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The risk factors described below and similar risk factors we may face are important to understanding other statements in this Report and should be reviewed carefully.
−Removed: The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
−Removed: and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report.
+Added: The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report.
Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results.
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Risks Related to Our Business and Industry
−Removed: ● We recently launched our own online ride-hailing platform, which makes it difficult for investors to evaluate the success of this business to date and to assess the future viability of this business.
−Removed: ● Relationship between us, our affiliates and Gaode Maps, Meituan and other cooperated partners such as Xiehua and Anma is crucial to our ability to grow our business, results of operations and financial condition.
+Added: ● We have limited experience in the operation of our own online ride-hailing platform, which makes it difficult for investors to evaluate the success of this business to date and to assess the future viability of this business.
+Added: ● Relationship between us, our affiliates and Gaode Maps and other cooperated partners is crucial to our ability to grow our business, results of operations and financial condition.
+Added: ● Our customers’ failure to fully comply with PRC online ride-hailing-related laws may expose us to potential penalties and negatively affect our operations.
● If we are unable to repossess the car collateral for delinquent financing payments of the automobile purchasers referred by us or do so in a cost-effective manner or if our ability to collect delinquent financing payments is impaired, our business and results of operations would be materially and adversely affected.
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● We are exposed to credit risk in our auto financing and prior auto financing facilitation businesses.
−Removed: ● We are required to obtain licenses and permits related to financing and lending in China for our business operations.
● Our failure to lease cars that we purchased from dealers or leased from other automobile rental companies with a satisfied utilization may have a material and adverse effect on our business, financial condition and results of operations.
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● Government policies on automobile purchases and usage in the online ride-hailing industry may materially affect our results of operations.
+Added: ● Our business is subject to laws, regulations and regulatory policies that are being continuously amended and improved, and the interpretation and implementation of newly established policies may remain uncertain, which could have an adverse impact on our business and future prospects.
● We have identified material weaknesses in our internal control over financial reporting.
−Removed: ● Our auditor is headquartered in the United States, and is subject to inspection by the PCAOB on a regular basis.
−Removed: To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company become located in China, the PCAOB may not be able inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection and our common stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act.
+Added: ● Our common stock will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCA Act, in the future if the PCAOB is unable to inspect or investigate completely our auditors.
+Added: The delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment.
+Added: Additionally, the inability of the PCAOB to conduct inspections of our auditors would deprive our investors of the benefits of such inspections.
● We face risks related to natural disasters, health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations.
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● Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.
+Added: ● We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.
● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of from our public offerings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
● We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
+Added: ● Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.
● Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
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● We have a significant number of outstanding warrants.
−Removed: ● We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
Other General Risk Factors
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Risks Related to Our Business and Industry
−Removed: We only recently launched our own online ride-hailing platform, which makes it difficult for investors to evaluate the success of this business to date and to assess the future viability of this business.
−Removed: We only launched our online ride-hailing platform since late October 2020.
−Removed: This lack of operating history may make it difficult for investors to evaluate our prospects for success for this business.
+Added: We have limited experience in the operation of our own online ride-hailing platform, which makes it difficult for investors to evaluate the success of this business to date and to assess the future viability of this business.
+Added: We launched our online ride-hailing platform in late October 2020.
+Added: This short operating history may make it difficult for investors to evaluate our prospects for success for this business.
We may not have sufficient experience to address the risks to which our operation in new or rapidly evolving markets may be exposed.
There can be no assurances that we will be able to do so.
−Removed: As a “startup” business, our online ride-hailing platform may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans.
+Added: As a relatively new business, our online ride-hailing platform may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans.
Before the year ended March 31, 2022, we used to pay a large number of driver incentives to acquire and maintain the large customer base.
However, we shifted the expansion strategy of our online ride-hailing platform to launch our platform in more cities, rather than maintaining the customer base when the industry condition changed, especially the cyber security investigation on Didi performed by PRC authorities in July 2021.
−Removed: There is no assurance that we will be successful with this business and the likelihood of success of our online ride-hailing platform must be considered in light of our
−Removed: relatively early stage of operations.
+Added: There is no assurance that we will continue to be successful with this business and the likelihood of success of our online ride-hailing platform must be considered in light of our relatively early stage of operations.
Any growth in this business will put significant demands on our processes, systems and personnel.
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We face intense competition, which could lead to our inability to secure market share or cause us to lose market share to our competitors, any of which could materially and adversely affect our business, results of operations and financial condition.
−Removed: The online ride-hailing market in China, especially in our initial target market of Chengdu, is intensely competitive and characterized by rapid changes in technology, shifting user preferences, and frequent introductions of new services and offerings.
+Added: The online ride-hailing market in China, especially in our key target markets of Chengdu, Changsha and Guangzhou, is intensely competitive and characterized by rapid changes in technology, shifting user preferences, and frequent introductions of new services and offerings.
We face intense competition in the Automobile Transaction and Financing Services, as well as the Online Ride-hailing Platform Services.
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Failure to compete with current and potential competitors could materially harm our business, financial condition and our results of operations.
−Removed: We only recently launched our own proprietary online ride-hailing platform, and as a new business line, we will be highly susceptible to competition.
We expect competition to continue, both from current competitors and new entrants in the market that may be well-established and enjoy greater resources or other strategic advantages.
If we are unable to anticipate or react to these competitive challenges, our competitive position could weaken, or fail to improve, and we could experience growth stagnation or even a decline in revenue that could materially and adversely affect our business, results of operations and financial condition.
−Removed: The relationship between us, our affiliates and Gaode Maps and Meituan, the leading platforms in China, and other cooperated partners such as Xiehua and Anma is crucial to our ability to grow our business, results of operations and financial condition.
−Removed: The strategic relationship between us, our affiliates and Gaode Maps and Meituan, the leading aggregation platforms, and other local online ride-hailing platforms is crucial to our business as most of customers we provide services to are online ride-hailing drivers.
+Added: The relationship between us, our affiliates and Gaode Maps, the leading aggregation platform in China, and other cooperated partners is crucial to our ability to grow our business, results of operations and financial condition.
+Added: The strategic relationship between us, our affiliates and Gaode Maps, the leading aggregation platform, and other local online ride-hailing platforms is crucial to our business as most of customers we provide services to are online ride-hailing drivers.
Those drivers earn income on our platform from the trip orders distributed from Gaode Maps, or directly from other platforms.
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These activities may include abuse, assault, theft, false imprisonment, sexual harassment, identity theft, unauthorized use of credit and debit cards or bank accounts, and other misconduct.
−Removed: We are not able to control or predict the actions of our customers and third parties, either during the process of providing services or otherwise.
+Added: The relevant regulations also require the licensed online ride-hailing platforms to ensure that the drivers and cars engaged in providing ride services meet the requirements stipulated by the regulations.
+Added: are not able to fully control or predict the actions of our customers and third parties, either during the process of providing services or otherwise.
While we have implemented various measures to anticipate, identify and address risks associated with these activities, we may not adequately address or prevent all illegal, improper or otherwise inappropriate activities by our users, which could damage our brand and the viability of this business.
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Any of the foregoing risks could harm our business, results of operations and financial condition.
+Added: Our customers’ failure to fully comply with PRC online ride-hailing-related laws may expose us to potential penalties and negatively affect our operations.
+Added: The online ride-hailing industry is highly regulated in China.
+Added: According to the guidelines issued by the different local authorities in China, including our major operations, Chengdu, Changsha and Guangzhou, online reservation taxi operating license, automobile certificate and online reservation taxi driver’s license are required for a driver to operate the online ride-hailing business.
+Added: Approximately 57% of our served online ride-hailing drivers have not obtained the online reservation taxi driver’s certificates as of March 31, 2023.
+Added: During the year ended March 31, 2023, we have been fined by approximately $19,000 by Traffic Management Bureaus in Chengdu and Changsha for the non-compliance on taxi driver’s certificates, of which, approximately $4,000 was further compensated by drivers or cooperated third parties.
+Added: We cannot assure you that we will not be subject to further fines, penalties or more severe administrative actions or proceedings in the future.
+Added: If we or drivers or vehicles on our platform fail to obtain or maintain any required licenses, permits or approvals or make any necessary filings in a timely matter or at all, we may be subject to a variety of penalties, including fines or potentially being forced to suspend, terminate or significantly reduce our operations in the city or jurisdiction.
+Added: Our business and results of operations will be materially affected if our affiliated drivers are suspended from providing ride-hailing services or receive substantial fines.
+Added: We are in the process of assisting the drivers to obtain the required certificates and licenses.
+Added: However, there is no guarantee that all of the drivers affiliated with us would be able to obtain all the certificates and licenses.
