(Note: The shares in the IPO will be offered by the holding company, incorporated in the Cayman Islands, and not by the underlying Chinese business.)
QinHong International Group provides factoring and related financial services to small to medium enterprises (SMEs) and financial institutions in Sichuan Province in the People’s Republic of China (PRC) through its subsidiaries in China. (Incorporated in the Cayman Islands) (Factoring is a type of financing in which a business sells its accounts receivable to a third party to meet it short-term liquidity needs.)
We are an emerging provider of financial facilitation and referral services in Sichuan Province, People’s Republic of China with operations conducted through our subsidiaries in China. We offer our clients, primarily small to medium enterprises (or SMEs) and financial institutions, a variety of services in connection with the monetization of negotiable instruments, accounts receivable and other rights to payment, all of which we collectively refer to as RTPs.
Our operating subsidiaries commenced operations in July 2017. Since then, they have since built a network of SMEs, commercial banks, factoring companies and other financial and non-financial institutions which enables us to effectively and efficiently help our SME clients to obtain greater cash flows at lower costs through disposition of their RTPs, and assist our financial institution clients in finding diversified investment opportunities with attractive returns by referring to them SMEs with RTP financing requirements.
Through the extensive experience of our founders in the transfers of negotiable instruments, we strategically focus on the facilitation of transfers of banker’s acceptance bills (or BA bills), which is a type of negotiable instrument commonly used in trades in China), typically with an aggregate face value of more than RMB10 million (approximately $1.55 million) per transaction. Such transactions bring us higher revenue per transaction with relatively lower operating costs than transactions that trade other types of negotiable instruments as we can focus our resources on servicing fewer clients with higher transaction value. As of June 30, 2022, we had facilitated transfers of negotiable instruments, all of which were BA bills for our SME clients, with an aggregate face value of approximately RMB 12.8 billion (approximately $1.9 billion) over the past five completed fiscal years.
Leveraging on our expanding network of SMEs and financial institutions, in August 2019 we started offering referral services to one financial institution whose business is to purchase low risk RTPs at a discount. We presently service one factoring company based in Shenzhen City, China, and have successfully referred 33 RTP holders to this client and facilitated its purchase of RTPs in the aggregate amount of approximately RMB 131.7 million (approximately $19.7 million) as of June 30, 2022.
We receive service fees for our facilitation and referral services, which generally range from 0.2% to 0.3% of the face value of RTPs for SME clients and 0.1%-3% of proceeds for referral services. For the fiscal years ended June 30, 2022, and June 30, 2021, we generated revenue of approximately $1,438,000 and $2,132,000, respectively, among which approximately $1,271,000 and $1,294,000 were derived from our facilitation services (before deducting sales taxes) to our SME clients.
**Note: Revenue and net income are in U.S. dollars for the fiscal year that ended June 30, 2022.
(QinHong International Group revised its IPO in an F-1/A filing dated March 14, 2023, by increasing its price range to $4.00 to $4.50 – from the previous assumed IPO price of $4.00 – and kept the number of shares at 3.75 million – to raise $15.94 million. QinHong filed its F-1 on Jan. 6, 2022 – a little more than two years after filing confidential IPO documents with the SEC on Dec. 6, 2019.)