Jiuzi Holdings(JZXN) - 2025 Q4 - Annual Report

Regulatory Risks - The company is subject to risks related to its holding company structure, including potential sanctions from PRC regulatory agencies if compliance is not met[21]. - The company has not been involved in any investigations or received inquiries from the China Securities Regulatory Commission regarding its continued listing[22]. - The company is classified as an Existing Issuer under the Trial Administrative Measures, which requires it to file with the CSRC for any subsequent offerings within three working days after completion[23]. - The PCAOB has determined it can now inspect registered public accounting firms in mainland China and Hong Kong, but future access may be obstructed by PRC authorities[26]. - The Accelerating Holding Foreign Companies Accountable Act reduces the non-inspection years from three to two, impacting the company's ability to trade on U.S. exchanges[24]. - The Draft Overseas Listing Regulations may require the company to complete filing procedures with the CSRC for its ordinary shares listed on Nasdaq[41]. - The approval or filing requirement from the China Securities Regulatory Commission (CSRC) may be necessary for future offerings, and the application of the M&A Rules remains unclear, posing potential challenges[111][112]. - The company is required to comply with the Draft Overseas Listing Regulations, which took effect on March 31, 2023, mandating filing procedures with the CSRC for overseas securities offerings[161]. - The company may face additional scrutiny from Nasdaq or regulatory authorities regarding its auditor's compliance with professional standards, which could affect its market position[208]. Financial Performance and Dividends - As of the date of the annual report, the company and its subsidiaries have not distributed any earnings or dividends, and there are no plans to do so in the foreseeable future[28]. - The company intends to retain all available funds and future earnings for business operations and expansion, with no anticipated dividend payments[28]. - The company has not transferred any earnings or cash to date between the holding company and its subsidiaries[27]. - Current PRC regulations allow the company's subsidiaries to pay dividends only out of accumulated profits, which have not been distributed to the holding company[28]. - The company has not made any cash transfers or distributions to shareholders to date[35]. - The company relies on dividends from PRC subsidiaries for cash needs, and any limitations on these payments could restrict its ability to cover expenses or pay dividends to shareholders[107]. - A withholding tax rate of up to 10% applies to dividends payable by Chinese companies to non-PRC-resident enterprises, which could impact the company's ability to distribute profits[110]. - The company does not expect to pay dividends in the foreseeable future, relying instead on price appreciation for returns on investment[215]. Operational Risks - The company relies on its PRC legal counsel's opinion that it is not subject to cybersecurity review under current regulations due to not having over one million users' personal information[22]. - The company may struggle to monitor franchise operations effectively, which could lead to compliance issues and negatively impact brand reputation and financial results[78]. - The company faces potential sanctions from regulatory agencies if it fails to seek necessary approvals for follow-on offerings, which could significantly limit its ability to offer securities[179]. - The company may face challenges in transferring funds to its PRC subsidiaries due to regulatory requirements, which could negatively impact liquidity and operational funding[119]. - The company may be impacted by governmental control of currency conversion, which could restrict its ability to remit foreign currency for dividend payments[142]. - The company faces scrutiny and negative publicity similar to other U.S.-listed Chinese companies, which could harm its business operations and reputation[191]. Market and Industry Conditions - The company relies on China's automotive industry for net revenues, which is subject to uncertainties including government regulations[59]. - The growth of the automotive industry in China is subject to uncertainties, including government regulations and economic conditions, which may impact consumer demand for automobiles[62]. - The Chinese government has reduced subsidies for new energy vehicles (NEVs) by 20% in 2021 compared to 2020, with further reductions leading to the complete termination of purchase subsidies by 2025[74]. - The company faces increased competition as the Chinese government has lifted restrictions on foreign ownership of auto manufacturers, allowing competitors like Tesla to establish wholly-owned facilities in China[73]. - The availability of government incentives for electric vehicles is crucial for growth, and any reduction or elimination of these incentives could adversely affect the company's financial condition[72]. Compliance and Legal Issues - The company is subject to the U.S. Foreign Corrupt Practices Act and Chinese anti-corruption laws, which could expose it to liabilities if violations occur[134]. - Uncertainties in the PRC legal system and potential government intervention could materially affect operations and the value of securities[136]. - The PRC legal system is evolving rapidly, leading to uncertainties that may limit legal protections available to the company and its investors[137]. - The evolving regulatory landscape regarding data privacy and cybersecurity in the PRC may impose additional compliance burdens on the company[174]. - The company is currently not in compliance with the PRC's Circular 37 regulations regarding offshore investment activities, which may subject shareholders to penalties and restrict foreign exchange activities[185][186]. Financial Condition and Risks - The company reported an accumulated deficit of $87,984,114 and a loss from operations of $10,191,058 as of October 31, 2025, raising substantial doubt about its ability to continue as a going concern[95]. - During the year ended October 31, 2025, the company generated write-offs of advances to suppliers amounting to $8,729,222 due to suppliers failing to deliver purchased vehicles[88]. - The company faces intense competition for senior management and qualified personnel in the PRC, which could adversely affect its future growth and financial condition[80]. - The company may face increased compliance costs if China adopts more stringent environmental protection or corporate social responsibility standards[138]. - The company anticipates continued increases in labor costs due to the PRC Labor Contract Law, which may impact financial results if these costs cannot be passed on to vehicle buyers[166]. Currency and Exchange Rate Risks - The company does not engage in currency hedging transactions, exposing it to foreign exchange risks[51]. - Fluctuations in the RMB exchange rate against the U.S. dollar and other currencies may adversely affect the company's revenues and financial condition, particularly in terms of conversion rates for operational needs[163]. - The PRC government may impose restrictions on foreign currency access for current account transactions in the future[34]. - The evolving foreign exchange regulations may lead to stricter reviews and approvals for remittance of dividends, affecting financial conditions and operational results[118]. Corporate Governance and Structure - The company has obtained valid business licenses for all its subsidiaries from the State Administration for Market Regulation[36]. - The company is not required to obtain permissions from PRC authorities to operate its business or offer securities to foreign investors as of the date of the annual report[38]. - The company is not classified as an Operator under the Measures for Cybersecurity Review (2021) and does not control more than one million users' personal information, thus not requiring a cybersecurity review for overseas listings[179]. - The PRC Foreign Investment Law, effective January 1, 2020, establishes a framework for foreign investments but introduces uncertainties regarding the company's corporate structure and governance[147].