F-1/A: Carbon Zero Technologies International Files for Nasdaq IPO Amidst Expanding Recycling Operations and Mounting Losses

Carbon Zero Technologies International Inc., a Cayman Islands holding company operating primarily in China's renewable resources recycling sector, has filed an F-1/A registration statement for an initial public offering of 3,335,000 American Depositary Shares (ADSs) at an estimated price range of $11.00 to $13.00 per ADS, while reporting a significant net loss and negative operating cash flow for 2024.

Summary

• Carbon Zero Technologies International Inc. (CZTI), established in 2016, is a technology-driven renewable resources recycling company and system provider, operating primarily in mainland China through its Operating Entities.
• The company is positioned as the largest waste household appliance recycling platform in China, holding approximately 1.04% market share in 2023, having recycled approximately 21.8 million units of waste household appliances since inception to December 31, 2023, and 34.1 million units of household waste by December 31, 2024.
• CZTI operates an Online-to-Offline (O2O) model, utilizing proprietary technology applications like Boolv ShouShou (for collecting recycling information from 77,000+ sales personnel and 78,000+ end consumers), Boolv Collect (for 35,000+ registered recycling personnel to bid and accept orders), and Boolv Sorting Center (for inventory management and settlement at 3,800+ recycling stations and 237+ transit/sorting centers).
• Total revenues increased by 11.8% from RMB 4.0 billion in 2023 to RMB 4.5 billion (US$0.6 billion) in 2024, primarily driven by a 22.0% increase in ferrous metals sales volume, despite a decrease in average selling price for household waste.
• The company reported a net loss of RMB 24.8 million (US$3.4 million) in 2024, a significant decline from a net income of RMB 2.8 million in 2023, and experienced negative net cash flows from operating activities of RMB 68.4 million (US$9.4 million) in 2024.
• The initial public offering consists of 3,335,000 ADSs, each representing eight Class A ordinary shares, with an estimated price between $11.00 and $13.00 per ADS, aiming to raise approximately US$36.4 million in net proceeds.
• An additional 750,000 ADSs are being registered for resale by a selling shareholder, from which the company will not receive any proceeds.
• The company plans to use the IPO proceeds for expanding recycling operations beyond current categories (35%), expanding downstream operations including dismantling (25%), mergers and acquisitions (25%), enhancing R&D systems (5%), increasing employee compensation and talent recruitment (5%), and general working capital (5%).
• CZTI will be a 'controlled company' under Nasdaq rules, as CEO Baitong Tang will hold approximately 82.24% of the combined voting power post-offering.

Sentiment

Score: 3

Explanation: The company shows strong revenue growth and a leading market position in a growing industry, backed by innovative technology and strategic expansion plans. However, the significant net loss in 2024, negative operating cash flow, and identified material weaknesses in internal controls, coupled with extensive risks related to operating in China and the inherent dilution of the IPO, indicate a challenging financial position and high operational uncertainties. The negative financial performance outweighs the positive strategic initiatives for current sentiment.

Positives

• Established as the largest waste household appliance recycling platform in China with approximately 1.04% market share in 2023, demonstrating significant presence in a growing industry.
• Achieved substantial revenue growth of 11.8% year-over-year in 2024, reaching RMB 4.5 billion (US$0.6 billion), primarily driven by increased recycling volume of ferrous metals.
• Possesses an extensive nationwide recycling network covering over 500 cities with approximately 3,800 third-party recycling stations and over 35,000 registered recycling personnel, enabling efficient and effective supply sourcing.
• Leverages tech-driven innovations with proprietary O2O system applications (Boolv ShouShou, Boolv Collect, Boolv Sorting Center) that enhance efficiency, traceability, and standardization in the recycling process.
• Recognized by the Ministry of Commerce of China as a Key Enterprise for Resources Recycling and obtained National High Tech Enterprise title, affirming its industry leadership and technological capabilities.
• Has an industry-leading traceability system for renewable resources, providing ESG traceability capabilities and receiving invitations from the Ministry of Commerce to share and promote the system to other local governments.
• Strategic partnerships with over 15 downstream waste dismantling and disposal companies and more than 10 steel production companies ensure seamless integration and efficient distribution channels.
• Actively pursuing expansion into new high-value recycling categories like lithium-ion batteries and integrating downstream dismantling businesses to increase gross profit margin and strengthen value proposition.
• Obtained Product Carbon Footprint Certification/PCF Certification of Registration in the PRC, positioning the company to capitalize on China's carbon emissions trading system for future profit growth.