+Added: Our ability and method to provide the automobile transaction related services might be affected or restricted if our affiliated drivers or automobiles do not possess the requisite licenses.
+Added: Further, there is no assurance that each of the drivers who use our platform or the cars used by such drivers in providing ride-hailing services possesses the requisite license or certificate.
+Added: Our business and results of operations will be materially and adversely affected if our affiliated drivers are suspended from providing ride-hailing services or imposed substantial fines or if we are found to be in serious violation of the Interim Measures due to the drivers’ failure to obtain requite licenses and/or automobile certificates in connection with providing services through our platform.
+Added: If we fail to effectively manage the behaviors of order skipping, disintermediation and other misconduct and fraud by our users, our business, results of operations and financial condition could be materially and adversely affected.
+Added: Online ride-hailing drivers on our platform may skip orders and fail to pick up riders, or circumvent our platform and complete the transaction offline and in private.
+Added: Our users may also maliciously misappropriate subsidies provided on our platform.
+Added: For example, if we detect users engaging in cheating behaviors to earn incentives we have offered, we may be required to disqualify them from using such incentives.
+Added: We have also implemented various measures to prevent order skipping.
+Added: For example, we monitor the order completion
+Added: rate for our online ride-hailing drivers, and those with low credit scores based on riders’ feedback or behavior scores will be less likely to receive orders on our platform.
+Added: If we detect a persistent skipping pattern, we will permanently close their user accounts on our platform.
+Added: In addition, we may incur losses from various types of fraud by our users, including use of stolen or fraudulent credit card data, attempted payments by riders with insufficient funds and fraud committed by riders in concert with online ride-hailing drivers.
+Added: Bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts.
+Added: Under current credit card practices, we may be liable for rides facilitated on our online ride-hailing platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction.
+Added: We are in the process of taking measures to detect and prevent fraudulent transactions by our users, such as cross-checking a driver’s travel path against the proposed itinerary to verify the authenticity of an order.
+Added: Despite our efforts, our measures may not eliminate order skipping, disintermediation, and other user misconducts and fraud.
+Added: Our failure to adequately detect and prevent such user behaviors could materially and adversely affect our business, results of operations and financial condition.
Our affiliate or equity investee company did not have written agreements in place with certain financing partners and adverse change in our relationship with such financing partners may materially and adversely impact our business and results of operations.
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Because such financing partners are not contractually bound by any specific commitment to provide financing, they may determine not to collaborate with Hunan Ruixi and Jinkailong or limit the funding that was available for financing transactions we facilitated, which will materially and adversely affect our business, financial condition and results of operations.
−Removed: We used to advance payments for over 90% of the automobile purchases for our customers and we can provide no assurances that our current financial resources will be adequate to support this operation.
−Removed: We and our equity investee company, former VIE, Jinkailong, prepaid all the purchase price and expenses on behalf of the automobile purchasers in prior years when we provided purchase services and collect all the advance payment and relevant services fees from the proceeds disbursed by the financial institutions upon the closing of the financing and/or when the monthly installment payment made by automobile purchasers during the lease term.
−Removed: As of March 31, 2022, we still had accounts receivable of $0.3 million and advanced payments of approximately $0.2 million for the automobile purchases to be collected in the future.
−Removed: Jinkailong had accounts receivable and advanced payments totaling approximately $0.6 million.
−Removed: We funded those advance payments by proceeds of our initial public offering, the June 2019 Offering, August 2020 Offering, February 2021 Offering, May 2021 Offering, loans from financial institutions and capital contributions from shareholders.
−Removed: Our liquidity may be negatively impacted as a result of the increases in advance payments for automobile purchases in addition to general economic and industry factors.
−Removed: We anticipate that, to the extent that we require additional liquidity, it will be funded through the incurrence of other indebtedness, additional equity financings or a combination of these potential sources of liquidity.
−Removed: If we raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution.
−Removed: Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability
−Removed: to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
−Removed: The covenants under future credit facilities may limit our ability to obtain additional debt financing.
−Removed: We cannot be certain that additional funding will be available on acceptable terms, or at all.
−Removed: Any failure to raise capital in the future could have a negative impact on our financial condition and our ability to pursue our business strategies.
−Removed: Our failure to raise additional capital and in sufficient amounts may significantly impact our ability to maintain and expand our business.
Prior consent from financial institutions which provided financing to our online ride-hailing driver customers for the purchase of automobiles has not been obtained for us to sublease or sell the drivers’ automobiles.
−Removed: As described in the section titled “ Business ” above, as of March 31, 2022, approximately 1,327 ride-hailing drivers in Chengdu and Changsha exited the online ride-hailing business and tendered their purchased automobile to us for sublease or sales in order to offset monthly payment owed to us and the financial institutions.
+Added: As described in the section titled “ Business ” above, as of March 31, 2023, approximately 108 online ride-hailing drivers in Changsha and over 1,200 online ride-hailing drivers in Chengdu exited the online ride-hailing business and rendered their purchased automobile to Hunan Ruixi and Jinkailong for sublease or sales in order to offset monthly payment owed to Hunan Ruixi and Jinkailong and the financial institutions.
Their Financing Agreements with the financial institutions are still valid and in effect.
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We may also be subject to risks relating to third-party debt collection service providers whom we engage for the recovery and collection of loans.
−Removed: Under most of the Financing Agreements between the automobile purchasers and third-party financing partners, we guarantee the lease/loan payments including principal and the accrued and unpaid interest for the automobile purchase funded by these financing partners.
+Added: Under most of the Financing Agreements between the automobile purchasers and third-party financing partners, Hunan Ruixi and Jinkailong guarantee the lease/loan payments including principal and the accrued and unpaid interest for the automobile purchase funded by these financing partners.
Therefore, failure to collect lease/loan payments or to repossess the collateral may have a material adverse effect on our business operations and financial positions.
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We have in the past failed to repossess one car as the GPS trackers failed to function properly or had been disabled, and we cannot assure you that this incident will not happen again the future.
−Removed: We also cannot assure you that there will not be regulatory changes that prohibit the installation of GPS trackers, or the realized value of the repossessed cars will be sufficient to cover our customers’ payment obligations.
+Added: We also cannot assure you that there will not be regulatory changes that prohibit the installation of GPS trackers, or the
+Added: realized value of the repossessed cars will be sufficient to cover our customers’ payment obligations.
If we cannot repossess some of these cars or the residual values of the repossessed cars are lower than we expected and not sufficient to cover the automobile purchaser’ payment obligation, our business, results of operations and financial condition may be materially and adversely affected.
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Our current risk management system may not be able to accurately assess and mitigate all risks to which we are exposed, including credit risk.
−Removed: We are exposed to credit risk as we provide automobile financing facilitation to automobile purchasers and are required to provide guarantees to most of our financing partners on the financing for automobile purchases facilitated by us.
−Removed: As of March 31, 2022, the
−Removed: maximum contingent liabilities we and our equity investee company, Jinkailong would be exposed to was approximately $0.8 million and $6.3 million, respectively, assuming all the automobile purchasers were in default.
+Added: We are exposed to credit risk as Hunan Ruixi and Jinkailong provide automobile financing to automobile purchasers and are required to provide guarantees to most of their financing partners on the financing for automobile purchases facilitated by them in prior years.
+Added: As of March 31, 2023, the maximum contingent liabilities we and our equity investee company, Jinkailong would be exposed to was approximately $10,000 and $3.9 million, respectively, assuming all the automobile purchasers were in default.
As Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any consideration towards to the investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately $570,000) of which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.
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We may be deemed to operate financing guarantee business by the PRC regulatory authorities.
−Removed: Under certain arrangements in our services, we provide guarantees to our customers who apply for financing with certain of our financing partners.
+Added: Under certain arrangements in the services, Hunan Ruixi and Jinkailong provide guarantees to their customers who applied for financing in prior years with certain of their financing partners.
In August 2017, the PRC State Council promulgated the Regulations on the Administration of Financing Guarantee Companies (the “Financing Guarantee Rules”), which became effective on October 1, 2017.
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According to the Financing Guarantee Rules, the establishment of financing guarantee companies are subject to the approval by the relevant governmental authority, and unless otherwise stipulated, no entity may operate financing guarantee business without such approval.
−Removed: We do not believe that the Financing Guarantee Rules apply to our car financing facilitation business as we provide guarantees to our financing partners in connection with the financing of the purchase of automobiles and such guarantees are not provided independently as our principal business.
+Added: We do not believe that the Financing Guarantee Rules apply to our prior car financing facilitation business as we provide guarantees to our financing partners in connection with the financing of the purchase of automobiles and such guarantees are not provided independently as our principal business.
