Share Structure and Financial Reporting - The company has a total of 1,643,162,653 ordinary shares with a par value of 0.001asofMay31,2023[5]−ThecompanyisclassifiedasalargeacceleratedfileraccordingtotheSecuritiesExchangeActrules[6]−ThecompanyfollowsU.S.GenerallyAcceptedAccountingPrinciples(GAAP)foritsfinancialstatements[7]−Thecompany′sfinancialstatementsareconsolidatedunderUSGAAP,includingthefinancialperformanceofitsvariableinterestentities[9]−Thecompany′sfinancialdataispresentedinUSD,withconversionsbasedonexchangeratesasofMay31,2023[10]−Thecompany′sfinancialreportingcurrencyisUSD,withcertaindataconvertedforreaderconvenience[10]−Thecompany′sconsolidatedaffiliatedentitiescontributed99.9300 million in 2.125% notes due in 2025, and failure to comply with the trust indenture or other debt agreements could lead to accelerated repayment and liquidity issues[103] - The company’s rental costs and ability to secure leases at desirable locations could significantly impact its business, with potential relocation costs and penalties for unregistered leases[104] - Some of the company’s leased properties do not fully comply with fire safety regulations, which could result in fines, relocation, and additional expenses[105] - Food safety and product quality are critical to the reputation and business success of Oriental Selection, with potential penalties for non-compliance with regulations[106] - The company's contractual arrangements with variable interest entities in China are subject to regulatory risks, potentially leading to severe penalties or loss of business interests[108] - Foreign ownership in value-added telecommunications services in China is restricted, with internet information service providers capped at 50% foreign ownership[109] - The company may be required to terminate contractual arrangements with its smart learning system entities if they are deemed as subject to the Double Reduction Policy[112] - The company could face penalties including license revocation, revenue confiscation, and operational restrictions if found in violation of Chinese laws or regulations[113] - The company’s operations may be significantly impacted by changes in Chinese laws, regulations, and policies governing private education, such as the "Double Reduction" policy[119] - The company’s use of seals (company, contract, and financial) is strictly controlled, with approvals required from legal, administrative, or financial departments to prevent misuse[118] - Misuse or unauthorized control of seals by designated legal representatives could disrupt the company’s normal business operations and require significant time and resources to resolve[118] - The company’s subsidiaries and New Oriental China may face restrictions on their ability to pay dividends or make other payments due to debt obligations or tax adjustments[120] - The company’s tax liabilities could increase if Chinese tax authorities adjust transfer pricing or impose penalties for underpaid taxes, negatively impacting net profits[119] - The company’s private schools must allocate a minimum of 25% of annual net profits or asset value increases to development funds, depending on their classification[120] - The company’s reliance on dividends and payments from its Chinese entities could limit its ability to invest, acquire, or fund its business operations[120] - Offshore holding company's ability to provide loans or additional capital to Chinese subsidiaries may be restricted by Chinese regulations and government currency exchange controls, potentially impacting liquidity and funding capabilities[121] - Loans to Chinese subsidiaries must comply with Chinese regulations, including registration with the State Administration of Foreign Exchange (SAFE) and adherence to statutory limits[121] - Capital injections into Chinese subsidiaries must be filed and reported to the Ministry of Commerce or its local departments, but are unlikely to fund New Oriental China and its schools due to regulatory constraints[122] - SAFE regulations (Circular No. 19 and No. 16) restrict the use of RMB converted from foreign currency registered capital, potentially limiting the company's ability to transfer foreign currency and impacting liquidity[122] - SAFE Circular No. 28 allows foreign-invested enterprises to use RMB converted from foreign currency for equity investments in China, provided it complies with applicable laws and the negative list for foreign investment[122] - Chinese laws and regulations may continue to limit the use of proceeds from overseas offerings, potentially affecting the company's ability to capitalize its Chinese business[123] - Bankruptcy or liquidation proceedings involving New Oriental China or its schools could result in the loss of assets, reducing operational scale and impacting revenue generation[124] - Changes in China's economic, political, or social conditions, or government policies, could significantly impact the company's business, financial condition, and operating results[126] - China's economic growth has slowed since 2010, with COVID-19 negatively impacting the economy in 2022[127] - Global economic recession and geopolitical tensions could adversely affect the company's financial performance and access to financing[128] - Uncertainties in China's legal system and regulatory changes may pose risks to the company's operations[129] - Increased Chinese government oversight of overseas listings could lead to significant adverse changes in the company's operations and stock value[130] - Future regulatory approvals for overseas securities offerings may be delayed or denied, impacting the company's