company” and “Sowell” refer to Lianhe Sowell International Group Ltd, a Cayman Islands company, and its subsidiaries, Sowell BVI, Sowell HK, and Sowell Shanwei, and other PRC operating entities, unless the context otherwise indicates.

        “CAC” refers to the Cyberspace Administration of China.

        “CSRC” refers to the China Securities Regulatory Commission.

        “Hezhi Rongtong” refers to Hezhi Rongtong (Shenzhen) Technology Co., Ltd., a limited liability company organized under the laws of China, which is 51% owned by Shenzhen Sowell.

        “HFCA Act” refers to the Holding Foreign Companies Accountable Act.

        “M&A Rules” refers to the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors of China.

        “MOFCOM” refers to the Ministry of Commerce of China.

        “Negative List (2021)” refers to the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2021 Version).

        “NDRC” refers to the National Development and Reform Commission of China.

        “NPC” refers to the National People’s Congress of China.

        “PRC subsidiaries” refers to Shenzhen Sowell, Hezhi Rongtong, Shenzhen Sowell Digital, Wuxi Sowell, Shenzhen Aiyin, and Suzhou Sowell.

        “RMB” or “yuan” refers to the legal currency of China.

        “SAFE” refers to the State Administration of Foreign Exchange in China.

        “SAT” refers to the PRC State Administration of Taxation.

        “SAMR” refers to the former State of Administration of Industry and Commerce of China, which has been merged into the State Administration for Market Regulation.

        “SCNPC” refers to the Standing Committee of the National People’s Congress of China.

        “Shenzhen Aiyin” refers to Shenzhen Aiyin Digital Technology Co., Ltd, a limited liability company organized under the laws of China, which is 51% owned by Shenzhen Sowell.

        “Shenzhen Sowell” refers to Shenzhen Sowell Technology Development Co., Ltd., a limited liability company organized under the laws of China.

        “Shenzhen Sowell Digital” refers to Shenzhen Sowell Digital Energy Technology Co., Ltd., a limited liability company organized under the laws of China, which is 80% owned by Shenzhen Sowell.

        “Sowell BVI” refers to Lianhe Sowell International Holding Group Limited, a company organized under the laws of British Virgin Islands, which is wholly-owned by Sowell.

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        “Sowell HK” refers to Lianhe Sowell International Group Limited, a company organized under the laws of Hong Kong, which is wholly-owned by Sowell BVI.

        “Sowell Shanwei” refers to Lianhe Sowell Enterprise Management (Shanwei) Co., Ltd., a limited liability company organized under the laws of China, which is wholly-owned by Sowell HK.

        “Suzhou Sowell” refers to Suzhou Sowell Vision Technology Co., Ltd., a limited liability company organized under the laws of China, which is wholly-owned by Shenzhen Sowell.

        “Wuxi Sowell” refers to Wuxi Sowell Information Technology Co., Ltd., a limited liability company organized under the laws of China, which is wholly-owned by Shenzhen Sowell.

        “U.S. GAAP” refers to generally accepted accounting principles in the United States.

        “USD” or “$” refers to the legal currency of the United States.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

        our goals and strategies;

        our future business development, financial condition and results of operations;

        expected changes in our revenues, costs or expenditures;

        our expectations regarding demand for and market acceptance of our products and services;

        competition in our industry; and

        government policies and regulations relating to our industry.

You should read this prospectus and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This prospectus contains statistical data and estimates that we obtained from various government and private publications. This prospectus also contains information from a market research report by Moore Transaction Services Limited (“Moore”, and the report, the “Moore Report”), an independent third party which we commissioned. Statistical data in these publications and the Moore Report also include projections based on a number of assumptions. The machine vision industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the price of our Ordinary Shares. In addition, the rapidly evolving nature of the machine vision industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions.

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PROSPECTUS SUMMARY

This summary highlights information that we present more fully in the rest of this prospectus. This summary does not contain all of the information you should consider before buying Ordinary Shares in this offering. This summary contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could,” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the “Risk Factors” section and the financial statements and the notes to those statements before deciding whether to buy our Ordinary Shares. Unless otherwise stated, all references to “us,” “our,” “Sowell,” “we,” the “Company” and similar designations refer to Lianhe Sowell International Group Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands, and its consolidated subsidiaries.

Our Business

We are a provider of machine vision products and solutions in China, and our products improve efficiency and quality for customers in a wide range of businesses across industries. We invent and integrate technologies and solutions that address some of the most critical manufacturing and distribution challenges, such as precision and accuracy required in manufacturing of electronic products. Based on nine foundational technologies, our solutions integrate physical products with software to capture and analyze visual information, allowing for manufacturing automation and improvement of distribution process for customers across China.

We apply machine vision technology across diverse industries, ranging from manufacturing, transportation, security, and building management. We offer a variety of machine vision products that have similar technological foundation, production processes, and sales distribution channels, with customized settings to accommodate various needs of our customers in different industries.

As of the date of this prospectus, we categorize our machine vision products in four categories based on their application settings:

        Industrial Machine Vision:    Our industrial machine vision products are integration of physical products and software, and are able to detect various defects on the surface of the workpiece. Our industrial machine vision products can be used in intensive manufacturing or hazardous working environment, such as manufacturing of 3C (computer, communication and consumer) consumer electronics, QR code, bar code, glass, hardware, packaging, and other industries.

        Artificial Intelligence (Face Recognition and AI Behavior Analysis):    Our face recognition system uses our self-developed proprietary advanced face detection and recognition algorithms to detect, recognize, and track individuals based on the recognition results. AI behavior analysis is a deep learning algorithm that we

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developed independently based on AI neural networks to analyze pedestrians, vehicles and objects captured in the surveillance video, and promptly warn, upload, and collect evidence for abnormalities, through background warning, pop-up windows, and intelligent voice prompts.

        Intelligent Weak Current (Building Intelligence and Intelligent Transportation):    Building intelligence is also known as the intelligent integrated management system (IBMS), which is a system designed to manage a building in an integrated manner with enhanced data sharing, system interconnection and interoperability, achieving the automatic control and management of the entire intelligent building. Intelligent Transportation System (ITS) is a comprehensive application aggregating advanced information technology, computer technology, data communication technology, sensor technology, electronic control, artificial intelligence, which can be utilized in transportation, service control, and vehicle manufacturing.

