20-F: MicroCloud Hologram Inc. Reports Financial Results for Fiscal Year Ended December 31, 2023, Outlines Share Structure and Corporate Governance

MicroCloud Hologram Inc.'s 20-F filing details the company's share structure, financial performance for the year ended December 31, 2023, and key aspects of its corporate governance.

Summary

• MicroCloud Hologram Inc. reported having 5,941,204 ordinary shares issued and outstanding as of December 31, 2023, after adjusting for a 10-for-1 share consolidation effective February 2, 2024.
• The company's share capital structure was adjusted due to the consolidation, changing the nominal or par value from US$0.0001 to US$0.001 per share.
• Holders of ordinary shares are entitled to dividends declared by the Board of Directors and have one vote per share on matters subject to shareholder vote.
• The company is not obligated to hold annual general meetings unless required by Nasdaq listing rules.
• The Board of Directors is authorized to issue additional ordinary shares and preferred shares without shareholder action, which may dilute the voting power of ordinary shareholders.
• MicroCloud Hologram Inc. is an exempted company with limited liability under Cayman Islands law, primarily conducting business through its subsidiaries in China.
• The company reported revenues of RMB 203.5 million (USD 28.9 million) and a net loss of RMB 81.6 million (USD 11.6 million) for the year ended December 31, 2023.
• The company identified material weaknesses in its internal control over financial reporting related to insufficient resources with U.S. GAAP expertise and a lack of a formal risk assessment process.
• The company is taking steps to remediate these weaknesses, including hiring personnel with relevant experience and implementing controls to ensure data accuracy.
• The company is exposed to risks associated with the holographic technology service industry, including rapid technological changes, intense competition, and uncertain market adoption of LiDAR technology.
• The company is also subject to risks related to doing business in China, including adverse changes in economic, political, and legal conditions, as well as uncertainties in the interpretation and enforcement of PRC laws and regulations.
• The company is exposed to risks associated with data security and data protection, and may be subject to penalties for non-compliance with PRC laws and regulations.
• The company is also subject to risks associated with the Holding Foreign Companies Accountable Act, which could result in the delisting of its securities from the stock exchange.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While it highlights the company's share structure and corporate governance, it also reveals a net loss for the year, material weaknesses in internal control, and various risks associated with the industry and operating environment. The sentiment is therefore slightly negative.

Positives

• Holders of ordinary shares are entitled to dividends declared by the Board of Directors and have one vote per share on matters subject to shareholder vote.
• The company is taking steps to remediate material weaknesses in internal control, including hiring personnel with relevant experience and implementing controls to ensure data accuracy.

Negatives

• The company reported a net loss of RMB 81.6 million (USD 11.6 million) for the year ended December 31, 2023.
• The company identified material weaknesses in its internal control over financial reporting related to insufficient resources with U.S. GAAP expertise and a lack of a formal risk assessment process.
• The company is exposed to risks associated with the holographic technology service industry, including rapid technological changes, intense competition, and uncertain market adoption of LiDAR technology.
• The company is also subject to risks related to doing business in China, including adverse changes in economic, political, and legal conditions, as well as uncertainties in the interpretation and enforcement of PRC laws and regulations.
• The company is exposed to risks associated with data security and data protection, and may be subject to penalties for non-compliance with PRC laws and regulations.
• The company is also subject to risks associated with the Holding Foreign Companies Accountable Act, which could result in the delisting of its securities from the stock exchange.