ability to raise capital[131] - The company may face significant uncertainty regarding the classification of its contractual arrangements as foreign investment under the PRC Foreign Investment Law, potentially requiring the termination of existing arrangements or sale of related business operations[132] - Non-compliance with Chinese internet content regulations could lead to penalties, license revocation, and website closures, adversely affecting the company's operations and reputation[133] - The company must obtain multiple licenses and permits for its education and e-commerce businesses, including ICP, food operation, publication operation, and performance operation licenses[134] - The company is required to comply with various health, safety, and food regulations, and failure to obtain or renew necessary licenses could result in fines, legal sanctions, or service suspension[135] - Chinese residents establishing offshore special purpose companies must register with the State Administration of Foreign Exchange, and failure to do so may limit the company's ability to inject capital into its Chinese subsidiaries or repatriate profits[136] - The company must submit applications to the State Administration of Foreign Exchange (SAFE) for employees participating in equity incentive plans, with no guarantee of approval[138] - Non-compliance with SAFE regulations could result in fines, legal sanctions, and restrictions on employees' ability to exercise stock options or repatriate funds[138] - The company's offshore offerings may require approval from the China Securities Regulatory Commission (CSRC) or other government agencies, with uncertain timelines[138] - Acquisitions in China are subject to complex procedures under the Anti-Monopoly Law and may face delays in obtaining necessary approvals[138] - Overseas investments by Chinese-controlled entities exceeding 300millioninnon−sensitiveprojectsmustreporttotheNationalDevelopmentandReformCommission(NDRC)[139]−ThecompanymustcomplywithnewCSRCregulationsforoverseassecuritiesissuanceandlisting,includingfilingrequirementsforfutureofferings[140]−ThecompanyisrequiredtoestablishaconfidentialityandarchivemanagementsystemforoverseassecuritiesissuanceundernewCSRCrules[140]−RisinglaborcostsinChinamaysignificantlyimpactthecompany′sprofitabilityandoperatingperformance[142]−Thecompanyisrequiredtocontributetogovernment−mandatedemployeewelfareprograms,includingsocialinsuranceandhousingfunds,basedonapercentageofemployeesalaries[143]−Chinesegovernmentcontrolsoncurrencyexchangemaylimitthecompany′sabilitytopaydividendstoforeignshareholders[144]−FluctuationsintheRMBexchangeratecouldhaveamaterialadverseeffectonthecompany′srevenue,earnings,andfinancialcondition[145]−LimitedavailabilityofhedgingtoolsinChinatomitigateforeignexchangerisk[146]−Potentialregulatorypenaltiesorsanctionsifthecompanyfailstoobtainnecessaryapprovalsorcompleterequiredfilingsforoverseasissuances[141]−Thecompanymayfacefines,latefees,orlegalsanctionsifitfailstomakesufficientemployeewelfarepayments[143]−Futurerestrictionsonforeigncurrencyaccesscouldhinderthecompany′sabilitytomeetitscurrencyneeds[144]−Thecompanycurrentlyhasnohedgingtransactionsinplacetomitigateforeignexchangerisk[146]−Regulatoryuncertaintyornegativereportsregardingapprovalrequirementscouldadverselyaffectthecompany′sbusinessandstockprice[141]−ThecompanyfacesuncertaintyinobtainingandmaintainingnecessarylicensesforitsonlinebusinessinChina,particularlyregardinginternetaudio−visualprograms,broadcasting,andonlineeducationactivities[153]−Thecompanyhasre−submittedorisintheprocessofre−submittingfilingsforitseducationalmobileapplicationstocomplywiththe"DoubleReduction"policy[153]−ThecompanymayneedadditionalorupdatedICPlicensestocoverallitscurrenttelecommunicationsservicesduetopotentialchangesinregulatoryinterpretations[153]−Thecompany′slive−streaminge−commercebusinessthroughDongfangZhenxuandoesnotrequireaninternetculturebusinesslicenseasitprimarilyinvolvesagriculturalproductsales[153]−Thecompanycouldfacepenalties,legalsanctions,orsuspensionofonlinetutoringservicesifitfailstoobtainrequiredlicensesorpermits[154]−PCAOB′sinabilitytoinspectthecompany′sauditorsinChinapreviouslydeprivedinvestorsofthebenefitsofsuchinspections[155]−Thecompany′sAmericanDepositaryShares(ADS)couldbedelistedfromU.S.exchangesifPCAOBisunabletoinspectitsauditorsfortwoconsecutiveyears[155]−PCAOBremovedChinaandHongKongfromthelistofjurisdictionswhereitcannotinspectorinvestigateregisteredpublicaccountingfirms,andthecompanyexpectsnottobeidentifiedasaCommission−IdentifiedIssuerunderHFCAAaftersubmittingitsForm20−FforthefiscalyearendingMay31,2023[156]−IfthecompanyisidentifiedasaCommission−IdentifiedIssuerunderHFCAAfortwoconsecutiveyears,itssecuritieswillbeprohibitedfromtradingonU.S.nationalsecuritiesexchangesorover−the−countermarkets,severelyimpactingitsabilitytoraisefunds[156]−OverseasregulatorsmayfacedifficultiesconductinginvestigationsorobtainingevidencewithinChinaduetolegalproceduresandthelackofeffectivecooperationmechanismswithU.S.securitiesregulators[157]−Thecompany’sADSandordinaryshareshaveexperiencedsignificantpricevolatility,withADSclosingpricesrangingfrom12.60 to 58.70ontheNYSEandordinarysharesrangingfromHK10.10 to HK46.40ontheHKEXbetweenJune1,2022,andSeptember21,2023[160]−Thecompany’sorganizationalbylawsincludeprovisionsthatdifferfromHKEXrules,suchasrequiringatleastone−thirdoftotalvotingrightstoconveneanextraordinarygeneralmeeting,whichwasrevisedtoalignwithHKEXrulesinMarch2021[158]−If5556.0 million, with a weighted average repurchase price of 58.78perADS[177]−Thecompanyissued300 million of 2.125% notes due in 2025, with net proceeds of