However, due to the lack of further interpretations, the exact definition and scope of “operating financing guarantee business” under the Financing Guarantee Rules is unclear.
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We adopt a stable pricing formula, considering the historical and future expenditure, remaining available leasing months and market price to determine our rental price for various rental solutions.
−Removed: During the year ended March 31, 2022, our average utilization of the automobiles for operating lease, including the ones operated by Jinkailong, was approximately 56.3%.
+Added: During the year ended March 31, 2023, our average utilization of the automobiles for operating lease, including the ones operated by Jinkailong, was approximately 64.9%, as compared with 56.3% in the year ended March 31, 2022.
However, we have limited experience in the operating lease of automobiles, and there is no assurance that we will be able to do so effectively and the utilization of automobiles held for operating lease is satisfied to generate sufficient profit and cash.
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Moreover, this credit database is only accessible to banks and a limited number of market players authorized by the Credit Reference Center and does not support sophisticated credit scoring and assessment.
−Removed: In 2015, the PBOC announced that it would open the credit reporting market to private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure in the market we operate.
+Added: In 2015, the PBOC announced that it would open the credit reporting market to
+Added: private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure in the market we operate.
For the purpose of credit assessment, we obtain credit information from prospective customers, including online ride-hailing drivers, automobile lessees, and with their authorization, obtain credit data from external parties to assess applicants’ creditworthiness.
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Any negative publicity resulting from any failures, mistakes or omissions of our safety system, including any safety incidents or data security breaches, could materially and adversely affect our reputation and brand, and could potentially lead to increased regulatory or litigation exposure.
−Removed: We also take measures to help increase safety, prevent privacy and security breaches, and protect against fraud which may make our platform less convenient or accessible for some drivers and discourage or diminish their use of our platform.
+Added: We also take measures to help increase safety, prevent privacy and security breaches, and protect against fraud which may make our platform less convenient
+Added: or accessible for some drivers and discourage or diminish their use of our platform.
Any reduction in the number or availability of drivers would likely lead to a reduction in platform usage by consumers, which in turn would make our platform less attractive to drivers.
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We may be considered as conducting payment services as a non-financial institution without a Payment Business Permit.
−Removed: Gaode Maps, Meituan and other online ride-hailing platforms settle payments to our accounts in Alipay or Qiandaibao once a week or a month.
−Removed: In general, after deducting service fees of these platforms, the remaining amounts, including the earnings of the drivers and our service fees, are transferred to XXTX’s accounts in Alipay, Qiandaibao or other banks.
+Added: Gaode Maps settles payments to XXTX’s accounts in Alipay once a week.
+Added: Meituan and other online ride-hailing platforms settles payments to accounts of Auto Business Entities in Alipay or Qiandaibao once a week or a month.
+Added: In general, after deducting service fees of these platforms, the remaining amounts, including the earnings of the drivers and our service fees, are transferred to those accounts in Alipay, Qiandaibao or other banks.
Then we settle the payments with the online ride-hailing drivers we served.
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Therefore, there is a risk that our settlement practice may cause us to be deemed as engaging in payment and settlement services without a license.
−Removed: As of the date of this Report, to our knowledge, we were not required by the relevant
−Removed: regulatory authorities to obtain the Payment Business Permit for our past settlement practice, nor have we received any penalty in connection with any purported operations of payment and settlement services without a Payment Business Permit or otherwise in violation of the above-described rules and regulations.
+Added: As of the date of this Report, to our knowledge, we were not required by the relevant regulatory authorities to obtain the Payment Business Permit for our past settlement practice, nor have we received any penalty in connection with any purported operations of payment and settlement services without a Payment Business Permit or otherwise in violation of the above-described rules and regulations.
If we encounter issues in this regard, we will consider engaging a licensed commercial bank to escrow our bank account and manage the prepayments received from our enterprise users and refund balances attributable to our individual users.
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However, we may fail to retain and attract qualified online ride-hailing drivers due to a number of reasons, such as our lack of brand recognition and reputation or our failure to provide subsidies that are comparable or superior to those of our competitors.
−Removed: Other factors beyond of our control, such as laws and regulations limiting in the markets in which we operate, increases in the price of gasoline, vehicles or insurance, and the vehicle quantity control of PRC government, may also reduce the number of private car owners and taxi drivers on our platform or their utilization of our online ride-hailing platform.
−Removed: Our failure to continuously attract and retain drives and to increase utilization of our online ride-hailing platform in a cost-effective way would impair the network effect of our platform, which would in turn materially and adversely affect our business, results of operations and financial condition.
+Added: Other factors beyond of our control, such as laws and regulations limiting in the markets in which we operate, vehicles or insurance, and the vehicle quantity control of PRC government, may also reduce the number of Active Drivers on our platform or their utilization of our online ride-hailing platform.
+Added: However, the increasing number of online ride-hailing drivers in the market may cause the decrease of average income of each driver, which, in return would make our platform, or the whole industry less attractive to drivers.
+Added: For example, according to the MOT of the People’s Republic of China, the total volume of online ride-hailing orders was approximately 735 million in May 2023 as compared with 706 in April 2023 and 527 million in May 2022.
+Added: Considering the number of online ride-hailing drivers are keep increasing while the consumer demand has no significant increase in current months in China, the MOT of certain cities, such as Changsha, Sanya has suspended issuing new online booking taxi transportation certificates and transport certificates since April and May 2023 accordingly.
+Added: In addition, changes in driver qualification
+Added: and background check requirements may increase our costs and reduce our ability to onboard additional drivers to our platform.
+Added: Our driver qualification and background check procedure varies by jurisdiction.
+Added: Any changes in the legal requirements for the qualification, screening, and background check procedure could reduce the number of drivers in those markets or extend the time required to recruit new drivers to our platform, which would adversely impact our business and growth.
+Added: Our failure to continuously attract and retain Active Drives and to increase utilization of our online ride-hailing platform in a cost-effective way would impair the network effect of our platform, which would in turn materially and adversely affect our business, results of operations and financial condition.
Changes to pricing for our online ride-hailing services could materially and adversely affect our ability to attract or retain riders and qualified drivers.
Demand for our online ride-hailing services is sensitive to ride fares, which takes into consideration, among other things, incentives paid to online ride-hailing drivers and our service fees.
−Removed: Our pricing strategies could be affected by a number of factors, including operating costs, legal and regulatory requirements or constraints, our current and future competitors’ pricing and marketing strategies, and the perception of ride fares as a non-compensatory sharing of travel cost by online ride-hailing drivers.
+Added: Our pricing strategies could be affected by a number of factors, including operating costs, legal and regulatory requirements or constraints, our current and future competitors’ pricing and marketing strategies, the principal requirement of pricing model of our cooperated platforms, and the perception of ride fares as a non-compensatory sharing of travel cost by online ride-hailing drivers.
Some competitors offer, or may in the future offer, lower-priced services.
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Our information technology infrastructure for our online ride-hailing business in Hangzhou is hosted by third-party service providers.
−Removed: Our IT systems infrastructure is currently deployed, and our data is currently
−Removed: maintained through a customized cloud computing system.
+Added: Our IT systems infrastructure is currently deployed, and our data is currently maintained through a customized cloud computing system.
Our servers are housed at third-party data centers, and our operations depend on the service providers’ ability to protect our systems in their facilities as well as their own systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events, many of which may be beyond our control.
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Any such penalties may disrupt our business operations and materially and adversely affect our business, results of operations and financial condition.
−Removed: Our customers’ failure to fully comply with PRC online ride-hailing-related laws may expose us to potential penalties and negatively affect our operations.
−Removed: The online ride-hailing industry is highly regulated in China.
−Removed: According to the guidelines issued by the different local authorities in China, including our major operations, Chengdu, Changsha and Guangzhou, online reservation taxi operating license, automobile certificate and online reservation taxi driver’s license are required for a driver to operate the online ride-hailing business.
−Removed: Approximately
−Removed: 45% of our served online ride-hailing drivers have not obtained the online reservation taxi driver’s certificates as of March 31, 2022.
−Removed: During the year ended March 31, 2022, we have been fined by approximately $178,000 by Traffic Management Bureaus in Chengdu and Changsha for the non-compliance on taxi driver’s certificates, of which, approximately $16,000 was further compensated by drivers or cooperated third parties.
−Removed: We cannot assure you that we will not be subject to further fines, penalties or more severe administrative actions or proceedings in the future.
−Removed: If we or drivers or vehicles on our platform fail to obtain or maintain any required licenses, permits or approvals or make any necessary filings in a timely matter or at all, we may be subject to a variety of penalties, including fines or potentially being forced to suspend, terminate or significantly reduce our operations in the city or jurisdiction.
