Regulatory Risks - The company is subject to risks related to its holding company structure, including potential sanctions from PRC regulatory agencies, which could materially affect financial performance and share value [23]. - Recent regulatory changes in China may impact the company's ability to accept foreign investments and continue its U.S. listing [24]. - The company is closely monitoring regulatory developments in China regarding necessary approvals from the CSRC and other governmental authorities [41]. - Recent regulatory actions by the PRC government emphasize the need for stricter administration over illegal securities activities and increased supervision over overseas listings by Chinese companies [43]. - The Draft Overseas Listing Regulations require PRC domestic enterprises seeking to issue and list shares overseas to complete filing procedures with the CSRC [44]. - The approval from the China Securities Regulatory Commission (CSRC) may be required for future offerings, and the company cannot predict if such approval will be obtained [100][101]. - The company is not required to apply for a cybersecurity review under the Measures for Cybersecurity Review (2021) as it does not control more than one million users' personal information [180]. - The evolving regulatory landscape regarding data privacy and cybersecurity may impose additional compliance requirements on the company [176]. - The company believes it is not subject to the cybersecurity review by the CAC, but uncertainties remain regarding future regulatory interpretations [193]. - The SEC and PCAOB have proposed stricter criteria for emerging market companies, adding uncertainties to the company's offerings [203]. - The PCAOB's inability to inspect auditors in China could lead to a loss of investor confidence in the company's financial statements [215]. - The PCAOB announced it secured complete access to inspect public accounting firms in mainland China and Hong Kong in 2022, but future inspections remain uncertain [214]. Financial Performance and Dividend Policy - The company has not distributed any earnings or dividends to shareholders and does not plan to do so in the foreseeable future, intending to retain funds for business operations and expansion [31]. - The company has not made any distributions to its shareholders and does not anticipate declaring dividends in the near future [31]. - The company has not distributed any earnings or dividends among the holding company and subsidiaries, and does not plan to do so in the foreseeable future [39]. - Current PRC regulations permit the payment of dividends only out of accumulated profits, and subsidiaries must set aside at least 10% of net income as statutory surplus reserves until it reaches 50% of registered capital [37]. - The company may face limitations on its ability to pay dividends due to restrictions imposed by the PRC government on currency exchange and capital controls [98]. - The company is a holding company and relies on dividends from its subsidiaries to meet cash needs, which may be restricted by various regulations [96]. - The company relies on its PRC subsidiaries for funding dividend payments, which are subject to PRC laws and may be restricted [143]. - Dividends paid from PRC subsidiaries are considered "tax-exempt income" under the EIT Law, but future guidance may change this status [130]. Operational Risks - The company relies on its PRC subsidiary for potential future dividend payments, which may be affected by PRC government restrictions on cash transfers [31]. - The company may face operational risks if suppliers default on contracts, potentially leading to financial stress and cash flow issues [85]. - The company faces challenges in maintaining brand recognition, which is critical for attracting new franchisees and customers [78]. - The company is dependent on key personnel, and their loss could adversely affect business operations and strategy [76]. - A prolonged downturn in the global or Chinese economy could adversely impact the company's business and financial condition [84]. - The company is vulnerable to pandemics, which can influence consumer behavior and potentially lead to financial distress among vehicle buyers and franchisees, impacting revenues [201]. Market and Economic Conditions - The company relies on China's automotive industry for net revenues and future growth, which is subject to uncertainties including government regulations [59]. - If the market for electric vehicles does not develop as expected, the company's business and financial condition may be adversely affected [62]. - The electric vehicle market is highly dependent on consumer adoption, with significant fluctuations in demand due to factors like price competition and safety concerns [63]. - Government subsidies for NEVs are set to decrease by 20% in 2021 compared to 2020 levels, which may adversely affect the competitiveness of electric vehicles [70]. - Economic slowdowns in China may reduce demand for the company's products and services, adversely affecting financial results [127]. - Deterioration in economic conditions could lead to decreases in sales volume and negatively impact short-term revenue growth [199]. Compliance and Legal Risks - The company is exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, which could negatively impact its operations [132]. - Uncertainties in the PRC legal system may limit legal protections and affect the company's ability to conduct business [135]. - The company may face increased compliance costs if China adopts stricter environmental protection standards [137]. - The PRC Labor Contract Law increases labor costs and imposes restrictions on workforce reductions, potentially affecting operational efficiency [166]. - Non-compliance with Circular 37 by some shareholders may lead to penalties and restrictions on foreign exchange activities [168]. - The company has not received any notifications or warnings from PRC authorities regarding compliance with social security and employee insurance regulations [195]. Currency and Financial Management - The company’s financial information is presented in U.S. dollars, with the functional currency being Renminbi (RMB), and exchange rates are subject to fluctuations [53]. - Fluctuations in the RMB against the U.S. dollar can adversely affect revenues and financial conditions, impacting the value of shares [163]. - Loans to PRC subsidiaries are subject to statutory limits and must be registered with SAFE, which may restrict financial support [116]. - The process for remitting offering proceeds to China may take up to six months, impacting the company's ability to fund operations [111]. - The company must comply with foreign exchange regulations, which may limit the ability to convert proceeds into Renminbi for investments [117].
Jiuzi Holdings(JZXN) - 2024 Q4 - Annual Report