        Electronic Customs Clearance.    Our container number identification system automatically captures the identification number on containers entering and leaving the port, and quickly performs automatic identification to reduce the waiting time for containers. The electronic customs clearance system is mainly applied to gates where access control is needed, such as gates in customs, port, storage space.

In 2022, we also successfully developed Nine-Axis Linkage Spray Painting Robot, which is a vehicle painting robot composed of a robot body, a computer, and corresponding control system to achieve automatic painting of vehicle body. We believe the Nine-Axis Linkage Spray Painting Robot is one of the advanced robotic systems in China’s vehicle repair and maintenance industry.

Our Competitive Advantages

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

        We possess independent research and development capabilities and strong brand identity, which together have fostered a high-quality customer base that in turn foster innovation powering our products.

        We leverage experience in machine vision industry, powering our research and development (R&D) capability that supports our continuous upgrade of existing products and creation of new products.

        We provide dedicated customer service demonstrating our commitment to our customers’ unique needs.

Our Challenges and Opportunities

We face both uncertainties and opportunities in realizing our business objectives and executing our strategies, including:

        The resilience of the electronic information manufacturing industry and evolving manufacturing landscape in China drives the growing need for customized machine vision solutions.

        China’s demographic shift posts opportunity for machine vision industry, which is powered by lowered component costs. As China’s aging population reduces the demographic dividend and labor costs rise, operational costs of production lines continue to climb, driving a growing need for automation equipment in most factories.

        China’s favorable industrial policy powers strong support for development of the machine vision industry.

        China’s machine vision industry faces challenges in talent acquisition and financial resources to advance technological improvement.

Our Strategies

We plan to pursue the following growth strategies to expand our business:

        Strengthen our market position in China’s machine vision industry with increased and tailored R&D efforts.

        Strengthen our marketing and sales network to serve expanding customer base in China.

        Expand leading advantage of our Nine-Axis Linkage Spray Painting Robots.

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Corporate History and Structure

We are an exempted company incorporated with limited liability under laws of the Cayman Islands on July 26, 2023, with operations conducted through our PRC operating subsidiaries, Shenzhen Sowell, Wuxi Sowell, Suzhou Sowell, Shenzhen Sowell Digital, Shenzhen Aiyin, and Hezhi Rongtong.

The following diagram illustrates our corporate structure as of the date of this prospectus. For more detail on our corporate history please refer to “Corporate History and Structure” on page 77 of this prospectus.

Certain Risks and Limitations Related to Doing Business in China

We face various legal and operational risks and uncertainties as substantially all of our operations are in China. The PRC government has authority to regulate a China-based company, like us, to conduct its business, accept foreign investments or list on a U.S. stock exchange. For example, we face risks associated with regulatory approvals of offshore offerings, anti-monopoly regulatory actions, and cybersecurity and data privacy.

Because substantially all of our operations are in mainland China, our business is subject to the complex and rapidly evolving laws and regulations of mainland China. PRC laws and regulations governing our current business operations are sometimes revised, adjusted, or refined with detailed rules. See “Risk Factors — Risks Related to Doing Business in China — Because substantially all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there, which could result in a material change in our operations and/or the value of our Ordinary Shares.” on page 33, “PRC laws and regulations governing our current business operations are sometimes revised, adjusted, or refined with detailed rules.” on page 37, and “Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.” on page 40 of this prospectus.

The Chinese government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our securities. See “Risk Factors — Risks Relating to our operation in the People’s Republic of China — The PRC government has significant authority to exert influence on our operations in mainland China.” On page 33 of this prospectus. Furthermore, the PRC government has recently promulgated the new filing-based administrative rules for overseas offering and listing by domestic companies in China. These risks could result in a material change in our operations and the value of our Ordinary Shares, or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless. See “Risk Factors — Risks Related to Doing Business in China — With the promulgation of the new filing-based

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administrative rules for overseas offering and listing by domestic companies in China, or if the PRC government were to impose new requirements for approval from the PRC authorities to issue our Ordinary Shares to foreign investors or list on a foreign exchange, failure to comply with the relevant requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.” on page 35 of this prospectus.

It may present some difficulties for you to effect service of process or the U.S. courts judgments obtained in U.S. courts upon us or our directors and officers, many of whom are not residents in the United States, and whose significant part of assets are located outside of the United States. In addition, under Chinese law, you can apply to a competent Chinese court for recognition and enforcement of U.S. court judgments, but there is no guarantee that it would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, it is uncertain whether such Cayman Islands or PRC courts would entertain original actions brought in the courts of the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of the United States or any state. See “Prospectus Summary — Summary of Significant Risk Factors — Risks Related to Doing Business in China — You may experience some difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in foreign country against us or our management named in the prospectus.” on page 11.

There are certain limitations on our ability to transfer cash between us or our subsidiaries. In order for us to pay dividends to our shareholders, we may rely on the distribution of profits of the PRC operating entities to the Hong Kong subsidiary. PRC regulations currently permit the payment of dividends only out of accumulated profits, as determined in accordance with accounting standards and PRC regulations. To the extent any funds or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong, due to the interventions in or the imposition of restrictions and limitations by PRC governments which may limit our ability to transfer funds, pay dividends or make distribution. See “Prospectus Summary — Summary of Significant Risk Factors — Risks Related to Doing Business in China — To the extent any funds or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong.” on page 11 of this prospectus, and “Risk Factors — Risks Related to Doing Business in China — To the extent any funds or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong.” on page 42 of this prospectus. Furthermore, if our subsidiaries in mainland China incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. In addition, the PRC 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 companies in mainland China to enterprises outside of mainland China unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the enterprises outside of mainland China are tax resident. See “Prospectus Summary — Dividend Distributions or Assets Transfer among the Holding Company and Subsidiaries.” on page 7 of this prospectus, “Prospectus Summary — Summary of Significant Risk Factors — Risks Related to Doing Business in China — The transfer of funds, dividends and other distributions between us and our subsidiaries is subject to restriction.” on page 11, “Prospectus Summary — Summary of Significant Risk Factors — Risks Related to Doing Business in China — We must remit the offering proceeds to our PRC operating subsidiaries before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner.” on page 11 of this prospectus, “Risk Factors — Risks Related to Doing Business in China — The transfer of funds, dividends and other distributions between us and our subsidiaries is subject to restriction.” on pages 41 of this prospectus, and “Risk Factors — Risks Related to Doing Business in China — We must remit the offering proceeds to our PRC operating subsidiaries before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner.” on page 42 of this prospectus. In addition, any transfer of funds by us to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China. Any foreign loans procured by our PRC subsidiary is required to be registered with China’s State Administration of Foreign Exchange (“SAFE”) in its local branches and satisfy relevant requirements, and our PRC subsidiaries may not procure loans which exceed the difference between its respective total project investment amount and registered capital or three times (which may be varied year by year due to the change of PRC’s national macro-control policy) of the net assets of our PRC subsidiaries. According to the relevant PRC regulations on foreign-invested enterprises in China,

