Our Holding Company Structure
Nam Tai Property Inc. is not a Chinese operating company but a BVI holding company with operations primarily conducted through our PRC subsidiaries. Under this holding company structure, holders of our common shares hold equity interests in the BVI holding company and obtain indirect ownership interests in the Chinese operating companies.
Implications of Having the Majority of Our Operations in China
We face various legal and operational risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, the PRC government has issued statements and taken regulatory actions relating to areas such as regulatory approvals on overseas offerings and listings conducted by, and foreign investment in, China-based companies, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. These legal and operational risks and uncertainties relating to doing business in China may impact our ability to conduct certain businesses, accept foreign investments, or list on and conduct offerings on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our common shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks relating to doing business in China, see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business.”
Risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China could result in a material adverse change in our operations and the value of our common shares. The PRC legal system is a civil law system based on written statutes, and unlike the common law system, prior court decisions may be cited for reference but hold limited precedential value. The PRC legal system evolves rapidly, and the interpretations of many laws, regulations and rules may change from time to time. See “Item 3. Key Information — D. Risk Factors — Risks Related to China — Uncertainties regarding the PRC legal system could adversely affect our business.”
The PRC government has significant oversight and discretion over our business and may intervene or influence our operations by promulgating new laws and regulations. It may exert strict administration over our business, which could result in a material change in our operations and/or the value of our common shares. It may also exert more oversight and control over offerings conducted overseas by, and/or foreign investment in, China-based companies, which could significantly result in a material change in our operations and/or the value of our common shares. The PRC government has indicated an intent to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based companies. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. See “Item 3. Key Information — D. Risk Factors — Risks Related to China — The PRC government’s significant oversight and discretion over our business operations could result in a material change in our operations and/or the value of our common shares.” In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — We may suffer a penalty or even forfeit land to the PRC government if we fail to comply with procedural requirements applicable to land grants from the government or the terms of the land use rights grant contracts.” Therefore, our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.
The Holding Foreign Companies Accountable Act
Pursuant to the Holding Foreign Companies Accountable Act, as amended by the Consolidated Appropriations Act of 2023 (the “Consolidated Appropriations Act”), or the HFCA Act, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit our common shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
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On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in Chinese mainland and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in Chinese mainland or Hong Kong. On August 26, 2022, the PCAOB signed a Statement of Protocol Agreement (the “SOP”) with the China Securities Regulatory Commission (the “CSRC”) and China’s Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigations (together, the “SOP Agreements”), establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in the Chinese mainland and Hong Kong, as required under U.S. law. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in the Chinese mainland and Hong Kong and voted to vacate its previous determinations to the contrary.
Our current auditor, MRI Moores Rowland LLP (“MRI”), the independent registered public accounting firm that issues the financial reports included elsewhere in this annual report, is currently registered with the PCAOB. The PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. MRI is headquartered in Singapore and is not subject to the determinations announced by the PCAOB on December 16, 2021.
However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination. Each year, the PCAOB will determine whether it can inspect and investigate audit firms completely in the Chinese mainland and Hong Kong, among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms in the Chinese mainland and Hong Kong completely and we plan to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, or that the PCAOB would determine that it can inspect or fully investigate our auditor at such future time, and if we were so identified for two consecutive years, our securities would become subject to the prohibition on trading in the United States under the HFCA Act. See “Item 3. Key Information—D. Risk Factors—Risks Related to China—The enactment of the Holding Foreign Companies Accountable Act and the adoption of any rules, legislation or other efforts to increase U.S. regulatory access to audit information could cause uncertainty and our securities could be prohibited from being traded “over-the-counter” if we are unable to meet the PCAOB requirement in time.”
An Overview on Our Core Assets
As of the date of this annual report, the Company’s core assets comprise a simple portfolio of four real estate projects, all of which are located in the Greater Bay Area:
•Nam Tai Inno Park, a 331,701 square meter (in total gross floor area, or GFA) industrial park located in Guangming District, Shenzhen. Constructed between 2018 and 2020, the for-rent project reached approximately 75% occupancy as of December 31, 2025;
•Nam Tai Technology Center, a 194,595 square meter (in total GFA) industrial park located in Bao’an District, Shenzhen. The project is currently under construction and expected to be completed by June 2026, with the acceptance inspection by July 30, 2026;
•Nam Tai Inno Valley, a to-be-redeveloped former factory facility in Bao’an District, Shenzhen, adjacent to Nam Tai Technology Center, with an existing gross floor area of 41,927 square meters. Consistent with typical redevelopment projects in the area, the gross floor area may increase upon government approval of the redevelopment plan. The final GFA and terms remain subject to regulatory approval, and we cannot assure you that the expected increase will be realized;
•Nam Tai • Longxi, a 114,520 square meter (in total GFA) for-sale residential property located in Machong, Dongguan. Constructed between 2020 and 2022, the project is currently for sale with an inventory-to-sales ratio of 88.67% as of December 31, 2025.
For detailed information on the above projects, see “Item 4. Our Business—Our Projects and Properties.”
Cash and Asset Flows through Our Organization
Nam Tai Property Inc. is a BVI holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries in China. As a result, the Company’s ability to pay dividends to our shareholders and to service our indebtedness outside China depends significantly upon dividends that we receive from our subsidiaries in China. To the extent our existing subsidiaries or any newly formed ones incur indebtedness or losses on their own behalf in the future, such indebtedness or losses may impair their ability to pay dividends or other distributions to us.
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For further discussion, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We are a holding company that depends on dividend payments from our subsidiaries for funding. To the extent funds or assets in the business are in the PRC or a PRC entity, the funds or assets may not be available to fund operations or for other use outside the PRC due to interventions in or the imposition of restrictions and limitations on the ability of our company or the operating entities by the PRC government to transfer cash or assets”, and “Item 10. Additional Information—E. Taxation.”
Restrictions and Limitations on Transfer of Cash and Cash Dividend Distribution
Subject to certain contractual, legal and regulatory restrictions, cash and capital contributions may be transferred among our BVI holding company and our Chinese operating entities. If needed, our BVI holding company can transfer cash to the Chinese operating entities through loans and/or capital contributions, and the Chinese operating entities can transfer cash to our BVI holding company through loans and/or issuing dividends or other distributions. There are limitations on the ability to transfer cash between the BVI holding company, the Chinese operating entities or investors. Cash transfers from the BVI holding company to the Chinese operating entities are subject to the applicable PRC laws and regulations on loans and direct investment. See “Item 3. Key Information—D. Risk Factors—Risks Related to China—PRC regulations of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our offshore financing to make loans or additional capital contributions to the operating entities, which could materially and adversely affect our liquidity and business.”
Cash transfers from the Chinese operating entities to the BVI holding company are also subject to the current PRC regulations, which permit the Chinese operating entities to pay dividends to their shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. To the extent cash or assets in the business are in China or a Chinese operating entity, the funds or assets may not be available to fund operations or for other use outside China due to interventions in or the imposition of restrictions and limitations on the ability of our Company or the operating entities by the PRC government to transfer cash or assets. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax.
Relevant PRC laws and regulations permit PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, the Company’s PRC subsidiaries can only distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to the statutory reserves. Under PRC laws, rules and regulations, when any of our subsidiaries incorporated in the Chinese mainland is to distribute its after-tax profit for the current year, it is required to set aside at least 10% of its after-tax profits each year, after making up for previous years’ accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such fund reaches 50% of its registered capital. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We are a holding company that depends on dividend payments from our subsidiaries for funding. To the extent funds or assets in the business are in the PRC or a PRC entity, the funds or assets may not be available to fund operations or for other use outside the PRC due to interventions in or the imposition of restrictions and limitations on the ability of our company or the operating entities by the PRC government to transfer cash or assets” and “—Risks Related to China—The PRC’s capital administration may affect our ability to pay offshore bills, expenses and dividends. Payment of dividends by our subsidiaries in the PRC to our subsidiaries outside the PRC and to us, as the ultimate parent, is subject to restrictions under PRC law.”
Cash transfers from the BVI holding company to the investors are subject to the restrictions on the remittance of Renminbi into and out of China and governmental administration of currency conversion. Our cash dividends, if any, will be paid in U.S. dollars. The conversion of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China, shall comply with certain procedures stipulated under the PRC laws and regulations. The majority of our income is received in Renminbi and shortages in foreign currencies may restrict our ability to pay dividends or other payments, or otherwise satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange of China, or SAFE, as long as certain procedural requirements are met. Approval from appropriate government authorities is required if Renminbi is converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions in the future, and in such event, we may not be able to pay dividends in foreign currencies to our shareholders. See “Item 3. Key Information—D. Risk Factors—Risks Related to China—Changes in government control of currency conversion and in PRC foreign exchange regulations may adversely affect our business operations.”
As a result of these and other restrictions under the PRC laws and regulations, our PRC subsidiaries are restricted in their ability to transfer a portion of their cash or assets to the Company. Even though the Company currently does not require any such dividends, loans or advances from the PRC subsidiaries for working capital and other funding purposes, the Company may in the future require additional cash resources from its PRC subsidiaries due to changes in business conditions, to fund future acquisitions and developments, or merely declare and pay dividends to or distributions to the Company’s shareholders.
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Permissions Required from the PRC Authorities for Our Operations and Overseas Securities Offering
We conduct our business primarily through our PRC subsidiaries. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, each of our PRC subsidiaries is required to have, and does have, a business license issued by the PRC State Administration for Market Regulation or its local counterparts. Several PRC subsidiaries are responsible for distinct real estate development projects. Under the PRC laws and regulations, there are governmental licenses and permits that need to be obtained for each real estate project from local authorities. As of the date hereof, all of our PRC subsidiaries have obtained all, and none has been denied, any requisite licenses and permits from the PRC government authorities that are required for their primary business operations in China. These include, among others, qualification certificates for real estate development enterprises, real estate property registration certificates, land use rights certificates, construction land use planning permits, construction work planning permits, construction permits, pre-sale permits and completion acceptance certificates. However, given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services in the future.
As of the date of this annual report, we have not received any notice of warning or been subject to penalties or other disciplinary action from any PRC authorities regarding conducting our business without requisite approvals or permits. However, we cannot assure shareholders that we will not be subject to any penalty in the future due to a lack of such approvals or permits. If (i) we or our subsidiaries do not receive or maintain any permission or approval required of us or our subsidiaries, (ii) we or our subsidiaries inadvertently and mistakenly concluded that certain permissions or approvals have been acquired or are not required, or (iii) applicable laws, regulations, or interpretations thereof change, and we or our subsidiaries become subject to the requirement of additional permissions or approvals in the future, we may have to expend significant time and costs to procure them. If we are unable to do so, in a timely manner or otherwise, we may become subject to sanctions imposed by the PRC regulatory authorities, which could include fines, penalties, proceedings against us, and other forms of sanctions, and our ability to conduct our business, invest in the Chinese mainland as foreign investments or accept foreign investments, or list on a U.S. or other overseas exchange may be restricted. Our business, reputation, financial condition, and results of operations may be materially and adversely affected, and the value of our common shares could significantly decline or become worthless. For more detailed information, see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — We may fail to obtain, or experience material delays in obtaining requisite licenses, certificates, permits or governmental approvals for our technology park development projects. As a result, our development plans, business, results of operations and financial condition may be materially and adversely affected.”
On December 28, 2021, the Cyberspace Administration of China, or the CAC, and certain other PRC governmental authorities jointly released the revised Cybersecurity Review Measures, which became effective on February 15, 2022. Pursuant to these measures, (i) operators of critical information infrastructure that intend to purchase network products and services and online platform operators that conduct data processing activities, in each case that affect or may affect national security, and (ii) operators of network platforms seeking listing abroad that are in possession of more than one million users’ personal information must apply for a cybersecurity review. These measures set out certain general factors which would be the focus in assessing the national security risk during a cybersecurity review, including, without limitation, risks of influence, control or malicious use of critical information infrastructure, core data, important data or large amounts of personal information by foreign governments in relation to listing abroad. As of December 31, 2025, we had not received any notice that we are a critical information infrastructure operator from any government authority, nor had we received any request from the CAC to undergo a cybersecurity review. As advised by our PRC counsel, Beijing Dacheng Law Office, LLP (Shenzhen), as of the date of this annual report, neither the Company nor any of its subsidiaries currently are subject to the cybersecurity review process with respect to the historical offering of our securities or the business operations of our PRC subsidiaries, as neither we nor any of our PRC subsidiaries has been designated as a critical information infrastructure operator by the competent authorities or has conducted any data processing activities that affect or may affect national security or holds personal information of more than one million users There remains uncertainty, however, as to how the Revised Cybersecurity Review Measures 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 Revised Cybersecurity Review Measures.
On February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, or the Overseas Offering and Listing Measures, which became effective on March 31, 2023, and subsequently issued seven supporting guidelines on CSRC’s official website. Pursuant to these measures, PRC domestic enterprises conducting overseas securities offering and listing, either directly or indirectly, shall complete filings with the CSRC within three working days following the submission of application for an initial public offering or listing. These filings shall include, among other documents, (i) a filing report, (ii) regulatory opinions, filing or approval documents issued by the competent authorities of the industry concerned (if applicable), (iii) opinions on the security assessment and review issued by the competent department of the State Council (if applicable), (iv) legal opinions and undertakings issued by PRC counsel, and (v) the listing documents. Our PRC counsel, Beijing Dacheng Law Offices, LLP (Shenzhen), has advised us that, based on their understanding of currently effective PRC laws and regulations, including the Overseas Offering and Listing Measures, as of the date of this annual report, we are not required to obtain any prior approval or permission from or complete filing procedures with the CSRC or CAC for our historical offshore offerings to foreign investors which have been completed.
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However, we are required to go through filing procedures with the CSRC for our future issuance or offering of securities (including shares, depository receipts, corporate bonds convertible into shares and other securities in the nature of equity) to foreign investors if certain conditions set forth in the Overseas Offering and Listing Measures are met so that they are considered “indirect overseas offerings and listings by a PRC domestic company”. We cannot assure shareholders that we will be able to comply with such filing requirements in a timely manner, or at all. If we fail to obtain the necessary approval or complete the filings and other regulatory procedures in a timely manner, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in the Chinese mainland, limitations on our operating activities in China, restrictions on or prohibition of the payments or remittance of dividends by our Chinese mainland subsidiaries, delay of or restriction on the repatriation of the proceeds from our securities offering into the Chinese mainland, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common shares. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filings or other regulatory procedures for our initial public offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation and the trading price of our common shares.
For detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Failure to maintain the security of our information and technology networks, including personally identifiable and customer information, as well as uncertainties with respect to the interpretation and implementation of cybersecurity review procedures and proprietary business information, could significantly adversely affect us”, “Item 3. Key Information—D. Risk Factors—Risks Related to China—The approval of the CSRC may be required if we intend to do a follow-on equity offering in the future, and, if required, we cannot predict whether we will be able to obtain such approval”, “Item 4. Information on the Company — B. Business Overview — PRC Regulations on Real Estate Development and Management — Regulatory Developments On Data Privacy.”
A.[Reserved]
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
D.Risk Factors
Investing in our company involves a high degree of risk. You should carefully consider the following risks, as well as other information contained in this annual report, before making an investment in our company. The risks discussed below could materially and adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay dividends and the trading price of our common shares. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.
Risks Related to Kaisa Group
Our business has been materially and adversely affected as a result of shareholder activism, a proxy contest and related litigation.