Negatives

• Reported a significant net loss of RMB 24.8 million (US$3.4 million) in 2024, a substantial deterioration from a net income of RMB 2.8 million in 2023.
• Experienced negative net cash flows from operating activities of RMB 68.4 million (US$9.4 million) in 2024, indicating that core operations are not generating sufficient cash.
• Merchandise costs increased significantly by 16.5% in 2024, outpacing revenue growth, due to increasing volume and competitive market prices offered to suppliers.
• Has a history of negative net cash flows from operating activities in both 2023 and 2024, raising concerns about financial performance sustainability.
• Identified material weaknesses in internal control over financial reporting as of December 31, 2024, including a lack of sufficient competent financial reporting and accounting personnel with U.S. GAAP and SEC reporting understanding, and a lack of formal internal control policies.
• The company's initial public offering price is substantially higher than its net tangible book value per share, resulting in immediate and substantial dilution of approximately US$10.67 per ADS for new investors.
• The company does not currently expect to pay dividends in the foreseeable future, meaning investors must rely solely on price appreciation for returns.
• The company has significant related party transactions, including substantial accounts payable to related parties (RMB 157.3 million in 2024) and loans to/from related parties, which can introduce conflicts of interest and financial opacity.
• The company's total accounts receivable turnover days increased from 27.1 days in 2023 to 44.8 days in 2024, indicating slower collection from customers.