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capital contributions to our PRC subsidiaries are subject to the registration with State Administration for Market Regulation in its local branches, report submission to the Ministry of Commerce in its local branches and registration with a local bank authorized by SAFE. Based on our understanding of the Hong Kong laws and regulations, as of the date of this prospectus, there is no restriction imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to mainland China), except transfer of funds involving money laundering and criminal activities. Notwithstanding the foregoing, we cannot assure that there will not be any changes in the future in the economic, political and legal environment in Hong Kong and that the PRC government will not in the future exert influence over changes to laws and regulations of Hong Kong to impose restrictions on the transfer of capital within, into and out of Hong Kong.

Approvals from PRC Authorities to Conduct Our Operations and Issue Ordinary Shares to Foreign Investors

Our operations in the PRC are governed by PRC laws and regulations. Our PRC legal counsel, Guangdong Zhuojian Law Firm, has advised us that, except as otherwise disclosed in this prospectus, as of the date of this prospectus, based on their understanding of the current PRC laws, regulations and rules, we have received the approvals from the PRC government authorities for our business operations currently conducted in the PRC. Our PRC legal counsel has also advised us that, as of the date of this prospectus, based on their understanding of the current PRC laws, regulations and rules, as a company that has substantially all operation in China, we shall comply with the New Administrative Rules Regarding Overseas Listings and go through the filing procedures with the CSRC before the overseas offering and listing.

However, we are subject to the risks of uncertainty of any future actions of the PRC government in this regard, including the risk that the PRC government could disallow our holding company structure, which would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. These adverse actions could cause the value of our Ordinary Shares to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if we fail to comply with such rules and regulations, which would likely adversely affect the ability of our securities to be listed on a U.S. exchange and would likely cause the value of our securities to significantly decline or become worthless.

Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in mainland China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.

On December 28, 2021, the Cyberspace Administration of China (the “CAC”), jointly with the relevant authorities, formally published Measures for Cybersecurity Review (2021) which took effect on February 15, 2022. Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services and online platform operator carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review. Any online platform operator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country. Our business does not rely on the collection of user data or implicate cybersecurity and we do not possess more than one million users’ individual information, our PRC counsel, Guangdong Zhuojian Law Firm, is therefore of the opinion that as of date of this prospectus, we are not subject to a cybersecurity review under the Measures for Cybersecurity Review (2021).

On February 17, 2023, the CSRC issued Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”) and relevant supporting guidelines (collectively with the Trial Administrative Measures, the “New Administrative Rules Regarding Overseas Listings”), which came into effect on March 31, 2023. The New Administrative Rules Regarding Overseas Listings aim to lay out the filing

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regulation arrangement for both direct and indirect overseas listing and clarify the determination criteria for indirect overseas listing in overseas markets. The New Administrative Rules Regarding Overseas Listings, among other things, stipulate that, after making relevant applications with overseas stock markets for initial public offerings or listings, all China-based companies shall file with the CSRC within three working days. Where a China-based company submits its application for initial public offering and listing overseas by secret or non-public means, it may submit explanations at the time of filing with the CSRC, apply to postpone the disclosure of the information, and shall report to the CSRC within three working days after the applications for offering and listing are made public overseas. After completing overseas offerings and listings, China-based companies shall report to the CSRC in accordance with the guidance. The required filing materials with the CSRC include (without limitation): (i) record-filing reports and related undertakings, (ii) compliance certificates, filing or approval documents from the primary regulator of the applicants’ businesses (if applicable), (iii) security assessment opinions issued by related departments (if applicable), (iv) PRC legal opinions, and (v) prospectus or listing documents. In addition, overseas offerings and listings may be prohibited for such China-based companies when any of the following applies: (1) if the intended securities offerings and listings are specifically prohibited by the laws, regulations or provision of the PRC; (2) if the intended securities offerings and listings may constitute a threat to, or endanger national security as reviewed and determined by competent authorities under the State Council in accordance with laws; (3) if, in the past three years, the China-based companies, controlling shareholders or de facto controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy; (4) if the China-based companies are under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations, and no clear conclusion has been reached; (5) if there is a material ownership dispute over the equity held by the controlling shareholder or the shareholder subject to the controlling shareholder or de facto controllers. We do not believe any of the five prohibited situations aforementioned applies to us. The New Administrative Rules Regarding Overseas Listings further stipulate that a fine between RMB 1 million and RMB 10 million may be imposed if an applicant fails to fulfil the filing requirements with the CSRC or conducts an overseas offering or listing in violation of the New Administrative Rules Regarding Overseas Listings. Our PRC counsel, Guangdong Zhuojian Law Firm, has advised us that, based on its understanding of the current PRC laws and regulations, our offering will be identified as an indirect overseas issuance and listing under the New Administrative Rules Regarding Overseas Listings. We are therefore subject to the approval, filing or other requirements of the CSRC in connection with this offering. We have timely submitted the filing with the CSRC as per requirement of the New Administrative Rules Regarding Overseas Listings, which is currently under review.

Furthermore, on February 24, 2023, the CSRC, together with the Ministry of Finance, the National Administration of State Secrets Protection Bureau and the National Archives Administration issued the Archives Rules and the Archives Rules came into effect together with the Trial Administrative Measures on March 31, 2023. The Archives Rules expand their application to cover indirect overseas offering and listing, stipulating that a domestic company which plans to publicly disclose any documents and materials containing state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.