Our business has been materially and adversely affected as a result of shareholder activism, a proxy contest and related litigation. The proxy fight between IsZo Capital LP (“IsZo”), one of our shareholders, and Kaisa Group Holdings Limited (“Kaisa”), our former controlling shareholder, lasted until the last quarter of 2024 (the “Shareholders Dispute”), with certain potential risks still remaining. Under the Kaisa-controlled Board, the Company acquired a land parcel in Machong, Dongguan, for the “Nam Tai • Longxi” project, at approximately RMB705 million in 2020, severely straining the Company’s cash flow.
Following the legal proceedings instituted by IsZo in October 2020 against Kaisa in the High Court of Justice of the British Virgin Islands of the Eastern Caribbean Supreme Court (the “BVI Court”), the BVI Court handed down a judgment on March 3, 2021, holding that the offering of our common shares by private placement to Kaisa on October 5, 2020 (the “Private Placement”) was void and should be set aside. In December 2021, Nam Tai’s shareholders successfully removed four Kaisa-appointed directors and appointed six new Board members through a shareholders’ meeting, while also dismissing Kaisa-appointed CEO Wang Jiabiao.
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However, the former management refused to hand over the corporate chops, business licenses, and bank account access, leaving the new Board unable to obtain financial records or pay suppliers. Meanwhile, the dispute with Kaisa caused concern from our lending banks, local authorities and suppliers. The Company’s strategic partners suspended project negotiations, suppliers demanded cash payments, and new tenant signings and lease renewals stalled. Lending banks were requiring full loan repayment and restricting fund transfers from company accounts, making employee salary payments difficult. In 2022, workers staged protests at Nam Tai Technology Center, disrupting project progress. Moreover, the Dongguan residential project “Nam Tai • Longxi” has been unable to complete liquidation. Even if fully liquidated, the project would be expected to incur massive losses, representing a significant ongoing risk for the Company. During this period, the Company also faced a cascade of other operational crises: rising tenant attrition rates at Nam Tai Inno Park, construction delays and suspensions at Nam Tai Technology Center, which may result in potential significant government penalties, and an exodus of employees. 80% of Nam Tai Technology Center was constructed under the former management team, who failed to properly hand over the project to the current management. All of these factors severely disrupted our domestic leasing and development operations.
Since 2022, prolonged management disarray has also resulted in the Company’s repeated failure to file financial reports on time or comply with listing rules, triggering regulatory scrutiny and a severe erosion of market confidence that precipitated a stock price collapse, ultimately leading to the Company’s delisting from the NYSE.
Shareholder activism, proxy contests and related litigation have resulted in costs to us and have required management and Board attention. Additionally, they may give rise to perceived uncertainties as to our future, which could affect our relationships with banks, suppliers, and contractors, and make it more difficult to attract and retain qualified personnel. Following the recent reconciliation among shareholders, we continue to monitor potential risks associated with corporate chops and the authority of the legal representative due to accumulated litigation and economic disputes from the past. These factors could potentially lead to further challenges from the former shareholder or former delegated management, which may affect the Company’s operational stability and legal compliance. In addition, we may incur significant legal fees and other expenses related to shareholder activism, proxy contests and related litigation that may arise in the future. Our stock price could be subject to fluctuations or otherwise be adversely affected by any possible events, risks and uncertainties related to shareholder activism, proxy contests and related litigation. If any of these risks materialize, they could adversely affect our business, financial condition, results of operations or cash flows, as well as investors’ confidence in our business.
We may be subject to operational and litigation risks due to the Company’s prior dealings with IsZo.
Since late 2024, IsZo has made several demands against the Company related to, among other things, IsZo’s allegation that the Company owes it reimbursements for certain litigation and activism campaign costs. The Company has been engaged in discussions with IsZo regarding IsZo’s demands. To date, IsZo has not filed any formal litigation action against the Company.
Our relationships with key stakeholders and our corporate reputation have been significantly impaired by the Shareholders Dispute, which may continue to adversely impact our business, financial condition and results of operations.
The prolonged period of public uncertainty, the proxy contest, related litigation and subsequent operational disruptions have damaged our corporate reputation and materially affected our relationships with key stakeholders especially lenders, suppliers, and contractors. Our current management has undertaken extraordinary efforts to rebuild these relationships, including renegotiating loan terms and subsequently achieving loan refinancing, enhancing governance transparency, and proactively communicating to resolve issues with vendors and contractors. However, we continue to face challenges specifically from vendors and contractors who are mostly engaged by Kaisa-affiliated management. We have been involved in multiple litigations initiated by those vendors or contractors for the past years. We also face continued challenges in obtaining full cooperation from the vendors and contractors which may further delay the construction completion of Nam Tai Technology Center. These specific challenges from vendors and contractors could materially and adversely affect our business, financial condition, results of operations and growth prospects.
The sales-type lease arrangements entered into by Kaisa-affiliated management may be subject to regulatory review and potential penalties.
Certain sales-type lease arrangements entered into by prior Kaisa-affiliated management involved upfront lease payments and repurchase rights (put options) granted to customers. As previously disclosed in our annual report for the fiscal year ended December 31, 2020, this leasing model was relatively new in the local market, was not widely adopted, and was implemented under regulatory constraints that limit the transfer of property rights on industrial land. Because these arrangements involve features that may be viewed by regulators as similar to disguised sales, they may attract regulatory scrutiny.
In 2024, the Company managed to address the repurchase right obligations with customers by proposing various types of supplemental agreements that revised the original settlement terms. This adjustment alleviated the Company’s short-term cash flow pressure associated with making the repurchase payments under the original settlement terms. Most customers accepted the revised settlement terms.
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However, we cannot assure you that the relevant governmental authorities will not review, question, or recharacterize these historical arrangements or determine that they are inconsistent with applicable laws, regulations, or policy directives. Any such review could result in administrative inquiries, penalties imposed by the relevant authorities, or other regulatory actions. If any of these events occur, our cash flows, and financial condition could be adversely affected.
Although we have completed the audit for the fiscal year ended December 31, 2025, our historical failure to meet reporting obligations may impose regulatory and capital-market risks.
Due to the past Shareholders Dispute and the refusal from Kaisa-affiliated management, the Company has failed to meet its disclosure obligations, resulting in the delisting from the NYSE.
Although the Company has now completed the audits of its consolidated financial statements for the year ended December 31, 2025 with an unqualified opinion, we cannot assure you that the historical non-compliance with disclosure obligations will not impact regulatory approvals or delay our relisting progress.
We are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our shares.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. Our management, with the participation of our chief executive officer and chief financial officer, has assessed our internal control over financial reporting as of December 31, 2025. Based on such assessment, our management concluded that its internal control over financial reporting as of December 31, 2025 our internal control over financial reporting was effective.
In addition, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm has issued an attestation report, in which it has concluded that the company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025. See “Item 15. Controls and Procedures.” We are required to disclose changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting on an annual basis.
Our compliance with Section 404 requires that we incur substantial accounting expense and expend significant management efforts. We face challenges in timely and appropriately designing controls in response to evolving risks of material misstatement. During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.
We recognize the importance of maintaining effective internal controls over our financial reporting. However, we cannot assure you that there will not be material weaknesses in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or operating results. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our shares could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
The focus of our management and Board may continue to be diverted from our business operations to address legacy issues, hindering our competitive agility.
Our current management team and Board of Directors have dedicated, and will likely need to continue dedicating, a significant amount of their time, energy, and intellectual resources to resolving the extensive legacy issues stemming from the prior period of challenges.
These activities are wide-ranging and include overseeing multiple active litigation matters, designing and implementing a new internal control framework, and continually negotiating with lenders, regulators, and former counterparties. While these actions are necessary for the Company’s recovery and long-term stability, they represent a material diversion of management’s attention and resources away from the day-to-day operations, strategic planning, market analysis, and the implementation of our long-term growth strategy. This continued diversion could hinder our operational performance, slow our response to market opportunities and competitive threats, and ultimately limit our ability to create value for shareholders. The opportunity cost of this protracted cleanup effort is a significant, albeit non-financial, burden on the Company’s future prospects.
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Risks Related to Our Business
We are heavily dependent on China’s economy and the performance of the PRC real estate market, particularly in the Guangdong-Hong Kong-Macao Greater Bay Area.
Our major real estate development, leasing and sales operations are located in China, particularly in Shenzhen and the Guangdong-Hong Kong-Macao Greater Bay Area, (the “GBA”), one of China’s most economically powerful and fastest-growing regions. Compared with traditional homebuilders, we are more focused on the development of industrial land, and our current major target clients are enterprises. Therefore, our business prospects depend significantly on the performance of the general economy and the real estate market in China, particularly in the GBA. The rapid development of the GBA has led to an oversupply of commercial and industrial space, intensifying competition for tenants and putting downward pressure on rental rates and property values.
As of December 31, 2025, we had four significant projects located in the GBA, including Nam Tai Inno Park, Nam Tai Technology Center, Nam Tai Inno Valley and Nam Tai • Longxi. In the event that general economic conditions in the cities and regions where we operate do not perform as expected, demand for office or commercial properties may decrease, which could adversely affect our business, operating results and financial position.
The real estate market in China is highly cyclical and its supply and demand are affected by changes in economic, social and political, regulatory, environmental and other conditions beyond our control. We cannot assure you that there will not be an oversupply of properties in the GBA or other parts of China where we operate or intend to expand. In the event of an oversupply of properties, property prices in the markets may decline. Any market downturn in the cities or regions where we operate could adversely affect our business, results of operations and financial condition.
A severe or prolonged downturn in the global or Chinese economy could materially and adversely affect our business, financial condition, results of operations and prospects. Our continued access to Chinese and local lenders may be impacted by geopolitical and economic factors outside management’s control.
The global macroeconomic environment continues to face challenges, including the production conflicts among major oil producers in the world and uncertainties over the impact of the Russia-Ukraine conflict. The Chinese economy has shown slower growth compared to the previous decade since 2012 and the trend may continue. 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. There have been concerns over unrest in the Middle East, Europe and Africa, which have resulted in market volatility. There have also been concerns over the relationship between China and other countries, including surrounding Asian countries. Recent international trade disputes, including tariff actions announced by the United States, China and certain other countries, recent escalation in the Middle East, and the uncertainties created by such disputes may cause disruptions in the international flow of goods and services and may adversely affect the Chinese economy as well as global markets and economic conditions. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, financial condition, results of operations and prospects.
The tensions in U.S.-China economic relations may lead Chinese financial institutions to intensify financing scrutiny on foreign-controlled enterprises and tighten lending scales. Meanwhile, during an economic downturn, banks tend to restrict credit, and investors shift toward safe-haven assets. These factors are beyond management’s control and may exert persistent impacts on the Company’s financing capacity.
Ongoing geopolitical tensions may negatively impact Shenzhen economy and local constituents’ attitudes towards us.
In recent years, escalating and prolonged U.S.-China tensions and prolonged trade wars have significantly impacted Shenzhen, a major hub for China’s foreign trade. The city has seen a decline in import/export volumes, with U.S. sanctions disproportionately targeting its high-tech enterprises. These geopolitical headwinds now pose substantial risks to our U.S.-controlled enterprise, potentially undermining partnerships with local authorities and financial institutions’ support. Separately, recent escalation in the Middle East, including the 2026 conflict involving the United States, Israel, and Iran and disruptions to the Strait of Hormuz, has caused significant volatility in global oil prices. Sustained high energy prices could increase our construction and operating costs, exert downward pressure on the value of the Renminbi, and slow economic growth in the Greater Bay Area, which may adversely affect tenant demand for industrial space, our rental income, operating margins and overall financial performance.
Compounding these challenges, Shenzhen’s real estate market has deteriorated amid broader economic pressures—marked by prolonged price declines and corporate relocations—adversely affecting our existing property operations.
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The PRC government has adopted various measures to regulate foreign investment in the property development industry and may adopt further restrictive measures in the future.
The PRC government has implemented a number of regulations and measures governing foreign investment in the property development industry.
In July 2006, the Ministry of Construction, MOFCOM, National Development and Reform Commission (“NDRC”), the PBOC, the State Administration for Industry and Commerce, or the “SAIC,” and the SAFE, issued the Opinions on Regulating the Entry and Administration of Foreign Investment in the Real Estate Market, amended on August 19, 2015, which impose significant requirements on foreign investment in the PRC real estate sector. For instance, these opinions set forth requirements for the procedures to set up a foreign-invested real estate enterprise, or the “FIREE,” and the thresholds for a FIREE to borrow domestic or overseas loans. In addition, since June 2007, a FIREE approved by local authorities is required to file such approvals with MOFCOM or its provincial branches. We cannot assure that any FIREE that we establish, or whose registered capital we increase, will be able to complete the filing procedures with MOFCOM in time or otherwise fully comply with those specific requirements set for FIREEs.
The regulatory restrictions imposed on foreign investment in real estate projects have been and continue to be evolving. Currently, on March 15, 2019, the National People’s Congress adopted the Foreign Investment Law of the PRC, or the “FIL,” which became effective on January 1, 2020. The FIL grants national treatment to foreign invested entities, except for those foreign invested entities that operate in industries deemed to be either “restricted” or “prohibited” in a “negative list.” On September 6, 2024, MOFCOM and the NDRC promulgated the Special Administrative Measures on the Access of Foreign Investment (Negative List) (2024 Edition), which took effect on November 1, 2024 and provides that there are no specific restrictions for foreign investment in the real estate industry.
The PRC government’s restrictive regulations and measures could increase our operating costs in adapting to these regulations and measures, limit our access to capital resources or even restrict our business operations. We cannot be certain that the PRC government will not issue additional or more stringent regulations or measures, which could further adversely affect our business and prospects.
Our results of operations may vary significantly from period to period.
We derive the majority of our revenue from the sale and leasing of properties that we have developed. Our results of operations tend to fluctuate from period to period due to various factors including the overall schedule of our property development projects, the timing of the sale and leasing of our properties, the size of our land bank, our revenue recognition policies and changes in costs and expenses such as land acquisition and construction costs. The number of properties that we can develop or complete during any particular period is limited due to the size of our land bank, the substantial capital required for land acquisition and construction, as well as the development periods required before positive cash flows may be generated. At the same time, sales and leasing of real estate will be affected by market conditions.
In addition, our projects under development including Nam Tai Technology Center are large scale and are developed in multiple phases over the course of several years. The selling or leasing prices of the office and commercial units in larger scale property developments tend to vary over time, which may impact our sales proceeds and rental income, and accordingly our revenues for any given period.
Our business may be materially and adversely affected by government measures affecting China’s real estate sector, especially the industrial real estate sub-sector.
The real estate sector in China, especially the industrial real estate sub-sector, is subject to government regulations, including measures intended to curtail property speculation, as well as stabilize the cost of housing for enterprises. To achieve these objectives, the Chinese government changes its real estate policies, implementing measures and policies intended to promote the healthy development of the real estate sector. These measures regulate various aspects of the property market, including: (i) land acquisition financing, (ii) pre-sale management, (iii) sale price restriction, (iv) purchaser qualification and (v) purchaser financing.
