Regulatory Compliance and Risks - The company is subject to unique risks due to its holding company structure, including potential sanctions from PRC regulatory agencies if compliance is not met[12]. - As of the date of the annual report, neither the company nor its subsidiary Zhejiang Jiuzi has been involved in any investigations or received sanctions from the China Securities Regulatory Commission[12]. - The company is classified as an Existing Issuer and is required to file with the CSRC for any subsequent offerings within three working days after completion[13]. - The PCAOB has determined it can secure complete access to inspect and investigate registered public accounting firms in mainland China and Hong Kong[15]. - The Accelerating Holding Foreign Companies Accountable Act reduces the number of consecutive non-inspection years from three to two, impacting trading on U.S. exchanges[15]. - The company is closely monitoring regulatory developments in China regarding necessary approvals from the China Securities Regulatory Commission and other authorities[23]. - The Draft Overseas Listing Regulations require PRC domestic enterprises seeking to issue and list shares overseas to complete filing procedures with the CSRC[23]. - The company is subject to new regulations under the Trial Measures, which could impose administrative penalties for non-compliance in future offerings[25]. - The company faces uncertainties regarding the ability to continue trading on U.S. exchanges if its auditor cannot be inspected by the PCAOB for consecutive years[27]. - The company is currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, but future requirements could materially affect investor interests[25]. - The company is subject to potential tax audits by PRC authorities, which could result in increased tax liabilities and penalties[58]. - The company may face uncertainties regarding future regulatory changes that could impact its ability to offer securities to investors[91]. - The PRC legal system is evolving rapidly, creating uncertainties that could adversely affect the company's operations and the value of its securities[75]. - The company is subject to the U.S. Foreign Corrupt Practices Act and Chinese anti-corruption laws, which may expose it to liabilities and risks related to unauthorized payments by franchisees[75]. - The company may face significant scrutiny and negative publicity similar to other U.S.-listed Chinese companies, which could harm its operations and reputation[98]. Financial Performance - For the year ended October 31, 2022, the company reported revenues of 4,592,471, resulting in a net loss of 9,975,446 for the same period, indicating significant financial challenges[29]. - The company reported a net income loss of 6,316,831, indicating an increase in operational expenses compared to previous periods[31]. - The company’s share of loss from non-VIE subsidiaries was 9,285,628, with a cost of revenues amounting to 4,431,393[32]. - The net income for the period was reported at 1,277,782[32]. - Current assets totaled 16,946,303, indicating a strong asset base[33]. - Total liabilities were reported at 7,836,342[33]. - The comprehensive income for the period was $1,876,686, showcasing overall financial health[32]. Dividend Policy and Earnings Retention - The company has not distributed any earnings or dividends to date and does not anticipate doing so in the foreseeable future[14]. - Current PRC regulations permit the company's subsidiaries to pay dividends only out of accumulated profits, if any, determined in accordance with Chinese accounting standards[14]. - The company intends to retain all available funds and future earnings for business operations and expansion, with no plans for dividend distribution[14]. - The company has not made any transfers, dividends, or distributions between the holding company and its subsidiaries to date[14]. - The company relies on the ability to receive funds from its subsidiary Zhejiang Jiuzi for any future dividend payments[14]. - As of the date of the annual report, no dividends or distributions have been made between the company and its subsidiaries, and there are no plans to distribute earnings in the foreseeable future[20]. - The PRC government may impose future restrictions on foreign currency access for current account transactions, affecting the company's ability to transfer cash[20]. - Jiuzi Holdings relies on dividends from its PRC subsidiaries for cash needs, with potential limitations on these payments due to PRC regulations[61]. Market and Competitive Environment - The growth of the electric vehicle market is projected to increase the urban power grid's peak load by 10% to 11%, with maximum load demand reaching 1,000 to 4,000 MW due to NEVs[44]. - The Chinese government plans to reduce subsidies for NEVs by 20% in 2021 compared to 2020 levels, impacting the pricing advantage of the company's vehicles[44]. - The company faces increased competition from foreign electric vehicle manufacturers due to changes in government policies allowing foreign ownership without local partners[44]. - The electric vehicle market's development is contingent on consumer perceptions of quality, safety, and performance, which can fluctuate significantly[41]. - The limited range of electric vehicles on a single charge is a critical factor affecting consumer adoption, with most vehicles lasting only 100-200 miles[42]. - The company generates revenues