−Removed: Our business and results of operations will be materially affected if our affiliated drivers are suspended from providing ride-hailing services or receive substantial fines.
−Removed: We are in the process of assisting the drivers to obtain the required certificates and licenses.
−Removed: However, there is no guarantee that all of the drivers affiliated with us would be able to obtain all the certificates and licenses.
−Removed: Our ability and method to provide the automobile transaction related services might be affected or restricted if our affiliated drivers or automobiles do not possess the requisite licenses.
−Removed: Further, there is no assurance that each of the drivers who use our platform or the cars used by such drivers in providing ride-hailing services possesses the requisite license or certificate.
−Removed: Our business and results of operations will be materially and adversely affected if our affiliated drivers are suspended from providing ride-hailing services or imposed substantial fines or if we are found to be in serious violation of the Interim Measures due to the drivers’ failure to obtain requite licenses and/or automobile certificates in connection with providing services through our platform.
We rely primarily on a third-party insurance policy to insure our auto-related risks relating to our online ride-hailing platform services.
If our insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, results of operations and financial condition.
−Removed: We may become subject to claims arising primarily from our online ride-hailing platform services for automobile-related incidents, including bodily injury, property damage and uninsured and underinsured liability.
+Added: We may become subject to claims arising primarily from our online ride-hailing platform services and automobile operating leasing for automobile-related incidents, including bodily injury, property damage and uninsured and underinsured liability.
If we are held liable to these automobile-related claims under court orders and the amounts exceed our applicable aggregate coverage limits, we would bear the excess, in addition to amounts already incurred in connection with deductibles or otherwise paid by our insurance provider.
11 unchanged sentences
Reclassification of drivers as employees, workers or quasi-employees where those statuses exist could require us to fundamentally change our business model, with repercussions that are difficult to anticipate.
−Removed: Among other things, reclassification could subject us to vicarious liability for any misconduct of drivers, require us to pay them wages, make social insurance contributions or provide other benefits, or reduce our attractiveness to drivers given the loss of flexibility under an employee model.
+Added: Among other things, reclassification could subject us to vicarious liability for any misconduct of drivers, require us to pay them wages, make
+Added: social insurance contributions or provide other benefits, or reduce our attractiveness to drivers given the loss of flexibility under an employee model.
In December 2021, media reported that China plans to amend laws to allow ride-hailing drivers and food delivery workers to form unions.
18 unchanged sentences
Should any of our competitors or technology partners modify their products, standards or terms of use in a manner that degrades the functionality or performance of our platform or gives preferential treatment to competitive products or services or is otherwise disadvantageous to us, our business, results of operations and financial condition could be materially and adversely affected.
−Removed: If we fail to effectively manage the behaviors of order skipping, disintermediation and other misconduct and fraud by our users, our business, results of operations and financial condition could be materially and adversely affected .
−Removed: Online ride-hailing drivers on our platform may skip orders and fail to pick up riders, or circumvent our platform and complete the transaction offline and in private.
−Removed: Our users may also maliciously misappropriate subsidies provided on our platform.
−Removed: For example, if we detect users engaging in cheating behaviors to earn incentives we have offered, we may be required to disqualify them from using such incentives.
−Removed: We have also implemented various measures to prevent order skipping.
−Removed: For example, we monitor the order completion rate for our online ride-hailing drivers, and those with low credit scores based on riders’ feedback or behavior scores will be less likely to receive orders on our platform.
−Removed: If we detect a persistent skipping pattern, we will permanently close their user accounts on our platform.
−Removed: In addition, we may incur losses from various types of fraud by our users, including use of stolen or fraudulent credit card data, attempted payments by riders with insufficient funds and fraud committed by riders in concert with online ride-hailing drivers.
−Removed: Bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts.
−Removed: Under current credit card practices, we may be liable for rides
−Removed: facilitated on our online ride-hailing platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction.
−Removed: We are in the process of taking measures to detect and prevent fraudulent transactions by our users, such as cross-checking a driver’s travel path against the proposed itinerary to verify the authenticity of an order.
−Removed: Despite our efforts, our measures may not eliminate order skipping, disintermediation, and other user misconducts and fraud.
−Removed: Our failure to adequately detect and prevent such user behaviors could materially and adversely affect our business, results of operations and financial condition.
Government policies on automobile purchases and usage in the online ride-hailing industry may materially affect our results of operations.
1 unchanged sentence
Since 2009, the PRC government has changed the purchase tax on automobiles with 1.6 liter or smaller engines several times.
−Removed: In addition, in August 2014, several PRC governmental authorities jointly announced that from September 2014 to December 2017, purchases of new energy vehicles (“NEV”) designated on certain catalogs will be exempted from the purchase taxes.
−Removed: In April 2015, several PRC governmental authorities also jointly announced that from 2016 to 2020, NEV purchasers designated on certain catalogs will enjoy subsidies.
+Added: In addition, in August 2014, several PRC governmental authorities jointly announced that from September 2014 to December 2017, purchases of NEVs designated on certain catalogs will be exempted from the purchase taxes.
+Added: In April 2015, several PRC governmental authorities also jointly announced that from 2016 to 2020, NEV purchasers designated on certain catalogs will enjoy
In December 2016, relevant PRC governmental authorities further adjusted the subsidy policy for NEVs.
13 unchanged sentences
If automobile retail transactions indeed decline, our revenues may fluctuate and our results of operations may be materially and adversely affected.
−Removed: The online ride-hailing service market in China is still in a relatively early stage of growth with intense competition in metropolitan cities and if such market does not continue to grow or grow less than we expect, our business, financial condition and results of operations could be adversely affected.
−Removed: According to the Chinese Academy of Industry Economy Research Institute, the online ride-hailing service market in China has grown rapidly since 2015.
−Removed: However, it is still relatively new, and it is uncertain to what extent market acceptance will continue to grow, if at all.
−Removed: Our success will depend to a substantial extent on the willingness of people to more widely adopt ride-hailing.
−Removed: If the public does not perceive ridesharing as beneficial, or chooses not to adopt it as a result of concerns regarding safety, affordability or other reasons, then the ride-hailing service market may not further develop, or may develop more slowly than we expect or may not achieve the growth potential we expect, any of which could adversely affect our business, financial condition and results of operations.
−Removed: Our business is subject to numerous legal and regulatory risks that could have an adverse impact on our business and future prospects.
+Added: Our business is subject to laws, regulations and regulatory policies that are being continuously amended and improved, and the interpretation and implementation of newly established policies may remain uncertain, which could have an adverse impact on our business and future prospects.
As of March 31, 2023, our business are available in 26 cities in China.
4 unchanged sentences
A large number of proposals are before various regional, and local legislative bodies and regulatory entities regarding issues related to our industry or our business model.
+Added: As of March 31, 2023, we had not been subject to any material fines or other penalties under any PRC laws or regulations as to our business operations.
As we expand into new cities or as we add new products and services to our platform, we may become subject to additional laws and regulations that we are not subject to now.
−Removed: Existing or new laws and regulations could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, and could dampen the growth and usage of our platform, which could adversely affect our business and results of operations.
+Added: However, if the PRC government tightens regulatory for industries our business been involved in the future, and subject industry participants to new or specific requirements (including without limitation, capital requirements and licensing requirements), our business, financial condition and prospects would be materially and adversely affected.
+Added: Meanwhile, compliance with existing and future rules, laws and regulations can be costly and if our practice is deemed to violate any existing or future rules, laws and regulations, it may face injunctions, including orders to cease non-compliant activities, and may be exposed to other penalties as determined by the relevant government authorities as well.
Our business is subject to risks related to China’s automobile leasing and financing industry, including industry-wide and macroeconomic risks.
3 unchanged sentences
● general economic conditions in China and around the world;
−Removed: ● the impact by public health epidemics, including epidemic prevention policies against Covid-19, especially zero-COVID policy in China on the industries we operate in and our business, results of operations and financial condition
+Added: ● the impact by public health epidemics, including epidemic prevention policies in China on the industries we operate in and our business, results of operations and financial condition
● the growth of disposable household income and the availability and cost of credit available to finance car purchases and lease;
13 unchanged sentences
We had net losses from our continuing operations of $3,790,693 and $5,606,145 in the years ended March 31, 2023 and 2022, respectively.
−Removed: We had net loss from our discontinued operations of $2,747,209 and $5,187,214 for the years ended March 31, 2022 and 2021, respectively.
+Added: We had net loss from our discontinued operations of $2,747,209 for the year ended March 31, 2022.
We may continue to incur losses in the future.