The regulations promulgated by the central and local governments may change from time to time to either stimulate or depress the real estate market, and it is difficult to foresee the timing or direction of regulatory changes. Since 2016, many local governments including Beijing, Shanghai, Shenzhen, Guangzhou and Tianjin have issued notices restricting the purchase of houses. However, since 2023, the Chinese government has implemented a series of accommodative policies for the real estate market, comprehensively relaxing restrictive measures to stimulate rigid demand and revitalize existing assets. Notably, China’s industrial real estate policies are “enhancing efficiency, reducing costs, and promoting upgrading”. Through measures such as relaxing floor-area ratio requirements, controlling land costs, innovating land supply models, and easing property division restrictions, an increasing number of cities have piloted “mixed-use industrial land” initiatives to drive the transformation of traditional manufacturing toward intensive and intelligent development. It is uncertain for how long these measures will remain in effect, and whether the central or local governments will further tighten their policies or adopt new measures that are less restrictive in the future.
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In May 2018, the PRC Ministry of Housing and Urban-Rural Development (“MOHURD”) issued a circular (the “May Circular”) intended to increase the supply of property. The May Circular provided that banks strictly examine the mortgagor’s loan repayment capacity before granting any mortgages, that enterprises use solely their own funds to purchase land (as opposed to borrowed funds), and that the source of such purchasing funds would be under stringent supervision.
In July 2018, the General Office of the People’s Government of Shenzhen Municipality issued a circular (the “July Circular”) intended to further strengthen the regulation of and promote the steady and healthy development of the real estate market in Shenzhen. The July Circular included restrictions on the transfer of residences and commercial apartments built on land zoned as either residential, commercial, or mixed-use.
In July 2020, the Housing and Construction Bureau of Shenzhen Municipality issued a Notice on Further Promoting the Stable and Healthy Development of the Real Estate Market, in which stricter regulations were imposed on the qualifications to purchase houses, the calculation of the number of houses purchased by divorced persons, the online signing of mortgage contracts, and the disclosure of second-hand housing information.
On February 8, 2021, Shenzhen Housing and Construction Bureau issued a Notice on the Establishment of Release Mechanism on Second-hand Housing Transaction Reference Price. The notice prescribed that Shenzhen shall establish a second-hand housing transaction reference price release mechanism which aims to promote the transparency of second-hand housing market, guide real estate brokerage agencies to issue listing prices reasonably, steer commercial banks to grant second-hand housing loans reasonably, prevent and control personal housing credit risk, and stabilize market expectations.
On February 27, 2021, the Housing and Urban-Rural Construction Bureau, the Municipal Natural Resources Bureau and other five departments of Dongguan jointly issued the Notice on the Further Regulating the Real Estate Market Regulation, to firmly curb speculation and excessive price increases. Regulations in the notice include increasing the ratio of initial down payment, strengthening the new housing record price guidance and others. On September 30, 2024, Dongguan’s Housing and Urban-Rural Development Bureau issued the Notice on Adjusting Policy Measures for the Stable and Healthy Development of Our City’s Real Estate Market, which abolished the previous restrictions on commodity housing transfer timelines and optimized personal housing loan policies, including, among other things, lowering the minimum down payment ratio to 15% for first-time homebuyers.
Since 2023, the municipal governments of Shenzhen and Dongguan, where our key projects are located, have introduced a series of policy adjustments to gradually ease purchasing and transfer restrictions on residential properties. These measures include, but are not limited to, reductions in down-payment ratios, relaxations of eligibility criteria for home purchasers, and the removal of certain limitations on property resale. While these adjustments have contributed to a gradual recovery in local market sentiment, we will continue to monitor regulatory developments and assess their potential impact on our project portfolios.
MOHURD, NDRC, Ministry of Public Security, State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission and the CAC also issued the Opinions on Rectifying and Regulating the Order of the Housing Rental Market (the “Opinions”) in December 2019. The Opinions stipulated requirements for the management of lease registration and the control of rent financing business. Stricter control imposed on the leasing industry may increase our costs to comply with the requirements and adversely affect our business operations and financial position.
The Regulations on Urban Renewal of the Shenzhen Special Economic Zone (the “Renewal Regulations”), effective from March 1, 2021, stipulated that the land use rights assignment contract shall specify the urban renewal unit planning and include a project implementation supervision agreement. In case of industrial projects, the developer shall also sign an industrial development supervision agreement with the competent authority to clarify the regulatory requirements. Any failure to comply with the regulatory requirements may result in a penalty on the developer.
Pursuant to the Notice on Improving Industrial Land Supply Policies to Support the Development of the Real Economy issued by the Ministry of Natural Resources in November 2022, the supply model for industrial land will shift from being primarily transfer-based to an equal emphasis on leasing and transfer. The specific approaches include: Long-term leasing (5–20 years); Lease-to-transfer (lease period not exceeding 5 years); Flexible-term transfer. This diversified supply system helps reduce corporate land acquisition and investment costs.
According to Shenzhen’s “Industrial Upgrading” Project Approval Implementation Plan, the city will add more than 20 million square meters of high-standard factory buildings annually for five consecutive years, with the plot ratio ceiling raised to 6.5. The policy allows for less than 30% supporting dormitory construction, while mixed-use industrial land (M0) can integrate R&D, commercial, and logistics functions. This new policy aligns well with the Company’s existing business and future development direction.
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The “Notice on Several Measures to Reduce Costs for Manufacturing Enterprises in Shenzhen” issued in November 2023 stipulates that: Land prices for key industrial projects will be set at 60% of market value; The maximum floor-area ratio (FAR) for logistics and warehousing land has been increased to 4.0; For industrial plant lease contracts registered with the government and signed for more than 5 years, landlords will receive a 1% rental subsidy (capped at RMB100,000/year) from the government. These measures are expected to benefit the Company’s leasing business and new industrial real estate development projects.
See “Item 4. Information on the Company—B. Business Overview—PRC Regulations on Real Estate Development and Management” for additional information.
In addition, we cannot assure you that the PRC or Shenzhen governments will not adopt new measures in the future. Frequent changes in government policies may also create uncertainty that could discourage investment in real estate. If we fail to comply with these measures, we may face penalties or sanctions from the government. Our operating results and financial position may be significantly and adversely affected.
We may suffer a penalty or even forfeit land to the PRC government if we fail to comply with procedural requirements applicable to land grants from the government or the terms of the land use rights grant contracts.
According to the relevant PRC laws and regulations, if we fail to develop a property project according to the terms of the land use rights grant contract, including those relating to the payment of land premiums, specified use of the land and the time for commencement and completion of the property development, the PRC government may issue a warning, may impose a penalty or may order us to forfeit the land. Specifically, under current PRC laws and regulations, if we fail to pay land premiums in accordance with the payment schedule set forth in the relevant land use rights grant contract, the relevant PRC land bureau is entitled to unilaterally terminate such land use rights grant contract and claim damages for the breach of contract. Furthermore, if we fail to commence development within one year after the commencement date stipulated in the land use rights grant contract, the relevant PRC land bureau may issue a warning notice to us and impose an idle land fee. If we fail to commence development within a specific period, then upon approval by the competent local branch of the PRC government, the land may be subject to forfeiture to the PRC government without any compensation. Even if land development commences in accordance with the land grant contract, should the developed gross floor area remain significantly below the total required project scope or investment substantially below the required ratio, with development suspended for a specific period without obtaining the required government exemption, such land shall be deemed idle and subject to penalty or forfeiture.
Our Nam Tai Technology Center project has been suspended for about two and a half years due to the Shareholders Dispute, and we have failed to comply with some terms in related contracts. Currently, we are actively negotiating with the relevant authorities regarding potential penalty mitigation solutions. As of the date of this annual report, we have not received any penalty notice.
We cannot assure shareholders that circumstances leading to significant delays in our own land premium payments or development schedules or forfeiture of land will not arise in the future. If we pay a substantial penalty, we may not be able to meet pre-set investment targeted returns for a given project and our financial condition could be adversely affected. If any of our land is forfeited, we will not only lose the opportunity to develop the property projects on such land, but may also lose a significant portion of the investment in such land, including land premium deposits and the development costs incurred.
We may fail to obtain, or experience material delays in obtaining requisite licenses, certificates, permits or governmental approvals for our technology park development projects. As a result, our development plans, business, results of operations and financial condition may be materially and adversely affected.
Property development in the PRC, and in Shenzhen in particular, is highly regulated by the government and has long and complicated processes, which generally requires a large amount of capital and involves numerous parties such as designers, material suppliers, contractors and subcontractors, and potential purchasers and tenants. At various stages of our development projects, we are required to obtain and maintain certain licenses, certificates, permits and governmental approvals, including but not limited to, qualification certificates, land use rights certificates, construction land use planning permits, construction works planning permits, construction permits, pre-sale permits, construction acceptance certificates and property ownership certificates. Before government authorities issue any license, certificate or permit, we must satisfy certain specific conditions and requirements. We cannot assure you that we will not encounter material delays or difficulties in fulfilling the necessary conditions to obtain all necessary licenses, certificates or permits for our projects in a timely manner, or at all.
We cannot assure you that the final GFA of Nam Tai Technology Center as approved by the government will be the same as expected, which may add uncertainty to our ability to obtain certificates for the construction project. See “Item 4. Information on the Company—B. Business Overview—PRC Regulations on Real Estate Development and Management” for more information.
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The relevant PRC tax authorities may challenge the basis on which we have been paying our land appreciation tax and our results of operations and cash flows may be affected.
Under PRC laws and regulations, our PRC subsidiaries engaging in property development are subject to land appreciation tax, or “LAT,” which is levied by the local tax authorities. All taxable gains from the sale or transfer of land use rights, buildings and their attached facilities in the PRC are subject to LAT at progressive rates ranging from 30% to 60%. Exemptions are available for the sale of ordinary residential properties if the appreciation values do not exceed certain thresholds specified in the relevant tax laws. Gains from the sale of commercial properties, luxury residential properties and villas are not eligible for this exemption.
We have accrued LAT payable on our property sales and transfers in accordance with the progressive rates specified in relevant tax laws, less amounts previously paid under the levy method applied by relevant local tax authorities. However, provision for LAT requires our management to use a significant amount of judgment with respect to, among other things, the anticipated total proceeds to be derived from the sale of the entire phase of the project or the entire project, the total appreciation of project value and the various deductible items. Given the time gap between the point at which we make provisions for and the point at which we settle the full amount of LAT payable, the relevant tax authorities may not necessarily agree with our apportionment of deductible expense or other bases on which we calculate LAT. As a result, our LAT expenses as recorded in our financial statements of a particular period may require subsequent adjustments. If the LAT provisions we have made are substantially lower than the actual LAT amounts assessed by the tax authorities in the future, our results of operations and cash flows will be materially and adversely affected.
Failure to maintain the security of our information and technology networks, including personally identifiable and customer information, as well as uncertainties with respect to the interpretation and implementation of cybersecurity review procedures and proprietary business information, could adversely affect us.
In the PRC, the government is still ramping up regulations with regard to personal information protection. On October 1, 2020, the Information Security Technology—Personal Information Security Specification (GB/T 35273-2020), or the “2020 Specification,” took effect. Although the 2020 Specification is a recommended guideline, and it is not enforceable by law, the authority will use this standard to evaluate our compliance with China’s legal guidelines and regulations regarding personal information protection. On August 20, 2021, the Standing Committee of the National People’s Congress, or “SCNPC,” promulgated the Personal Information Protection Law of the PRC, or the “Personal Information Protection Law,” which integrates various rules with respect to personal information rights and privacy protection. The Personal Information Protection Law, which took effect on November 1, 2021, seeks to protect the personal information rights and interests, regulating the processing of personal information, ensuring the orderly and free flow of personal information in accordance with the laws and promoting the reasonable use of personal information. The Personal Information Protection Law applies to the processing of personal information within China, as well as certain personal information processing activities conducted by entities outside China for natural persons within China, including those for the provision of products and services to natural persons within China or for the analysis and assessment of acts of natural persons within China. The Personal Information Protection Law provides severe punishment for violations of the regulations relating to the processing of personal information.
The relevant regulatory authorities in China continue to monitor websites and networks in relation to the protection of personal data, privacy and information security, and may impose additional requirements from time to time. For example, the SCNPC promulgated the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law provides for a security review procedure for data that may affect national security.
Furthermore, the CAC, the NDRC, the Ministry of Industry and Information Technology, or the “MIIT,” and several other administrations jointly published the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures provide that certain operators of critical information infrastructure engaged in the purchasing of network products and services, and certain network platform operators carrying out data processing activities, in each case that affect or may affect national security, must apply with the Cybersecurity Review Office to conduct a cybersecurity review. On July 30, 2021, the State Council issued the Security Protection Regulations for Critical Information Infrastructure, or the “Regulation for CII,” which became effective on September 1, 2021. The Regulation for CII specifies that CII refers to important Internet facilities and information systems in significant industries, such as public communication, information services, energy, traffic, water conservancy, financing, public services, e-government, national defense technology, and other facilities that once destroyed, lost function or data leakage, may seriously endanger national security, national economy, people’s livelihood, and public interest. However, the scope of operators of “critical information infrastructure” under the current regulatory regime remains unclear and is subject to further decisions of competent PRC regulatory authorities.
The PRC regulatory authorities have also undertaken recent efforts to enhance the supervision and regulation of cross-border data transmissions.
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On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Cross-border Data Transmission, which came into effect on September 1, 2022 and regulate security assessment procedures with respect to cross-border data transfers by data processors of important data and personal information that is collected and generated during operations within the PRC. The Measures for the Security Assessment of Cross-border Data Transmission provide a six-month transition period (beginning from the regulation’s effective date) for data processors to rectify their compliance with the security assessment requirements with regard to cross-border data transfers carried out before these measures take effect (September 1, 2022). On March 22, 2024, the CAC issued the long-awaited Provisions on Facilitating and Regulating Cross-Border Data Transfers, effective as of the same date. The CAC simultaneously updated the Guidelines to Applications for Security Assessment of Outbound Data Transfers and the Guidelines for Filing the Standard Contract for Outbound Cross-Border Transfer of Personal Information to harmonize the current rules applicable to cross-border data transfers. These regulations benefit many multinational companies that are involved in the transfer of personal information and other data out of China. The essence of these regulations consists of exceptions to existing data compliance requirements (such as the need to conduct “security assessments” and to complete “standard contracts”) set out under pre-existing laws and regulations concerning outbound cross-border data transfers.
On September 24, 2024, the State Council published the Regulations on Network Data Security Management, or the Network Data Regulations, which became effective on January 1, 2025. The Network Data Regulations restate and further specify the legal requirements for personal information, important data, cross-border data transfer, network platform services, and data security. Among others, if the network data processing activities have or may have an impact on national security, such activities shall be subject to national security review in accordance with relevant laws and regulations.
Regulatory requirements on cybersecurity and data privacy are constantly evolving and can be subject to varying interpretations or significant changes, resulting in uncertainties about the scope of our responsibilities in that regard, and we cannot assure that relevant governmental authorities will not interpret or implement relevant laws or regulations in ways that may negatively affect us. Security breaches and other disruptions of our information and technology networks could compromise our information and expose us to liability, reputational harm and significant remediation costs, which could cause material harm to our business and financial results. In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information, and information relating to our customers and information of our employees, contractors and vendors, in our networks. Despite our security measures, and those of our third-party service providers, our information technology and infrastructure may be vulnerable to attacks by third parties or breached due to employee error, malfeasance or other disruptions. A significant theft, loss, corruption, exposure, fraudulent use or misuse of customer, employee or other personally identifiable or proprietary business data, or noncompliance with our contractual or other legal obligations regarding such data could result in significant remediation and other costs, fines, litigation or regulatory actions against us. Such an event could additionally disrupt our operations, harm our relationships with contractors and vendors, damage our reputation, result in the loss of a competitive advantage, which could adversely affect our business, revenue, competitive position and investor confidence.
