Company: STAK
Filing Date: 2025-11-05
Form Type: 20-F
Source: 0001493152-25-020818
Chunk: 39

Company: STAK Inc.
Filing Date: 2025-11-05
Form: 20-F
Item: Item 3
Chunk 39
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 required by PRC regulations may subject us to penalties.
 
Companies operating in mainland China are required to participate in various government-mandated employee benefit contribution plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit contribution plans has not been implemented consistently by the local governments in mainland China given the different levels of economic development in different locations. Companies operating in mainland China are also required to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment. Should we fail to make adequate contributions to employee benefit plans or under-withhold individual income tax, we may be subject to late fees and fines and our financial condition and results of operations may be adversely affected.
 
Failure to timely register a branch office for business activities as required by PRC regulations may subject us to penalties.
 
Starting from June 2021, we leased facilities and employed staff in Shiyan, China, to carry out warehousing, assembly, testing, coordination with contract manufacturers, and related operations. However, due to various external factors, including disruptions to our daily operations caused by the COVID-19 pandemic, we did not establish a legally registered branch office for our operations in Shiyan, China, until September 2024. This non-compliance may expose us to potential administrative penalties and tax liabilities. Chinese local regulations require business operating within its jurisdictions to comply with all applicable registration procedures and maintain proper licensing. Our failure to adhere to these requirements could lead to fines, interest charges on any unpaid taxes, as well as potential operational restrictions imposed by the authorities. We have taken steps to rectify this situation by registering our branch office in Shiyan, China, and ensuring full compliance moving forward. Nonetheless, such failure may subject us to late fees and fines and our financial condition and results of operations may be adversely affected. Based on the advice of our PRC counsel, DeHeng Law Offices (Shenzhen), the likelihood of incurring penalties or tax liabilities is remote due to the relatively minor nature of the violations and our proactive measures to address the situation.
 
We do not hold a special vehicle production permission to produce special vehicles as requested by the Chinese Ministry of Industry and Information Technology. If the government does not allow outsourcing or if our business demand exceeds the outsourcing factory’s capacity in the future, it