Since the New Administrative Rules Regarding Overseas Listings and the Archives Rules are newly promulgated, we cannot assure you that we will be able to receive clearance of such filing requirements in a timely manner, or at all, in the future. There is a possibility that we may not be able to obtain or maintain the approval prior to the completion of this offering, and the offering will be delayed until we have obtained CSRC approval, which may take several months. These authorities may impose fines and penalties upon our operations in China, delay or restrict the repatriation of the proceeds from this offering into China, or take other actions that could have a material adverse effect upon our business, financial condition, results of operations, reputation and prospects, as well as the market value of our Ordinary Shares. The CSRC or other Chinese regulatory agencies may also require us, or make it advisable for us, to terminate this offering prior to closing. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer the Ordinary Shares, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations, and cause the Ordinary Shares to significantly decline in value or become worthless. See “Risk Factors — Risks Related to Doing Business in China — With the promulgation of the new filing-based administrative rules for overseas offering and listing by domestic companies in China, or if the PRC government were to impose new requirements for approval from the PRC authorities to issue our Ordinary Shares to foreign investors or list on a foreign exchange, failure to comply with the relevant requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.” on page 35 of this prospectus.

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Dividend Distributions or Assets Transfer among the Holding Company and Subsidiaries

We are a holding company with no material operations of our own and do not generate any revenue. We currently conduct substantially all of our operations through our PRC operating entities. We are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business,” on page 43 of this prospectus.

Neither we nor our subsidiaries have cash management policies dictating how funds are transferred, and each entity needs to comply with applicable laws or regulations with respect to transfer of funds, dividends and distributions with other entities.

As of the date of this prospectus, there has been no cash flows, including dividends, transfers and distributions, between our company and our subsidiaries. As of the date of this prospectus, there has been no dividend or distributions made between U.S. investors, other investors and the company’s entities.

Cash proceeds raised from overseas financing activities, including the cash proceeds from this offering, will be transferred by us to Sowell BVI, and then transferred to Sowell HK, and then transferred to Sowell Shanwei, and then transferred to Shenzhen Sowell and its subsidiaries as capital contribution and/or shareholder loans as the case may be. Any transfer of funds by us to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China. Any foreign loans procured by our PRC subsidiaries is required to be registered with China’s State Administration of Foreign Exchange (“SAFE”) in its local branches and satisfy relevant requirements, and our PRC subsidiaries may not procure loans which exceed the difference between its respective total project investment amount and registered capital or three times (which may be varied year by year due to the change of PRC’s national macro-control policy) of the net assets of our PRC subsidiaries. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries are subject to the registration with SAMR in its local branches, report submission to the Ministry of Commerce in its local branches and registration with a local bank authorized by SAFE. Please see “Risk Factors — Risks Related to Doing Business in China — We must remit the offering proceeds to our PRC operating subsidiaries before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner.” on page 42 of this prospectus. We intend to keep any future earnings to re-invest in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of profits of the company or its share premium amount or a combination of both, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, unless we receive proceeds from future offerings, Sowell will be dependent on receipt of funds from our BVI subsidiary, which will be dependent on receipt of dividends from our Hong Kong subsidiary, which will be dependent on receipt of payments from our PRC subsidiaries in accordance with the laws and regulations of the PRC and Hong Kong.

The ability of the PRC subsidiaries to distribute dividends is based upon their respective distributable earnings. Current PRC regulations permit the PRC subsidiaries to pay dividends only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each PRC subsidiary is required to set aside at least 10% of their after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their registered capital. Each of such similar entity in China may also set aside a portion of its after-tax profits to fund an optional reserve, although the amount to be set aside, if any, is determined at the discretion of such entity’s shareholder. The reserves can be used to increase the registered capital, cover losses made in past years and enhance the company’s productivity and expand its business, however a company’s capital reserve shall not be used to cover the company’s losses.

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The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Further, if our subsidiaries in the PRC incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. Please see “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” on page 43 of this prospectus; “Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business,” on page 45 of this prospectus; and “Risk Factors — Risks Related to Doing Business in China — Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” on page 45 of this prospectus.

Our subsidiaries in the PRC generate and retain cash generated from operating activities and re-invests it in our business. As of the date of this prospectus, none of our PRC subsidiaries has paid any dividends to the offshore companies.

Based on our understanding of the Hong Kong laws and regulations, as of the date of this prospectus, there is no restriction imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to mainland China), except transfer of funds involving money laundering and criminal activities. Notwithstanding the foregoing, we cannot assure that there will not be any changes in the future in the economic, political and legal environment in Hong Kong and that the PRC government will not in the future exert influence over changes to laws and regulations of Hong Kong to impose restrictions on the transfer of capital within, into and out of Hong Kong. Please see “Risk Factors — Risks Related to Doing Business in China — To the extent any funds or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong.” on page 42 of this prospectus. Based on the BVI laws and regulations, as of the date of this prospectus, there is no restriction on the transfer of capital within, into and out of BVI.

Cash dividends, if any, on our Ordinary Shares will be paid in USD. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and, as a result, may be subject to PRC withholding tax at a rate of up to 10%.

In order for us to pay dividends to our shareholders, we may rely on payments made from the PRC subsidiaries and the distribution of such payments to Sowell HK as dividends from the PRC subsidiaries. Certain payments as dividends from PRC subsidiaries to Sowell HK are subject to PRC taxes, including withholding taxes.

Pursuant to the Arrangement between mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC company. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong company must be the beneficial owner of the relevant dividends; and (b) the Hong Kong company must directly hold no less than 25% of share ownership in the PRC company during the twelve (12) consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong company must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by our Shenzhen Sowell to its immediate holding company, Sowell HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Sowell HK intends to apply for the tax resident certificate when Sowell Shanwei plans to declare and pay dividends to Sowell HK. See “Risk Factors  Risks Related to Doing Business in China — If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.” on page 48 of this prospectus.

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Implications of the HFCA Act

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. An identified issuer will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. In June 2021, the Senate passed the AHFCAA, which would reduce the time period for the delisting of foreign companies under the HFCA Act to two consecutive years instead of three years. If our auditor cannot be inspected by the PCAOB for two consecutive years, the trading of our securities on any U.S. national securities exchanges, as well as any over-the-counter trading in the U.S., will be prohibited. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions. On August 26, 2022, a Statement of Protocol was signed by the PCAOB, the CSRC and the Ministry of Finance of the PRC governing inspections and investigations of audit firms based in mainland China and Hong Kong (the “Statement of Protocol”). Pursuant to the Statement of Protocol, the PCAOB conducted inspections on select registered public accounting firms subject to the Determination Report in Hong Kong between September and November 2022. On December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination Report. On December 29, 2022, the CAA was signed into law by President Biden. The CAA contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.

