2023-05-10 21:01Regulatory Environment - The company is classified as an "emerging growth company" and intends to utilize exemptions from various reporting and financial disclosure requirements, including presenting only two years of audited financial statements[29]. - The company can remain an emerging growth company for up to five years or until annual gross revenues exceed $1.07 billion or the market value of its ordinary shares held by non-affiliates exceeds $700 million[31]. - The company is subject to uncertainties regarding future regulatory requirements, including potential approvals from the CSRC and CAC for overseas listings and offerings[41]. - The PRC government has significant authority to regulate the company's operations, which could materially affect its financial condition and results of operations[42]. - The company does not utilize a VIE structure and believes its subsidiaries are not directly affected by recent PRC regulatory actions[45]. - The PRC government may intervene in operations or impose restrictions on foreign investment, which could significantly impact the company's ability to offer securities[121]. - Regulatory bodies in the United States may face limitations in conducting investigations or inspections of the company's operations in the PRC[122]. - The draft Overseas Listing Rules require PRC companies to file with the CSRC for overseas offerings, with significant penalties for non-compliance[135]. - The company cannot assure timely compliance with new regulatory requirements, which may disrupt operations and adversely affect financial condition[131]. - The 2021 Negative List requires PRC companies in prohibited businesses to obtain governmental approval for overseas listings, impacting foreign investment operations[138]. - Substantial uncertainties exist regarding the Overseas Listing Rules and their implications for PRC companies, particularly concerning follow-on offerings[139]. - The Revised Review Measures mandate cybersecurity reviews for online platform operators with over one million users intending to list abroad, effective February 15, 2022[140]. - Approval from CSRC or CAC may be required for future offerings, with potential delays or rescissions impacting business operations and financial conditions[142]. - The PRC government has not formally acknowledged the legality of VIE structures, posing risks to companies utilizing such arrangements[144]. - The Foreign Investment Law (2019) introduces uncertainties regarding contractual arrangements as a form of foreign investment, potentially affecting VIE structures[151]. - The PRC Cybersecurity Law mandates that personal information and important data must be stored in China, with potential cybersecurity reviews for critical infrastructure operators[194]. - Companies with personal information of over 1 million users must file for cybersecurity review before listing abroad, as per recent measures[195]. - The interpretation and implementation of the PRC Foreign Investment Law may impact the company's corporate structure and financial results[190]. - The Opinions on Strictly Cracking Down on Illegal Securities Activities emphasize the need for tighter supervision of overseas listings by PRC companies[193]. Financial Condition - The company has incurred continued losses from operations and has a working capital deficiency as of December 31, 2022[120]. - The auditor has expressed substantial doubt about the company's ability to continue as a going concern due to an accumulated deficit and continued operational losses[120]. - The company is financially dependent on timely distributions from its subsidiaries, which could adversely affect its results if not received[96]. - The company may experience net operating cash outflows due to the production of graphene products not selling at the same rate as production, potentially affecting cash flow[94]. - The company faces significant risks from potential accidents involving heavy equipment or hazardous substances, which could lead to civil lawsuits and regulatory enforcement proceedings, negatively impacting financial condition[70]. - The company may face significant losses from legal claims, some of which may not be covered by insurance, adversely impacting financial condition and reputation[114]. - The company is subject to numerous health, safety, and environmental regulations in the PRC, which may increase compliance costs over time[69]. - The company may incur additional costs to meet client specifications, which could lead to disputes and negatively affect profitability[79]. - The profitability of the landscape architecture business is contingent on accurate service fee estimates; incorrect estimates could result in lower returns or losses[77]. - The performance of the property markets in the PRC and Hong Kong is critical to the company's business prospects, with potential downturns adversely affecting opportunities for new projects[87]. Market and Competition - The company must continually invest in expanding production capacity to meet increasing market demand[49]. - The company is currently able to produce spherical graphite with a particle size of 6-9 microns, which is expected to be the next iteration of technology[63]. - The company faces risks related to customer concentration, relying on a few customers for a significant portion of its revenue[51]. - Government policies significantly affect demand for electric vehicles and renewable energy, which could impact the company's business[50]. - The company operates in competitive markets, facing competition from larger and better-funded