Factory Audit Report

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1 Factory Audit Report Client Bxxx Pxx AI Service No R-us Supplier XxAx Apparel Co.Ltd Auditor Snow Ma Factory XxAx Apparel Co. Ltd Audit Date 04-Sep-2014 General Overview of the Audit s Findings Fields Amount Score Theoritical max Score / 5 Weight / 5 Weighted Score Work Flow and Organizational Charts 20 / Production Lines - Capacity 20 / Factory Facilities - Machinery Condition 25 / Quality Assurance System 12 / Social Accountability 0 / Supply Chain Management 10 / R&D Sampling Capacity 20 / Environment 16 / Total Overall Score 6.5/10 Important remarks Based on onsite observation and interview with factory management, it is noted that the operation plant was rent in the 4th and 5th floors out of 1 building with 5 floors from XXX Manufacture Co., Ltd which is used as workshop, warehouse and office. No dormitory and canteen were provided for employees. The lease agreement expire date is 9/Jan/2018. The main market of its business is domestic of PRC and Europe by trade agent, factory didn t have own import/export license and custom register Negative Findings : 1. Based on the interview with factory management, the procurement time was 15 days, but records were unavailable for review. 2. No anti-explosive lightings were installed in material or goods stored area. 3. No work instructions for all the machines in the workshop. No Training records of machinery operation for this audit review. 4. No independent warehouse or separated area and limited space for raw material and finished goods storage. 5. No clear instruction except approved sample visible at all work stations. 6. Factory performed regular control at major production steps and the IQC, IPQC & OQC reports available for review during audit. The containers in the inspection line for acceptable and defective goods stored were without clear marked and separate label. AI-QR-16-01A Page 1 of 34

2 7. Factory had established documented calibration system but no relevant calibration records for steel rule and electrical balance which was used in workshop and warehouse are available. 8. QC staff is qualified, but no training records available for this audit review. 9. The QC staff is not easily identified without visual badge or armband etc out of total 63 (factory stated 15 among of them just joined within 1 month) were provided with social insurance. 11. Working hour and wage could not be verified, as no attendance records and wage record were available for auditor's review. 12. Only cleanser and machine oil were used and not properly separated in workshop. 13. No secondary container and MSDS available for chemical storage and usage. Content : General Overview of the Audit s Findings... 1 Important remarks... 1 Content :... 2 PART FACTORY PROFILE... 4 General Information... 4 Communication infrastructure... 4 Products / Markets... 4 Recommendations / credentials... 5 Building:... 5 PART FACTORY ORGANIZATION AND PRODUCTION PROCESS... 9 Factory Organization chart... 9 Production workflow chart PART PRODUCTION LINES / CAPACITY Production area condition PART FACTORY FACILITIES / MACHINERY CONDITIONS Machines for production Machine Documentation Warehouse/Factory condition Sample room condition Public power supply Shipment capabilities PART QUALITY ASSURANCE SYSTEM & RELATED CERTIFICATES (OPTIONAL) Export license Quality system management Quality system management AI-QR-16-01A Page 2 of 34

PART 6... 22 SOCIAL ACCOUNTABILITY (OPTIONAL)... 22 Preliminary / Document... 22 1. Child Labour, Forced and Compulsory Labour:... 23 2. Working time:... 24 3. Wages:.

.. 30 R & D facilities... 30 PART 9... 31 ENVIRONMENT (OPTIONAL)... 31 PART 10... 33 SYNOPSIS OF MAJOR FACTS AND PROBLEMS FOUND.