Our auditor, WWC, P.C., an independent registered public accounting firm that issued the audit report for the years ended March 31, 2022 and 2023 included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. WWC, P.C., is headquartered in San Mateo, California, and has been inspected by the PCAOB on a regular basis.

Our auditor is not identified in the report issued by the PCAOB on December 16, 2021 as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit WWC, P.C. to provide audit work papers located in mainland China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB re-evaluates its determination as a result of any obstruction with the implementation of the Statement of Protocol in the future, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities on a national exchange or “over-the-counter” markets may be prohibited under the HFCA Act. In addition, under the HFCA Act, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, which could be reduced to two consecutive years if the AHFCAA, passed by the U.S. Senate on June 22, 2021, is signed into law, and this ultimately could result in our Ordinary Shares being delisted by the exchange. Further, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. See “Risk Factors — Recent joint statement by the SEC and the PCAOB, proposed rule changes submitted by Nasdaq, and an act passed by the US Senate all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.” on page 51 of this prospectus.

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Impacts of COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The outbreak has reached almost every country, resulting in the implementation of significant governmental measures from time to time, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. The PRC government ordered quarantines, travel restrictions, and the temporary closure of stores and facilities from time to time, from March 2020 to November 2022. Companies also took precautions, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing businesses. Therefore, like many others, our business was temporarily and adversely impacted by the COVID-19 coronavirus outbreak to a certain extent: we experienced some resulting disruptions to our business operations from March 2020 to November 2022.

From 2020 to 2022, China implemented various restrictive measures in response to the COVID-19 pandemic, including imposing lockdowns and other restrictions from time to time. Since January 8, 2023, China government has lifted its restrictions. However, there are still uncertainties of COVID-19’s future impact, and the extent of the impact will depend on a number of factors, including the duration and severity of the pandemic; and the macroeconomic impact of government measures to contain the spread of COVID-19 and related government stimulus measures.

Summary of Significant Risk Factors

Investing in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our Ordinary Shares. Below is a summary of the significant risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Risk Factors.”

Risks Related to Our Business and Industry

Risks and uncertainties related to our business and industry, beginning on page 21 of this prospectus, include, but are not limited to, the following:

        We have a limited operating history and are subject to the risks encountered by early-stage companies. See a more detailed discussion of this risk factor on page 21 of this prospectus.

        Our historical growth may not be indicative of our future performance, which is dependent upon factors beyond our control such as market conditions of the machine vision industry in China. See a more detailed discussion of this risk factor on page 21 of this prospectus.

        Our business may be exposed to risks associated with an increasingly concentrated customer base. See a more detailed discussion of this risk factor on page 22 of this prospectus.

        If we are unable to retain existing customers or attract new ones, or to attract sufficient spending from our customers, our business, results of operations and financial condition could be materially and adversely affected. See a more detailed discussion of this risk factor on page 21 of this prospectus.

        If we lose the services of any of our key executive officers and other key employees, or are unable to retain, recruit and hire experienced staff, our ability to effectively manage and execute our operations and meet our strategic objectives could be harmed. See a more detailed discussion of this risk factor on page 23 of this prospectus.

        The industry in which we operate is highly fragmented and intensively competitive, and if we fail to compete effectively with current or future competitors, our business, results of operations and financial conditions could be materially and adversely affected. See a more detailed discussion of this risk factor on page 25 of this prospectus.

        Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business, reputation and competitive edge. Intellectual property is crucial to our competitiveness and success. See a more detailed discussion of this risk factor on page 27 of this prospectus.

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        If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected. See a more detailed discussion of this risk factor on page 57 of this prospectus.

Risks Related to Our Corporate Structure

Risks related to our corporate structure, beginning on page 31 of this prospectus, include, but are not limited to, the following:

        You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. See a more detailed discussion of this risk factor on page 31 of this prospectus.

Risks Related to Doing Business in China

We are based in China and have substantially all of our operations in China. We face uncertainties related to doing business in China in general, including, but not limited to, the following:

        Because substantially all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. PRC laws and regulations governing our current business operations may be revised from time to time with respect to the PRC legal system, such revision or changes in laws and regulations in China could have a material adverse effect on us. See a more detailed discussion of this risk factor on page 33 of this prospectus.

        Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. See a more detailed discussion of this risk factor on page 40 of this prospectus.

        With the promulgation of the new filing-based administrative rules for overseas offering and listing by domestic companies in China, or if the PRC government were to impose new requirements for approval from the PRC authorities to issue our Ordinary Shares to foreign investors or list on a foreign exchange, failure to comply with the relevant requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. See a more detailed discussion of this risk factor on page 35 of this prospectus.

        The transfer of funds, dividends and other distributions between Sowell and our subsidiaries is subject to restriction. See a more detailed discussion of this risk factor on page 41 of this prospectus.

        To the extent any funds or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong. See a more detailed discussion of this risk factor on page 42 of this prospectus.

        We must remit the offering proceeds to our PRC operating subsidiaries before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner. See a more detailed discussion of this risk factor on page 42 of this prospectus.

        You may experience some difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in foreign country against us or our management named in the prospectus. See a more detailed discussion of this risk factor on page 44 of this prospectus.

        PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us. See a more detailed discussion of this risk factor on page 46 of this prospectus.

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Risks Related to Our Ordinary Shares and This Offering

Risks and uncertainties related to our Ordinary Shares and this offering, beginning on page 49 of this prospectus, include, but are not limited to, the following:

        There has been no public market for our Ordinary Shares prior to this offering, and you may not be able to resell our Ordinary Shares at or above the price you paid, or at all. See a more detailed discussion of this risk factor on page 49 of this prospectus.

        A sale or perceived sale of a substantial number of our Ordinary Shares may cause the price of our Ordinary Shares to decline. See a more detailed discussion of this risk factor on page 50 of this prospectus.

        If we are listed on the Nasdaq Capital Market and our financial condition deteriorates, we may not meet the continued listing standards of the Nasdaq Capital Market. See a more detailed discussion of this risk factor on page 50 of this prospectus.