We face risks of losing control of corporate chops, business licenses or the legal representative, which may materially disrupt our business operations, damage our financial condition, and harm our reputation.
We face significant operational and legal risks associated with the control of corporate chops (company seals), business licenses and the authority of the legal representative for our PRC subsidiaries. Unlike common law jurisdictions where signatures typically bind companies, China’s legal system places paramount authority on the physical corporate chops and the official actions of the legal representative. The improper handling, unauthorized retention, or loss of control over these physical items or any conflict regarding the designation of the legal representative by any party could severely disrupt our normal business operations, such as impeding our ability to enter into binding contracts, access bank accounts to conduct routine financial transactions, or complete regulatory filings.
Examples of mishandling of corporate chops and disputes over the authority of the legal representative include (1) unauthorized use, or “chop-napping,” where physical possession of corporate chops and the control over the identity of the legal representative becomes a bargaining chip in internal disputes; (2) refusal to cooperate with the Board by “rogue” executives in control of corporate chops (usually the legal representative), who may refuse to give access to chops, which are necessary for bank access, contract signing, and government filings, and (3) forgery of corporate chops by rogue employees.
The historical precedent of operational disruptions during past governance challenges, which involved issues related to corporate chops and legal representative authority, underscores the material nature of this risk factor. Any future occurrence could lead to immediate operational paralysis and significant financial losses.
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We are a holding company that depends on dividend payments from our subsidiaries for funding. To the extent funds or assets in the business are in the PRC or a PRC entity, the funds or assets may not be available to fund operations or for other use outside the PRC due to interventions in or the imposition of restrictions and limitations on the ability of our company or the operating entities by the PRC government to transfer cash or assets.
We are a holding company established in the British Virgin Islands; we operate most of our business and operations through our subsidiaries in China. Our ability to pay dividends to our shareholders and to service our indebtedness outside China depends significantly upon dividends that we receive from our subsidiaries in China. If our subsidiaries incur indebtedness or losses, such indebtedness or losses may impair their ability to pay dividends or other distributions to us. As a result, our ability to pay dividends and to service our indebtedness will be restricted. Regulations in China currently permit payment of dividends only out of accumulated after-tax profits upon satisfaction of relevant statutory conditions and procedures, if any, determined in accordance with Chinese accounting standards and regulations. Each of our PRC subsidiaries, including wholly foreign-owned enterprises and domestic companies, is required to set aside at least 10.0% of its after-tax profits each year, if any, to fund certain reserve funds until the cumulative amount of such reserves reaches 50.0% of its respective registered capital and, with the approval of a shareholder meeting, a PRC subsidiary may set aside a certain amount of after-tax profits to its discretionary general reserves. As of December 31, 2025, our statutory reserves amounted to $ 4.5 million. Our statutory reserves are not distributable as cash dividends. Dividends paid by the PRC subsidiaries may also be subject to PRC withholding tax. In addition, restrictive covenants in bank credit facilities, bonds, other long-term debt agreements, joint venture agreements or other agreements that we or our subsidiaries currently have or may enter into in the future may also restrict the ability of our subsidiaries to pay dividends or make other distributions to us and our ability to receive distributions. Specifically, all lending banks of the Company prohibited the borrower from paying dividends or reducing capital before full repayment of the loans. Therefore, these restrictions on the availability and usage of our major source of funding may impact our ability to pay dividends to our shareholders and to service our indebtedness.
Failure to repay our debt timely, upon demand or comply with the restrictive covenants imposed by our loans could restrict future borrowings or cause all of our debt to become immediately due and payable, which could impair operations and adversely affect our results of operations and financial condition.
We have several loan agreements with commercial banks in China and may enter into new loan agreements with banks in and outside China. If we fail to repay the principal or interest when it becomes due or fail to comply with certain restrictive covenants in any of our loan agreements, we will be in default under the loan agreement, which may trigger cross-defaults in other loan agreements. The lingering impacts of past operational challenges and the Shareholder Dispute have previously led several major Chinese banks, including Bank of Guangzhou and Bank of China, to downgrade our credit status to “special mention”. Such downgrades represented increased risk to the lenders and have resulted in, and may continue to result in, tighter credit terms, higher interest rates, and reduced lending capacity. Although current management has worked actively to rebuild these critical banking relationships and has successfully refinanced some obligations through alternative means, the perception of elevated risk may continue to influence lender decisions in the future.
Moreover, certain loan agreements contain covenants restricting our relevant PRC subsidiaries from (i) engaging in mergers, joint ventures, or restructurings, (ii) engaging in material investments, capital reduction, equity transfers, or transfer of material assets, (iii) substantially increasing our indebtedness, or (iv) distributing dividends without the relevant lender’s prior written consent, failing which we may be required to fully settle the outstanding amounts under the relevant loan agreements. Some of these loan agreements may impose strict operational and financial performance requirements on us and our relevant PRC subsidiaries. Upon the occurrence of any material adverse change, as may be determined by the banks which affects or will affect our ability to repay the debt or the banks’ rights and interests, or if any cross-default occurs, these banks are entitled to accelerate payment of all or any part of the loan under the relevant loan agreements and/or to enforce all or any of the security for such loans. Early repayment obligations could strain cash flow, particularly if the company faces operational challenges. In the event of financial underperformance, these terms may further significantly hinder our business development. Any default restricts our ability to obtain financing in the future, which could materially and adversely impact our financial condition and cash flows.
Our business requires access to substantial financing. Our failure to obtain adequate financing in a timely manner could severely adversely restrict our ability to complete existing projects, expand our business, or repay our obligations and affect our financial performance and condition.
While the company’s business model continues to evolve with a strategic shift away from active land acquisition for large-scale development projects, the ongoing requirement for substantial financing needs for our core property business persists. As of the date of this annual report, we have funded our operations primarily through bank borrowings, proceeds from sales and pre-sale of our properties and proceeds from issuance of equity and debt securities. We obtain commercial bank financing for our projects through credit lines extended on a case-by-case basis. Our ability to secure sufficient financing for land use rights acquisition and property development and repayment of our existing onshore and offshore debt obligations depends on a number of factors that are beyond our control, including lenders’ perceptions of our creditworthiness, sufficiency of collateral, if any, market conditions in the capital markets, investors’ perception of our securities, the PRC economy and PRC government regulations that affect the availability and cost of financing for real estate companies or property purchasers.
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There can be no assurance that our internally generated cash flow and external financing will be sufficient for us to meet our contractual and financing obligations in a timely manner. Due to the current measures imposed by the PRC government (as well as other measures that may be imposed in the future) which limit our access to additional capital, as well as restrictions imposed on our conduct under existing debt arrangements, we cannot assure shareholders that we will be able to obtain sufficient funding to finance intended purchases of land and land use rights, develop future projects or meet other capital needs as and when required at a commercially reasonable cost or at all. Our failure to obtain adequate financing in a timely manner and on reasonable terms could severely adversely restrict our ability to complete existing projects, expand our business or repay our obligations, and affect our cash flow, liquidity, financial performance and condition.
The “Three Red Lines” policy may have a material adverse effect on our access to capital and future growth prospects.
Implemented in 2020 with a compliance deadline for the end of 2023, the “Three Red Lines” policy represents a fundamental shift in China’s regulatory approach to the real estate sector. This policy, designed to deleverage the entire real estate industry, mandates that all developers must meet three key financial metrics: a liability-to-asset ratio (excluding advance receipts) below 70%, a net gearing ratio below 100%, and a ratio of cash to short-term debt above one.
The policy enforces a strict, color-coded, four-tier system that links a developer’s compliance status directly to its debt-raising capacity. Each tier, defined by the number of “red lines” breached, carries escalating penalties that restrict the developer’s ability to increase interest-bearing debt:
1.Green Tier (Compliant with all three lines): Permitted annual debt growth is capped at 15%;
2.Yellow Tier (Breaching one line): Permitted annual debt growth is capped at 10%;
3.Orange Tier (Breaching two lines): Permitted annual debt growth is capped at 5%;
4.Red Tier (Breaching all three lines): Developers are completely prohibited from increasing their interest-bearing debt. This effectively halts their capacity for debt-financed expansion.
The consequences of non-compliance extend beyond growth constraints. Regulators, including banking authorities, may subject non-compliant companies to intensified supervisory scrutiny, which can include restrictions on new project approvals and access to capital markets.
This regulatory framework has fundamentally reshaped the industry’s landscape. By imposing a hard deadline for deleveraging, the policy has triggered a systemic contraction of credit within the banking and real estate sectors. It has rendered the previously dominant “high-leverage, high-turnover, high-growth” business model (once widely-accepted “industry standard” for Chinese property developers) unsustainable. Consequently, this policy has accelerated a widespread industry consolidation, where highly leveraged companies face severe financial distress, while “Green” tier companies with stronger balance sheets are positioned to capture market share.
While our business model is evolving, the Company’s operations and asset base remain substantially tied to the property sector. A tightened credit market constrains our access to capital, which is critical not only for completing existing projects but also for funding future strategic initiatives. This industry-wide credit contraction poses a significant risk to our liquidity, profitability, and competitive positioning. Our ability to execute our long-term strategy is therefore contingent upon maintaining stringent financial discipline and successfully adapting to this new paradigm of constrained leverage, with no assurance of success.
Fluctuations in interest rates, particularly the Loan Prime Rate (LPR), could significantly increase our borrowing costs.
Our financial performance is directly exposed to interest rate risk in the PRC, as a significant portion of our onshore debt carries variable rates benchmarked to China’s Loan Prime Rate (LPR). An upward shift in the LPR, driven by PBOC monetary policy, would directly increase our interest expenses. This rise in financial costs would occur without a corresponding, immediate increase in our revenue, thereby directly compressing our profit margins and operating cash flow. This fundamental exposure is systemic; the market-wide shift following the 2019 LPR reform means long-term fixed-rate corporate loans are generally unavailable, eliminating a traditional hedging strategy at the product level.
In the PRC market, as a non-financial enterprise, we do not have direct access to the interbank market. Consequently, we lack viable options to engage in interest rate hedging using financial derivatives (e.g., swaps, caps) due to various operational and market constraints inherent in the market. Our exposure to interest rate fluctuations remains and may impact our profitability.
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Our financial condition and results of operations may fluctuate significantly due to seasonality, and our periodic financial results may not fully reflect the underlying performance of our business.
Our periodic operating results have fluctuated in the past and will fluctuate in the future due to seasonality. We generally rent out a greater number of units during spring and fall. We typically experience a lower level of rental in the summer and winter months, especially around the Chinese New Year, when a large number of workers return to their hometowns to celebrate the Chinese New Year. Rental activity generally picks up after the Chinese New Year when these workers return to work and factories re-open. As a result of these factors, our revenues may vary from quarter to quarter, and our annual results of operations may be difficult to predict based on a quarter-to-quarter comparison of our results of operations. The quarterly fluctuations in our revenues and results of operations could result in volatility and cause the price of our common shares to fall. As our revenues grow, these seasonal fluctuations may become more pronounced.
We may not be able to fully utilize our net operating loss carryforwards.
Our operating activities in the short term will consist principally of leasing and the sale of properties. Certain of our net operating losses for PRC tax purposes may be carried forward to offset taxable income in future years, subject to applicable statutory limitations and requirements. If there are changes in the relevant PRC tax laws, regulations or policies applicable to the real estate industry, or if we are unable to generate sufficient taxable income within the applicable carryforward periods, we may not be able to fully utilize our tax loss carryforwards, and our forecasted profits in the future may also be affected.
We may be subject to fines due to the lack of registration of our leases.
Pursuant to relevant PRC regulations, parties to a lease agreement are required to file the lease agreements for registration and obtain property leasing filing certificates for their leases. However, there may be instances where our company, as the lessor, may fail to complete the registration and filing procedures for certain lease agreements. Generally, the failure to register the lease agreements does not affect the validity of the lease agreements under the relevant PRC laws and regulations, or our rights or entitlements to lease out the investment properties to tenants. However, we may be required by relevant government authorities to rectify the situation within a specified time limit, and if we fail to comply, we may be subject to a fine. The imposition of the above fines could require us to make additional efforts and/or incur additional expenses, any of which could materially and adversely impact our business, financial condition and results of operations. The registration of these lease agreements to which we are a party requires additional steps to be taken by the respective other parties to the lease agreement which are beyond our control. We cannot assure shareholders that the other parties to our lease agreements will be cooperative and that we can complete the registration of these lease agreements and any other lease agreements that we may enter into in the future.
We face ongoing maintenance challenges at our completed projects.
We incur ongoing maintenance and refurbishment costs at our completed projects, Nam Tai Inno Park and Nam Tai Inno Valley. Certain non-critical upgrades were deferred in prior years due to liquidity constraints during the shareholder transition period. While safety and structural repairs have been prioritized and addressed, remaining planned capital improvements (such as elevator modernizations and roofing systems) will require future expenditures.
If these maintenance needs increase or if we are unable to pass on a meaningful portion of such costs to tenants due to competitive market conditions, we could incur higher-than-expected capital expenditures. This may adversely affect our operating margins, cash flow and overall financial performance. We cannot assure you that we will be able to manage these expenditures within our capital budget or that they will not have a material adverse effect on our results of operations.
Macroeconomic headwinds, market oversupply and direct competition directly from adjacent projects pose significant risks to Nam Tai Inno Park’s occupancy and rental income.
We face competition from newly developed and recently launched industrial parks in proximity to our projects, including in the Guangming District of Shenzhen. The influx of new supply from competing developments, which may offer comparable or superior locational advantages and deploy more aggressive leasing incentives, has intensified competitive pressures in the local market. Increased supply and competitive leasing terms from these projects could affect our ability to attract and retain tenants, put downward pressure on rental rates, and adversely impact occupancy levels and rental income at Nam Tai Inno Park. In particular, tenant attrition at lease renewal junctures and pricing erosion when securing new occupiers could compress overall project yield. These risks may be further exacerbated by broader macroeconomic headwinds that dampen demand for industrial and technology park space across Shenzhen’s manufacturing and technology sectors.
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We may incur cost overruns and revenue impairment from delays in the Nam Tai Technology Center project.
The timely and cost-effective completion of our Nam Tai Technology Center project is subject to risks associated with various factors, including: delays in obtaining necessary governmental licenses, certificates, permits and approvals; shortage of contractors, materials, equipment or skilled labor, coupled with potential increase in labor or raw material costs; failure by third-party contractors to comply with our designs, specifications or standards; onsite labor disputes or accidents; natural catastrophes or adverse weather conditions; changes in governmental practices and policies; the possibility that lenders could withdraw funding support due to future adverse events, jeopardizing project liquidity; and other unforeseen problems or circumstances.
The Nam Tai Technology Center project, whose construction began in 2019, may encounter additional challenges arising from the proxy fight and its aftermath, in addition to the risks listed above. The construction of the project has been stalled for 2.5 years and resumed since March 2025. The project continues to grapple with legacy issues from vendor relationships, many of whom were signed up and initially managed by former management.
