NaaS(NAAS) - 2021 Q4 - Annual Report

Corporate Structure and Regulatory Environment - NaaS Technology Inc. is a Cayman Islands holding company, primarily conducting operations through its PRC subsidiaries, which may restrict its ability to pay dividends to shareholders[23]. - The Holding Foreign Companies Accountable Act may impact NaaS' ability to remain listed on U.S. exchanges if its auditors are not inspected by the PCAOB for three consecutive years[29]. - NaaS' PRC subsidiaries are required to set aside at least 10% of after-tax profits as a statutory common reserve fund, which is not available for distribution as cash dividends[31]. - NaaS' ability to pay dividends may depend on the retained earnings of its PRC subsidiaries, which are subject to PRC laws and regulations[31]. - The PRC government has significant oversight over the company's operations, which could lead to material adverse changes in business and the value of its ADSs[134]. - The PCAOB's inability to inspect the company's auditors in China may undermine investor confidence in the financial statements[145]. - The Holding Foreign Companies Accountable Act could lead to the company's ADSs being prohibited from trading in the U.S. if audit inspections are not conducted, significantly impacting capital raising efforts[146]. - The company is classified as a "controlled company" under Nasdaq rules, with Newlink holding 91.5% of the voting power[190]. - The company is a foreign private issuer and is exempt from certain provisions applicable to U.S. domestic public companies, including quarterly reporting requirements[200]. - The company is classified as an emerging growth company, allowing it to take advantage of reduced reporting requirements[202]. Financial Performance and Position - RISE incurred a net loss from continuing operations of RMB15.2 million, RMB17.6 million, and a net income of RMB249.1 million (US$39.1 million) for the years ended December 31, 2019, 2020, and 2021 respectively[36]. - Revenues for the year ended December 31, 2021, increased to RMB 160,916, a growth of 332% from RMB 37,206 in 2020[38]. - The net loss for the year was RMB 252,310, compared to a net loss of RMB 82,182 in 2020, indicating a worsening financial position[38]. - Total current assets rose to RMB 126,964 as of December 31, 2021, up from RMB 48,358 in 2020, reflecting improved liquidity[39]. - Total liabilities increased to RMB 128,334 from RMB 57,840, indicating a rise in financial obligations[39]. - Basic and diluted loss per share for 2021 was RMB 50,462, compared to RMB 55,906 in 2020, showing a slight improvement in loss per share[39]. - The company reported total operating costs of RMB 267,644 for 2021, up from RMB 88,042 in 2020, primarily driven by increased selling and marketing expenses[38]. - Cash and cash equivalents as of December 31, 2021, were RMB 8,726, an increase from RMB 3,665 in 2020, indicating better cash management[39]. - NaaS incurred a net loss of RMB82.2 million and RMB252.3 million (US$39.6 million) in 2020 and 2021, respectively, with expectations of increased losses in 2022 compared to 2021[49]. Market and Competitive Landscape - The company is focused on expanding its market presence in the EV charging industry, which is rapidly evolving and competitive[46]. - Future growth is highly dependent on the continued adoption of electric vehicles (EVs) and the company's ability to manage its growth effectively[46]. - The number of charging stations serviced by NaaS grew from over 11,000 in 2020 to 30,000 by March 31, 2022, representing a growth rate of 76.5%[50]. - The total number of chargers accessible through NaaS's network increased from 165,073 in 2020 to 340,000 by March 31, 2022, marking a growth of 106.0%[50]. - The company is highly dependent on the success of its online EV charging solutions, with any decline in demand potentially having a material adverse effect on its financial condition[68]. - NaaS faces intense competition in the public EV charging service market, which is still developing, necessitating continuous innovation to maintain a competitive edge[58]. - The company expects a substantial portion of its net revenue to continue deriving from a limited number of key station operator customers, which poses risks if any key customer is lost[83]. Regulatory and Compliance Risks - NaaS may face risks related to regulatory approvals and oversight from the PRC government, which could adversely affect its operations and securities value[27]. - The PRC government has implemented a phase-out schedule for subsidies for new energy vehicles, reducing the subsidy level by 30% in 2022 compared to 2021, which could adversely affect demand for EVs and charging services[89]. - The company faces risks related to global pandemics, which could disrupt operations and materially affect financial condition and results[75]. - The company is facing challenges related to evolving cybersecurity and data privacy laws in China, which could impact operations if not properly managed[92]. - The PRC Data Security Law, effective September 2021, imposes data security and privacy obligations on entities handling data activities, introducing a classification system based on data importance and potential harm to national security[100]. - The 2022 Cybersecurity Review Measures require internet platform operators with personal information of over one million users to file for cybersecurity review before listing on foreign stock exchanges[97]. - The company may face penalties, including fines and business suspension, if non-compliance with evolving cybersecurity and data privacy regulations occurs[103]. - The Draft Measures on Data Export Security Assessment may impose security assessments on data exports, affecting business operations if enacted[101]. Operational Challenges and Strategic Initiatives - The company is investing in marketing and branding activities to attract more station operators and end-users, but failure to refine these strategies could negatively impact revenues[71]. - The company relies on collaborative arrangements with Newlink, which holds 91.5% of its ordinary shares, and any changes in this relationship could adversely affect NaaS's operations[64]. - The company relies on its in-house business development team to identify new charging station operator customers, with significant competition for qualified personnel impacting future revenue growth[70]. - The company may face challenges in completing government registrations for future loans or capital contributions, which could adversely affect its ability to fund operations[171]. - The company may face significant risks related to acquisitions, including potential liabilities and integration challenges, which could adversely affect revenue and operating results[131]. - Construction and installation of charging stations may encounter cost overruns and delays, impacting revenue recognition and customer relationships[132]. - The company may need to comply with additional regulations and licensing requirements when managing contractors for charging station installations, adding complexity and costs[133]. Intellectual Property and Legal Risks - The company’s ability to protect its intellectual property is crucial for maintaining competitive advantage, and failure to do so could harm business prospects[111]. - The company may face significant costs and time-consuming litigation to enforce its intellectual property rights, which could adversely affect its business and financial condition[112]. - The reliance on proprietary information and trade secrets poses risks, as breaches or unauthorized disclosures could materially impact the company's competitive position and financial results[115]. - The use of open-source software may lead to loss of proprietary advantages and could require costly re-engineering efforts if legal claims arise[116]. - Cybersecurity threats pose risks to the company's information systems, potentially leading to operational disruptions and financial liabilities[119]. Shareholder and Market Considerations - The trading price of the company's ADSs has been volatile, influenced by various factors including regulatory developments and changes in market conditions[187]. - The company may experience dilution in shareholder holdings if it distributes rights to acquire securities without proper registration[191]. - The company may face difficulties in protecting shareholder interests due to its incorporation under Cayman Islands law, which offers less protection compared to U.S. laws[194]. - The company may incur significant expenses and management distraction if involved in class action suits related to market price instability[188]. - The company must comply with various tax regulations, including potential withholding obligations for non-resident enterprise income tax[174]. - The company may need to expend resources to comply with tax regulations or to establish that it should not be taxed under these regulations, potentially affecting its financial condition[175]. - The company will not pay dividends for the foreseeable future and intends to retain future earnings to finance operations and expansion[191].