20-F: Jiuzi Holdings Inc. Reports Annual Results for Fiscal Year 2024, Highlights Strategic Shifts and Risks

Jiuzi Holdings Inc.'s annual report for the fiscal year ended October 31, 2024, reveals a strategic shift towards new energy batteries and Southeast Asian electric vehicles, alongside significant financial losses and ongoing risks associated with operating in China.

Summary

• Jiuzi Holdings Inc. reports its annual results for the fiscal year ended October 31, 2024.
• The company is shifting its focus to sales of new energy batteries and electric vehicles in Southeast Asia.
• The company's revenue for the year was $1.4 million, derived from proprietary products and resales of sourced equipment.
• The company experienced a net loss of $55.8 million, a significant increase from the $4.8 million loss in the previous year.
• The company's operating expenses increased substantially, primarily due to share-based compensation and provisions for bad debt.
• The company acknowledges risks associated with operating in China, including regulatory uncertainties and potential government intervention.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could impact its listing on U.S. exchanges.
• The company's internal control over financial reporting was deemed ineffective due to material weaknesses.
• The company plans to implement remedial actions to strengthen its accounting and financial reporting functions.
• The company's auditor, Audit Alliance LLP, has issued an opinion with an explanatory paragraph regarding going concern considerations.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to significant financial losses, ineffective internal controls, and going concern doubts, despite strategic shifts towards growth areas.

Positives

• The company is focusing on the growing new energy vehicle market.
• The company has expanded its global network to integrate resources and demand.
• The company has identified key application areas for its battery business, including electric vehicles and energy storage systems.

Negatives

• The company experienced a significant net loss of $55.8 million.
• The company's operating expenses increased substantially.
• The company's internal control over financial reporting was deemed ineffective.
• The company's auditor has expressed doubt about the company's ability to continue as a going concern.
• The company has a significant provision for bad debt of $42.0 million.

Risks

• The company faces risks associated with operating in China, including regulatory uncertainties and potential government intervention.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCAA), which could impact its listing on U.S. exchanges.
• The company's reliance on the Chinese automotive industry and collaboration with suppliers poses business risks.
• The company may encounter operational risks originating from its inability to collect advances paid to its suppliers in the event of the suppliers' default.
• The company may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
• The company may be affected by perceptions about electric vehicle quality, safety, design, performance, and cost.

Future Outlook

The company plans to establish subsidiaries or operational outlets in key new energy cities across mainland China to enhance its brand presence and expand into home energy storage, commercial and industrial energy storage, and grid-level energy storage markets.

Industry Context

The new energy battery industry is experiencing rapid growth, driven by the adoption of electric vehicles and the development of renewable energy, with China being the largest market globally.

Comparison to Industry Standards

• The report mentions Tesla as a foreign electrical vehicle competitor that could build wholly-owned facilities in China without the need for a domestic joint venture partner.
• The report references the Chevrolet Volt battery pack fires as an example of safety concerns that affected customer perceptions about electric vehicles.
• The report cites the World Resources Institute's report on NEVs impact on China's electric grid, estimating a 10% to 11% increase in urban power grids peak load due to NEVs in the next couple of decades.

Related Party Transactions

• As of October 31, 2024, the amount due to related parties was $211,630, which consisted of $1,630 payable to Shuibo Zhang and a $210,000 interest free loan from Tao Li.

Stakeholder Impact

• Shareholders may experience significant losses due to the company's financial performance and risks.
• Employees may face uncertainty due to the company's going concern doubts and potential restructuring.
• Customers may be affected by the company's strategic shifts and potential changes in product offerings.
• Suppliers may face risks due to the company's financial instability and potential inability to fulfill obligations.

Next Steps

• The company plans to implement remedial actions to strengthen its accounting and financial reporting functions.
• The company plans to hire additional personnel with experience in US GAAP financial reporting and control procedures.
• The company will continue to monitor regulatory developments in China regarding any necessary approvals from the CSRC, CAC or other PRC governmental authorities.

Key Dates