3 PART SOCIAL ACCOUNTABILITY (OPTIONAL) Preliminary / Document Child Labour, Forced and Compulsory Labour: Working time: Wages: Discrimination Disciplinary practices PART SUPPLY CHAIN MANAGEMENT (OPTIONAL) PART R & D / SAMPLING CAPACITY (OPTIONAL) R & D facilities PART ENVIRONMENT (OPTIONAL) PART SYNOPSIS OF MAJOR FACTS AND PROBLEMS FOUND Capacity to manufacture client s product: (Part 2 and 3) Social accountability conditions: (Part 7) Factory behavior during Audit: Auditor : Snow Ma Supervisor : Sunny Sun AI-QR-16-01A Page 3 of 34

4 Part 1 Factory profile General Information 1 Date of foundation 27/Feb/ Legal status Private 3 Location 114#XX Road, JXX Distric, Xx City 4 GPS Location XX N 11X E 5 Area 1500 square meter 6 Number of employees Total Male Female Breakdown of employees Managers Engineering Admin QA/QC Workers Number of shifts 1 shift (from 8 :00 AM~11 :45, 13 :15 PM ~17 :15 PM) 9 Factory owner Mr CXX HX 10 Factory manager Mr XXX WX 11 Main products Knitting Sport wear 12 Main market Domestic 13 Business license Certificate No: Issued Date: Expiration Date: 14 Annual turnover for the past 3 years 35XX11XX0XX594 21/Aprail/ /Feb/ :RMB 22 Million 2012 :RMB18 Million Turnover 2011 :RMB 15 Million Communication infrastructure 15 Telephone 0XX2-6XX7XX5 Fax 0XX2-6XX7XX5 Homepage N/A Products / Markets Product type Major customer name Market location Monthly order qty Comments : factory denied to provide these information for reference due to their commercial confidence AI-QR-16-01A Page 4 of 34

5 Recommendations / credentials Company name Country Contract Products Details (date) N/A N/A N/A N/A N/A Building: Gate of Factory Factory exterior view Office Office AI-QR-16-01A Page 5 of 34

6 Business licence Lease Agreement With Landlord Business License Of Landlord AI-QR-16-01A Page 6 of 34

7 Production Lines: Raw Material Cutting Line Sewing Line Inspection Line Iron Pressing Line Packing Line AI-QR-16-01A Page 7 of 34

8 Managing staff: Factory manager : Mr Cxx Sales : Lx Cxx Workers In Sewing Line Workers In Packing Line AI-QR-16-01A Page 8 of 34

Part 2 Factory Organization and Production process Factory Organization chart Questions Findings/Comments Score Does the factory have a clear Organization chart?

9 Part 2 Factory Organization and Production process Factory Organization chart Questions Findings/Comments Score Does the factory have a clear Organization chart? Is it available for the entire employee? Do they all know the responsibilities of each other? Yes, based on the documents review, the factory had a clear organization chart. 5 /5 Yes, based on interview with employees, all the employee knows the responsibilities of each other. 5 /5 Organization Chart AI-QR-16-01A Page 9 of 34

Production workflow chart Questions Findings/Comments Score Does the factory have a written production Process? Yes, based on the documents review, factory has a written production process.

10 Production workflow chart Questions Findings/Comments Score Does the factory have a written production Process? Yes, based on the documents review, factory has a written production process. 5 /5 Is the production process followed? Yes, the production process is followed based on on-site visit. 5 /5 Production workflow chart Actual Score Theoretical Max 20 /20 AI-QR-16-01A Page 10 of 34

11 Part3 Production lines / Capacity Daily output check : Questions Findings/Comments Is there a running production in the factory during the Audit? START FINISH Total time Yes (14 :00) (15 :00) 1 Raw material Raw material Consumption Fabric 200 meters Finished products Finished products Output 140 Pcs 60 Pcs Daily Weekly What is the overall capacity? 7500 pcs/8 hours* pcs/8 hours days Daily Weekly What is the theoretical maximum capacity? 1200 pcs/ pcs/10 hours hours*6days Questions Findings / Comments Score Is the Production capacity sufficient to Auditor didn t know the detailed order quantity from factory N/A cover the potential client order? management and no way to verify this capacity. Lead times for client s production: Questions Findings / Comments Score What is the raw material procurement Based on interview with factory management, the procurement time? Are records available? 0 /5 time was 15 days, but records were unavailable for review. AI-QR-16-01A Page 11 of 34

Production area condition Questions Findings / Comments Score Does the assembly line is tidy and organized? Is the production area well enlightened?