Risks

• The rapidly evolving renewable resources recycling industry in China presents challenges due to limited established systems, absence of industry-wide pricing standards, and regulatory uncertainties, which may hinder the anticipated success and acceptance of the business model.
• Inability to meet talent recruitment needs for technological development, expanding recycling categories, and business expansion could impede development and growth.
• Risk of misalignment between technological development and business plans, potentially hindering growth if enhanced compatibility and functionality in digital systems, IT capabilities, traceability management, and financial inventory systems are not achieved.
• Market risks in implementing business strategy, including renewable resources recycling category expansion and downstream operations expansion, could materially and adversely affect business, financial condition, and results of operations if investments and operational management are not carefully evaluated.
• Potential deterioration of relationships with business partners in the renewable resources recycling value chain (e.g., sales businesses, recycling personnel, sorting centers, downstream dismantling businesses) poses a risk of adverse effects on business prospects and operations.
• The company has negative net cash flows from operating activities, which may continue, leading to substantial losses and unforeseen expenses, and hindering the ability to generate revenue and achieve positive net cash flows.
• Fluctuations or declines in the differences between merchandise costs and sales of renewable resources, and fees charged for online services, could harm business, financial condition, and results of operations.
• Expansion into new renewable resources recycling categories and offering new services may expose the company to new challenges, regulatory risks, intensified competition, and potential product liability claims.
• Risk of mishandling personal information, lack of confidence in privacy and security, and potential data breaches could deter users, harm reputation, and result in legal and regulatory risks.
• Any failure to obtain or renew certain filings, approvals, licenses, permits, and certificates required for business operations may materially and adversely affect business, financial condition, and results of operations.
• The approval, filing, or other requirements of the China Securities Regulatory Commission (CSRC) or other PRC government authorities may be required for this offering, and any failure to comply could completely hinder the ability to offer ADSs, cause significant disruption, and severely damage reputation.
• Adverse changes in economic, political, and social conditions of the PRC government could have a material adverse effect on business, financial condition, and results of operations, and may result in inability to sustain growth and expansion strategies.
• Uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations, and rapid changes in policies, could adversely affect the company and potentially lead to a material change in operations or value of ADSs.
• The Chinese government may exercise significant oversight and discretion over the conduct of subsidiaries' business and may intervene or influence their operations at any time, potentially causing material adverse changes or limiting the ability to offer securities.
• Recent greater oversight by the Cyberspace Administration of China (CAC) over data security, particularly for companies seeking to list on a foreign exchange, and other data protection obligations, could adversely impact business and the offering.
• PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject the company to liability or penalties, limit capital injection into PRC subsidiaries, or restrict profit distribution.
• Reliance on dividends and other distributions from Operating Entities in the PRC to fund cash and financing requirements, with potential restrictions and limitations by the PRC government on cash/asset transfers out of China.
• Difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against the company or management based on foreign laws.
• The Holding Foreign Companies Accountable Act (HFCAA) poses a risk of trading prohibition in the United States if the PCAOB is unable to inspect the company's auditor for two consecutive years, which could cause the value of ADSs to significantly decline or become worthless.
• No public market for ADSs prior to this offering, and no assurance that an active trading market will develop or that the market price will not decline below the initial public offering price.
• The dual-class voting structure limits the ability of Class A ordinary shareholders (ADS holders) to influence corporate matters and could discourage change of control transactions.
• Failure to establish and maintain proper internal financial reporting controls could impair the ability to produce accurate financial statements or comply with applicable regulations.
• Certain recent IPOs with smaller public floats have experienced extreme stock price run-ups followed by rapid price declines and volatility, which could make it difficult for prospective investors to assess the rapidly changing value of the ADSs.
• ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement or related to the ADSs, potentially resulting in less favorable outcomes.
• Claims relating to ordinary shares or ADSs may be submitted to arbitration, which may lead to increased costs or limit the ability to bring claims in a judicial forum.
• Voting rights of ADS holders are limited by the terms of the deposit agreement, and there is no assurance of receiving sufficient advance notice or the ability to direct voting as requested.
• Dilution of holdings due to the inability to participate in rights offerings if the company cannot register such rights or securities in the U.S.
• Limitations on the transfer of ADSs, as the depositary may close its books or refuse transfers under certain circumstances.
• The deposit agreement may be amended without consent from ADS holders, and disagreement with amendments limits choices to selling ADSs or withdrawing underlying shares.
• Increased labor costs, inability to retain suitable employees, or unfavorable labor relations may adversely affect the business, financial condition, or results of operations.
• Interruptions or failures that impair access to information technology systems could adversely affect business, including disruptions from system upgrades or security breaches.
• User growth and activity on mobile devices depend upon effective use of mobile operating systems, networks, and standards not controlled by the company, and any issues could harm user growth.
• Inability to prevent unauthorized use of intellectual property could harm business and competitive position, especially given difficulties in enforcing IP rights in China.
• Exposure to intellectual property infringement claims, which may be expensive to defend and disrupt business operations.
• Potential liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws.
• If classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to the company and non-PRC shareholders.
• Non-compliance with relevant PRC tax laws and regulations, such as not obtaining VAT invoices for fixed assets, could negatively affect financial condition and results of operations.
• Recent scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies could harm operations and reputation, and result in loss of investment.
• Uncertainties in the Hong Kong legal system could limit the availability of legal protections for the Hong Kong subsidiary.
• Failure to comply with PRC regulations regarding employee stock incentive plans may subject participants or the company to fines and sanctions.
• Inflation in the PRC could negatively affect profitability and growth if costs cannot be passed on to customers.
• Current tension in international trade, particularly with regard to U.S. and China trade policies, may adversely impact business, financial condition, and results of operations if the company expands internationally.

Future Outlook

The company plans to adhere to two strategic priorities for the next three to five years: rapid business growth by enhancing integrated system capabilities and expanding recycling categories while integrating business chain verticals. This includes strengthening technology innovation and R&D, increasing investments in digital technology, and emphasizing research on data analysis, IoT, LBS, unique product identifiers, and digital supply chain technologies. The company intends to expand its customer services through online and offline growth, aiming to add approximately 3,000 traditional offline recycling stations to cover over 6,000 total stations. It also plans to expand recycling services to include lithium-ion batteries and establish or acquire dismantling businesses to extend the value chain and increase gross profit margins. Furthermore, the company aims to strengthen business collaborations with major manufacturing enterprises and third-party systems (property management, appliance repair, home cleaning, charitable foundations) to diversify sourcing and expand the user base. The company also plans to capitalize on collected data to accumulate carbon quotas for future profit growth by participating in international/domestic carbon markets.