through initial franchise fees and sales commissions, expecting revenue growth as it expands its franchise operations[46]. - The company has awarded a total of 20,800,000 ordinary shares under its equity incentive plans (2,000,000 under the 2022 Plan, 1,200,000 under the 2023 Plan, and 17,600,000 under the 2024 Plan)[54]. - The company emphasizes the importance of brand recognition in attracting new franchisees and customers, which is critical for future growth[51]. - The company has established partnerships with over twenty NEV manufacturers, including BYD, Geely, and Chery, to enhance product offerings and competitive pricing[134]. - The company focuses marketing efforts in third to fifth tier cities in China, where the NEV market is relatively unexplored[156]. Operational Challenges and Strategies - The company relies heavily on collaboration with suppliers, with no long-term contractual commitments, posing risks to future revenue stability[39]. - The company may encounter operational risks if it cannot collect advances paid to suppliers, impacting cash flow and financial stability[56]. - The company plans to adopt a one-stop vehicle sales model, integrating online and offline services for vehicle selection, purchase, and maintenance[136]. - The company is developing an online-offline technology platform to enhance consumer shopping experiences and operational efficiency for suppliers[145]. - The company plans to establish display and distribution centers in first- and second-tier cities to support franchise stores in surrounding areas[146]. - The company intends to reduce overall operational costs by sourcing vehicles from 4S stores, which require smaller deposits and offer flexible return policies[147]. - The franchise arrangement allows franchisees to set their own sales prices, but they must cover any losses if the sales price is below the vehicle cost[150]. - The company has plans for market expansion and new product development, although specific details were not disclosed in the call[32]. - Future guidance indicates a focus on improving operational efficiency and exploring potential acquisitions to enhance market position[32]. Legal and Tax Considerations - The company may be classified as a "Resident Enterprise" under the EIT Law, subjecting it to a 25% enterprise income tax on worldwide income[73]. - If classified as a "Resident Enterprise," dividends paid to non-PRC shareholders may be subject to a 10% withholding tax[73]. - The Enterprise Income Tax Law imposes a withholding tax rate of up to 10% on dividends payable by Chinese companies to non-PRC resident enterprises[61]. - The PRC Foreign Investment Law establishes a framework for foreign investments, but uncertainties remain regarding its implementation and potential impact on the company's corporate structure[81]. - The company is not restricted from distributing profits and dividends to its parent company or carrying out cross-border foreign exchange activities due to its completed foreign exchange registration[200]. - The company has completed foreign exchange registration formalities for its WFOE, allowing it to receive capital contributions and make distributions without restrictions[197]. - The company has not filed required forms with PRC tax authorities to benefit from the reduced withholding tax rate[207]. Environmental and Social Compliance - The company is subject to various environmental protection and work safety regulations, which include penalties for non-compliance[190]. - The company must comply with the Catalogue for the Guidance of Foreign Investment Industries and the Negative List for market access[191]. - Employers in the PRC are required to provide employees with social insurance covering basic pension, medical, unemployment, maternity, and occupational injury insurance[209]. - The company has established a work safety protection scheme and is required to provide safety training and protective equipment to employees[190]. - The Cyber Security Law mandates internet service providers to safeguard personal data and maintain network security[187]. - The PRC Cybersecurity Law imposes obligations on network operators to protect users' personal information and mandates breach notification[170]. Shareholder and Corporate Governance - The company is classified as a "controlled company" under Nasdaq rules, allowing it to rely on exemptions from certain corporate governance requirements[125]. - The company may face challenges in protecting shareholder interests due to its incorporation in the Cayman Islands and operations in China[100]. - The issuance and sale of additional ordinary shares could dilute existing shareholders' holdings and reduce the prevailing market price[122]. - Future sales of ordinary shares could adversely affect their market price and impair the company's ability to raise capital through equity offerings[115]. - The trading price of the ordinary shares is volatile, influenced by factors such as net revenue variations, announcements of new investments, and changes in financial estimates by analysts[112]. - The company is classified as an "emerging growth company," allowing it to take advantage of reduced reporting requirements under the JOBS Act[119]. - The company is required to file an annual report on Form 20-F within four months of the fiscal year-end, with less extensive information compared to U.S. domestic issuers[121].
Jiuzi Holdings(JZXN) - 2023 Q4 - Annual Report