20-F: MicroCloud Hologram Inc. Details Share Structure, Voting Rights in 2024 20-F Filing

MicroCloud Hologram Inc.'s 20-F filing outlines its share structure, voting rights, and various corporate governance policies.

Summary

• MicroCloud Hologram Inc., a Cayman Islands exempted company, details its share capital structure, consisting of Class A and Class B ordinary shares, with a par value of US$0.02 per share.
• Class A shares have one vote each, while Class B shares have 20 votes each, and Class B shares are convertible to Class A shares.
• The company's authorized share capital is US$200,000,000 divided into 1,000,000,000 shares.
• The document outlines dividend rights, transfer restrictions, and liquidation preferences.
• The company is subject to PRC laws and regulations, including those related to cybersecurity and data protection.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company's operations are influenced by economic, political, and legal developments in China.
• The company is an emerging growth company and has taken advantage of certain exemptions from disclosure requirements.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act) and the Accelerating Holding Foreign Companies Accountable Act (AHFCAA).
• The company is a holding company and its ability to pay dividends depends on dividends paid by its subsidiaries in China.
• The company has material customer concentration, with a limited number of customers accounting for a material portion of its revenues for the years ended December 31, 2023 and 2024.
• The company and its subsidiaries depend on a limited number of vendors for a significant portion of its purchase which may result in heightened concentration risk.

Sentiment

Score: 5

Explanation: The document presents a mix of positive and negative aspects. While there's revenue growth in services, there are also concerns about customer concentration, internal control weaknesses, and regulatory risks. The sentiment is neutral, reflecting the balanced view.

Positives

• The company's Second Amended and Restated Memorandum and Articles of Association authorize its Board of Directors to issue additional ordinary shares.
• The company is an exempted company with limited liability under the Companies Act.
• The company has taken steps to remediate material weaknesses in internal controls.
• The company is authorized to repurchase its own shares.

Negatives

• Class B Ordinary Shares are not entitled to receive dividends of any kind.
• The company has material customer concentration, with a limited number of customers accounting for a material portion of its revenues.
• The company and its subsidiaries depend on a limited number of vendors for a significant portion of its purchase which may result in heightened concentration risk.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act) and the Accelerating Holding Foreign Companies Accountable Act (AHFCAA).