Management Comments

• "We intend to transform the entire renewable resources recycling business in China as we develop and deploy our Online to Offline system (O2O system) through online applications and offline sites in the traditional recycling business."
• "Our goal is to establish comprehensive, digitized, and standardized waste recycling services, covering all categories of recyclable materials."
• "We believe that our companys ability to create significant value for each player in our system means that every partner has an incentive to cooperate."
• "I believe that a robust and sustainable business is a good business, but a business that does good for society beyond generating shareholder return is a great business."
• "We believe that the value of a business lies in solving social problems and creating social value."

Industry Context

The U.S. Securities and Exchange Commission (SEC) filing highlights Carbon Zero Technologies International Inc.'s position as a technology-driven innovator in China's rapidly growing renewable resources recycling industry. The industry is characterized by steady growth (8.1% CAGR from 2017-2022, reaching 418 million tons in 2022), driven by increasing waste volumes (e.g., waste household appliances grew at 20.9% CAGR from 2017-2022) and supportive government policies aimed at carbon reduction. The traditional recycling model in China is fragmented and suffers from information asymmetry, which CZTI aims to address with its O2O system. The industry is highly competitive with over 90,000 companies, but CZTI claims to be the largest waste household appliance recycling platform with a 1.04% market share in 2023. The company's focus on digitization, end-to-end value chain coverage, and expansion into downstream dismantling aligns with key success factors in the industry, such as control over supply-side resources, recycling/dismantling capabilities, online platform operation, and scale effects. However, the industry also presents significant entry barriers related to qualifications, capital, and technology.

Comparison to Industry Standards

• CZTI claims to be the largest waste household appliance recycling platform in China with a market share of approximately 1.04% in 2023, recycling 21.8 million units of waste household appliances since inception to December 31, 2023. This indicates a leading position within its specific niche in the highly fragmented Chinese recycling industry.
• The company's O2O model, integrating online applications (Boolv ShouShou, Boolv Collect, Boolv Sorting Center) with an extensive offline network of 3,800 third-party recycling stations and 35,000+ recycling personnel, is presented as an industry innovation addressing information asymmetry and inefficiency in traditional recycling.
• CZTI's system provides industry-leading traceability capabilities for renewable resources, recording product details, sources, destinations, and sales, which is a competitive advantage, especially given the Ministry of Commerce's invitation to share and promote this system to other local governments.
• The company's expansion into downstream dismantling and disposal, as evidenced by the acquisition of Jiangxi Jingchuang Scrapped Vehicle Recycling and Dismantling Co., Ltd. and investment in Hubei Jinke, aligns with the industry trend of leading players becoming comprehensive waste recycling solution providers to increase resource utilization and profitability.
• While the document highlights CZTI's competitive strengths and market position, it does not provide specific comparable companies or their financial metrics (e.g., revenue per unit, profit margins for specific recycling categories) to benchmark against, making a direct quantitative comparison to industry standards challenging from the provided text.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of the prospectus, neither the company nor any of its subsidiaries is a party to any pending legal proceedings, nor are they aware of any such proceedings threatened against them.