Based on the onsite observation, it is noted that the assembly line was in average tidy and organized condition. No anti-explosive lightings installed in material or goods stored area.

12 Production area condition Questions Findings / Comments Score Does the assembly line is tidy and organized? Is the production area well enlightened? Is the production area suitable; ventilated; cooled & heated? Are production lines laid out in an efficient manner? Does the production area have floor markings? Are corridors free from obstruction? Based on the onsite observation, it is noted that the assembly line was in average tidy and organized condition. No anti-explosive lightings installed in material or goods stored area. Based on onsite observation, it is noted that the production area was in average suitable, ventilated, cooled & heated level. Based on the on-site observation and review of production workflow chart, the production lines laid out in an average manner. Based on the on-site observation, the production area have a clear floor markings. Based on onsite observation, it is noted that the corridors are free from obstruction. 3 /5 1 /5 3 /5 3 /5 5 /5 5 /5 Pictures Sewing Line In Average Tidy & Organized Condition Packing Line In Average Tidy & Organized Condition AI-QR-16-01A Page 12 of 34

Workshop In Average Enlightened & Ventilated Condition Clear Mark For Working

& Goods Stored Area Special Remarks on this section 1.

but records were unavailable for review. 2.

13 Workshop In Average Enlightened & Ventilated Condition Clear Mark For Working Area Corridors Free From Obstruction No Anti-explosive Lightings For Material & Goods Stored Area Special Remarks on this section 1. Based on interview with factory management, the procurement time was 15 days, but records were unavailable for review. 2. No anti-explosive lightings installed in material or goods stored area. Actual Score Theoretical Max 20 /35 AI-QR-16-01A Page 13 of 34

14 Machines for production Part 4 Factory Facilities / Machinery Conditions No. Maintenance Condition/ Type of Machinery No. of / Calibration Service machines record time Name Brand Country Yes No 1 Computerized Sewing QXX China Years Yes Machine 2 Edge Seaming Machine QXX China Years Yes 3 Cutting AXX China 2 10 Years Yes 4 Iron Pressing Machine SXX China 4 10 Years Yes 5 Stud Machine ZXX China 2 10 Years Yes Score Score (overall) 5 /5 Machine Documentation Questions Findings/Comments Score Does the factory have an equipment and Based on documents review, it is noted that the factory had machinery list? an equipment and machinery list. 5 /5 Do the machines have instructions? No work instruction for all the machine in the workshop.no Procedure Manual? Available for workers? Training records of machinery operation for this audit review. 0 /5 Pictures Equipment & Machinery List Maintenance Records Of Machinery AI-QR-16-01A Page 14 of 34

Appropriate PPE Available For Involved Operators Safeguard Available For Machinery Warehouse/Factory condition Questions Findings/Comments Score Are the

space for raw material and finished goods storage.

15 Appropriate PPE Available For Involved Operators Safeguard Available For Machinery Warehouse/Factory condition Questions Findings/Comments Score Are the storerooms/warehouse tidy? Can it No independent warehouse or separated area and limited 2 /5 stock all the potential order? space for raw material and finished goods storage. Estimated warehouse capacity: 2*40c Sample room condition Questions Findings/Comments Score Does the factory have a sample room tidy? Based on the onsite observation, it is noted that factory had 5 /5 a tidy showroom. Related pictures: Warehouse / Sample room AI-QR-16-01A Page 15 of 34

16 Finsihed Goods Stored Area Raw Material Stored Area Different Color Fabric Stored Together Without properly Separated Accessory Warehouse And Around 30% Material Without Clear Batch Label Sample room view Sample room view AI-QR-16-01A Page 16 of 34