Risks

• The holographic technology service industry is developing rapidly and affected by continuous technological changes, with the risk that the company cannot continue to make the correct strategic investment and develop new products to meet customer needs.
• Adverse conditions in the related industries, such as the automotive industry, or the global economy in general could have adverse effects on the company's results of operations.
• The market adoption of LiDAR, especially holographic LiDAR technology, is uncertain.
• The company's results of operations could materially suffer in the event of insufficient pricing to enable the company to meet profitability expectations.
• The company may need to raise additional capital in the future in order to execute its business plan, which may not be available on terms acceptable to the company, or at all.
• Market share of the company's holographic LiDAR products will be materially adversely affected if such products are not adopted by the automotive original equipment manufacturers (OEMs) or their supplier for ADAS applications.
• The company has material customer concentration, with a limited number of customers accounting for a material portion of its revenues for the years ended December 31, 2023 and 2024.
• The company and its subsidiaries depend on a limited number of vendors for a significant portion of its purchase which may result in heightened concentration risk.
• The period of time from a design win to implementation is long, and the company is subject to the risks of cancellation or postponement of the contract or unsuccessful implementation
• The complexity of the company's products could result in unforeseen delays or expenses from undetected defects, errors or bugs in hardware or software which could reduce the market adoption of the company's new products, damage the company's reputation with current or prospective customers, result in product returns or expose the company to product liability and other claims and adversely affect the company's operating costs.
• Failure in cost control may negatively impact the market adoption and profitability of the company's products.
• Continued pricing pressures may result in low profitability, or even losses to the company.
• The company has a limited operating history, and the company may not be able to sustain rapid growth, effectively manage growth or implement business strategies.
• If the company fails to attract, retain and engage appropriately-skilled personnel, including senior management and technology professionals, the company's business may be harmed.
• The company's business depends substantially on the market recognition of the company's brand, and negative media coverage could adversely affect the company's business.
• Failure to maintain, protect, and enhance the company's brand or to enforce the company's intellectual property rights may damage the results of the company's business and operations.
• The company may be vulnerable to intellectual property infringement charges filed by other companies.
• The company may not be able to protect the company's source code from copying if there is an unauthorized disclosure.
• Third parties may register trademarks or domain names or purchase internet search engine keywords that are similar to the company's trademarks, brand or websites, or misappropriate the company's data and copy the company's platform, all of which could cause confusion to the company's users, divert online customers away from the company's products and services or harm the company's reputation.
• The company's business is highly dependent on the proper functioning and improvement of the company's information technology systems and infrastructure.
• The company's operations depend on the performance of the Internet infrastructure and fixed telecommunications networks in China, which may experience unexpected system failure, interruption, inadequacy or security breaches.
• The company uses third-party services and technologies in connection with the company's business, and any disruption to the provision of these services and technologies to the company could result in adverse publicity and a slowdown in the growth of the company's users, which could materially and adversely affect the company's business, financial condition and results of operations.
• The company's insurance policies may not provide adequate coverage for all claims associated with the company's business operations.
• The company may be subject to claims, disputes or legal proceedings in the ordinary course of the company's business. If the outcome of these proceedings is unfavorable to the company, then the company's business, results of operations and financial condition could be adversely affected.
• The company may need additional capital to support or expand the company's business, and the company may be unable to obtain such capital in a timely manner or on acceptable terms, if at all.
• The company's management has limited experience in operating a public company and the requirements of being a public company may strain the company's resources, divert management's attention and affect the ability to attract and retain qualified board members and officers.
• The company may be materially and adversely affected by the complexity, uncertainties and changes in the PRC laws and regulations governing Internet-related industries and companies.
• The company's business may be exposed to Internet data, and the company is required to comply with PRC laws and regulations relating to cyber security. These laws and regulations could create unexpected costs, subject the company to enforcement actions for compliance failures, or restrict portions of the company's business or cause the company to change the company's data practices or business model.
• The company had previously identified certain material weaknesses which may continue to cause the company's failure to maintain an effective system of internal control over financial reporting and may result in material misstatements of the consolidated financial statements or cause the company to fail to meet the company's periodic reporting obligations.
• The company may be required to record a significant charge to earnings when the company reassesses the company's goodwill or amortizable intangible assets.
• Adverse changes in China's economic, political or social conditions, laws, regulations or government policies could have a material adverse effect on the company's business, financial condition and results of operations.
• A severe or prolonged downturn in the PRC or global economy and political tensions between the United States and China could materially and adversely affect the company's business and the company's financial condition.
• Uncertainties in the promulgation, interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and the company.
• The company may subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection.
• If the company's equity ownership is challenged by the PRC authorities, it may have a significant adverse impact on the company's operating results and your investment value.
• You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against the company or the company's management based on foreign laws.
• Under the PRC enterprise income tax law, the company may be classified as a PRC resident enterprise, which could result in unfavorable tax consequences to the company and the company's shareholders and have a material adverse effect on the company's results of operations and the value of your investment.
• The company may not be able to obtain certain benefits under relevant tax treaties on dividends paid by the company's PRC subsidiaries to the company through the company's Hong Kong subsidiaries.
• The company's PRC subsidiaries may face uncertainties relating to special preferential income tax rate in connection with PRC high and new technology enterprise and tax exempt status.
• We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
• If the chops of the company's PRC subsidiaries are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.
• Implementation of labor laws and regulations in China may adversely affect the company's business and results of operations.
• The M&A Rules and certain other PRC regulations may make it more difficult for the company to pursue growth through acquisitions.
• The approval of the China Securities Regulatory Commission may be required in connection with the company's offerings under a regulation adopted in August 2006, and, if required, the company cannot assure you that the company will be able to obtain such approval.
• PRC regulations relating to offshore investment activities by PRC residents may limit the company's PRC subsidiaries ability to increase their registered capital or distribute profits to the company or otherwise expose the company to liability and penalties under PRC law.
• 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 the company from using the proceeds the company receives from offshore financing activities to make loans to or make additional capital contributions to the company's PRC subsidiaries, which could materially and adversely affect the company's liquidity and the company's ability to fund and expand business.
• The company's PRC subsidiaries are subject to restrictions on paying dividends or making other payments to the company, which may restrict the company's ability to satisfy liquidity requirements, conduct business and pay dividends to holders of the company's Ordinary shares.
• Fluctuations in exchange rates could have a material adverse effect on the company's results of operations and the value of your investment.
• Governmental control of currency conversion may limit the company's ability to utilize revenues effectively and affect the value of your investment.
• Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or the company to fines and other legal or administrative sanctions.
• The company's leased property interests may be defective and the company's rights to lease the properties affected by such defects may be challenged, which could adversely affect the company's business.
• The PRC government exerts substantial influence over the manner in which the company and the company's PRC subsidiaries must conduct the company's business activities.
• The company are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.
• Certain judgments obtained against the company by the company's shareholders may not be enforceable.
• The company's share price may be volatile and could decline substantially.
• The company do not intend to pay cash dividends for the foreseeable future.
• The company may be subject to securities litigation, which is expensive and could divert management attention.
• The sale or availability for sale of substantial amounts ordinary shares could adversely affect the company's market price.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the company or the company's business, the company's Ordinary shares price and trading volume could decline.
• The company may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
• If the company cannot satisfy, or continue to satisfy, the requirements and rules of Nasdaq, the company's securities may be delisted, which could negatively impact the price of the company's securities and your ability to sell them.
• You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because the company are incorporated under Cayman Islands law.
• The company are an emerging growth company within the meaning of the Securities Act, and if the company take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make the company's securities less attractive to investors and may make it more difficult to compare the company's performance with other public companies.
• The company will continue to incur increased costs as a result of being a public company, particularly after the company cease to qualify as an emerging growth company.
• The company may be or become a PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders.

