Dividends and Financial Distributions - The company has not paid any dividends or distributions to its holding company or investors as of the report date[44]. - The company's PRC subsidiaries have not generated accumulated profits and will not be able to pay dividends until they meet statutory reserve fund requirements[43]. - The company does not have any present plan to pay cash dividends on its ordinary shares in the foreseeable future[46]. Regulatory Compliance and Risks - The company is subject to PRC regulations that may restrict the transfer of funds from its Hong Kong subsidiary to its PRC subsidiaries[46]. - The company must comply with confidentiality and archives administration requirements for overseas offerings, as per the revised Provisions effective March 31, 2023[51]. - The company may face penalties for non-compliance with new regulatory requirements, which could adversely affect its operations and financial condition[50]. - The company has not encountered any restrictions on the amount of funds that can be transferred out of China, provided compliance with procedures is maintained[46]. - The company has not obtained certain fire safety filings for some warehouses and offices, which may lead to administrative penalties affecting operations and financial conditions[54]. - The CSRC has implemented new filing requirements for domestic companies seeking to list overseas, effective March 31, 2023[49]. - The PCAOB has secured complete access to inspect and investigate audit firms in mainland China and Hong Kong, but future inspections remain uncertain[58]. - The company has not received any formal inquiries or sanctions from regulatory authorities regarding necessary permissions for business operations[54]. - The company is subject to various government regulations in China, and failure to comply may have a material adverse effect on its business[73]. - The company is subject to anti-corruption and anti-bribery laws, which if violated, could result in significant fines and penalties[169]. - The company has not registered any of its leasehold interests with the relevant authorities, exposing it to potential fines and operational disruptions[160]. - The company may face legal proceedings related to intellectual property rights, which could disrupt operations and incur significant costs[165]. - The company is currently involved in various litigations and disputes that could harm its reputation and financial condition[166]. - The company faces potential legal and financial repercussions due to non-compliance with anti-corruption and financial sanctions laws, which could adversely affect its business and reputation[172]. Financial Performance and Condition - The company has incurred negative cash flows in operating activities and has not been profitable, which may continue in the future[70]. - The company incurred net losses of US$10.5 million, US$11.1 million, and US$16.6 million for the fiscal years ended September 30, 2023, 2024, and 2025, respectively[89]. - Negative cash flows from operating activities were approximately US$7.3 million, US$10.1 million, and US$4.7 million for the fiscal years ended September 30, 2023, 2024, and 2025, respectively[89]. - The company has benefited from government subsidies for NEVs, but certain subsidies were terminated on December 31, 2022, which may impact future revenues[100]. - A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect the company's business and financial condition[83]. - The company's revenues are heavily dependent on consumer demand and preferences in China, which can be affected by economic conditions and consumer confidence[85]. - Changes in costs or availability of consumer financing may materially adversely affect the company's new car sales and financial results[87]. - The company may require additional capital for growth, and financing may not be available on acceptable terms, impacting business objectives[146][147]. - The company anticipates additional costs related to legal, accounting, and administrative expenses as it operates as a public company[89]. Market and Competitive Landscape - The lifecycle automotive service market in China is highly competitive, with competitors including authorized dealerships, e-commerce platforms, traditional manufacturers, and franchised repair shops[79]. - The company faces risks from intense competition and potential replication of its business model by other automotive platforms and traditional companies[70]. - The company is dependent on relationships with NEV manufacturers, and any deterioration in these relationships could materially impact its business[70]. - The company is exploring opportunities in the NEV market, including mergers and acquisitions, but current sales primarily focus on fuel cars[110]. - The Chinese government imposed limits on new car purchases in several cities, which could adversely affect demand and the company's results of operations[96]. Operational Challenges - Disruptions in the production and delivery of new cars due to supply chain issues, such as semiconductor shortages, could adversely affect the company's financial condition[70]. - The company may face risks related to supply chain shortages, fluctuations in prices, and relationships with suppliers, which could adversely affect its results of operations[73]. - The company may face challenges in attracting and retaining qualified personnel for its MBS stores, which could impact revenues and operations[103]. - The company has ceased providing credit lines to new customers in the auto parts business due to regulatory changes, which may impact cash flows and financial operations[148]. - The company may experience shortages or disruptions in the supply of new cars, auto parts, and accessories, which could adversely affect revenues and profit margins[141]. - The company relies on third-party logistics services for transportation, which may be disrupted by various factors, affecting timely delivery and customer satisfaction[144]. - Seasonal changes impact demand, with historically lower revenues in the first quarter and higher revenues in the second half of the year, particularly during promotional campaigns[149]. - The company may face challenges in managing inventory levels, which could lead to write-downs, overstock, or shortages, adversely affecting financial condition[150][151]. Technology and Cybersecurity - The company possesses personal information of less than one million users and does not qualify for a cybersecurity review under current regulations[48]. - The company must keep up with technological developments, including AI and cloud computing, to maintain competitiveness and avoid adverse effects on business operations[137]. - The company's technology infrastructure may experience disruptions due to network overloads, which could negatively affect customer experience and operational performance[176]. - The company is at risk of data breaches that could lead to significant unplanned expenses and harm its reputation, impacting its financial condition and results of operations[173]. - Companies must comply with various cybersecurity and data protection laws, with potential material adverse effects for non-compliance[232]. Internal Controls and Governance - The company has identified two material weaknesses in its internal control over financial reporting, which could lead to misstatements in financial statements and affect investor confidence[185]. - To address identified weaknesses, the company is hiring qualified accounting personnel and strengthening corporate governance to improve its internal control over financial reporting[187]. - The company may face challenges in maintaining effective internal controls, which could result in material misstatements and limit access to capital markets[190]. - The company has limited experience operating as a public company, which may lead to increased compliance costs and risks associated with non-compliance[182]. - The company is classified as a "controlled company," allowing it to rely on exemptions from certain corporate governance requirements, which may not provide the same protections to shareholders as other companies[181]. Economic and Geopolitical Factors - The ongoing geopolitical tensions and international trade issues may adversely impact the company's business and financial condition[199]. - Changes in China's economic, political, or legal conditions could materially affect the company's business and financial results, as all revenues are sourced from China[196]. - The company may incur increased costs to comply with existing and new regulations, which could adversely impact operations and the value of its securities[210]. - The PCAOB's access to inspect auditors in China has been limited, which may affect investor confidence and the company's compliance with U.S. regulations[215]. - The company’s auditor, Marcum Asia CPAs LLP, is subject to PCAOB inspections, but future regulatory changes in China could necessitate a change in auditors, impacting audit quality evaluations[217].
Autozi(AZI) - 2025 Q4 - Annual Report