        The market price for the Ordinary Shares may be volatile. See a more detailed discussion of this risk factor on page 53 of this prospectus.

        We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares. See a more detailed discussion of this risk factor on page 53 of this prospectus.

Compliance with Foreign Investment

The PRC Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited” from foreign investment in the Negative List (2021). The PRC Foreign Investment Law provides that (i) foreign-invested entities operating in “restricted” industries are required to obtain market entry clearance and other approvals from relevant PRC government authorities; and (ii) foreign investors shall not invest in any industries that are “prohibited” under the Negative List (2021). As of the date of this prospectus, we do not conduct any business that falls into the category of “restricted” industries or “prohibited” industries under the Negative List (2021).

Recent Regulatory Development in PRC

We are a holding company incorporated in the Cayman Islands with substantially all of our operations conducted by our operating entities in PRC. We are aware that, recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.

In addition, on December 28, 2021, the CAC adopted an amended Cybersecurity Review Measures, which became effective on February 15, 2022. Pursuant to the amended Cybersecurity Review Measures, online platform operators holding more than one million users’ individual information shall be subject to cybersecurity review before listing abroad. We believe we may not be subject to the cybersecurity review by the CAC, pursuant to the Cybersecurity Review Measures and the Data Security Management Regulations Draft (if it becomes effective as it is currently published), given that our business does not rely on the collection of user data or implicate cybersecurity and we do not possess more than one million users’ individual information.

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On February 17, 2023, the CSRC issued the New Administrative Rules Regarding Overseas Listings, which came into effect March 31, 2023. According to the New Administrative Rules Regarding Overseas Listings, among other things, a domestic company in the PRC that seeks to offer and list securities in overseas markets shall fulfill the filing procedure with the CSRC as per requirement of the Trial Administrative Measures. Where a domestic company seeks to indirectly offer and list securities in overseas markets, the issuer shall designate a major domestic operating entity, which shall, as the domestic responsible entity, file with the CSRC. Initial public offerings or listings in overseas markets shall be filed with the CSRC within 3 working days after the relevant application is submitted overseas. Our PRC counsel, Guangdong Zhuojian Law Firm, has advised us that, based on its understanding of the current PRC laws and regulations, our offering will be identified as an indirect overseas issuance and listing under the New Administrative Rules Regarding Overseas Listings. We are therefore subject to the approval, filing or other requirements of the CSRC in connection with this offering. We have timely submitted the filing with the CSRC as per requirement of the New Administrative Rules Regarding Overseas Listings, which is currently under review. However, since the New Administrative Rules Regarding Overseas Listings are newly promulgated, we cannot assure that we will be able to complete the relevant filings in a timely manner or fulfil all the regulatory requirements thereunder. For details, see “Regulations — Regulations Relating to Overseas Listings.”

On February 24, 2023, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality and Archives Administration Provisions”), which also became effective on March 31, 2023. The Confidentiality and Archives Administration Provisions set out rules, requirements and procedures relating to provision of documents, materials and accounting archives for securities companies, securities service providers, overseas regulators and other entities and individuals in connection with overseas offering and listing, including without limitation to, domestic companies that carry out overseas offering and listing (either in direct or indirect means) and the securities companies and securities service providers (either incorporated domestically or overseas) that undertake relevant businesses shall not leak any state secret and working secret of government agencies, or harm national security and public interest, and a domestic company shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level, if it plans to, either directly or through its overseas listed entity, publicly disclose or provide any documents and materials that contain state secrets or working secrets of government agencies. Working papers produced in the Chinese mainland by securities companies and securities service providers in the process of undertaking businesses related to overseas offering and listing by domestic companies shall be retained in the Chinese mainland. Where such documents need to be transferred or transmitted to outside the Chinese mainland, relevant approval procedures stipulated by regulations shall be followed. While we believe we do not involve leaking any state secret and working secret of government agencies, or harming national security and public interest in connection with provision of documents, materials and accounting archives, we may be required to perform additional procedures in connection with the provision of accounting archives. For details, see “Regulations — Regulations Relating to Overseas Listings.”

Since these statements and regulatory actions are new, we cannot predict how the legislative or administrative regulation making bodies may respond and what existing or new laws or regulations or detailed implementations and interpretations may be modified or promulgated, if any. It is also uncertain what the potential impact such modified or new laws and regulations will have on PRC subsidiaries’ daily business operation, its ability to accept foreign investments and the listing of our Ordinary Shares on a U.S. or other foreign exchanges. We were advised by our PRC counsel, Guangdong Zhuojian Law Firm, that except for the filling procedures with the CSRC and reporting of relevant information according to the Trial Administrative Measures, under existing PRC laws, we and our subsidiaries are not required to obtain other regulatory approval for this offering of our Ordinary Shares to foreign investors from the CSRC or other PRC authorities, or to pass cybersecurity review of the CAC, and we, and our subsidiaries have received, or will obtain all requisite permissions and approvals from PRC authorities for current business operation in the PRC and this offering of our Ordinary Shares to foreign investors. As of the date of this prospectus, none of those permissions or approvals has been revoked or denied by PRC authorities.

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Implications of Being an Emerging Growth Company

As a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include:

        being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our SEC filings;

        not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

        reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements; and

        exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until a private company is otherwise required to comply with such new or revised accounting standards. We have elected to use the extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least $1.235 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the preceding three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur as of the end of our fiscal year if the market value of our Ordinary Shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

Implications of Being a Foreign Private Issuer

We are incorporated in the Cayman Islands and more than 50% of our outstanding voting securities are not directly or indirectly held by residents of the United States. Therefore, we are a “foreign private issuer,” as defined in Rule 405 under the Securities Act and Rule 3b-4(c) under the Exchange Act. As a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example:

        we are not required to provide as many Exchange Act reports or provide periodic and current reports as frequently, as a domestic public company;

        for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;

        we are not required to provide the same level of disclosure on certain issues, such as executive compensation;

        we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;

        we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and

        we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.