6 unchanged sentences
We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers.
−Removed: We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers.
+Added: have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers.
With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the requirements of our operations.
11 unchanged sentences
(ii) be lacking adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned;
−Removed: (iii) be lacking adequate policies and procedures in our data management, storage, backup and recovery, including IT or Cybersecurity risk and vulnerability assessment, annual disaster recovery drills were not established and performed, system firewall configurations were not properly set up;
−Removed: (iv) did not establish and perform appropriate regular monitoring and testing on the security for the financial system, including lack of formal management of system change, user access and periodic review;
−Removed: and (iv) had deficiencies in our IT general controls, including lacking of IT policies and procedures, system monitoring, access and other managements, etc.
+Added: and (iii) had deficiencies in our IT general control regarding to the Logical Access Security, Change Management, IT Operations and Cybersecurity of our financial system and key application system.
We have implemented, and will continue to implement, measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to these material weaknesses.
−Removed: As of March 31, 2022, we hired an internal audit staff to start our internal audit work.
We plan to (i) continuously hire additional accounting staffs with comprehensive knowledge of U.S.
1 unchanged sentence
(ii) ameliorate our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internal controls related to financial reporting;
−Removed: (iii) improve our system security environment and conducting regular data and access management in all aspects of our financial system and penetration testing to ensure the network and information security;
−Removed: and (iv) improving our IT environment and daily management.
+Added: and (iii) improving our IT environment and daily management.
We cannot assure you that the measures we have taken to date, and actions we intend to take in the future, will be sufficient to remediate material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.
7 unchanged sentences
Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.
−Removed: Our auditor is headquartered in the United States, and is subject to inspection by the PCAOB on a regular basis.
−Removed: To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company become located in China, the PCAOB may not be able inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection and our common stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act.
+Added: Our common stock will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCA Act, in the future if the PCAOB is unable to inspect or investigate completely our auditors.
+Added: The delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment.
+Added: Additionally, the inability of the PCAOB to conduct inspections of our auditors would deprive our investors of the benefits of such inspections.
The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020.
The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
−Removed: Our independent registered public accounting firm issued an audit opinion on the financial statements incorporated by reference in this prospectus filed with the SEC and will issue audit reports related to us in the future.
−Removed: As auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the PCAOB.
−Removed: However, to the extent that our auditor’s work papers become located in China, such work papers will not be subject to inspection by the PCAOB because the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities.
−Removed: Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.
+Added: Our current auditor, Marcum Asia CPAs LLP, or Marcum Asia, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
+Added: Marcum Asia is headquartered in New York, New York, and was not included in the list of PCAOB Identified Firms in the PCAOB Determination Report issued in December 2021.
We are required by the HFCAA to have an auditor that is subject to the inspection by the PCAOB.
5 unchanged sentences
The proposed rule would also establish the manner of the PCAOB’s determinations;
−Removed: the factors the PCAOB will evaluate
−Removed: and the documents and information it will consider when assessing whether a determination is warranted;
+Added: the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted;
the form, public availability, effective date, and duration of such determinations;
2 unchanged sentences
On June 22, 2021, the U.S.
−Removed: Senate passed a bill which, if passed by the U.S.
−Removed: House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
+Added: Senate passed the Accelerating Holding Foreign Companies Accountable Act which proposed to reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, thus reducing the time period before the securities of such foreign companies may be prohibited from trading or delisted.
+Added: On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was signed into law by the U.S.
+Added: House of Representatives, which officially reduce the number of years that the auditor is not subject to inspection to two consecutive years.
+Added: On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by mainland China and Hong Kong authorities in those jurisdictions.
+Added: The PCAOB has made such designations as mandated under the HFCA Act.
+Added: Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions in the future.
+Added: As of the date of this annual report, our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021.
The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above.
5 unchanged sentences
For example, if a company was not subject to the PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.
−Removed: On December 2, 2021, the SEC issued amendments to finalize the interim final rules previously adopted in March 2021, and established procedures to identify issuers and prohibit the trading of the securities of certain registrants as required by the HFCAA.
+Added: On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the PRC (the “Statement of Protocol”), which is intended to enable the PCAOB to inspect and investigate completely registered public accounting firms in mainland China and Hong Kong.
+Added: According to a statement released by the PCAOB, the Statement of Protocol (i) provides the PCAOB with sole discretion to select the firms, audit engagements and potential violations it inspects and investigates without consultation with, nor input from, Chinese authorities, (ii) puts procedures in place for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed and (iii) provides the PCAOB with direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates.
+Added: While the Chairs of both the PCAOB and the SEC made statements supporting the Statement of Protocol, both emphasized that this is only the first step in the process.
+Added: As such, uncertainties remain regarding how the Statement of Protocol will be implemented and how it will impact China-based issuers and there is no assurance that the PCAOB will be able to execute, in a timely manner, its future inspections and investigations in a manner that satisfies the Statement of Protocol.
+Added: While the Statement of Protocol may lead to resolution of the previously identified issues, there can be no assurance that this will be the case.
+Added: On December 15, 2022, the PCAOB issued a new Determination Report which:
+Added: (1) vacated the December 16, 2021 Determination Report;
+Added: and (2) concluded that the PCAOB has been able to conduct inspections and investigations completely in the PRC in 2022.
+Added: The December 15, 2022 Determination Report cautions, however, that authorities in the PRC might take positions at any time that would prevent the PCAOB from continuing to inspect or investigate completely.
+Added: As required by the HFCAA, if in the future the PCAOB determines it no longer can inspect or investigate completely because of a position taken by an authority in the PRC, the PCAOB will act expeditiously to consider whether it should issue a new determination.
While the HFCAA is not currently applicable to the Company because the Company’s current auditors are subject to PCAOB review, if this changes in the future for any reason, the Company may be subject to the HFCAA.
3 unchanged sentences
We face risks related to natural disasters, health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations.
−Removed: An outbreak of respiratory illness caused by COVID-19 emerged in China in late 2019 and has expanded within the rest of China and globally.
−Removed: On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January 2020.
+Added: We are vulnerable to other natural disasters and calamities.
+Added: Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services.
The COVID-19 pandemic has materially and adversely affected the global economy, our markets in China and our business.
−Removed: Although gradually recovering from the pandemic, China is still facing with multiple resurgences from time to time.
−Removed: China keeps its lockdown policy and travel restrictions to halt resurgences.
−Removed: Upon such occurrence, our operation for online ride-hailing services in that city may be materially and adversely impacted.
+Added: Our business was adversely affected by the effects of COVID-19 coronavirus, the prevention and control policies, including the zero-COVID policy in China.
+Added: Although China has adjusted the prevention and control policies against COVID-19 and the market has been gradually recovering from the COVID-19 pandemic, we could not forecast whether the prevention and control policies shall be similar if other epidemics incur in the future.
+Added: Upon such occurrence, our operation may be materially and adversely impacted.
Our business could also be adversely affected by the effects of other epidemics.
1 unchanged sentence
In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy in general.
−Removed: At the same time, we are also vulnerable to other natural disasters and calamities.
−Removed: Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services.
Risks Related to Doing Business in China
4 unchanged sentences
Foreign ownership of internet-based businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations.
−Removed: For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Provisions on the Administration of Foreign-invested Telecommunication Enterprises, the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2018 Version), the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2019 Version), the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2020 Version) and the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2021 Version) (which came into force and replaced the 2020 Version on January 1, 2022).
+Added: For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce, domestic multiparty communication, store-and-forward and call center) in accordance with the Provisions on the Administration of Foreign-invested Telecommunication Enterprises and the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2021 Version) (which came into force and replaced the 2020 Version on January 1, 2022).
The PRC Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities.
−Removed: If any business of the Company is “restricted” or “prohibited” from foreign investment under the “Negative List” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, and we may be required to unwind or restructure our business operations, any of which may have a material adverse effect on our business operation.
+Added: If any of our business is “restricted” or “prohibited” from foreign investment under the “Negative List” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, and we may be required to unwind or restructure our business operations, any of which may have a material adverse effect on our business operation.
Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to our business operation, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.
10 unchanged sentences
Under the EIT Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%.
−Removed: The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over
−Removed: and overall management of the business, productions, personnel, accounts and properties of an enterprise.
+Added: The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise.
In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
−Removed: Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.
+Added: Although this circular
+Added: only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.
According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met:
11 unchanged sentences
Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
−Removed: The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
+Added: The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a SAT Bulletin 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
Under Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes.
1 unchanged sentence
Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.
−Removed: In February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698.
−Removed: Circular 7 has introduced a new tax regime that is significantly different from that under Circular 698.