Moreover, the extended suspension has exposed the project to continuous increases in labor and material costs in recent years. Should further delays occur, we may face additional cost escalations. Our construction contracts, while typically providing for fixed or capped payments, are subject to adjustment for changes in PRC government-suggested prices for certain raw materials we use, such as steel and cement, as well as increases in labor costs driven by wage growth in China. Such increases could be passed on to us by our contractors, and our construction costs would increase accordingly, and subsequently reduce earnings, especially if we are unable to fully pass these costs on to tenants, a practice generally considered unviable in the current competition environment.
On the revenue side, a delayed lease-up period arising from the project delay would compress the project’s internal rate of return (“IRR”), particularly when compounded with continued interest expenses during the extended development phase. We may also miss optimal leasing windows to secure high-quality tenants from our target sectors, such as artificial intelligence, biomedicine and new material technology, limiting our ability to achieve projected rental rates and occupancy levels, thereby further impairing the project’s investment return.
Lastly, we may also be penalized by the local authorities if we fail to complete our projects on time. See “Item 4. Information on the Company—B. Business Overview—PRC Regulations on Real Estate Development and Management” for information on the regulatory procedures and restrictions relating to delay of construction acceptance in PRC.
Our failure to manage our business expansion effectively could materially and adversely affect our results of operations and future prospects.
Our expansion has created, and will continue to place, substantial demand on our resources. Our ability to manage future growth opportunities and integrate any acquired businesses is subject to significant risks, including but not limited to, the challenges of: continued compliance with the laws, regulations and policies applicable to the acquired businesses, including obtaining timely approval for the real estate construction as required under the PRC law; maintaining adequate control over our business expansion to prevent, among other things, project delays or cost overruns; retaining key employees and maintaining relationships with business partners; attracting, training and motivating members of our management and qualified workforce; implementing adequate financial and operational controls; and sourcing the necessary capital on acceptable terms. These challenges may also give rise to significant uncertainty as to whether we will be able to successfully integrate disparate operations, corporate cultures and systems.
Any failure to meet these challenges could result in project delays, cost overruns, an inability to achieve projected synergies or cost savings, and even potential write-downs of acquired assets. Our historical experience demonstrates that expansion into new business areas, such as the decision to set foot in residential development made by the former management in 2020, can create significant internal strain, which stems from difficulties in coordinating resources and, critically, fundamental disagreements among shareholders regarding strategic directions. Furthermore, our strategic outlook involves exploring into new ventures, such as capital-light services and other ventures aiming at creating new revenue streams. This diversification into new business lines further increases the organizational complexity and the challenges associated with effectively allocating our limited resources.
In the current environment where China’s real estate industry is undergoing a significant and deleveraging, companies are compelled to adapt to evolved business models. Our ability to successfully adapt, survive and ultimately establish sustainable new growth areas, will be critical to our long-term success. This transformation, in which we must simultaneously manage internal growth and adapt to external changes, adds another layer of complexity to our expansion efforts.
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Injuries or damages may arise from construction accidents.
Risks related to injuries or damages arising from construction accidents are inherent in our business. As a policy, we require and uphold high construction safety standards within our project construction teams, in line with those set by reputable industry organizations in China. We also endeavor to instill the highest applicable safety standards and ensure all contractor and subcontractor personnel comply with such safety standards through training, supervision and monitoring. However, we cannot assure you that there will not be any construction accidents or related third party claims for damages. We may also be subject to claims from customers or other third parties, resulting from the use of our properties. Any substantial accident or harm caused to third parties during the construction of our projects could damage our reputation and relationship with regulators and customers, and adversely affect our business operations.
We may face intense competition from other developers. Other Chinese troubled real estate companies and competitors may disrupt the market by engaging in price wars, or conducting fire sales of assets at deep discounts to address liquidity or debt maturity issues. This may severely impact the company’s operating margin and profitability.
The property industry in the PRC is highly competitive. In recent years, the total floor area and the vacancy rate of office properties in Shenzhen increased while the rental rate declined. We are exposed to such risk and the possibility that property prices may fall significantly may adversely affect our revenue and profitability.
There has also been an increase in the number of competing projects in our proximity, which could intensify competition among property developers and force us to reduce prices or incur additional costs to make our properties more attractive. Moreover, as Shenzhen transforms from a labor-intensive electronic manufacturing hub to a research and innovation center, many factories located on industrial lands are being converted to technology parks similar to Nam Tai Inno Park, Nam Tai Technology Center and Nam Tai Inno Valley.
In fact, other financially distressed Chinese real estate developers and competitors may disrupt the market by initiating price wars and conducting fire sales of assets at deep discounts to address their liquidity issues or massive debt maturities. This could significantly erode the company’s operating margins and profitability.
Some of our competitors have competitive advantages over us, including greater economies of scale, more well-known brands, new and different business models, lower costs, larger customer bases, more experience in real estate development and greater financial, marketing, technology, human resources, as well as other expertise and resources. Furthermore, property developers that are better capitalized than we are may be more competitive in acquiring land through the auction process. We cannot assure you that we will always be able to successfully compete against our competitors. In addition, competition among property developers may result in increased costs, shortage of raw materials, oversupply of properties, and difficulty in hiring or retaining qualified personnel, any of which may adversely affect our business, financial condition and results of operations.
Commercial investment properties and properties held for sale are generally illiquid investments and the lack of alternative uses for such properties could limit our ability to respond to changes in the performance of our properties.
As of December 31, 2025, we held approximately 370,000 square meters (in total “GFA”) of investment properties in Shenzhen in China. As of December 31, 2025, we also had approximately 190,000 square meters of investment properties under construction for which we plan to develop commercial properties for lease. We anticipate that we may prudently and gradually increase our commercial investment properties as appropriate opportunities arise in the future. Any form of real estate investment is difficult to liquidate, and as a result, our ability to sell our properties in changing economic, financial and investment conditions is limited. In addition, we may need to incur operating and capital expenditures to manage and maintain our properties, or to correct defects or make improvements to these properties before selling them. We cannot assure you that we could obtain financing for such expenditures at a reasonable cost, or at all.
Furthermore, the aging of commercial investment properties or properties held for sale, changes in economic and financial conditions, or changes in the competitive landscape in the PRC or U.S. property markets, may adversely affect the rental income and revenue we generate from these properties, as well as their fair value. However, our ability to convert any of these properties to alternative uses is limited, as such conversion requires extensive governmental approvals in the PRC and involves substantial capital expenditures for renovation, reconfiguration and refurbishment. We cannot assure you that such approvals or financing can be obtained when needed. These and other factors that impact our ability to respond to adverse changes in the performance of our retail and commercial investment properties, as well as properties held for sale, may adversely affect our business, financial condition, cash flow and results of operations.
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Cancellations of leasing agreements could have an adverse effect on our business.
Both Nam Tai Inno Park and Nam Tai Inno Valley have achieved stable operations, generating consistent annual cash flow for the Company. In some cases, lessees may cancel the lease agreements for reasons such as failure of tenants to obtain necessary business approvals and certificates, changes in state and local laws and regulations, and financial distress of the lessee. In addition, intensified price and quality competition from neighboring projects may also prompt tenants to seek alternative locations. An economic downturn in China, and, in particular, a downturn in the key industries where our tenants are concentrated could disproportionately impact our leasing stability.
However, our ability to mitigate losses from early terminations is limited. Our standard lease agreements typically restrict our remedy to the security deposit, generally equivalent to two months’ rent and one month’s management fee. Due to legal and market constraints, we often cannot enforce clauses to recover the full remaining lease value. A significant increase in early terminations would therefore lead to higher vacancies, unplanned losses, and increased re-leasing costs, adversely affecting our revenue and profitability.
In addition, we may from time to time enter into lease agreements with strategic partners, which may be subject to termination risk that could adversely affect our rental income and operations. In December 2025, we entered into a six-year master lease agreement with Shenzhen Anju Leyu Development & Construction Co., Ltd. (“Shenzhen Anju”), a state-owned enterprise that manages the rental housing program for the Futian District Government, covering approximately 456 dormitory units across approximately 24,000 square meters of facilities at our Nam Tai Technology Center project in Bao’an District. Pursuant to the terms of the master lease agreement, Shenzhen Anju’s ability to perform its obligations under the master lease agreement is fundamentally dependent on the continuation of its cooperation with the Futian District Government and on the government policies including the policies supporting Shenzhen’s subsidized rental housing program. Accordingly, in the event of the Futian District Government’s termination of its cooperation with Shenzhen Anju, or any change in governmental policies, Shenzhen Anju would be excused from its obligations under the master lease agreement without any liability to us, and we would have no contractual recourse to seek damages or to compel continued performance. The PRC government has broad discretion to adopt, amend, or rescind governmental policies, and we cannot predict whether the policies currently supporting the Futian District Government’s rental housing program under the master lease agreement will remain in effect. If the master lease agreement were terminated for any of the above reasons, we could face a significant reduction in anticipated rental income, an extended lease-up period, and materially increased leasing costs as we seek to replace Shenzhen Anju with alternative tenants at market rates and without the occupancy stability that the current partnership is expected to provide. Any of these outcomes could materially and adversely affect our revenue stability, results of operations, financial condition, and prospects.
If the value of our brand or image diminishes, it could have a material adverse effect on our business and results of operations.
We intend to continue promoting the “Nam Tai” brand in key cities in our target markets by delivering quality products and attentive real estate-related services to our customers. Our brand is integral to our sales and marketing efforts. Our continued success in maintaining and enhancing our brand and image depends on our ability to satisfy customer needs by further developing and maintaining the quality of our services across our operations, as well as our ability to respond to competitive pressures. If we are unable to satisfy customer needs or if our public image or reputation is otherwise hindered, our business transactions with our customers may decline, which could in turn adversely affect our results of operations.
We face intense competition for funding, which could increase our financial cost and limit our growth.
Beyond the commercial competition for tenants and buyers, a key challenge we encounter is the cautious lending approach adopted by commercial banks towards the real estate sector in China. Due to the pervasive stress on China’s property market, banks have become more selective in extending credit to participants in the industry. Major domestic banks have imposed strict controls on both the aggregate quota for real estate development lending and the overall exposure limits to the sector, effectively creating a sector-wide credit constraint. The heightened risk awareness has intensified competition for limited credit resources among developers, requiring us to compete more aggressively with industry peers for financing. A similar scenario also applies to non-banking financing options, including alternative financing instruments and private lending.
As we compete with other developers for bank loans or non-banking financings, we may face higher financing costs and more restrictive terms. Should financing become less accessible or more expensive, we might experience delays in project timelines and face pressure on our profit margins.
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Any future investments or acquisitions could expose us to unforeseen risks or place additional strain on the management and other resources.
As part of our business strategy, we regularly evaluate investments in or acquisitions of subsidiaries and joint ventures, and we expect that we will continue to make such investments and acquisitions in the future. Any potential future acquisition may be accompanied by a number of risks, including those related to the evolving legal landscape in China. An acquired business may underperform relative to expectations or may expose us to unexpected liabilities. Acquisitions of entities that own real estate may involve risks in addition to the risks inherent in a real estate acquisition, because the acquisition of an entity generally includes all of the liabilities of the entity—known and unknown, fixed and contingent—rather than only the liabilities related to the real estate. These liabilities, which could be material, may include those not disclosed by the seller of the entity or not discovered during our due diligence. In addition, the integration of any acquisition could require substantial management attention and resources. If we are unable to successfully manage the integration and ongoing operations, or hire and retain additional personnel necessary for the running of the expanded business, the results of our operations and financial performance could be adversely affected.
Acquisitions may result in the incurrence and inheritance of debts and other liabilities, assumption of potential legal liabilities in respect of the acquired businesses, and incurrence of impairment charges related to goodwill and other intangible assets, any of which could harm our business, financial condition and results of operations. In particular, if any of the acquired business fails to perform as we expect, we may be required to recognize a significant impairment charge, which may materially and adversely affect our businesses, financial condition and results of operations. As a result, there can be no assurance that we will be able to achieve the strategic purpose of any acquisition, the desired level of operational integration or our investment return target.
We may pursue non-real-estate business, which may involve different sectors of risks.
We may look into new business opportunities beyond real estate to focus on resilient and long-term value-driven business. The success of these new business opportunities remains uncertain, as they require additional capital, specialized talent acquisition, and increased management complexity—all of which may introduce new risk factors.
We rely on our key management members and the loss of their services or investor confidence in such personnel could have a material adverse effect on our business, results of operations and financial condition.
We depend on the services provided by key management members. Competition for management talent is intense, especially for experience and ability to navigate complex and distressed situations. We rely on the leadership, expertise, experience and vision of our directors and senior management team. We do not maintain key employee insurance. In the event that we lose the services of any key management member, we may be unable to identify and recruit suitable successors in a timely manner or at all, which will adversely affect our business and operations, and we may incur additional expenses to recruit, train and retain qualified personnel. Moreover, we may need to employ and retain more management personnel to support an expansion into high-growth cities on a much larger geographical scale. If we cannot attract and retain suitable personnel, especially at the management level, our business and future growth will be adversely affected.
The interests of our major shareholders may not be aligned with the interests of our other shareholders.
If our major shareholders act together, they may be able to control and substantially influence the outcome of all matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of their shares. These actions may be taken even if they are opposed by our other shareholders.
The property development business is subject to claims under statutory quality warranties.
Under PRC law, all property developers in the PRC must provide certain quality warranties for the properties they construct or sell. We will be required to provide these warranties to our tenants and customers. Generally, we receive corresponding quality warranties from our third-party contractors with respect to our development projects, on which we are permitted to rely. If a significant number of claims were brought against us under our warranties and if we were unable to obtain reimbursement for such claims from our third-party contractors in a timely manner or at all, or if the money retained by us to cover our payment obligations under the quality warranties was not sufficient, we could incur significant expenses to resolve such claims or face delays in remedying the related defects, which could harm our reputation, and materially adversely affect our business, financial condition and results of operations.
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Failure to protect our brand or trademark may adversely affect our business.
We own trademarks for “Nam Tai Inno Park”, “Nam Tai”, Company logo , and in the form of Chinese characters in the PRC and Hong Kong. We rely on the country and region’s intellectual property and anti-unfair competition laws and contractual restrictions to protect our brand name and trademarks. We believe our brand, trademarks and other intellectual property rights are important to our success. Any unauthorized use of our brand, trademarks and other intellectual property rights could harm our competitive advantages and business. Monitoring and preventing unauthorized use are difficult. The measures we take to protect our intellectual property rights may not be adequate. Furthermore, the application of laws governing intellectual property rights in China and abroad is uncertain and evolving. If we are unable to adequately protect our brand, trademarks and other intellectual property rights, our reputation may be harmed and our business may be adversely affected.
In the PRC, the registration and protection of a company’s corporate name is regional and limited to its related industry. Although we have registered our corporate name “Nam Tai” in certain provinces where we operate, we cannot prevent others from registering the same corporate name in other provinces or industries. If another company registers “Nam Tai” as its corporate name in a province where we have not registered it, or in a different industry, we would have to adopt another corporate name to enter that market or industry. Moreover, the use of “Nam Tai” by another company may lead to confusion in the marketplace and reduce the value of our brand name.
Sold units purchased at a higher price may sue us in a class action if the market continues to go down.
Our saleable project, Nam Tai • Longxi, was launched during the peak of the real estate market with premium pricing in 2021. However, due to the current economic downturn and other factors, we are now offering residential units at discounted prices to accelerate inventory clearance. This pricing adjustment may potentially lead to dissatisfaction among clients who purchased properties at higher prices during the initial launch phase, which could result in legal actions against the company.