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Corporate Information

Our principal executive offices are located at Shenzhen Integrated Circuit Design Application Industry Park, Unit 505-3 Chaguang Road No. 1089, Nanshan District, Shenzhen, China. Our telephone number at this address is +86 400-616-9629. Our registered office in the Cayman Islands is currently located at the office of ICS Corporate Services (Cayman) Limited, 3-212 Governors Square, 23 Lime Tree Bay Avenue, P.O. Box 30746, Seven Mile Beach, Grand Cayman KY1-1203, Cayman Islands, which may be changed from time to time at the discretion of our directors. Our agent for service of process in the United States is Cogency Global Inc., with the address at 122 East 42nd Street, 18th Floor, New York, NY 10168.

Investors should contact us for any inquiries through the address and telephone number of our principal executive offices.

Notes on Prospectus Presentation

Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. Certain market data and other statistical information contained in this prospectus are based on information from independent industry organizations, publications, surveys and forecasts. We have relied on statistics provided by a variety of publicly-available sources regarding China’s expectations of growth. Some market data and statistical information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our internal research and our knowledge of the PRC machine vision industry. While we believe such information is reliable, we have not independently verified any third-party information and our internal data has not been verified by any independent source.

For the sake of clarity, this prospectus follows the English naming convention of first name followed by last name, regardless of whether an individual’s name is Chinese or English.

Our reporting currency is U.S. dollar and our functional currency is Renminbi. This prospectus contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Other than in accordance with relevant accounting rules and as otherwise stated, the relevant exchange rates are listed below:

 

Six Months
Ended
September 30,

2023

 

Six Months
Ended
September 30,

2022

 

Year Ended
March 31,
2023

 

Year Ended
March 31,
2022

Period Ended USD: RMB exchange rate

 

7.2960

 

6.8676

 

6.8676

 

6.3393

Period Average USD: RMB exchange rate

 

7.1287

 

6.7312

 

6.8516

 

6.4180

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THE OFFERING

Issuer

 

Lianhe Sowell International Group Ltd

Securities Being Offered

 

[      ] Ordinary Shares, par value $0.0001 per share, on a firm commitment basis.

Over-Allotment

 

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to [      ] additional Ordinary Shares.

Offering Price

 

We expect that the initial public offering price will be $[    ] to $[    ] per Ordinary Share.

Ordinary Shares Outstanding Immediately Before This Offering

 


50,000,000 Ordinary Shares

Ordinary Shares Outstanding Immediately After This Offering

 


     ] Ordinary Shares (or [      ] Ordinary Shares if the underwriters exercise their option to purchase additional Ordinary Shares in full).

Use of Proceeds

 

We estimate that we will receive net proceeds of approximately $[    ] from this offering (or $[    ] if the underwriters exercise their over-allotment option in full), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us and assuming an initial public offering price of $[    ] per Ordinary Share (the midpoint of the price range set forth on the cover page of this prospectus).

   

We plan to use the net proceeds we receive from this offering for (i) investment in our machine vision business (including industrial machine vision, face recognition and AI behavior analysis, weak current intelligence, and electronic customs clearance), to fund the research and development for new products and relevant market expansion; (ii) expansion of our spray painting robot business, including the preliminary assembling and installation of production equipment and machineries of an in-house production and assembly line for production of Nine-Axis Linkage Spray Painting Robots; and (iii) general corporate purposes and working capital. For details, see “Use of Proceeds” on page 59 of this prospectus for additional information. See also “Business — Manufacturing” on page 103 of this prospectus for details of our plan for installation of the new factory.

Representatives’ Warrants

 

We have agreed to sell to the representatives of the underwriters warrants (the “Representatives’ Warrants”) to purchase up to a total of 172,500 Ordinary Shares (equal to 5% of the aggregate number of Ordinary Shares sold in the offering, including shares issued pursuant to the exercise of the over-allotment option) at a price equal to 120% of the price of our Ordinary Shares offered hereby. The Representatives will receive Representatives’ Warrants for the portion of the offering pursuant to the over-allotment option.

Lock-up

 

Our directors and officers, and 5% holders of our Ordinary Shares on a fully diluted and converted basis immediately prior to this offering have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or otherwise dispose of any Ordinary Shares or similar securities for a period of six months after the effective date of this registration statement, without the prior written consent of the Representatives. See “Underwriting” beginning on page 147 and “Shares Eligible for Future Sale” beginning on page 136 of this prospectus for more information.

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Indemnification Escrow

 

Net proceeds of this offering in the amount of $300,000 shall be used to fund an escrow account for a period of 15 months following the closing date of this offering, which account shall be used in the event that we have to indemnify the underwriters pursuant to the terms of the underwriting agreement.

Risk Factors

 

Investing in our Ordinary Shares involves a high degree of risk and purchasers of our Ordinary Shares may lose part or all of their investment. See “Risk Factors” beginning on page 21 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Ordinary Shares.

Listing

 

We have applied to list the Ordinary Shares for trading on The Nasdaq Capital Market under the symbol “LHSW.” The Ordinary Shares will not be listed on any other stock exchange or traded on any automated quotation system.

Payment and Settlement

 

The Ordinary Shares are expected to be delivered against payment on [        ], 2024.

Dividend Policy

 

We have no present plans to declare dividends and plan to retain our earnings to continue to grow our business.

Transfer Agent

 

[•]

This prospectus assumes that the underwriters will not exercise their option to purchase additional Ordinary Shares in this offering, unless otherwise indicated.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following summary consolidated statements of net income for the six months ended September 30, 2023 and 2022 and summary consolidated balance sheet data as of September 30, 2023 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statements of net income for the years ended March 31, 2023 and 2022 and summary consolidated balance sheet data as of March 31, 2023 and 2022 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. You should read this “Summary Consolidated Financial Data and Operating Data” section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods.