Risks

• Rapid technological changes in the holographic service industry may render the company's products and services obsolete.
• Intense competition in the holographic service market may create downward pressure on pricing and profitability.
• Adverse conditions in related industries, such as the automotive industry, or the global economy in general could have adverse effects on our results of operations.
• Uncertain market adoption of LiDAR, especially holographic LiDAR technology, may adversely affect the company's business.
• Insufficient pricing for services and solutions may negatively impact the company's revenues and profitability.
• Failure to attract, retain, and engage appropriately-skilled personnel, including senior management and technology professionals, may harm the company's business.
• Negative media coverage could adversely affect the company's brand and business.
• Vulnerability to intellectual property infringement charges filed by other companies may result in costly litigation and settlement expenses.
• Service disruptions or failure to scale up and adjust existing technology and infrastructure may harm the company's business and operating results.
• Unexpected system failure, interruption, inadequacy, or security breaches of the Internet infrastructure and fixed telecommunications networks in China may affect the company's operations.
• The company's insurance policies may not provide adequate coverage for all claims associated with its business operations.
• The company may be subject to claims, disputes, or legal proceedings in the ordinary course of its business.
• The company may need additional capital to support or expand its business, and it 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, which may strain its resources and divert its attention.
• 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 may be 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 its operating results and investment value.
• You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our management based on foreign laws.
• Under the PRC enterprise income tax law, we may be classified as a PRC resident enterprise, which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.
• We may not be able to obtain certain benefits under relevant tax treaties on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiaries.
• Our 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 our 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 our business and results of operations.
• The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.
• The approval of the China Securities Regulatory Commission may be required in connection with our offerings under a regulation adopted in August 2006, and, if required, we cannot assure you that we will be able to obtain such approval.
• PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries ability to increase their registered capital or distribute profits to us or otherwise expose us 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 us from using the proceeds we receive from offshore financing activities 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 business.
• Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our ordinary shares.
• 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 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 us to fines and other legal or administrative sanctions.
• Our leased property interests may be defective and our rights to lease the properties affected by such defects may be challenged, which could adversely affect our business.
• The PRC government exerts substantial influence over the manner in which we and our PRC subsidiaries must conduct our business activities.
• We 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 us by our shareholders may not be enforceable.
• Our share price may be volatile and could decline substantially.
• We do not intend to pay cash dividends for the foreseeable future.
• We 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 our market price.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us or our business, our ordinary shares price and trading volume could decline.
• We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
• If we cannot satisfy, or continue to satisfy, the requirements and rules of Nasdaq, our securities may may be delisted, which could negatively impact the price of our securities and your ability to sell them.
• We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
• We will continue to incur increased costs as a result of being a public company, particularly after we cease to qualify as an emerging growth company.
• We 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 document provides insight into the competitive landscape of the holographic technology service industry in China, highlighting the importance of innovation, market share, and strategic relationships with industry participants.

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.

Related Party Transactions

• Shenzhen Bowei borrowed a total of RMB 350,000 from Yuxiu Han (Former shareholder and current legal representative of Shenzhen Bowei) on July 1, 2020 for cash flow purpose.
• Shenzhen Ultimate Holographic Culture Communication Co., Ltd borrowed RMB 60,280 from Shenzhen Mengyun in 2020 for cash flow purpose.

Stakeholder Impact

• Shareholders may experience dilution due to the Board of Directors' authorization to issue additional ordinary shares and preferred shares without shareholder action.
• Shareholders may face difficulties in protecting their interests due to the company's incorporation under Cayman Islands law and the limited judicial precedent regarding shareholder rights.
• Shareholders may be subject to PRC withholding tax on dividends paid by the company and PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is sourced from within the PRC.
• Shareholders may be subject to securities litigation, which is expensive and could divert management attention.
• Shareholders may be subject to adverse U.S. federal income tax consequences if the company is or becomes a PFIC.

Next Steps

• The company is taking steps to remediate material weaknesses in internal control, including hiring personnel with relevant experience and implementing controls to ensure data accuracy.
• The company intends to strengthen and further secure its market leading position by reinforcing R&D development to continuously drive innovation in holographic technology, including innovations in holographic LiDAR technology, intelligent holographic vision, and holographic digital twin technology.
• The company will 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

MicroCloud Hologram, Holographic Technology, Financial Results, Share Consolidation, Corporate Governance, Risk Factors, Internal Control, LiDAR, China, Financial Statements, Warrants