17 Public power supply Questions Findings/Comments Score Connected? Yes. 5 /5 Does the factory employ an electrician with certificate? No full-time certified electrician available on site. 0 /5 Frequent power outage in the area? Does the factory have backup electric power generator? (Ask several people: workers & management) Electric power generator count: Based on the interview with factory management, power outage in the area is unusual / No Backup Generator. No electric power generator. 3 /5 Shipment capabilities Questions What are the Delivery / loading conditions? How far is the nearest port / airport? Findings/Comments Based on the on-site observation, the delivery/ loading conditions is in average level. 60 minutes to XXX Port 60 minutes to XXX Airport Special Remarks on this section 1. No work instruction for all the machine in the workshop. No training records of machinery operation for this audit review. 2. No independent warehouse or separated area and limited space for raw material and finished goods storage. Actual Score Theoretical Max 25 /40 AI-QR-16-01A Page 17 of 34

Export license Part 5 Quality Assurance System & Related Certificates (optional) Date of the license: Comments: N/A Based on the on-site observation and interview with factory management, it is

Quality system management Questions Findings/Comments Score Does the management have an understanding of ISO 9001 or similar quality system? Certificate available?

18 Export license Part 5 Quality Assurance System & Related Certificates (optional) Date of the license: Comments: N/A Based on the on-site observation and interview with factory management, it is noted that the main market of its business is domestic of PRC and Europe by trade agent. Factory didn t have own import/export license and custom registration. Quality system management Questions Findings/Comments Score Does the management have an understanding of ISO 9001 or similar quality system? Certificate available? Based on the interview with factory management, it is noted that they had an average understanding of quality system, the quality manual available for this audit review. Picture(s) 3 /5 Quality Manual Quality Guidance & Objective AI-QR-16-01A Page 18 of 34

Quality system management Questions Findings/Comments Score Are clear instructions visible at all work stations? Is QC staff fully independent of production staff?

Is the QC staff qualified? Are QC supervisors easily identified Did the factory have had QC inspection by another company? Which one? When? Record / reports available?

19 Quality system management Questions Findings/Comments Score Are clear instructions visible at all work stations? Is QC staff fully independent of production staff? Does the QC manager have sufficient authority to stop production? Does the factory perform regular quality control at major production steps? Is there a documented calibration system for equipment? Is the QC staff qualified? Are QC supervisors easily identified Did the factory have had QC inspection by another company? Which one? When? Record / reports available? No clear instruction except approved sample visible at all work stations. 1 /5 The QC staff is completely independent from production staff and the QC manager had 5 /5 sufficient authority to stop production. Factory performed regular control at major production steps and the IQC, IPQC & OQC reports available for review during audit. The containers in the inspection line for acceptable 1 /5 and defective goods stored were without clear marks and separate label. Factory had established documented calibration system but no relevant calibration records for steel rule and electrical balance 1 /5 which was used in workshop and warehouse area available. QC staff is qualified, but no training records available for this audit review. 1 /5 The QC staff is not easily identified without visual badge or armband, etc. 0 /5 The factory has no QC inspection by another company. No Picture(s) Approved Sample Available At Work Station IQC On Site AI-QR-16-01A Page 19 of 34

20 IQC Report IPQC Report Documented Calibration System No Clear Instruction Available At Work Station No Clear Mark & properly Separated Available For The Containers Stored Acceptable And Defective Goods Of Inspection Line No Calibration Records For Electrical Balance AI-QR-16-01A Page 20 of 34

No Calibration Records For Steel Rule QC Staff Not Easily Identified Special Remarks on this section 1. No clear instruction except approved sample visible at all work stations. 2.

The containers in the inspection line for acceptable and defective goods stored were without clear marks and separate labels. 3.

21 No Calibration Records For Steel Rule QC Staff Not Easily Identified Special Remarks on this section 1. No clear instruction except approved sample visible at all work stations. 2. Factory performed regular control at major production steps and the IQC, IPQC & OQC reports available for review during audit. The containers in the inspection line for acceptable and defective goods stored were without clear marks and separate labels. 3. Factory had established documented calibration system but no relevant calibration records for steel rule and electrical balance which was used in workshop and warehouse. 4. QC staff is qualified, but no training records available for this audit review. 5. The QC staff is not easily identified without visual badge or armband, etc. Actual Score Theoretical Max 12 /35 AI-QR-16-01A Page 21 of 34

Part 6 Social Accountability (optional) Preliminary / Document Questions Findings/Comments Score Do all the

Result Yes, based on the interview with employees, they had signed labor contract and got the copy.

and no waiver from local agent available for this audit review.

