Company Classification and Governance - The company is classified as an "emerging growth company" until it meets certain thresholds, including a market value of Class A Ordinary Shares exceeding 1.235 billion[166]. - The company currently relies on exemptions from certain corporate governance requirements due to being a "controlled company," with Mr. Tsang Chun Ho Anthony holding approximately 62.14% voting rights[168]. - The company does not maintain a directors' and officers' insurance policy, which may complicate future insurance procurement and increase costs[167]. Regulatory Environment and Compliance Risks - The company operates in Hong Kong and is not currently regulated by Mainland China laws, but there are uncertainties regarding potential future regulatory impacts from the PRC government[180]. - The company faces risks related to evolving Mainland China laws that could affect its operations and the value of its Class A Ordinary Shares[184]. - Compliance with Mainland China laws may result in increased operational costs and management burdens, potentially impacting business practices[186]. - The company may encounter significant legal and operational risks if the PRC government extends its oversight to Hong Kong-based issuers[187]. - The company provides cloud-based IT solutions, which are subject to recent PRC government regulatory developments concerning data and cybersecurity[188]. - The enactment of the Personal Information Protection Law in China may not apply to the company's Hong Kong subsidiaries, as they only provide services in Hong Kong[189]. - There is significant uncertainty regarding the interpretation and enforcement of PRC laws related to cybersecurity and data privacy, which could disrupt operations and negatively impact financial resources[190]. - The CSRC's Trial Administrative Measures for overseas securities offerings require domestic companies to fulfill filing procedures, creating uncertainty for the company's Hong Kong subsidiaries regarding compliance[191]. - The Hong Kong legal system's uncertainties may limit legal protections available to the company's subsidiaries, affecting the enforcement of contractual rights[192]. - Political risks in Hong Kong, including social unrest and changes in legal frameworks, could adversely affect the company's business operations and financial conditions[201]. - The ongoing protests in Hong Kong, triggered by proposed extradition legislation, have negatively impacted various sectors, including airline, retail, and real estate[202]. - The U.S. government's removal of Hong Kong's preferential trade status may lead to increased tariffs and trade restrictions, potentially harming the company's business[203]. - The Hong Kong National Security Law could materially affect the operations and financial position of the company's subsidiaries if deemed in violation[197]. - The enforcement of PRC laws can change rapidly, which may result in significant impacts on the company's operations and the value of its securities[198]. - The inability of overseas regulators to conduct investigations directly in the PRC may complicate legal processes and shareholder claims[193]. Financial Performance and Market Risks - The company's revenue is vulnerable to social, economic, and political instability in Hong Kong, which could adversely affect business operations[205]. - Economic conditions in Hong Kong and Mainland China are sensitive to global economic trends, and a prolonged slowdown could negatively impact customer confidence and business performance[210]. - The U.S. government's revocation of Hong Kong's preferential trade status may lead to adverse effects on the company's operations and market perception[211]. - The dual-class share structure allows Class B shareholders to hold 62.14% of voting rights, potentially limiting the influence of Class A shareholders on corporate matters[215]. - The dual-class structure may hinder the inclusion of Class A Ordinary Shares in major indices, affecting market activity and shareholder value[216]. - The market price of the company's Class A Ordinary Shares may be volatile, influenced by factors such as performance of other Hong Kong and PRC companies[239]. - The company’s controlling shareholder, Mr. Tsang Chun Ho Anthony, owns approximately 2.60% of Class A Ordinary Shares and 100% of Class B Ordinary Shares, representing 62.14% voting rights, which may not align with other shareholders' interests[238]. - The company is subject to less stringent reporting requirements as a foreign private issuer, which may limit the information available to investors compared to U.S. domestic issuers[248]. - The market for the company's Class A Ordinary Shares may be thinly traded, affecting liquidity and the ability to sell shares at desired prices[243]. - The company may face securities litigation due to price volatility, which could divert management's attention and resources[242]. - The company may incur significant costs and management time if required to engage a new audit firm due to PCAOB inspection requirements[235]. - The company may face significant consequences if its Class A Ordinary Shares are delisted, including reduced liquidity and potential declines in share price[254]. - Substantial future sales of Class A Ordinary Shares could lead to a decline in share price due to increased market volatility[261]. Audit and Compliance Issues - The PCAOB's inability to conduct full inspections in Hong Kong could lead to trading prohibitions under the HFCA Act, impacting the company's securities[230]. - The company has engaged Audit Alliance LLP as its current auditor, which is subject to PCAOB inspections, but uncertainties remain regarding compliance with new regulatory frameworks[231]. - The PCAOB Board determined on December 15, 2022, that it could secure complete access to inspect registered public accounting firms in mainland China and Hong Kong[233]. - If the PCAOB is unable to inspect the auditor, it could lead to the delisting of the company's securities from Nasdaq[233]. - The company faces uncertainties regarding potential additional scrutiny and regulatory actions that could adversely affect its market price and lead to delisting[235]. Shareholder and Financial Management - The company has broad discretion in the use of net proceeds from securities offerings, which may not necessarily improve operational results or share price[255]. - The fair value of options granted under the 2024 Equity Incentive Plan will be charged to the company's financial results, potentially affecting profitability[259]. - The company has agreed to a 6-month lockup period for significant shareholders following its initial public offering on October 30, 2023[245]. - As of the date of the annual report, the company has 15,262,500 Class A Ordinary Shares and 1,200,000 Class B Ordinary Shares outstanding, with a maximum of 900,000,000 authorized Class A Ordinary Shares[260]. - For the year ended September 30, 2024, the top three customers accounted for 21.04%, 18.67%, and 12.31% of the company's total revenue, indicating a decrease in concentration compared to previous years[634]. - The consumer price index in China increased by 0.2%, 0.2%, and 2.0% in 2024, 2023, and 2022, respectively, showing minimal impact from inflation on the company's operations[636]. - The company has not used any derivative financial instruments to hedge foreign exchange risk, which may affect the value of investments due to currency fluctuations[632].
Techlution(ATGL) - 2024 Q4 - Annual Report