We face litigation risks and regulatory disputes in the course of our business.
In the ordinary course of our business, claims and disputes involving project owners, customers, labor, contractors, suppliers, business partners and regulatory authorities may be brought against us or by us. Claims may be brought against us for alleged defective or incomplete work, liabilities for defective products, related personal injuries or death, damage to or destruction of property, breaches of warranty and late completion of the project, as well as claims relating to taxes, among others. Such claims could involve actual and liquidated damages. We may also engage in disputes with regulatory authorities regarding taxation and matters in connection with our business and operations. Negotiations and legal processes for claims and disputes may be lengthy and costly, and may result in an adverse impact on our business, financial condition and results of operations. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Administrative Proceedings”.
Insurance may not cover all potential losses from damage affecting our assets and business.
We maintain property and liability insurance policies with coverage features and insured limits that we believe are consistent with market practices in the property development sector in Shenzhen, China. Nonetheless, the scope of insurance coverage that we can obtain may be limited, as we have to consider the commercial reasonableness of the insurance cost. There are also certain types of losses that are currently uninsurable in China. Our contractors may not be sufficiently insured themselves, or have the financial ability to absorb any losses that arise with respect to our projects or settle any claims we may have against them. We generally do not maintain any business disruption insurance or key-man insurance. As such, certain types of losses, generally of an unforeseen or catastrophic nature, such as those caused by the outbreak of infectious diseases, fires, natural disasters, and terrorist acts, may not be sufficiently, or at all, covered by insurance. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial conditions and results of operations, could be materially and adversely affected.
We are subject to potential environmental liability.
We are subject to a variety of laws and regulations concerning the protection of health and the environment. Environmental laws and regulations that apply to any given development site vary significantly according to the site’s location, environmental conditions, the present and former uses of the site and the nature of the adjoining properties. Compliance with environmental laws and regulations may result in delays, may cause us to incur substantial compliance and other costs and can prohibit or severely restrict project development activities. Although we have received environmental assessments by the local PRC environmental regulatory authorities that we are permitted to proceed with our projects, it is possible that these reviews did not reveal all environmental liabilities and the PRC environmental regulatory authorities could in the future curtail our operations. In addition, we also cannot assure you that the PRC government will not change the existing laws and regulations or impose additional or stricter laws or regulations, the compliance of which may cause us to incur significant capital expenditures.
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The interruption or failure of our systems or our business partners’ systems could impair our ability to effectively provide our services, which could damage our reputation and subject us to penalties.
A robust technology platform is essential for our company to enhance operational efficiency, optimize asset performance, and drive data-informed strategic decisions across our real estate development portfolio. Our systems remain vulnerable to damage or interruption as a result of power loss, telecommunications failures, computer viruses, fires, floods, earthquakes, interruptions in access to our toll-free numbers, hacking or other attempts to harm our systems, and other similar events. Our servers are subject to risks such as break-ins, sabotage and vandalism. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all possible scenarios.
Furthermore, our systems and technologies, including our website and database, could contain undetected errors or “bugs” that could adversely affect their performance, or they could become outdated, and we may not be able to replace or introduce upgraded systems as quickly as our competitors or within budgeted costs for such upgrades. If we experience frequent, prolonged or persistent system failures, our quality of services, customer satisfaction, and operational efficiency could be severely harmed, which could also adversely affect our reputation. Steps we take to increase the reliability and redundancy of our systems may be costly, which could reduce our operating margin, and there can be no assurance that any increased reliability may be achievable in practice or would justify the costs incurred.
In addition, we collaborate with various business partners in our day-to-day operations, and our ability to provide satisfactory services to customers also depends on the maintenance and efficacy of such business partners’ systems, such as the maintenance of networks with necessary speed, bandwidth, and stability. If any of our business partners’ systems encounter errors, “bugs” or other problems, our ability to effectively provide our services may be adversely affected, our reputation may be harmed, and we may also face customer complaints and be subject to fines and other penalties from competent authorities.
We have granted and expect to continue to grant share-based awards in the future under our share incentive plans, which may result in increased share-based compensation expenses.
We adopted (i) a stock option plan in 2016 (the “2016 Share Option Plan”), (ii) a stock option plan in 2017 (the “2017 Share Option Plan”), and (iii) a long-term incentive plan (the “LTIP”), in 2022, to provide additional incentives to employees, directors, consultants and other service providers. The maximum aggregate number of common shares which may be issued under the 2016 Share Option Plan is 3,500,000 shares. No options were granted pursuant to the 2016 Share Option Plan during 2025. As of December 31, 2025, 766,200 options were issued and outstanding under the 2016 Stock Option Plan. The maximum aggregate number of common shares which may be issued under the 2017 Share Incentive Plan is 1,500,000 shares. No options were granted pursuant to the 2017 Share Option Plan during 2025. As of December 31, 2025, 1,140,000 options were issued and outstanding under the 2017 Stock Option Plan. The maximum number of shares that may be delivered to the LTIP participants in connection with RSUs granted is 10,000,000 shares. See “Item 6. Directors, Senior Management and Employees—Compensation—Employee Share Incentive Plans.” While we currently have no plan to grant awards under the 2016 Share Option Plan and the 2017 Share Option Plan, we expect to continue to grant awards under our LTIP, which we believe is of significant importance to our ability to attract and retain key personnel and employees. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our financial condition and results of operations.
We may be adversely affected by the performance of third-party contractors.
We rely on third-party contractors to provide various services, including design, pile setting, foundation digging, construction, equipment installation, interior decoration, and other works. Our principal third-party contractors carry out property construction and may subcontract various works to independent subcontractors. We endeavor to engage contractors with good reputations, strong track records, and sufficient financial resources. We also implement and follow our own quality control procedures and routinely monitor works performed by third-party contractors. However, we cannot assure you that all work performed by third-party contractors will meet our quality standards and that expensive and time-consuming replacements or remedial actions may have to be deployed, delaying our project schedules. As we expand into new regional markets in China, we may face challenges in recruiting sufficient qualified contractors. Contractors may also undertake projects for other developers, engage in risky or unsound practices, or encounter financial and other difficulties, any of which may adversely affect their ability to complete their work for us on time and within budget.
We rely on our employees, real estate brokerage brands and their affiliated agents, financial institutions, and other business partners to provide quality services to customers. Their illegal actions or misconduct, or any failure by them to provide satisfactory services or maintain their service levels, could materially and adversely affect our business, reputation, financial condition and results of operations.
Real estate agents and certain personnel are the ultimate providers of the services, and our brands and reputation may be harmed by their actions that are outside our control. We rely on our employees, supporting staff and platform operation staff to provide housing transactions and services.
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Notwithstanding the strictly enforced service protocols, our employees, especially our agents, may not fully comply with our protocols and laws or regulations, and may engage in misconduct or illegal actions, which may result in negative publicity and adversely impact our reputation and brand image.
We rely upon connected agents to serve some of our housing customers. Although we have established comprehensive service protocols for agents and maintain rigorous governance mechanisms, we may not be able to exercise the same level of control over the conduct of connected brokerage brands and their agents as we would if we owned them or they were our employees. In the event of any unsatisfactory performance, lack of certain qualifications or licenses, misconduct, inappropriate service performances for illegal purposes, inappropriate remarks on we-media platforms, or other illegal actions, such as dishonesty, personal torts or extortion, by connected real estate brokerage brands and their agents, the disputes resulting from such actions may involve us and we may suffer reputational and financial damage and incur liabilities and even administrative penalties. For example, if connected agents provide inaccurate information to housing customers, who submit complaints to regulatory agencies, we may be involved as a related party in such disputes. If connected agents engage in embezzlement of housing customers’ transaction funds and become subject to liabilities and/or legal proceedings, we could be involved in negative publicity. Misconduct by real estate agents is subject to an increasing level of scrutiny by the regulatory authorities who would publicize such misconduct, which could damage our overall reputation, disrupt our ability to attract new customers or retain our current customers and diminish the value of our brand.
We face risks related to the outbreak of public health emergencies, natural disasters and other catastrophic events.
Our business could be adversely affected by the effects of epidemics and outbreaks. Health or other government regulations adopted in response to such emergencies or epidemics, natural disasters such as earthquakes, tsunamis, storms, floods or hazardous air pollution, or other catastrophic events may require temporary suspension of part or all operations. Such a suspension could disrupt our business and adversely affect the results of our operations and our financial condition. Moreover, these types of events could negatively impact the economy and the business of our tenants, which would in turn adversely impact our business and our results of operations and financial conditions.
Other natural disasters and catastrophic events, such as fires, floods, typhoons, earthquakes, power losses, telecommunications failures, wars, riots, terrorist attacks or similar events, could also cause severe disruption to our operations and to those of our contractors, suppliers or tenants, which could materially and adversely affect our results of operations and financial condition.
Risks Related to U.S. Tax Laws
We may be or become a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. Holders.
We may be or become a passive foreign investment company (a “PFIC”), for any taxable year if either: (a) at least 75% of our gross income is “passive income” for purposes of the PFIC rules or (b) at least 50% of our assets (determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rent and capital gains. However, rents and gains derived in the active conduct of a trade or business in certain circumstances are considered active income. Cash and cash equivalents are likely passive assets. The value of goodwill will generally be treated as an active or passive asset based on the nature of the income produced in the activity to which the goodwill is attributable. In applying these tests, we are treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the equity interests.
Based on our analysis of our income, assets, activities and market capitalization, we do not expect to be classified as a PFIC for the taxable year ended December 31, 2025. However, our PFIC status for any taxable year is a factual annual determination that can be made only after the end of that year and will depend on the composition of our company’s income and assets and the value of its assets from time to time (including the value of its goodwill, which may be determined in large part by reference to the market price of the common shares from time to time, which could be volatile). In addition, the risk of our company being a PFIC for any taxable year will increase if its market capitalization declines substantially during that year. Furthermore, whether and to which extent our company’s income and assets, including goodwill, will be characterized as active or passive will depend on various factors that are subject to uncertainty, including our future business plan and the application of laws that are subject to varying interpretation. Moreover, the application of the PFIC rules with respect to us is unclear in certain respects. The United States Internal Revenue Service (the “IRS”) or a court may disagree with our determinations, including the manner in which we determine the value of our assets and the percentage of our assets that are passive assets under the PFIC rules. For example, based on the current and anticipated structure and operations of our group, as well as rules contained in certain U.S. Treasury Regulations, we intend to treat certain rents and gains from any real property that we hold directly or that is held directly by our subsidiaries as active income. The application of the rules addressing active rental income to our facts is complex, however, and it is possible that future tax laws may adversely change these rules or the IRS may not agree with our conclusions. Accordingly, there can be no assurances that we will not be a PFIC for our past, current or any future taxable year, and our U.S. counsel expresses no opinion with respect to our PFIC status for any taxable year.
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If we are or become a PFIC for U.S. federal income tax purposes, the U.S. Holder (as defined below) generally will be subject to adverse U.S. federal income tax consequences, including increased tax liability on disposition gains and certain “excess distributions” and additional reporting requirements. Prospective U.S. Holders of our common shares should consult their tax advisors regarding the application of the PFIC rules in their particular circumstances. In particular, because we believe we were likely a PFIC prior to the taxable year ended December 31, [2018], for a U.S. Holder who has held our common shares from the period during which we were considered a PFIC, we may continue to be treated as a PFIC even if we cease to be a PFIC unless such U.S. Holder makes certain “deemed sale” election. See “Item 10. Additional Information—E. Taxation—Certain U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Considerations.”
Because under certain attribution rules we or our non-U.S. subsidiaries may be treated as controlled foreign corporations for U.S. federal income tax purposes, there could be adverse U.S. federal income tax consequences to certain U.S. Holders of common shares who own, directly or indirectly, ten percent or more of common shares.
For U.S. federal income tax purposes, each “Ten Percent Shareholder” (as defined below) in a non-U.S. corporation that is classified as a “controlled foreign corporation” (a “CFC”) generally is required to include in income such Ten Percent Shareholder’s pro rata share of the CFC’s “Subpart F income,” investment of earnings in U.S. property, and “global intangible low-taxed income” or “net CFC tested income,” as applicable, even if the CFC has made no distributions to its shareholders. Subpart F income generally includes dividends, interest, rents, royalties, gains from the sale of securities and income from certain transactions with related parties, and “global intangible low-taxed income” and “net CFC tested income” generally consists of net income of the CFC, other than Subpart F income and certain other types of income, in excess of certain thresholds. A non-U.S. corporation generally will be classified as a CFC if Ten Percent Shareholders own, directly, indirectly or constructively (through attribution), more than 50% of either the total combined voting power of all classes of stock entitled to vote of such corporation or of the total value of the stock of such corporation. A “Ten Percent Shareholder” is a United States person (as defined by the U.S. Internal Revenue Code of 1986, as amended) who owns or is considered to own, directly, indirectly or constructively, 10% or more of either the total combined voting power of all classes of stock entitled to vote of such corporation or the total value of the stock of such corporation. The determination of CFC status is complex and have been subject to recent changes in tax law. Under certain “constructive attribution” rules applicable till the 2025 taxable year we or our non-U.S. subsidiaries may be treated as constructively owned by certain U.S. Holders and, therefore, there can be no assurance that we or our non-U.S. subsidiaries will not be treated as CFCs. While such constructive attribution rules will no longer apply beginning in 2026, similar adverse U.S. tax consequences may still apply to Ten Percent Shareholders owning more than 50% of either the total combined voting power of all classes of stock entitled to vote of a non-U.S. corporation or of the total value of such corporation as if such corporation were a CFC. Prospective holders of common shares that may be or become Ten Percent Shareholders should consult their tax advisors with respect to the application of the CFC rules in their particular circumstances.
Future changes to tax laws could materially and adversely affect our company and reduce net returns to our shareholders.
Our company’s tax treatment is subject to changes in tax laws, regulations, and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration, and the practices of tax authorities in jurisdictions in which our company operates. The income and other tax rules in the jurisdictions in which our company operates are constantly under review by taxing authorities and other governmental bodies. Changes to tax laws (which changes may have retroactive application) could adversely affect our company or our shareholders. We are unable to predict what tax proposals may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax rates in the future in countries where our company has operations and where our company is organized or resident for tax purposes, and increase the complexity, burden and cost of tax compliance. We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in common shares.
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Risks Related to Regulatory Oversight
Regulatory initiatives in the United States, such as the Dodd-Frank Act and the Sarbanes-Oxley Act have increased, and may continue to increase the time and costs of being a U.S. public company and any further changes could continue to increase our costs.
In the United States, changes in corporate governance practices due to the Dodd-Frank Act and the Sarbanes-Oxley Act, changes in the continued listing rules of national securities exchanges, the new accounting pronouncements and new regulatory legislation, rules or accounting standards changes have increased our cost when operating as a U.S. public company and may have an adverse impact on our future financial position and operating results. These regulatory changes and other legislative initiatives have made some activities more time-consuming and have increased financial compliance and administrative costs for public companies, including foreign private issuers like us. In addition, any future changes in regulatory legislation, rules or accounting standards may cause our legal and accounting costs to further increase. These new rules and regulations require increasing time commitments and resource commitments from our company, including from senior management. This increased cost could negatively impact our earnings and have a material adverse effect on our financial position or results of operations.