22 Part 6 Social Accountability (optional) Preliminary / Document Questions Findings/Comments Score Do all the workers have a labor contract? Do all the workers have a social insurance included in their labor contract? Result Yes, based on the interview with employees, they had signed labor contract and got the copy. 22 out of total 63 (factory stated 15 among of them just joined within 1 month) were provided social insurance and no waiver from local agent available for this audit review. Picture(s) 5 /5 1 /5 Total found 6 Theoretical Max /10 Labor Contract Labor Contract Participant List Of Social Insurance Payment Evidence Of Social Insurance AI-QR-16-01A Page 22 of 34

Forced and compulsory Child labour 2015 AsiaInspection Limited. All rights reserved NB: If one item of this section is 0, the overall result of SA part will be 0 1.

Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure established by factory.

23 Forced and compulsory Child labour 2015 AsiaInspection Limited. All rights reserved NB: If one item of this section is 0, the overall result of SA part will be 0 1. Child Labour, Forced and Compulsory Labour: Item Findings / Comments Score Minimum legal age Workers under legal age according to SA 8000 labour Prisoners at work: Forbidden Above 16 years old. Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure established by factory. Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure established by factory. ID Papers Deposit: Forbidden Based on onsite observation and workers interview, no violation according to SA 8000 Result 3 /5 3 /5 3 /5 found, but no relevant policy or procedure established by factory. Total found 9 Theoretical Max /15 Picture(s) Employees Roster Employees ID Copy Kept In Factory AI-QR-16-01A Page 23 of 34

24 Wages Working time 2015 AsiaInspection Limited. All rights reserved NB: If one item of this section is 0, the overall result of SA part will be 0 2. Working time: Item Findings / Comments Score Local Standard 1, Employees shall work for 8 hours one day and 40 hours one week; 2, Overtime shall not exceed 3 hours one day and 36 hours one month; 3, The factory shall make sure that employees can take at least one rest day per seven days. Factory working hours Could not be verified, as no attendance records for this auditor review. 0 /5 Day off / Holiday Could not be verified, as no attendance records for this auditor review. 0 /5 Work at night Could not be verified, as no attendance records for this auditor review. 0 /5 Result Total found 0 Theoretical Max /15 NB: If one item of this section is 0, the overall result of SA part will be 0 3. Wages: Item Findings / Comments Score Local Standard (See below for Local laws)* The local minimum wage was RMB 1320 per month since 1 May (before this time is RMB 1200 per month); 150%, 200% and 300% of normal wage for the overtime hours in week days, rest days and statutory holidays. Wages Could not be verified, as no wage records for this auditor review. 0 /5 Night work Could not be verified, as no wage records for this auditor review. 0 /5 Overtime Could not be verified, as no wage records for this auditor review. 0 /5 Disciplinary deductions Could not be verified, as no wage records for this auditor review. 0 /5 Sufficiency to meet basic need of Could not be verified, as no wage records for this auditor review. 0 /5 workers and their families Result Total found 0 Theoretical Max /25 AI-QR-16-01A Page 24 of 34

25 Discrimination 2015 AsiaInspection Limited. All rights reserved NB: If one item of this section is 0, the overall result of SA part will be 0 4. Discrimination Item Findings / Comments Score Gender Race Age National or social origin Religion Disability Sexual orientation Family responsibilities Union membership Political opinions Result Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure was established by factory. 3 /5 Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation 3 /5 found, but no relevant policy or procedure was established by factory. Total found 30 Theoretical Max /50 AI-QR-16-01A Page 25 of 34

Disciplinary practices 2015 AsiaInspection Limited. All rights reserved NB : If one item of this section is 0, the overall result of SA part will be 0 5.

no violation found, but no relevant policy or procedure was established by factory.