competitors[52]. - Increased demand for Li-ion battery technologies may lead to lower battery prices, causing price pressure on the company's products and increasing competition from alternative electric storage technologies[71]. - The landscape architecture business faces increasing competition, particularly for small contracts, which may necessitate a focus on larger projects or geographic expansion to sustain revenue growth[75]. - Budgetary constraints from clients, particularly local governments, may impact demand for landscape architecture services, potentially leading to revenue declines[76]. Operational Risks - The company relies on third-party IT systems for processing and storing sensitive information, which are vulnerable to cyber incidents that could disrupt operations and lead to significant costs[72]. - Joint ventures and agreements with third parties expose the company to counterparty risks, which could adversely affect operating results if partners fail to meet their obligations[74]. - The company may struggle to attract and retain qualified employees, which could delay expansion plans and increase labor costs[112]. - Events such as natural disasters could disrupt operations and materially affect business[119]. - Changes in the PRC's economic, political, or social conditions could materially adversely affect the company's business and results of operations[124]. - The PRC legal system's uncertainties could limit legal protections and complicate the enforcement of rights, impacting business operations[157]. Tax and Compliance - Under PRC laws, wholly foreign-owned enterprises can only pay dividends from accumulated after-tax profits, and must set aside at least 10% of these profits for statutory reserves until they reach 50% of registered capital[98]. - Dividends and gains from equity interests may be subject to withholding tax under PRC tax laws, affecting foreign investors[159]. - Under the PRC EIT Law, a 10% withholding tax applies to dividends and other income paid to non-resident enterprises unless a tax treaty provides a reduced rate[160]. - For Hong Kong non-resident companies owning at least 25% of a PRC enterprise, the effective withholding tax on dividends is currently 5%[160]. - Loans to PRC subsidiaries are subject to statutory limits and must be registered with the State Administration of Foreign Exchange (SAFE)[163]. - The total amount of foreign debts for foreign-invested companies is limited by the difference between total investment approved and registered capital[163]. - Enhanced scrutiny by PRC tax authorities on acquisition transactions may negatively impact future acquisitions[185]. - Under Circular 7, non-resident enterprises conducting indirect transfers may face PRC enterprise income tax at a rate of up to 10% if deemed abusive[187]. - The PRC Enterprise Income Tax Law imposes a 25% tax rate on global income for enterprises classified as "resident enterprises" with a "de facto management body" in the PRC[182]. - Current enterprise income tax rates for certain subsidiaries are 15%, which is preferential treatment for High and New Technology Enterprises, subject to local government approval[184]. Corporate Governance - Approximately 94.3% of the company's ordinary shares are beneficially owned by officers, directors, and significant shareholders, which may lead to conflicts of interest[224]. - The company is a foreign private issuer under US laws, which subjects it to more lenient reporting obligations compared to US issuers[227]. - As a foreign private issuer, the company is exempt from certain provisions of the Exchange Act, including specific proxy solicitation regulations and insider trading reporting requirements[228]. - The company intends to furnish quarterly reports to the SEC on Form 6-K, which may differ from the information required in quarterly reports on Form 10-Q for US domestic issuers[228]. - Annual reports for foreign private issuers are due 120 days after the fiscal year-end, compared to 90 days for US domestic issuers[228]. - The company will follow home country corporate governance practices, which may provide less protection to holders of its ADSs compared to US issuers[229]. - The legal protections available to shareholders in the Cayman Islands are significantly less than those in the US, which may complicate legal actions against the company[210]. - The company's operations are primarily conducted outside the US, making it difficult for shareholders to enforce judgments obtained in US courts[212]. - Future developments in the Hong Kong legal and political systems could limit legal protections and impact the company's operations[206]. - The company faces uncertainties regarding compliance with the economic substance requirements in the Cayman Islands, which could affect its business operations[209]. Auditor and Inspection - The company’s auditor, Marcum Asia CPAs LLP, has been regularly inspected by the PCAOB and is not subject to recent determinations affecting other firms[46]. - The PCAOB has reported that it is unable to inspect or investigate registered public accounting firms in mainland China and Hong Kong, which may affect investor confidence in financial statements[219]. - The company’s auditor, Marcum Asia CPAs LLP, is headquartered in New York and is subject to PCAOB inspections, mitigating some risks associated with non-US auditors[215]. - The company is subject to the Holding Foreign Companies Accountability Act (HFCA Act), which could prohibit trading of its securities if its auditor is not inspected by the PCAOB for three consecutive years[221].