−Removed: Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company.
−Removed: In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
−Removed: Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets.
+Added: In February 2015, the SAT issued SAT Bulletin 7 to replace the rules relating to indirect transfers in Circular 698.
+Added: SAT Bulletin 7 has introduced a new tax regime that is significantly different from that under Circular 698.
+Added: SAT Bulletin 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company.
+Added: In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
+Added: SAT Bulletin 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets.
Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer.
Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax.
−Removed: As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to
−Removed: pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
+Added: As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
On October 17, 2017, the SAT issued the Public Notice on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Notice 37, which came into effect on December 1, 2017.
3 unchanged sentences
The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing.
−Removed: As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59, Circular 7 or SAT Notice 37, and may be required to expend valuable resources to comply with Circular 59, Circular 7 and SAT Notice 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
−Removed: The PRC tax authorities have the discretion under SAT Circular 59, Circular 7 and SAT Notice 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment.
+Added: As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59, SAT Bulletin 7 or SAT Notice 37, and may be required to expend valuable resources to comply with Circular 59, SAT Bulletin 7 and SAT Notice 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
+Added: The PRC tax authorities have the discretion under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment.
Although we currently have no plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures.
−Removed: If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59, Circular 7 and SAT Notice 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.
+Added: If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.
We are required to obtain a value-added telecommunication business certificate and be subject to foreign investment restrictions.
2 unchanged sentences
These sanctions include corrective orders and warnings from the PRC communication administration authority, fines and confiscation of illegal gains and, in the case of significant infringements, the websites may be ordered to cease operation.
−Removed: To the extent that the PRC regulatory authorities require such value-added telecommunication certificate to be obtained or set forth rules that impose additional requirements, and we do not obtain such certificate, we may be subject to the sanctions described above.
+Added: To the extent that the PRC regulatory authorities require such value-added telecommunication certificate to be obtained or set forth rules that impose additional requirements.
+Added: As of the date of this Report, none of our subsidiaries have been authorized VATS licenses as we are do not operate the value-added telecommunications services as defined by the regulations.
+Added: However, it is uncertain whether any of our business are defined as the operation of a value-added telecommunication business in the future and we do not obtain such certificate, we may be subject to the sanctions described above.
According to the Provisions on the Administration of Foreign-Invested Telecommunication Enterprises, the ratio of investment by foreign investors in a foreign-invested telecommunication enterprise that engages in the operation of a value-added telecommunication business shall not exceed 50%.
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Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like us with significant China-based operations, all of which could increase our compliance costs, subject us to additional disclosure requirements.
−Removed: If the Chinese government were to impose new requirements for approval from the PRC authorities to our future offshore offerings, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
+Added: In addition, uncertainties with respect to the PRC legal system could adversely affect us.
+Added: We conduct all of our business through our subsidiaries in China.
+Added: Our operations in China are governed by PRC laws and regulations.
+Added: Our PRC subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises.
+Added: The PRC legal system is based on statutes.
+Added: Prior court decisions may be cited for reference but have limited precedential value.
The recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital raising activities in the United States.
−Removed: In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations.
−Removed: We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or
−Removed: policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
−Removed: On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law, or the Opinions.
−Removed: The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the supervision over overseas listings by China-based companies.
+Added: In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the
+Added: effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations.
+Added: We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective.
−Removed: On August 1, 2021, the China Securities Regulatory Commission (the “CSRC”) stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers.
+Added: On August 1, 2021, the CSRC stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers.
To the best knowledge of this Company, as of the date of this Report, current Chinese laws and regulations do not forbid us from issuing securities overseas.
−Removed: On December 24, 2021, the CSRC, issued Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the “Administration Provisions”), and the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the “Draft Measures”), which were opened for public comments until January 23, 2022.
−Removed: These draft measures propose to establish a new filing-based regime to regulate overseas offerings and listings by domestic companies.
−Removed: Specifically, an overseas offering and listing by a PRC company, whether directly or indirectly, an initial or follow-on offering, must be filed with the CSRC.
−Removed: According to the Administration Provision and the Draft Measures, new initial public offerings and refinancing by existing overseas listed China-based companies will be required to complete the filing procedures with PRC regulatory authorities;
−Removed: other existing overseas listed companies will be allowed sufficient transition period to complete such filing procedure.
−Removed: We may be required to complete the filing procedure as an existing overseas listed China-based companies in the future.
−Removed: However, it is uncertain when the Administration Provision and the Draft Measures will take effect or if they will take effect as currently drafted.
−Removed: If it is determined in the future that the approval of the CSRC, the CAC or any other regulatory authority is required for listed companies like us, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies.
−Removed: These regulatory agencies may impose fines or penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our stocks.
−Removed: The CSRC, the CAC, or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to suspend the listing or trading of our stocks before completing required procedures.
−Removed: Any uncertainties or negative publicity regarding such approval could have a material adverse effect on the trading price of our stocks.
−Removed: Given the current PRC regulatory environment, it is uncertain when and whether we, our PRC subsidiaries will be required to obtain permission from the PRC government for listing overseas in the future, and even when such permission is obtained, whether it will be denied or rescinded.
−Removed: We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listing.
−Removed: As of the date of this Report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to our listing from the CSRC or other PRC governmental authorities.
−Removed: However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
+Added: On December 24, 2021, the CSRC published the Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Draft Administrative Provisions”) and the Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (the “Draft Filing Measures”).
+Added: The Draft Administrative Provisions and the Draft Filing Measures lay out requirements for filing and include unified regulation management, strengthening regulatory coordination, and cross-border regulatory cooperation.
+Added: On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which took effect on March 31, 2023.
+Added: On the same date, the CSRC circulated Supporting Guidance Rules No.
+Added: 1 through No.
+Added: 5, Notes on the Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answers to Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website.
+Added: The Trial Measures, together with the Guidance Rules and Notice reiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises, and clarified and emphasized several aspects, which include but are not limited to:
+Added: (1) criteria to determine whether an issuer will be required to go through the filing procedures under the Trial Measures;
+Added: (2) exemptions from immediate filing requirements for issuers including those that have already been listed in foreign securities markets, including U.S.
+Added: markets, prior to the effective date of the Trial Measures, but these issuers shall still be subject to filing procedures if they conduct refinancing or are involved in other circumstances that require filing with the CSRC;
+Added: (3) a negative list of types of issuers banned from listing or offering overseas, such as issuers whose affiliates have been recently convicted of bribery and corruption;
+Added: (4) issuers’ compliance with web security, data security, and other national security laws and regulations;
+Added: (5) issuers’ filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to file with the CSRC after it completes subsequent offerings and to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer;
+Added: and (6) the CSRC’s authority to fine both issuers and their relevant shareholders for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation.
+Added: Specifically, pursuant to the Trial Measures, our future securities offerings in the Nasdaq Capital Market where we have previously offered and listed shall also be filed with the CSRC within 3 working days after the offering is completed.
+Added: The Trial Measures provide the CSRC with power to warn, fine, and issue injunctions against both PRC domestic companies, their controlling shareholders, and their advisors in listing or offering securities (collectively, the “Subject Entities”), as well as individuals directly responsible for these Subject Entities (the “Subject Individuals”).
+Added: For failure to comply with the Trial Measures Negative List or the Trial Measures Filing Obligations, or materially false or misleading statements in the filing and reporting required by the Trial Measures:
+Added: (1) PRC domestic companies, and their controlling shareholders if the controlling shareholders induced the PRC domestic companies’ failure to comply, severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million (approximately $145,647 and $1,456,473);
+Added: the Subject Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5 million (approximately $72,824 and $728,237).
+Added: (2) Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies and their controlling shareholders in complying with the Trial Measures and caused such failures to comply can face warnings and fines between RMB0.5 million and RMB5 million (approximately $72,824 and $728,237);
+Added: the Subject Individuals in these advisor entities may, severally, face warnings and fines between RMB0.2 million and RMB2 million (approximately $29,129 and $291,295).
+Added: As the Trial Measures are newly issued, there remain uncertainties regarding its interpretation and implementation.
+Added: Therefore, we cannot assure you that we will be able to complete the filings for our future offerings and fully comply with the relevant new rules on a timely basis, if at all.
+Added: In addition, we cannot guarantee that we will not be subject to tightened regulatory review and we could be exposed to government interference in China.
+Added: Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China.
+Added: However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China.
+Added: In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws
+Added: and regulations involve uncertainties.
+Added: In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect.
+Added: As a result, we may not be aware of our violation of these policies and rules until some time after the violation.
+Added: In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.
Compliance with China’s new Data Security Law, Measures on Cybersecurity Review, Personal Information Protection Law, regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.