26 Disciplinary practices 2015 AsiaInspection Limited. All rights reserved NB : If one item of this section is 0, the overall result of SA part will be 0 5. Disciplinary practices Item Findings / Comments Score Sexual harassment Corporal punishment Mental coercion Physical coercion Verbal abuses Result Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure was established by factory. Based on onsite observation and workers interview, no violation found, but no relevant policy or procedure was established by factory. 3 /5 3 /5 3 /5 3 /5 3 /5 Total found 15 Theoretical Max /25 Picture(s) Suggestion Box Training Course List AI-QR-16-01A Page 26 of 34

27 NB: If one item of this section is 0, the overall result of SA part will be 0 First worker Questions Results Comments General 1 Name of the employee : Ms ZXX XX N/A 2 Documented age and sex (according to ID / Photo ) 3XXX1X84X10X28XX Female 3 Name of the Company/Factory you work for? XIX XX Apparel Co., Ltd N/A 4 How long have you worked here? Are you satisfied 3 Month with your job? N/A 5 What specific manufacture process/component are Sewing and she was you working on? What is your job? satisfied with her job N/A SAFETY 6 Have you had first aid training? Yes Frequency: when hiring 7 Does the factory provide Personal Protective Equipment to all employees? Yes What kind of? Operation safety of sewing machine 8 Have all employees been trained in case of fire emergency? Yes Frequency: twice per year CHILD LABOUR 9 Have you seen children at work in the factory? No FORCED LABOUR 10 Have you seen prisoners at work in the factory? No Have you seen people asked to deposit their ID paper to work? Are employees allowed to assemble in order to bargain with management? DISCIPLINARY PRACTICES Are some employees sexually threatened by people from the factory? Are there employees that are physically punished in case of mistakes? ASSOCIATION No Yes No No AI-QR-16-01A Page 27 of 34

28 Are the employees able to create or join any union as they want? Does the factory let you play games or practise sport? Does a Suggestion Box exist for employees to give anonymous messages to the manager? DISCRIMINATION Does the factory use pregnancy test as a condition of hiring? Does a difference of wages exist between men and women? WAGES Are employees able to meet their basic needs with their wages? Yes Yes Yes No Yes Yes HOURS OF WORK Have you ever worked during 7 days without 21 interruption? Result Yes Violation was found Special Remarks on this section out of total 63 (factory stated 15 among of them just joined within 1 month) were provided with social insurance. 2. Working hour and wage could not be verified because no attendance records and wage record were available for auditor review. Actual Score Theoretical Max 0 /140 AI-QR-16-01A Page 28 of 34

29 Part 7 Supply Chain Management (optional) Raw materials Questions Findings/Comments Score Is the factory able to provide data about Yes, based on documents review, it is noted that the data supplier? Does the factory control them? about suppliers available for this audit review. 5 /5 Who are the suppliers of raw materials and components? Material Supplier name Country of origin / location Zipper Hardware Label & Tag Fabric SX XX FUX JTX WXX FXX WX YXX XXDXX TXLX China/JXX China/JXX China/SXX China/SXX China/XXX China/XXX China/XXX China/SXX Sub-contracting Questions Findings/Comments Score Is the factory able to provide data Based on documents review and interview with factory management, about sub-contractors? Does the factory control them? it is noted that the process of printing and embroider are sub-contracted which are under factory controls. 5 /5 Which part of the production process is outsourced? Printing and embroider Production step (ex: packaging) Supplier name Country of origin / location Printing Embroider JXBX HXCX DXX XXYX LCAX NWX China/XX China/XXX China/XX China/XXX China/XX China/XXX Actual Score Theoretical Max 10 /10 AI-QR-16-01A Page 29 of 34

Part 8 R & D / Sampling capacity (optional) R & D facilities Questions Findings/Comments Score Does the factory have a R&D Department? What is the sample production process?

Based on the on-site observation, it is noted that the sample production process is same as the assive production.