The following table presents our summary consolidated data for the six months ended September 30, 2023 and 2022:

Interim Condensed Consolidated Statements of Operations Information

 

For the Six Months Ended September 30, 2023

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Revenues

 

$

 

$

16,798,757

 

 

$

 

$

16,798,757

 

Cost of revenues

 

$

 

$

(12,948,658

)

 

$

 

$

(12,948,658

)

Gross profits

 

$

 

$

3,850,099

 

 

$

 

$

3,850,099

 

Total operating expense

 

$

 

$

(2,144,423

)

 

$

 

$

(2,144,423

)

Total other income (expenses), net

 

$

 

$

(9,713

)

 

$

 

$

(9,713

)

Net income

 

$

 

$

1,580,574

 

 

$

 

$

1,580,574

 

Comprehensive income

 

$

 

$

1,346,091

 

 

$

 

$

1,346,091

 

 

For the Six Months Ended September 30, 2022

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Revenues

 

$

 

$

460,447

 

 

$

 

$

460,447

 

Cost of revenues

 

$

 

$

(258,988

)

 

$

 

$

(258,988

)

Gross profits

 

$

 

$

201,459

 

 

$

 

$

201,459

 

Total operating expense

 

$

 

$

(262,138

)

 

$

 

$

(262,138

)

Total other income (expenses), net

 

$

 

$

6,049

 

 

$

 

$

6,049

 

Net loss

 

$

 

$

(31,701

)

 

$

 

$

(31,701

)

Comprehensive loss

 

$

 

$

(173,785

)

 

$

 

$

(173,785

)

Interim Condensed Consolidated Balance Sheets Information

 

As of September 30, 2023

   

Parent

 

Parent’s subsidiary

 

Elimination

 

Consolidated

Total current assets

 

$

 

$

13,095,818

 

$

 

$

13,095,818

Total non-current assets

 

$

 

$

1,400,144

 

$

 

$

1,400,144

Total assets

 

$

 

$

14,495,962

 

$

 

$

14,495,962

Total current liabilities

 

$

 

$

7,948,716

 

$

 

$

7,948,716

Total non-current liabilities

 

$

 

$

286,321

 

$

 

$

286,321

Total liabilities

 

$

 

$

8,235,037

 

$

 

$

8,235,037

Shareholders’ equity

 

$

 

$

6,260,925

 

$

 

$

6,260,925

Total liabilities and shareholders’ equity

 

$

 

$

14,495,962

 

$

 

$

14,495,962

18

Table of Contents

Interim Condensed Consolidated Cash Flows Information

 

For the Six Months Ended September 30, 2023

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Net cash used in operating activities

 

$

 

$

(376,257

)

 

$

 

$

(376,257

)

Net cash used in investing activities

 

$

 

$

(2,928

)

 

$

 

$

(2,928

)

Net cash provided by financing activities

 

$

 

$

(187,861

)

 

$

 

$

(187,861

)

 

For the Six Months Ended September 30, 2022

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Net cash used in operating activities

 

$

 

$

(167,453

)

 

$

 

$

(167,453

)

Net cash used in investing activities

 

$

 

$

(3,128

)

 

$

 

$

(3,128

)

Net cash provided by financing activities

 

$

 

$

131,478

 

 

$

 

$

131,478

 

The following table presents our summary consolidated data for the years ended March 31, 2023 and 2022:

Consolidated Statements of Operations Information

 

For the Year Ended March 31, 2023

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Revenues

 

$

 

$

13,070,586

 

 

$

 

$

13,070,586

 

Cost of revenues

 

$

 

$

(9,715,604

)

 

$

 

$

(9,715,604

)

Gross profits

 

$

 

$

3,354,982

 

 

$

 

$

3,354,982

 

Total operating expense

 

$

 

$

(1,522,682

)

 

$

 

$

(1,522,682

)

Total other income (expenses), net

 

$

 

$

8,052

 

 

$

 

$

8,052

 

Net income

 

$

 

$

1,610,055

 

 

$

 

$

1,610,055

 

Comprehensive income

 

$

 

$

1,510,046

 

 

$

 

$

1,510,046

 

 

For the Year Ended March 31, 2022

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Revenues

 

$

 

$

949,341

 

 

$

 

$

949,341

 

Cost of revenues

 

$

 

$

(473,882

)

 

$

 

$

(473,882

)

Gross profits

 

$

 

$

475,459

 

 

$

 

$

475,459

 

Total operating expense

 

$

 

$

(940,065

)

 

$

 

$

(940,065

)

Total other income (expenses), net

 

$

 

$

(58,769

)

 

$

 

$

(58,769

)

Net loss

 

$

 

$

(391,087

)

 

$

 

$

(391,087

)

Comprehensive loss

 

$

 

$

(340,253

)

 

$

 

$

(340,253

)

Consolidated Balance Sheets Information

 

As of March 31, 2023

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Total current assets

 

$

 

$

8,963,694

 

$

 

$

8,963,694

Total non-current
assets

 

$

 

$

275,499

 

$

 

$

275,499

Total assets

 

$

 

$

9,239,193

 

$

 

$

9,239,193

Total current liabilities

 

$

 

$

5,772,942

 

$

 

$

5,772,942

Total non-current liabilities

 

$

 

$

218,139

 

$

 

$

218,139

Total liabilities

 

$

 

$

5,991,081

 

$

 

$

5,991,081

Shareholders’ equity

 

$

 

$

3,248,112

 

$

 

$

3,248,112

Total liabilities and shareholders’ equity

 

$

 

$

9,239,193

 

$

 

$

9,239,193

19

Table of Contents

 

As of March 31, 2022

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Total current assets

 

$

 

$

2,420,772

 

$

 

$

2,420,772

Total non-current
assets

 

$

 

$

236,236

 

$

 

$

236,236

Total assets

 

$

 

$

2,657,008

 

$

 

$

2,657,008

Total current liabilities

 

$

 

$

1,232,623

 

$

 

$

1,232,623

Total non-current liabilities

 

$

 

$

103,232

 

$

 

$

103,232

Total liabilities

 

$

 

$

1,335,855

 

$

 

$

1,335,855

Shareholders’ equity

 

$

 

$

1,321,153

 

$

 

$

1,321,153

Total liabilities and shareholders’ equity

 

$

 

$

2,657,008

 

$

 

$

2,657,008

Consolidated Cash Flows Information

 

For the Year Ended March 31, 2023

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Net cash used in operating activities

 

$

 

$

(1,478,638

)

 

$

 

$

(1,478,638

)

Net cash used in investing activities

 

$

 

$

(5,257

)

 

$

 

$

(5,257

)

Net cash provided by financing activities

 

$

 

$

2,092,236

 

 

$

 

$

2,092,236

 

 

For the Year Ended March 31, 2022

   

Parent

 

Parent’s
subsidiary

 

Elimination

 

Consolidated

Net cash provided by operating activities

 

$

 

$

239,201

 

 

$

 

$

239,201

 

Net cash used in investing activities