4 unchanged sentences
Additionally, China’s Cyber Security Law, requires companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on their networks.
−Removed: Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform
−Removed: obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered.
+Added: Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered.
Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level to which the entity’s information and network systems belong-from the lowest Level 1 to the highest Level 5 pursuant to the Measures for the Graded Protection and the Guidelines for Grading of Classified Protection of Cyber Security.
7 unchanged sentences
stock market.
−Removed: Also, on August 20, 2021, the SCNPC passed the Personal Information Protection Law, started to be implemented on November 1, 2021.
+Added: Also, on August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, started to be implemented on November 1, 2021.
The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China.
3 unchanged sentences
Compliance with the Cyber Security Law and the Data Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future.
−Removed: Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, and our belief that we are currently in compliance therewith, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations.
+Added: Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, and our belief that we are currently in compliance therewith, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security
+Added: Law and/or related implementing regulations.
Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations.
4 unchanged sentences
Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.
−Removed: On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures, which will take effect on February 15, 2022.
−Removed: The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, net platform operators engaging
−Removed: in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC.
+Added: On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022.
+Added: The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, online platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC.
According to the Cybersecurity Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing.
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As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation of such regulations.
−Removed: As of the date of this Report, we, our PRC subsidiaries and equity investee company, (i) are not required to obtain permissions from any PRC government authorities on the operation of our PRC subsidiaries and the issuance of our stocks to foreign investors, (ii) are not required to obtain permissions from the CSRC, CAC or any other government authorities on our PRC subsidiaries’ operations, and (iii) have not received or were denied such permissions by any PRC government authorities.
−Removed: When the Cybersecurity Review Measures become effective, and if the Security Administration Draft is enacted as proposed, we believe that the operations of our PRC subsidiaries and our listing will not be affected and that we will not be subject to cybersecurity review by the CAC, given that our PRC subsidiaries possess personal data of fewer than one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this Report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future.
+Added: We have made our determinations based on Yuantai Law Offices, our PRC counsel, to the extent that the discussion relates to matters of CSRC, CAC and other government authorities on our PRC subsidiaries’ operations and concluded that:
+Added: as of the date of this Report, we, our PRC subsidiaries and equity investee company, (i) are not required to obtain permissions from the CSRC, CAC or any other government authorities on our PRC subsidiaries’ operations, and (ii) have not received or were denied such permissions by any PRC government authorities.
+Added: If the Security Administration Draft is enacted as proposed, we believe that the operations of our PRC subsidiaries and our listing will not be affected and that we will not be subject to cybersecurity review by the CAC, given that our PRC subsidiaries possess personal data of fewer than one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this Report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future.
There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft.
1 unchanged sentence
We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future.
−Removed: During such reviews, we may be required to suspend our operation or experience other disruptions to our operations.
+Added: During such reviews, we may be required to suspend our operation or experience other disruptions to our
Cybersecurity review and network data security review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect our business, financial conditions, and results of operations.
5 unchanged sentences
This could have a material adverse effect on our results of operations and business prospects.
−Removed: Second, the notion of “important
−Removed: data” is not clearly defined by the Cyber Security Law or the Data Security Law.
+Added: Second, the notion of “important data” is not clearly defined by the Cyber Security Law or the Data Security Law.
In order to comply with the statutory requirements, we will need to determine whether we possess important data, monitor the important data catalogs that are expected to be published by local governments and departments, perform risk assessments and ensure we are complying with reporting obligations to applicable regulators.
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For example, loans by us to our PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE.
−Removed: The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by the MOFCOM or its local counterpart and the amount of registered capital of such foreign-invested company.
+Added: The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by the MOFCOM or its local counterpart and the amount of registered capital of such foreign-invested company or 2.5 times of the net assets of such foreign-invested company.
We have financed and expect to continue to finance our PRC subsidiaries by means of capital contributions.
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Circular 16 reiterates the principle that RMB converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purpose beyond its business scope or prohibited by PRC Laws or regulations, while such converted RMB shall not be provide as loans to its non-affiliated entities.
−Removed: As Circular 16 is newly issued and SAFE has not provided detailed guidelines with respect to its interpretation or implementation, it is uncertain how these rules will be interpreted and implemented.
+Added: SAFE has not provided detailed guidelines with respect to its interpretation or implementation, it is uncertain how these rules will be interpreted and implemented.
Violations of these Circulars could result in severe monetary or other penalties.
These circulars may significantly limit our ability to use RMB converted from the net proceeds of our public offerings to fund the establishment of new entities in China by our PRC subsidiaries, to invest in or acquire any other PRC companies through our PRC subsidiaries.
+Added: As March 31, 2023, the Company has made accumulated capital contributions and loans of $21.1 million and $2.9 million directly to the subsidiaries, respectively.
+Added: The contributions were generated from our historical offering proceeds.
+Added: Besides, the Company also loaned accumulated approximately $2.2 million to our former VIE, Jinkailong, through our subsidiaries in PRC.
+Added: The loans were from the daily operation of these subsidiaries.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future capital contributions or future loans by us to our PRC subsidiaries.
4 unchanged sentences
Under PRC laws and regulations, our PRC subsidiaries, as a wholly foreign-owned enterprise in China, may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations.
−Removed: a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.
+Added: In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.
At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds.
These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.
−Removed: Our PRC subsidiaries are currently unable to pay us any dividend given their financial condition.
+Added: Our PRC subsidiaries currently suffer accumulated loss and are unable to pay us any dividend given their financial condition.
If our PRC subsidiaries’ financial condition improves, the above discussed PRC laws will likely limit their ability to pay dividends or make other distributions to us.
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There remains significant international pressure on the PRC government to adopt a flexible currency policy.
−Removed: Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our securities in U.S.
+Added: Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the
+Added: value of, and any dividends payable on, our securities in U.S.
For example, to the extent that we need to convert U.S.
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Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements.
−Removed: Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange
−Removed: regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents.
+Added: Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents.
But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
6 unchanged sentences
As of March 31, 2023 and 2022, we did not make adequate employee benefit contributions in the amount of $1,086,526 and $963,824, respectively, for our continuing operations.
−Removed: As of March 31, 2021, we did not make adequate employee benefit contributions in the amount of $897,091 for our discontinued operations.
We accrued the amount in accrued payroll and welfare.
4 unchanged sentences
Moreover, the Anti-Monopoly Law requires that the MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are triggered.
−Removed: In addition, the security review rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.
+Added: In addition, the security review rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review,
+Added: including by structuring the transaction through a proxy or contractual control arrangement.
In the future, we may grow our business by acquiring complementary businesses.
21 unchanged sentences
This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
−Removed: If our stockholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries.
+Added: If our stockholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be
+Added: restricted in our ability to contribute additional capital to our PRC subsidiaries.
Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
6 unchanged sentences
Our common stock is currently listed for trading on The Nasdaq Capital Market, and the continued listing of our common stock on The Nasdaq Capital Market is subject to our compliance with a number of listing standards.
−Removed: On August 16, 2021, we received notices from Nasdaq that because the closing bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days,
−Removed: we no longer complied with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules.
+Added: On August 16, 2021, we received a notice from Nasdaq that because the closing bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days, we no longer complied with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules.
On February 15, 2022, we received a letter from Nasdaq informing that trading of the Company’s common stock will be suspended at the opening of business on February 24, 2022, unless the Company requests an appeal of Nasdaq’s determination.
2 unchanged sentences
Should the Company fail to meet the minimum bid price requirement for a period of 30 consecutive trading days or any other requirements for continued listing on Nasdaq, the staff will issue a Delist Determination Letter and promptly schedule a new hearing.
+Added: On May 8, 2023, we received a notice from Nasdaq to inform the Company was in compliance with the applicable Nasdaq Listing Rules.
+Added: On June 15, 2023, we received a notice from Nasdaq that because the closing bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days, we no longer complied with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules.
+Added: We are provided a compliance period of 180 calendar days in which to regain compliance.
If our common stock were no longer listed on The Nasdaq Capital Market, investors might only be able to trade on one of the over-the-counter markets.
7 unchanged sentences
The trading prices of our common stock are likely volatile and could fluctuate widely due to factors beyond our control.
−Removed: This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of internet or other companies based in China that have listed their securities in the United States in recent years.
+Added: This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of internet or other companies based in China that have listed their securities in the United States in
+Added: recent years.
The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial decline in their trading prices.
19 unchanged sentences
In addition, the so-called full-ratchet anti-dilution protections and reset provisions, subject to limited exceptions, would reduce the exercise price of the warrants in the event that we in the future issue common stock, or securities convertible into or exercisable to purchase common stock, at a lower price per share.