Future Outlook

The company aims to continually provide customers with high-quality holographic technology services by dedicating significant resources to research and development in advanced holographic technology so as to achieve steady growth of revenue and improvement of market share for the benefit of shareholders.

Industry Context

The holographic service market is characterized by intense competition, new industry standards, limited barriers to entry, disruptive technology developments, short product life cycles, customer price sensitivity and frequent product introductions.

Corporate Governance

Legal Proceedings

• The Company, along with its shareholder Joyous JD Limited, has initiated litigation in the New York Supreme Court New York County against Greenland Asset Management Corporation, the sponsor of the pre-business combination company, Golden Path Acquisition Corporation.
• Joyous JD Limited is seeking damages in connection with the Sponsor's breach of certain investment agreements which was executed by and between the Sponsor and Joyous JD Limited.
• The Company is seeking damages in connection with the Sponsor's noncompliant misuse of Form S-4 in registering shares during the course of the business combination, which resulted in a forced withdrawal of the Form S-4.
• Greenland Asset Management initiated a countersuit against the Company in response to the Company's lawsuit.

Stakeholder Impact

• Shareholders may experience dilution due to potential issuance of additional shares.
• Employees may be affected by changes in compensation and benefits.
• Customers may benefit from the company's focus on research and development and new product offerings.
• Suppliers may be affected by changes in the company's purchasing arrangements.

Next Steps

• The company will continue to expend significant resources in the research and development of holographic technology.
• The company plans to promote the implementation of holographic technology in broader mass market.
• The company will continue to cooperate closely with the upstream and downstream of the industry chain.
• The company will continue to develop and cultivate talented individuals.

Key Dates

Keywords

Ordinary Shares, Share Capital, Voting Rights, Cayman Islands, MicroCloud Hologram, HFCAA, Dividends, Warrants, LiDAR, China, Securities, Regulations, Directors, Subsidiaries, Merger, Audit, Tax