Company Overview

Company Description

We are a Nevada-incorporated corporation, operating primarily through our wholly owned subsidiary, Rubber Leaf Sealing Products (Zhengjiang) Co., Ltd. (“RLSP”). Specializing in the production and sales of automotive rubber and plastic sealing strips, we have established ourselves as an important supplier to several major auto original equipment manufacturers, or OEMs, including eGT New Energy Automotive Co., Ltd. (“eGT”) and Volkswagen. With significant advancements in rubber formulations and manufacturing technologies, we have strategically positioned ourselves in the dynamic automotive parts market. Operating through both direct and indirect sales models we have rapidly expanded our market presence since entering the market in 2019.

Our primary offerings consist of automotive rubber and plastic sealing strips tailored for specific models. These products boast distinctive personalized customization features, making the direct sales model the predominant approach. We directly engage with the auto OEMs or their first-tier suppliers to obtain supplier qualifications, define product specifications and models, negotiate product prices and finalize orders.

All of our executives are seasoned industry professionals with extensive experience in the automotive sector for more than 20 years. Their expertise and extensive network facilitate our market expansion for businesses. While securing approval from auto OEMs may be a time-intensive process, once established as their supplier, our continuing orders demonstrate stability spanning several years.

Our sales process is generally divided into two stages: product development and mass supply. In the initial product development stage, we initiate contact with potential customers, gaining entry into a list of qualified suppliers through a series of reviews by them. After securing projects through bidding or other methods, we will collaborate with automakers and their component suppliers to either enhance existing seal products for mass-produced models or develop new models that align with the specified functions, performance criteria and cost requirements.

Prior to finalizing batch supply agreements, which refer to supply agreements where “batch” means a specific quantity of products or materials, uniformly processed to maintain quality and identified by a unique number for efficient traceability and distribution, customers conduct thorough evaluations of our factory, production lines and management systems to verify our capacity to supply products in the required quantities and ensure consistency in product quality. This stage is time-consuming, with the improved development of seals for mass-produced auto models typically taking around six months. Simultaneous development of new models by auto OEMs and their accessory suppliers often extends over a year or more. Based on considerations such as cost efficiency and product consistency, auto OEMs generally choose one or two major suppliers for a given automotive seal product. Therefore, in the batch supply stage, we can generally obtain consistent and stable orders based on the production and sales volume of the models that incorporate our products. At this stage, our primary responsibilities include providing high-quality products in a timely manner based on customer orders, offering after-sales service, engaging in regular or irregular price negotiations and formalizing pricing contracts.

Our sales are substantially dependent on a related party, Shanghai Xinsen Import & Export Co., Ltd (“Shanghai Xinsen”). Effective on October 1, 2022, Ms. Xingxiu Hua, our Company’s Chief Executive Officer, President and Chairperson, reduced her direct ownership in Shanghai Xinsen from 90% to 15%. Concurrently, Ms. Hua stepped down as the Legal Representative and General Manager of Shanghai Xinsen pursuant to a board resolution of Shanghai Xinsen on the same date. This change in ownership was made and certified by the local government on October 11, 2022. Ms. Hua’s decision to reduce her ownership in Shanghai Xinsen was driven by her desire to focus on improving RLSP’s business strategy and market development. Despite these changes, we expect our future sales to Shanghai Xinsen will remain unaffected since RLSP has established a matured sales system with Shanghai Xinsen over the years. Furthermore, two of Shanghai Xinsen’s customers, Shanghai Hongyang and Wuhu Huichi, who indirectly purchase RLSP’s products through Shanghai Xinsen, have been using RLSP’s products on a stable and consistent basis for many years.

We currently operate with two sales models, the direct supply model and indirect supply model:

Model A: Direct supply model. Following successful on-site inspections by auto OEMs, RLSP secures listing in its directories as a first-tier supplier that directly provides products to the OEM. For example, eGT is an auto OEM, and we serve as their first-tier supplier. eGT directly signs purchase or supply agreements with RLSP. This positions RLSP to independently procure raw materials, manufacture final products and directly deliver finished goods to the warehouses of the auto OEMs. RLSP fulfills its performance obligation upon the delivery of finished products to their warehouses, following a subsequent quality inspection approved by them. Simultaneously, they may request product replacements for disqualified items. Ownership and control of our finished products transfer to customers upon successful inspection and acceptance into an OEM’s warehouse. Revenue recognition occurs upon the transfer of control of our products to a customer, with payments made directly by the OEM.

Model B: Indirect supply model. RLSP receives the purchase orders from our related parties-Shanghai Xinsen and Xinsen Sealing Products (Hangzhou) Co., Ltd (“Hangzhou Xinsen”) (collectively named as “Xinsen Group” for two companies together). The Company’s Chief Executive Officer, President and Chairperson, Ms. Xingxiu Hua, previously held a 90% ownership interest in Shanghai Xinsen and Shanghai Xinsen holds a 70% ownership interest in Hangzhou Xinsen. Effective October 1, 2022, Ms. Hua reduced her ownership of Shanghai Xinsen from 90% to 15%, and accordingly reduced her indirect ownership of Hangzhou Xinsen from 63% to 10.5%. The Xinsen Group serves as a certified second-tier supplier for branded Automobile Manufacturers (“Auto Manufacturers”). A second-tier supplier refers to a supplier that provides products to the first-tier suppliers of the OEM. First-tier suppliers could be suppliers of car doors, rubber and plastic components and other automobile parts. Auto Manufacturers issue consolidated purchase orders for complete sets of rubber and plastic auto parts for a particular model to their first-tier suppliers. These first-tier suppliers subcontract the production of rubber and plastic seals to second-tier suppliers. As a second-tier supplier and a facilitator of production rather than a direct manufacturer, Xinsen Group coordinates with us to fulfill orders. Upon receipt of purchase orders, RLSP procures rubber materials from our vendors. The production process involves outsourcing to third-party manufacturers for either work-in-process products (“WIP”) or finished products, based on management’s decisions in response to operational circumstances.

We employ two distinct forms of outsourced processing under Model B.

1. RLSP purchases raw materials and subcontracts production to third-party manufacturers for WIP. Once WIP is finished and delivered to RLSP’s warehouse, RLSP performs certain manual processes, such as welding and constructing in order to meet the specification of the purchase orders. The completion of the final products is contingent upon a rigorous quality inspection conducted by RLSP, ensuring they meet the highest standards.

2. RLSP purchases raw materials and subcontracts third party manufacturers to produce finished products. RLSP will trace and observe each step of production undertaken by third-party manufacturers, with a primary focus on the final quality control step.

The finished products are delivered to the warehouses of Xinsen Group’s upstream first-tier suppliers, either from our locations or those of the third-party manufacturers. Quality inspection is carried out by assigned inspectors from Xinsen Group upon delivery. RLSP fulfills its obligation when the finished products reach Xinsen Group’s customers and pass the qualified quality inspection.

In the event of products that do not pass inspection, the Xinsen Group initiates a product replacement process. Upon confirmation of quality and quantity, and acceptance of finished products into Xinsen Group’s customers’ warehouses, invoices are provided to us as proof of delivery. The date of the invoices signifies the transfer of ownership and control of the finished products under model B from us to Xinsen Group and indirectly to its upstream first-tier suppliers. We recognize at such time as Xinsen Group’s customers accept delivery of products.

Our principal executive offices are located at Qixing Road, Weng’ao Industrial Zone, Chunhu Subdistrict, Fenghua District Ningbo, Zhejiang, China. Our corporate website address is located at www.rubberleaf.com.cn. Our telephone number is +86-0574-88733850.