−Removed: As of the date of this Report, there were 6,091,296 (14,908,262 pre reverse split) shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.28 per share, and we may issue additional options, warrants and other types of equity in the future as part of stock-based compensation, capital raising transactions or other strategic transactions.
+Added: As of the date of this Report, there were 6,062,504 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.26 per share, and we may issue additional options, warrants and other types of equity in the future as part of stock-based compensation, capital raising transactions or other strategic transactions.
To the extent these options and warrants are ultimately exercised, existing holders of our common stock would experience dilution which may cause the price of our common stock to decline.
9 unchanged sentences
Our articles of incorporation and by-laws could deter a change of our management, which could discourage or delay offers to acquire us.
−Removed: Certain provisions of our articles of incorporation (the “Articles of Incorporation”) and by-laws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial
−Removed: amount of our voting stock.
+Added: Certain provisions of our articles of incorporation (the “Articles of Incorporation”) and by-laws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock.
It is possible that these provisions could make it more difficult to accomplish, or could deter transactions that stockholders may otherwise consider to be in their best interests or in our best interests.
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or (iii) arising out of the Nevada Revised Statutes, and establishing more detailed disclosure in any stockholder’s advance notice to nominate a new member of the board, including specified information regarding such nominee, which may inhibit or deter such nomination and lengthen the time needed to elect a new majority of the board.
−Removed: We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
−Removed: We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company.
−Removed: As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
−Removed: The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.
−Removed: However, we have elected not to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for private companies.
−Removed: This decision to take advantage of the extended transition period under the JOBS Act is irrevocable.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our common stock for return on your investment.
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Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Nevada law.
−Removed: Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
+Added: Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if
+Added: any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock.
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Negative publicity about our partners, outsourced service providers or other counterparties, such as negative publicity about any failure by them to adequately protect the information of users, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation.
−Removed: Furthermore, any negative development in any of the automobile financing or ride-hailing industries, such as bankruptcies or failures of other companies in any of this these, and especially a large number of such bankruptcies or failures, or
−Removed: negative perception of any of the industries as a whole, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new clients.
+Added: Furthermore, any negative development in any of the automobile financing or ride-hailing industries, such as bankruptcies or failures of other companies in any of this these, and especially a large number of such bankruptcies or failures, or negative perception of any of the industries as a whole, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new clients.
Negative developments in these industries, such as widespread automobile purchaser/borrower defaults, unethical or illegal activities by industry players and/or the closure of companies providing similar services, may also lead to tightened regulatory scrutiny of these sectors and limit the scope of permissible business activities that may be conducted by us.
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Any prolonged slowdown in the Chinese or global economy may have a negative impact on our business, results of operations and financial condition.
−Removed: In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates, may affect automobile purchasers’ willingness to seek financing and financing partners’ ability and desire to provide financing.
−Removed: Economic conditions in China are sensitive to global economic conditions.
−Removed: The global financial markets have experienced significant disruptions since 2008 and the United States, Europe and other economies have experienced periods of recession.
−Removed: The recovery from the lows of 2008 and 2009 has been uneven and there are new challenges, including the escalation of the European sovereign debt crisis from 2011 and the slowdown of China’s economic growth since 2012 which may continue.
−Removed: There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.
−Removed: In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates, may affect consumers’ demand for cars, car buyers’ willingness to seek credit and financial institutions’ ability and desire to fund financing
−Removed: transactions we facilitate.
+Added: In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates, may affect automobile purchasers and lessees’ willingness to seek working opportunities and financing partners’ ability and desire to provide financing.
Economic conditions in China are sensitive to global economic conditions.
−Removed: As of the date of this Report, we are unable to assess the full impact of the outbreak on our business, results of operations and financial condition.
+Added: The COVID-19 pandemic resulted in declines in economic activities in China and other parts of the world and raised concerns about the prospects of the global economy.
+Added: There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal
+Added: policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.
There have also been concerns over unrest in Ukraine, the Middle East and Africa, which have resulted in volatility in financial and other markets.
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Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.
+Added: As of the date of this Report, we are unable to assess the full impact of the outbreak on our business, results of operations and financial condition.
Our ability to protect the confidential information of our customers may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions.
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We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements with our employees and others to protect our proprietary rights.
−Removed: We have 20 software copyrights, 52 trademarks and one trademark application pending at the PRC Trademark Office.
+Added: We have 19 software copyrights, 52 trademarks and two trademark applications pending at the PRC Trademark Office.
Thus, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us with competitive advantages.
In addition, because of the rapid pace of technological change in our industries, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.
−Removed: It is often difficult to register, maintain and enforce intellectual property rights in China.
+Added: Intellectual property protection may not be sufficient in the jurisdiction in China.
Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation.
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To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions.
−Removed: Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
+Added: Any failure in protecting
+Added: or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
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Unless we are able to control our labor costs or pass on these increased labor costs to our customers by increasing the fees of our services, our financial condition and results of operations may be adversely affected.
−Removed: Furthermore, on July 16, 2021, the Ministry of Human Resources and Social Security, the National Development and Reform Commission, the Ministry of Transport, together with several other governmental authorities jointly promulgated Guiding Opinions on Safeguarding the Rights and Interests of Labors in New Forms of Employment, which require, among others, platform enterprises adopting labor outsourcing and other cooperative labor methods to undertake corresponding responsibilities in accordance with laws and regulations when labors’ rights and interests are damaged, call for organizing and launching pilot programs for occupational injury protection of flexible employment personnel, focusing on platform enterprises in industries such as mobility, takeout, instant delivery and intra-city freight, and encourage platform enterprises to improve the protection for flexible employment personnel on the platform by purchasing personal accident, employer liability and other commercial insurances.
−Removed: On November 17, 2021, the Ministry of Transport, the National Development and Reform Commission, the CAC and certain other governmental authorities jointly promulgated the Opinions on Strengthening the Protection of the Rights and Interests of Labors in New Forms of Transportation Industry, which provide that the relevant departments shall urge online ride hailing platform enterprises to announce pricing rules and income distribution rules to relevant parties such as drivers and passengers.
+Added: Furthermore, on July 16, 2021, the Ministry of Human Resources and Social Security, the NDRC, the Ministry of Transport, together with several other governmental authorities jointly promulgated Guiding Opinions on Safeguarding the Rights and Interests of Labors in New Forms of Employment, which require, among others, platform enterprises adopting labor outsourcing and other cooperative labor methods to undertake corresponding responsibilities in accordance with laws and regulations when labors’ rights and interests are damaged, call for organizing and launching pilot programs for occupational injury protection of flexible employment personnel, focusing on platform enterprises in industries such as mobility, takeout, instant delivery and intra-city freight, and encourage platform enterprises to improve the protection for flexible employment personnel on the platform by purchasing personal accident, employer liability and other commercial insurances.
+Added: On November 17, 2021, the Ministry of Transport, the NDRC, the CAC and certain other governmental authorities jointly promulgated the Opinions on Strengthening the Protection of the Rights and Interests of Labors in New Forms of Transportation Industry, which provide that the relevant departments shall urge online ride hailing platform enterprises to announce pricing rules and income distribution rules to relevant parties such as drivers and passengers.
The total amount paid by the passengers and the remuneration of the driver, and the ratio of the difference between the aforementioned amounts to the total amount paid by the passengers shall be displayed to the drivers.
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We will incur increased costs as a result of operating as a smaller reporting public company after we no longer qualify to be an emerging growth company, and our management will be required to devote substantial time to new compliance initiatives.
−Removed: As a smaller reporting public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company.
+Added: A smaller reporting company is defined as a company that has a public float of less than $75 million in common equity as of the last business day of its most recently completed second fiscal quarter, or if a public float of zero, has less than $50 million in annual revenues as of its most recently completed fiscal year-end.
+Added: As a smaller reporting public company, and particularly after we were no longer an emerging growth company since April 1, 2023, we will incur significant legal, accounting and other expenses that we did not incur as a private company.
In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
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For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.
−Removed: For as long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies as described in the preceding risk factor.
−Removed: We might remain an emerging growth company until March 31, 2023, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an emerging growth company as of December 31 of the applicable year.
−Removed: We also would cease to be an emerging growth company if we issue more than $1 billion of nonconvertible debt over a three-year period.
−Removed: Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
−Removed: However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
+Added: Pursuant to Section 404, we were not required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
+Added: However, since we are a smaller reporting company, we are not required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.
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The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.
−Removed: If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the market price for our common stock would likely decline.
+Added: If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the market price for our
+Added: common stock would likely decline.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common stock to decline.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.