30 Part 8 R & D / Sampling capacity (optional) R & D facilities Questions Findings/Comments Score Does the factory have a R&D Department? What is the sample production process? Does the factory have special facilities? (sample production line or equipment) What is the approval sample lead time? Based on the on-site observation, it is noted that factory had a R&D department. Based on the on-site observation, it is noted that the sample production process is same as the assive production. Based on the on-site observation, it is noted that factory had the special facilities of drawing machines. Based on the interview with factory management, it is noted that the approval sample lead time is 7 days. Picture(s) 5 /5 5 /5 5 /5 5 /5 Clear Mark Of Sample Room View Of Sample Room Actual Score Theoretical Max 20 /20 AI-QR-16-01A Page 30 of 34

lead to pollution of the environment? it is noted that separated containers are available for recycled and non-recycle waste storage.

31 Environment 2015 AsiaInspection Limited. All rights reserved Part 9 Environment (optional) Item Findings Comments / Justifications Score Is waste management arranged No finding Based on the on-site observation, 5 /5 in a way that does not lead to pollution of the environment? it is noted that separated containers are available for recycled and non-recycle waste storage. Are chemicals properly and Only cleanser and machine oil The different chemicals should 1 /5 separately disposed off? were used and not properly separated in workshop. be separately stored and disposed off. Is it ensured that chemicals do No secondary container and The secondary container and 0 /5 not leak into the ground? MSDS available for chemical storage and usage. MSDS should be available for the chemical storage and usage. Is effluent treated to prevent No finding Based on the on-site observation, 5 /5 environmental pollution? it is noted that no hazardous stuff was produced on site. Are emissions in legal conformity? No finding Based on the on-site observation, it is noted that no hazardous stuff was produced on site. 5 /5 Result Total found 16 Theoretical Max 25 Picture(s) Specific Container Available For Recycle Waste No Properly Separately Stored, Secondary Container & MSDS For Different Chemicals AI-QR-16-01A Page 31 of 34

32 Special Remarks on this section 1. Only cleanser and machine oil were used and not properly separated in workshop. 2. No secondary container and MSDS available for chemical storage and usage Actual Score Theoretical Max 16 /25 AI-QR-16-01A Page 32 of 34

33 Part 10 Synopsis of major facts and problems found Capacity to manufacture client s product: (Part 2 and 3) Very bad Bad Average Good Very good Comments:Nil Production conditions: (Part 4 and 5) Very bad Bad Average Good Very good Comments:Nil Social accountability conditions: (Part 7) Very bad Bad Average Good Very good Comments:Nil Factory behavior during Audit: Very bad Bad Average Good Very good Comments:Nil IMPORTANT NOTES THE ABOVE RESULT(S) REFLECT(S) ASIAINSPECTION LIMITED S FINDINGS AT THE TIME AND PLACE OF AUDIT. WITH REGARD TO THE RANDOM SAMPLE CHARACTER OF THE AUDIT, IT SHOULD BE NOTED THAT ADDITIONAL NONCONFORMITIES MAY EXIST, WHICH WERE NOT FOUND DURING THE AUDIT. THE AUDITOR'S FINDINGS DO NOT RELIEVE THE AUDITEE OF ITS RESPONSIBILITY TO ENSURE THAT THE REQUIREMENTS OF THE STANDARD ARE FULFILLED AND CONSTANTLY ADHERED TO. AI-QR-16-01A Page 33 of 34

signature from Factory Manager accepting AsiaInspection

34 Corrective Action Plan With Factory Signature & Chop Confirmation Of COC With Factory Signature & Chop Original signature from Factory Manager accepting AsiaInspection conditions on Shipment authorization and bribery issues END AI-QR-16-01A Page 34 of 34

Factory Audit Report

Factory Audit Report 1997-2014 AsiaInspection Limited. All rights reserved Client Anonymous Client AI Service No R-us3-142702 Supplier Shenzhen Yes-Hope Auditor Rick Guo Factory Shenzhen Kingda Co., Ltd.