Company Classification and Compliance - The company is classified as an "emerging growth company" and will benefit from reduced disclosure requirements, which may affect the attractiveness of its Ordinary Shares to investors [169]. - The company plans to rely on exemptions from certain disclosure requirements, including providing only two years of audited financial statements and reduced executive compensation disclosures [170]. - The company will remain an emerging growth company until its market value exceeds $700 million or total annual gross revenues reach $1.235 billion [172]. - After ceasing to be an emerging growth company, the company expects to incur significant expenses related to compliance with the Sarbanes-Oxley Act and public company reporting obligations [173]. - The company does not currently intend to rely on "controlled company" exemptions but may choose to do so in the future, potentially affecting board independence [175]. - The company is exempt from certain SEC reporting requirements as a foreign private issuer, which may affect the information available to investors [258]. - If the company loses its foreign private issuer status, it would incur significant additional regulatory costs and obligations [260]. - The company must comply with Nasdaq listing requirements to avoid delisting, which could negatively impact share price and liquidity [263]. Ownership and Control - As of September 30, 2023, Ms. Ma Xiaoqiu beneficially owned approximately 73.0% of the company's Ordinary Shares, classifying it as a "controlled company" under Nasdaq rules [174]. - Ms. Ma Xiaoqiu owns approximately 63.37% of the voting power, significantly influencing corporate decisions [246]. Regulatory Environment and Risks - The company operates in Hong Kong and does not collect or process personal data from Mainland China, thus avoiding direct regulatory impact from Mainland China laws [187]. - There are uncertainties regarding the potential future application of Mainland China laws to the company's operations in Hong Kong, which could materially affect its business [188]. - Compliance with Mainland China laws could result in increased operational costs and management burdens, potentially harming the company's business [192]. - The company faces uncertainties regarding the need for pre-approval from the PRC government for its U.S. listing and business operations, which could adversely affect its ability to conduct business [193]. - The PRC government may extend oversight over overseas offerings, potentially hindering the ability to offer Ordinary Shares and causing significant declines in share value [194]. - The Personal Information Protection Law, effective November 1, 2021, applies to personal information processing activities outside Mainland China for services offered to domestic individuals, but the company believes it is not subject to this law [196]. - There is significant uncertainty regarding the interpretation and enforcement of PRC laws related to cybersecurity and data privacy, which could disrupt operations and negatively impact financial conditions [198]. - The CSRC's Trial Administrative Measures for overseas securities offerings took effect on March 31, 2023, requiring domestic companies to fulfill filing procedures, adding regulatory uncertainty [199]. - The Hong Kong National Security Law, enacted on June 30, 2020, could materially affect the operations and financial position of the company's Hong Kong subsidiaries [208]. - The enforcement of PRC laws can change rapidly, potentially impacting the company's operations and the value of its securities [210]. - The U.S. government has revoked Hong Kong's preferential trade status, treating it similarly to Mainland China, which may affect the company's operations and market access [224]. - The SEC and PCAOB have implemented stricter criteria for auditing companies with significant operations in the PRC, which could lead to uncertainties regarding the company's compliance and trading status [226]. - The PCAOB has determined it can now inspect registered public accounting firms in Mainland China and Hong Kong, but future obstructions could lead to delisting risks for the company's securities [240]. Financial Performance and Market Conditions - All revenue is derived from operations in Hong Kong, making the company vulnerable to adverse political and economic conditions in the region [213]. - Ongoing protests in Hong Kong have adversely affected various sectors, including airline, retail, and real estate, leading to declines in sales [214]. - The company is susceptible to ongoing incidents affecting the stability of social, economic, and political conditions in Hong Kong, which may adversely impact business operations [217]. - Economic conditions in Hong Kong and Mainland China are sensitive to global economic conditions, and a prolonged slowdown may negatively impact customer confidence and business performance [223]. - The company relies on dividend payments from its Hong Kong Operating Subsidiaries to fund cash and financing requirements, with no current restrictions on converting Hong Kong dollars into foreign currencies [219]. - The PRC government's control over foreign currency conversion may limit the company's foreign exchange transactions, including future dividend payments [218]. - Changes in the exchange rate between the Hong Kong dollar and U.S. dollar may materially affect the company's financial condition and cash flows [265]. Share Price and Market Risks - The market price of the company's ordinary shares could be adversely affected by regulatory changes and uncertainties related to audit inspections and compliance [242]. - The market price of the Ordinary Shares is expected to be volatile, influenced by factors such as financial projections and negative publicity [247]. - The company may face significant legal expenses and management distraction if involved in securities litigation due to share price volatility [250]. - The Ordinary Shares may be thinly traded, leading to potential difficulties in selling shares at desired prices [251]. - Substantial sales of Ordinary Shares in the public market could adversely affect the market price and the company's ability to raise capital [253]. - The company is subject to lock-up restrictions for 6 months post-IPO, limiting the sale of shares by significant shareholders [254]. - Substantial future sales of Ordinary Shares could cause the market price to decline, with three existing shareholders having registered an aggregate of 2,000,000 shares for resale [274]. Future Plans and Shareholder Considerations - The company has a maximum of 1,500,000,000 authorized Ordinary Shares, with only 15,262,500 shares outstanding as of the date of the annual report [272]. - The 2024 Equity Incentive Plan, if approved, may reserve and grant a maximum of 15,000,000 Ordinary Shares, potentially diluting existing shareholders [270]. - The company may face potential shareholder dilution from future equity incentive plans and share issuances [270]. - The company has not used any derivative financial instruments to hedge foreign exchange risk, which may affect the value of investments due to currency fluctuations [578]. - The company has not used any derivative financial instruments to manage interest rate risk exposure, which is considered not material [582]. - The company may become a passive foreign investment company (PFIC), which could result in adverse U.S. tax consequences for U.S. investors [268]. Customer Concentration - For the year ended September 30, 2023, Customer B, Customer A, and Customer D accounted for 35.01%, 32.50%, and 16.23% of the Company's total revenue, respectively [581].
Techlution(ATGL) - 2023 Q4 - Annual Report