Related Party Transactions

• The company has significant related party transactions, including sales to and services provided for related parties, and purchases of products and services from related parties.
• Sales to and services provided for related parties totaled RMB 12.6 million in 2023 and RMB 134.3 million in 2024, representing approximately 0% and 3% of total revenue, respectively.
• Purchases of products and services from related parties totaled RMB 1.4 million in 2023 and RMB 518.7 million in 2024, representing less than 0.1% of total purchases in both years.
• Accounts receivable from related parties were RMB 28.7 million in 2023 and RMB 44.6 million in 2024, primarily from Hubei Jinke.
• Advance to suppliers related parties was RMB 0.5 million in 2023 and RMB 0.5 million in 2024, including advances to Tianjiu and Zhoukou Bolv.
• Accounts payable to related parties were nil in 2023 and RMB 157.3 million in 2024, primarily from Jiujiang Lichuang, Jiujiang Xinchuang, GQC Yi An, GQC Siyi, GQC Yucan, Jiujiang Chen An, and Nanchang Lvshang.
• Due from related parties was RMB 1.8 million in 2023 and RMB 20.5 million in 2024, including loans to Henan ZYR, HNHY, Henan Jiataihong Environmental, Shanghai Zhongyao, Jiangxi Yuchuang, and Ms. Hong Wang.
• Due to related parties was RMB 11.5 million in 2023 and RMB 40.0 million in 2024, including short-term working capital loans from Mr. Baitong Tang, Zhoukou Bolv, SZ ARSC(LP), Ms. Meixia Zhang, China Link, Mr. Qi Yu, Jiangxi Yuchuang, Ms. Xiangying Xiang, Mr. Renlu Dong, Shanghai Zhongyao, and Jiangxi New Difeng.
• Long-term loan payable to related parties was RMB 85.9 million in 2023 and RMB 101.1 million in 2024, primarily from BJ ABGreen RSC, with an annual interest rate of 5.5% and 5% respectively, maturing in 2028 and 2026.

Stakeholder Impact

• **Shareholders (Existing & New Investors):** Significant dilution for new investors due to IPO price being substantially higher than net tangible book value. Dual-class voting structure limits influence of Class A shareholders. No expected dividends in the foreseeable future means reliance on stock price appreciation. Risks related to PRC regulations, HFCAA, and internal control weaknesses could negatively impact investment value. Potential for increased costs as a public company.
• **Employees:** Increased compensation and benefit packages, and investment in vocational training are planned, which could improve employee satisfaction and retention. However, the company's negative net cash flow and losses could pose long-term risks to job security or benefit sustainability if not reversed.
• **Customers & Suppliers:** The O2O system aims to provide more convenient recycling methods and efficient information dissemination, potentially benefiting both consumers and suppliers. Strategic partnerships with downstream companies ensure distribution channels. However, slower accounts receivable collection could impact suppliers relying on timely payments.
• **Creditors:** The company has significant bank loans and related party loans. Negative net cash flows from operations and a net loss could raise concerns about the company's ability to service its debt obligations, although management believes current cash and cash flows are sufficient for the next 12 months.
• **Regulatory Bodies:** The company is subject to extensive and evolving PRC regulations, including those related to overseas listings, data security, and anti-monopoly. Compliance failures could lead to fines, penalties, or operational restrictions. The HFCAA poses a risk of delisting if PCAOB inspections are not fully accessible.

Next Steps

• Complete the initial public offering and list ADSs on the Nasdaq Global Market under the symbol CZTI, contingent on Nasdaq approval.
• Expand recycling operations into new categories beyond household waste, ferrous metals, lithium batteries, and electronic devices.
• Expand downstream operations, including the dismantling of household appliances, plastic granulation, lithium battery recycling and dismantling.
• Pursue mergers and acquisitions involving downstream companies in the recycling and dismantling sectors.
• Enhance research and development systems, increasing investments in digital technology, data analysis, IoT, LBS, and unique product identifiers.
• Increase employee compensation and benefit packages, recruit high-level talent, and invest in vocational training.
• Strengthen business collaborations with major manufacturing enterprises and third-party systems (property management, appliance repair, home cleaning, charitable foundations) to expand sourcing and user base.
• Capitalize on collected data to accumulate carbon quotas for future profit growth by participating in international/domestic carbon markets.
• Remediate identified material weaknesses in internal control over financial reporting by hiring qualified personnel, formulating U.S. GAAP accounting policies, and improving financial closing procedures.
• Report offering information to the CSRC within 15 business days upon completion of the offering.

Key Dates

Recommendation

Keywords

Renewable Resources Recycling, Waste Management, O2O Model, China Recycling, Household Appliance Recycling, Ferrous Metals Recycling, Environmental Technology, ESG Traceability, IPO, Nasdaq Listing, Chinese Company, SEC Filing, Carbon Trading, Circular Economy, Waste Plastic Recycling, Scrap Vehicles Dismantling