Further legislative or interpretative changes to the BVI Economic Substance Act may affect our operations.
The British Virgin Islands has enacted the Economic Substance (Companies and Limited Partnerships) Act, 2018 (as amended) (the “BVI Economic Substance Act”). We are required to comply with the BVI Economic Substance Act. As we are a British Virgin Islands company, compliance obligations include filing notifications and reports for the Company, which need to state whether we are carrying out any relevant activities and if we have satisfied economic substance tests to the extent required under the BVI Economic Substance Act. While we believe we are fully compliant with the requirements and obligations imposed on us by the BVI Economic Substance Act in its current form and customary interpretation, it is anticipated that the BVI Economic Substance Act may evolve and be subject to further clarifications and amendments. We may need to allocate additional resources to keep updated with these developments and may have to make changes to our operations in order to comply with all requirements under the BVI Economic Substance Act. Failure to satisfy these requirements may subject us to penalties under the BVI Economic Substance Act.
It may be difficult to serve us with legal process or enforce judgments against our management or us.
We are a British Virgin Islands holding company with subsidiaries in Chinese mainland and Hong Kong. Substantially, most of our assets are located in the PRC. In addition, most of our directors and executive officers reside within the PRC or Hong Kong, and substantially all of the assets of these persons are located within the PRC or Hong Kong. It may not be possible to effect service of process within the United States or elsewhere outside the PRC or Hong Kong upon our directors, or executive officers, including effecting service of process with respect to matters arising under United States federal securities laws or applicable state securities laws. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries. As a result, recognition and enforcement in the PRC of judgments of a court in the United States or many other jurisdictions in relation to any matter, including securities laws, may be difficult or impossible. An original action may be brought against our assets and our subsidiaries, our directors and executive officers in the PRC only if the actions are not required to be arbitrated by PRC law and only if the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with any such original action, a PRC court may award civil liability, including monetary damages.
No treaty exists between Hong Kong or the British Virgin Islands and the United States providing for the reciprocal enforcement of foreign judgments. However, the courts of Hong Kong and the British Virgin Islands are generally prepared to accept a foreign judgment as evidence of a debt due. An action may then be commenced in Hong Kong or the British Virgin Islands for recovery of this debt. A Hong Kong or British Virgin Islands court will only accept a foreign judgment as evidence of a debt due if:
•the judgment is for a liquidated amount in a civil matter;
•the judgment is final and conclusive;
•the judgment is not, directly or indirectly, for the payment of foreign taxes, penalties, fines or charges of a like nature (in this regard, a Hong Kong court is unlikely to accept a judgment for an amount obtained by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favor the judgment was given);
•the judgment was not obtained by actual or constructive fraud or duress;
•the foreign court has taken jurisdiction on grounds that are recognized by the common law rules as to conflict of laws in Hong Kong or the British Virgin Islands;
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•the proceedings in which the judgment was obtained were not contrary to natural justice (i.e. the concept of fair adjudication);
•the proceedings in which the judgment was obtained, the judgment itself and the enforcement of the judgment are not contrary to the public policy of Hong Kong or the British Virgin Islands;
•the person against whom the judgment is given is subject to the jurisdiction of a foreign court; and
•the judgment is not on a claim for contribution in respect of damages awarded by a judgment, which fall under Section 7 of the Protection of Trading Interests Ordinance, Chapter 7 of the Laws of Hong Kong.
Enforcement of a foreign judgment in the PRC, Hong Kong or the British Virgin Islands may also be limited or affected by applicable bankruptcy, insolvency, liquidation, arrangement and moratorium, or similar laws relating to or affecting creditors’ rights and will be subject to a statutory limitation of time within which proceedings may be brought.
Our status as a foreign private issuer in the United States exempts us from certain reporting requirements under the Securities Exchange Act of 1934, limiting the protections and information afforded to investors.
We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934. As such, we are exempt from certain provisions applicable to U.S. domestic public companies, including:
•the rules under the Securities Exchange Act of 1934 requiring the filing with the SEC of quarterly reports on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K;
•the sections of the Securities Exchange Act of 1934 regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
•the selective disclosure rules under Regulation FD restricting issuers from selectively disclosing material nonpublic information;
•the sections of the Securities Exchange Act of 1934 requiring principal shareholders to file public reports of their stock ownership and trading activities and prescribing the short-swing profit recovery for principal shareholders, directors and officers; and
•certain audit committee independence requirements in Rule 10A-3 of the Exchange Act.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
As a business company incorporated in the BVI and not listed on any stock exchange, our corporate governance practices may differ significantly from those of companies incorporated in Delaware or in other states in the United States or those of companies listed on a stock exchange, and these practices may afford less protection to shareholders.
We are a business company with limited liability incorporated under the laws of the British Virgin Islands and not currently listed on any stock exchange. Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, the BVI Act and the common law of the BVI. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under the BVI law are to a large extent governed by the common law of the BVI. The common law of the BVI is derived in part from comparatively limited judicial precedent in the BVI as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the BVI. The rights of our shareholders and the fiduciary duties of our directors under BVI law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the BVI. In addition, BVI companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Certain corporate governance practices in the BVI, where our holding company was incorporated, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States.
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As a result of the foregoing, shareholders may have more difficulties in protecting their interests in the face of actions taken by our management, or members of our Board of directors than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the BVI Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Differences in Corporate Law.”
In addition, as we are not currently listed on any stock exchange, we are not subject to any listing rules or listing standards. To the extent that we continue to follow the NYSE corporate governance listing standards that were previously applicable to us, we may stop following any or all of those listing standards at any time at the discretion of our Board of directors or management, as the case may be. Our corporate governance practices may afford shareholders less protection than they would otherwise enjoy under Delaware law or under the corporate governance listing standards of the NYSE, the NASDAQ Stock Market (the “NASDAQ”) or other stock exchanges.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
We were subject to the United States Foreign Corrupt Practices Act as we previously listed on the NYSE, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, may not be subject to these restrictions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC. We cannot assure you, however, that our employees or other agents will not engage in such conduct for which we may be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial position and results of operations.
The consolidated financial statements included in the periodic reports we file with the SEC are prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject to changes in the future, and any such changes could result in corresponding changes to the amounts of assets, liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on our financial position and results of operations.
Due to inherent limitations, there can be no assurance that our system of disclosure and internal controls and procedures will be successful in preventing all errors or fraud, or in informing management of all material information in a timely manner.
Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and internal controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system reflects that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur simply because of error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls is also based, in part, upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions, and its degree of compliance with certain policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur or may not be detected.
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It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the United States may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or “Article 177,” which became effective in March 2020, no overseas securities regulator is allowed to directly conduct an investigation or evidence collection activities within the territory of the PRC. Furthermore, on February 24, 2023, the CSRC and several other Chinese authorities promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, which provide that where an overseas securities regulator or a competent overseas authority requests to inspect, investigate or collect evidence from a PRC domestic company concerning overseas offering and listing, or to inspect, investigate, or collect evidence from the PRC domestic securities companies and securities service providers that undertake relevant businesses for such PRC domestic companies, such inspection, investigation and evidence collection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC or other competent Chinese authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. The PRC domestic company, securities companies and securities service providers shall first obtain approval from the CSRC or other competent Chinese authorities before cooperating with the inspection and investigation by the overseas securities regulator or competent overseas authority, or providing documents and materials requested in such inspection and investigation. Accordingly, the inability for an overseas securities regulator to directly conduct investigations or collect evidence within China may further increase difficulties faced by you in protecting your interests. See also “—As an exempted company incorporated in the BVI and not listed on any stock exchange, our corporate governance practices may differ significantly from those of companies incorporated in Delaware or in other states in the United States or those of companies listed on a stock exchange, and these practices may afford less protection to shareholders.” for risks associated with investing in us as a BVI company.
Risks Related to China
Changes in economic, political or social conditions or government policies of China, especially in Shenzhen and the Guangdong-Hong Kong-Macao Greater Bay Area (“the GBA”), could have a material and adverse effect on our business and operations.
Most of our business operations are conducted in China, especially in Shenzhen and the GBA. Accordingly, our business, results of operations, financial condition and prospects are affected by economic, political and social conditions in China generally and by continued economic growth in the GBA.
The industry we operate in is highly sensitive to general economic changes. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results. In addition, the Chinese government continues to play a significant role in regulating industry development. The Chinese government exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to certain industries or companies.
The growth of China’s economy has been uneven both geographically and among various sectors of the economy. Some government measures may benefit the overall Chinese economy, such as policies supporting technology and innovation enterprises, which may help increase the number and rental capacity of potential tenants in our technology parks. However, some may have a negative effect on us, such as stricter controls in leasing. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition.
The economies of Shenzhen and the GBA economy are heavily reliant on the technology and export-oriented manufacturing sectors that the Chinese government strongly supports. This concentrated industrial base, while a source of growth, also increases our vulnerability to sector-specific downturns. A slowdown in global tech demand or an escalation of trade tensions between the U.S. and China could disproportionately impact the local economy and, consequently, demand for our commercial and residential properties. Furthermore, the health of local market is particularly dependent on the continuous inflow of young professional immigrants, whose ability and willingness to relocate and purchase property are highly sensitive to employment prospects and economic sentiment, making demand less stable than in more established, native population-centric megacities like Beijing or Shanghai. It is also important to note that the economic fabric of Shenzhen and the GBA is predominantly composed of private enterprises, which are generally more agile but also more vulnerable to economic shocks and have less access to state-backed support. This private-sector dominance increases the region’s economic volatility, which directly translates to higher volatility in our local real estate market.
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China’s economy, especially the economy in Shenzhen and the GBA, has a direct impact on the business market and our major enterprise customers. Our results of operations and financial position would be materially and adversely affected if business demand for offices or other businesses declines due to the slowing or stagnant economic growth in China.
Recent trade or investment policy announced by the United States administration against the PRC may adversely affect our business.
The U.S. government imposed new, or increased existing, tariffs on goods exported from China and limited U.S. investment portfolio flows into China. For example, in May 2020, under pressure from U.S. administration officials, the independent Federal Retirement Thrift Investment Board suspended its implementation of plans to change the benchmark of one of its retirement asset funds to an international index that includes companies in emerging markets, including China. In November 2020, the U.S. administration issued U.S. Executive Order 13959, which was subsequently amended in January 2021, prohibiting investments by any U.S. persons in publicly traded securities of certain Chinese companies that are deemed owned or controlled by the Chinese military. As a result, in December 2020, and again in January 2021, the New York Stock Exchange, or the NYSE, announced plans to delist the American depositary shares of China Telecom, China Mobile and China Unicom to comply with this executive order. On February 21, 2025, the Trump Administration released the America First Investment Policy National Security Presidential Memorandum (“NSPM”) introducing potential changes to the Committee on Foreign Investment in the United States (“CFIUS”) regulations, which could significantly impact foreign investment activities. The NSPM aims to further restrict Chinese investments in sensitive U.S. technologies, including artificial intelligence.
Additionally, the NSPM seeks to strengthen CFIUS’s authority over foreign investments, including “greenfield” investments, which are currently exempt from certain CFIUS restrictions. The NSPM’s proposals include additional scrutiny of U.S. investments in China’s military-industrial sector and potential new restrictions on outbound U.S. investments in China, particularly in sectors related to national security. As the NSPM and its related proposals are still relatively new, it is unclear how these policies, and any future policies concerning investments between the U.S. and China, will be interpreted, amended and implemented by U.S. government authorities. These changes could affect the ability of U.S. businesses to engage in cross-border investments or transactions involving China. Further, such changes could result in delays, increased compliance requirements or restrictions on transactions involving China, which may have an adverse effect on our operations, investment opportunities and business strategy. Geopolitical tensions between China and the United States may intensify and the United States may adopt even more forceful measures in the future. Global trade and investment between China and the United States continue to remain dynamic, and there are still many uncertainties. Furthermore, there have been media reports on deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets, and delisting China-based companies from U.S. national securities exchanges. If any such deliberations were to materialize, the trading price of China-based companies listed in the United States would be materially and adverse affected.
The GBA is a global hub for electronics manufacturing and export. Tariffs on Chinese goods or restrictions on key technologies (e.g., semiconductors) can disrupt the supply chains and profitability of our tenant base, which is heavily concentrated in these sectors.
The institution of trade tariffs both globally and specifically between the U.S. and China carries the risk of negatively affecting China’s overall economic condition, which could have a negative impact on us as the vast majority of our operations are in China. Furthermore, the imposition of tariffs could have a negative impact on our potential tenants and buyers, most of whom are technology companies and may be subject to the tariffs imposed by the two governments, which would indirectly affect our business and operating results.
Changes in government control of currency conversion and in PRC foreign exchange regulations may adversely affect our business operations.
The PRC government imposes controls on the convertibility between Renminbi and foreign currencies and the remittance of foreign exchange out of China. We receive substantially all our revenue in Renminbi. Our PRC subsidiaries must convert their Renminbi earnings into foreign currency before they can pay cash dividends to us or service their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current-account items may be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”), by complying with certain procedural requirements.
However, approval or registration from appropriate governmental authorities is required when Renminbi is converted into foreign currencies and remitted out of China for capital-account transactions, such as the repatriation of equity investments in China and the repayment of principal on loans denominated in foreign currencies. Such restrictions on foreign exchange transactions under capital accounts also affect our ability to finance our PRC subsidiaries and limit our ability to act in response to changing market conditions.
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Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of our common shares.
The conversion of Renminbi into other currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollars at times significantly and unpredictably. The value of Renminbi against the U.S. dollar is affected by changes in the political and economic conditions of the PRC and the U.S., and by the foreign exchange policies of the PRC and the U.S., among other things. We cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. Any significant appreciation or depreciation of Renminbi may materially and adversely affect our financial position and results of operations.
As part of our assets and operating activities are denominated in Renminbi and part of those are denominated in U.S. dollars, the translation of Renminbi-denominated assets to U.S. dollars for reporting purposes and the translation of U.S. dollar denominated assets to Renminbi for operation purposes can result in a foreign exchange losses. We expect to continue to see fluctuations in the reporting of foreign exchange gains or losses in the financial statements due to the movement of Renminbi against the U.S. dollar.
Uncertainties regarding the PRC legal system could adversely affect our business.
We conduct our business primarily through our subsidiaries and consolidated affiliated entities in China. Our operations in China are governed by PRC laws and regulations. Our subsidiaries are generally subject to laws, regulations and policies applicable to foreign investments in China. The PRC legal system is based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but hold limited precedential value.
Over the past decades, PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, newly promulgated laws, regulations and standards may be subject to varying interpretations, and their practical application may change over time as new guidance becomes available.
Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which may not be published on a timely basis or at all. As a result, we may not be aware of potential violation of these policies and rules.
In addition, from time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted and result in substantial costs and diversion of resources and management attention. As the PRC legal framework continues to mature, shifting judicial and administrative interpretations may affect the practical application of our contracts and our business.
The PRC government’s significant oversight and discretion over our business operations could result in a material change in our operations and/or the value of our common shares.
Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business. The PRC government has released regulations and policies that have impacted various industries in general and specific operators within such industries, and may in the future release new laws, regulations or policies that could intervene in or influence our operations or the industry sectors in which we operate. The PRC government may also require us to obtain new permits or approvals to continue our operations. If we fail to comply with these laws, regulations, policies or requirements, the enforcement actions taken by the PRC government may intervene or influence our operations at any time and it could result in a material adverse change in our operations and/or the value of our common shares. In addition, the PRC government has indicated an intent to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based companies. Any such actions, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our common shares to significantly decline or become worthless. Therefore, investors of our company and our business face uncertainty from potential actions taken by the regulatory authorities that may affect our business and the value of our common shares. We cannot assure you that we will be able to comply with new laws, regulations, policies or requirements in all respects, and we may be ordered to rectify, suspend or terminate any actions or services that are deemed illegal by the regulatory authorities and become subject to material penalties, which may materially harm our business, financial condition, results of operations and prospects.
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Changes to PRC tax laws and heightened efforts by the PRC tax authorities to increase revenues have subjected us to greater taxes.
Under PRC law before 2008, we were afforded a number of tax concessions by, and tax refunds from, PRC tax authorities on a substantial portion of our operations in China by reinvesting all or part of the profits attributable to our PRC manufacturing operations. However, on March 16, 2007, the PRC government enacted a unified enterprise income tax (“EIT”) law which became effective on January 1, 2008 and was amended on December 29, 2018. Prior to the EIT Law, as FIEs located in Shenzhen, China, our PRC subsidiaries enjoyed a national income tax rate of 15% and were exempted from the 3% local income tax. The preferential tax treatment given to our subsidiaries in the PRC as a result of reinvesting their profits earned in previous years in the PRC also expired on January 1, 2008. Under the EIT Law, most domestic enterprises and FIEs are subject to a single PRC EIT rate of 25% from 2012 onwards.
For information on the EIT rates as announced by the PRC’s State Council for the transition period until year 2013, see the table in “Item 5. Operating and Financial Review and Prospects”.
We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various administrative regions and countries in which we have assets or conduct activities; however, our tax position is subject to review and possible challenge by taxing authorities and to possible changes in law, which changes may have a retroactive effect. The tax authority may retroactively examine past transactions and take a different position from the Company, its tax advisors or auditors, resulting in unexpected tax liabilities and penalties. Pursuant to the Circular of the State Administration of Taxation on Issues Related to the End of Various Preferential Tax Policies for Foreign and Foreign-Invested Enterprises (STA [2008] No. 23) published by the State Administration of Taxation of the PRC on February 27, 2008, an FIE may be required to pay back the taxes previously exempted as a result of the preferential tax treatment enjoyed in accordance with the Income Tax Law of People’s Republic of China for Foreign Investment Enterprises and Foreign Enterprise, if such FIE no longer meets the conditions for preferential tax treatment after 2008 due to a change in its nature of business or if the term of its business operation is determined to be less than ten years since its inception. As we have ceased production operations at all of our manufacturing facilities and are switching our core business to technology park management and development, our tax position may be subject to review by relevant tax authorities, and we cannot determine in advance whether, or to what extent a tax policy may require us to pay taxes or make payments in lieu of taxes.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
In February 2015, the State Administration of Tax (“SAT”) issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises, or SAT Public Notice 7. SAT Public Notice 7 extends its tax jurisdiction to not only indirect transfers but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides certain criteria 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. SAT Public Notice 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. As a result, gains derived from such indirect transfer may be subject to PRC EIT, 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, SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident EIT.
We face uncertainties on the reporting and consequences of future share exchanges or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises. 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. 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 SAT Public Notice 7 and SAT Bulletin 37, and may be required to expend valuable resources to comply with them or to establish that we and our non-resident enterprises should not be taxed under these regulations, which may have a material adverse effect on our financial condition and results of operations.
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The PRC’s capital administration may affect our ability to pay offshore bills, expenses and dividends. Payment of dividends by our subsidiaries in the PRC to our subsidiaries outside the PRC and to us, as the ultimate parent, is subject to restrictions under PRC law.
Cross-border capital flows of enterprises are subject to the Foreign Exchange Administration Regulations. Large outbound payments by PRC enterprises require approval from the State Administration of Foreign Exchange (SAFE). If a company needs to make overseas payments for technical service fees, patent licensing fees, etc., such transactions may trigger a security review if they involve “important data,” leading to payment delays or rejection. Additionally, when making payments to overseas suppliers for patent fees or equipment procurement, if the transaction is deemed to involve “transfer pricing,” it may be blocked by banks or require supplementary documentation.
Under PRC law, dividends may only be paid out of distributable profits. Distributable profits with respect to our subsidiaries in the PRC refers to after-tax profits as determined in accordance with accounting principles and financial regulations applicable to PRC enterprises, less any recovery of accumulated losses and allocations to statutory funds we are required to make. Any distributable profits that are not distributed in a given year are retained and available for distribution in subsequent years. As a result, our subsidiaries in the PRC may not be able to pay a dividend in a given year. China’s tax authorities may also change the determination of income which would limit our PRC subsidiaries’ ability to pay dividends and make other distributions.
Prior to the PRC Enterprise Income Tax Law, or the EIT Law, which became effective on January 1, 2008, PRC-organized companies were exempt from withholding taxes with respect to earnings distributions, or dividends, paid to shareholders of PRC companies outside the PRC. However, under the EIT Law, dividends payable to foreign investors that are derived from sources within the PRC are subject to income tax at a rate of 10% by way of withholding unless the foreign investors are companies incorporated in countries that have tax treaty agreements with the PRC, whereupon the rate agreed by both countries will be applied. For example, under the terms of the tax treaty between Hong Kong and the PRC, which became effective in December 2006, distributions from our PRC subsidiaries to our Hong Kong subsidiary are subject to a withholding tax at a rate ranging from 5% to 10%, depending on the extent of ownership of equity interests held by our Hong Kong subsidiary in our PRC enterprises. As a result of this PRC withholding tax, amounts available to us in earnings distributions from our PRC enterprises will be reduced. Since we derive most of our profits from our subsidiaries in the PRC, the reduction in amounts available for distribution from our PRC enterprises could, depending on the income generated by our PRC subsidiaries, impair our ability to issue dividends to our shareholders in the future.
Restrictions on cross-border payments may impair our ability to repay shareholder loans, potentially forcing equity conversion at significant dilution to existing shareholders.
As detailed in Promissory Notes Amendments (Item 5), the Company took on two Shareholders Loans (both US dollar loans at the BVI Holdco level, payable only in US dollars) from IAT and IsZo totaling $19.69 million, originally maturing on January 11, 2026. On January 9, 2026, the Company fully repaid the outstanding amount of $3.95 million under the IsZo Note. Subsequently, on March 20, 2026, the Company fully repaid approximately $17.1 million outstanding under the IAT Note.
Following these repayments, the Company no longer has any outstanding shareholder loans from IAT or IsZo. However, any future shareholder loans or similar obligations that require cross-border repayment from the PRC would still be subject to approval by the State Administration of Foreign Exchange (SAFE). As mentioned in the preceding risk factor, large outbound payments require SAFE approval and may be delayed, blocked, or subjected to additional review. Any failure to obtain the necessary approvals or to complete the cross-border payment procedures in a timely manner could prevent us from meeting repayment obligations under future facilities.
While the Company has the contractual option to equitize such debt at maturity in lieu of cash repayment, such conversion, if it were to occur, is likely to take place at a suboptimal time (for example, before the Company is relisted and frequent trading of its shares resumes) and could therefore materially dilute existing shareholders.
Certain information contained in this annual report is derived from third-party publications and not independently verified by us.
Certain information in this annual report relating to the growth of Shenzhen, Shanghai and other areas, including statistics relating to the growth of its gross domestic product (“GDP”), and industry sectors, is derived from various publicly available third-party publications, including government and private entity publications. Such information may not be consistent with that prepared by other market research bodies within or outside the Chinese mainland. Furthermore, the information also has not been independently verified by us.
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Regulations in the PRC may make it more difficult for us to pursue growth through acquisitions.
A number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex, including the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the “M&A Rules,” which became effective on September 8, 2006 and was amended on June 22, 2009, and the Implementing Rules Concerning Security Review on the Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, or the “Security Review Rules,” issued by MOFCOM in August 2011. These laws and regulations impose requirements in some instances that approval from MOFCOM must be obtained in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In addition, the Anti-Monopoly Law of PRC requires that the anti-monopoly enforcement agency be notified in advance of any concentration of undertaking if certain thresholds are triggered. On February 7, 2021, the Anti-Monopoly Committee of the State Council published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, which stipulates that any concentration of undertakings involving variable interest entities is subject to anti-monopoly review. Moreover, the Security Review Rules 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 MOFCOM, and prohibit any attempt to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. On December 19, 2020, the NDRC and MOFCOM jointly issued the Measures for the Security Review for Foreign Investment, which took effect on January 18, 2021. These measures set forth the provisions concerning the security review mechanism on foreign investment, including, among others, the types of investments subject to review, and the review scopes and procedures. In the future, we may grow our business by acquiring complementary businesses. On January 22, 2024, the Provisions of the State Council on Filing Thresholds for Business Concentrations came into effect, which raises the filing threshold concerning the revenues of parties participating in business concentrations to be consistent with the current Anti-Monopoly Law of PRC, and, to a certain degree, alleviates the burdens of PRC regulatory compliance applicable to acquisition activities.
Complying with the requirements of the relevant regulations to complete such transactions could be time consuming, and any required approval processes, including approval from MOFCOM and other PRC government authorities, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. We believe that our business is not in an industry related to national security. However, we cannot preclude the possibility that MOFCOM or other government agencies may publish interpretations contrary to our understanding or broaden the scope of such security review in the future. Although we have no current plans to do so, we may elect to grow our business in the future in part by directly acquiring complementary businesses in China.
The approval of the CSRC may be required if we intend to do a follow-on equity offering in the future, and, if required, we cannot predict whether we will be able to obtain such approval.
The M&A Rules require an overseas special purpose vehicle (“SPV”) formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our follow-on offering of securities may be subject to approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and any failure to obtain or delay in obtaining the CSRC approval for such future offering would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside China and other forms of sanctions that may materially and adversely affect our business, financial condition and results of operations.
In addition, on February 17, 2023, the CSRC promulgated the Overseas Offering and Listing Measures and five relevant guidelines on the application of the Regulatory Rules, which took effect on March 31, 2023, requiring the overseas securities offerings or listings of Chinese domestic companies to be filed with the CSRC. The Overseas Offering and Listing Measures clarify the scope of overseas offerings or listings by Chinese domestic companies which are subject to the filing and reporting requirements thereunder, and provide, among other things, that Chinese domestic companies that have already directly or indirectly offered and listed securities in overseas markets prior to the effectiveness of the Overseas Offering and Listing Measures must fulfill their filing obligations and report relevant information to the CSRC within three working days after conducting a follow-on securities offering on the same overseas market, and follow the relevant reporting requirements within three working days upon the occurrence and public disclosure of any specified circumstances provided thereunder, including any (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. In addition, where the main business of an issuer undergoes a material change after an overseas offering and listing, and is therefore beyond the scope of the business stated in the original filing documents, such issuer shall follow the relevant reporting requirements within three working days after occurrence of such changes. The CSRC promulgated Guideline No. 7 on the application of the Regulatory Rule on May 5, 2024, which specify that overseas offering and listing refers to activities related to the offering and listing on an overseas stock exchange, and the listing of Chinese domestic enterprises on overseas over-the-counter markets does not fall within the scope of the filing administration. If a Chinese domestic enterprise transfers its listing to an overseas stock exchange, it shall, in accordance with the relevant requirements for an initial public offering or listing overseas, complete the filing with the CSRC within three working days after submitting the application documents for the overseas listing transfer.
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As of the date of this annual report, we are not required by the CSRC to make the above filings. However, if we conduct a new issuance of securities on or transfer our listing to an overseas stock exchange, we are required by the Overseas Offering and Listing Measures to fulfill relevant filing obligations within three working days upon the completion of the new securities offering or the submission of the application documents for the overseas listing transfer.. If we are found in violation of these provisions or measures, the competent Chinese authorities may impose administrative regulatory measures, such as orders for correction, warnings, and fines, and may subject us to legal liability in accordance with PRC laws and regulations, which could include fines and penalties on our operations in the Chinese mainland, and other forms of sanctions that may materially and adversely affect our business, financial condition and results of operations.
The enactment of the Holding Foreign Companies Accountable Act and the adoption of any rules, legislation or other efforts to increase U.S. regulatory access to audit information could cause uncertainty and our securities could be prohibited from being traded “over-the-counter” if we are unable to meet the PCAOB requirement in time.
The increased regulatory scrutiny of U.S.-listed companies with operations in China could add uncertainties to our business operations, share price and reputation. U.S. public companies that have or had a substantial portion of their operations in China have been the subject of heightened scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.
As part of increased regulatory focus in the United States on access to audit information, the United States enacted the HFCA Act on December 18, 2020. The HFCA Act includes requirements for the SEC to identify issuers whose audit reports are prepared by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The HFCA Act also requires public companies on this SEC list to certify that they are not owned or controlled by a foreign government and make certain additional disclosures in their SEC filings. In addition, under the HFCA Act, if the auditor of a U.S. listed company’s financial statements is not subject to PCAOB inspections for three consecutive “non-inspection” years, the SEC is required to prohibit the securities of such issuer from being traded on a U.S. national securities exchange, such as the NYSE and NASDAQ, or in the U.S. over-the-counter markets.
On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements under the HFCA Act, pursuant to which the SEC would identify a “Commission-Identified Issuer” if an issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, and will then impose a trading prohibition on an issuer after it is identified as a “Commission-Identified Issuer” for three consecutive years.
On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in Chinese mainland and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in Chinese mainland or Hong Kong.
On August 26, 2022, the PCAOB signed a SOP with the CSRC and China’s Ministry of Finance. The SOP Agreements establish a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in Chinese mainland and Hong Kong, as required under U.S. law.
On December 15, 2022, PCAOB Chair Erica Y. Williams released a statement stating that, for the first time in history, the PCAOB has secured complete access to inspect and investigate registered public accounting firms headquartered in Chinese mainland and Hong Kong, and the PCAOB voted to vacate the previous December 16, 2021 determinations to the contrary.
On December 29, 2022, the Consolidated Appropriations Act was signed into law, which, among other things, amended the HFCA Act to reduce from three years to two years the number of consecutive years an issuer can be identified as an identified issuer before the SEC can prohibit an issuer’s securities from trading on any U.S. national securities exchange and on the over-the-counter market. Accordingly, our securities may be prohibited from trading on U.S. stock exchanges if our auditor is not inspected by the PCAOB for two consecutive years.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in Chinese mainland and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor’s control. The PCAOB continues to demand complete access in Chinese mainland and Hong Kong moving forward. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed.
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On August 1, 2025, we appointed MRI as our independent registered public accounting firm for the fiscal year ended December 31, 2025. MRI is headquartered in Singapore and subject to inspections by the PCAOB on a regular basis. As an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, MRI 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. It is not subject to the determinations issued by the PCAOB on December 16, 2021. Therefore, we believe the appointment of MRI would substantially reduce the risk of us being identified as “Commission-Identified Issuer” under the HFCA Act, and the risk of our securities being prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States due to rules under the HFCA Act.
If we were to be identified as a “Commission-Identified Issuer”, the ramifications of such identification include volatility in the trading price of our securities. We may also be subject to the additional compliance requirements under the HFCA Act and potentially other requirements under related proposed rules. If our shares are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside the United States. Such a prohibition would substantially impair your ability to sell or purchase our shares when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our shares. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.
If for whatever reason the PCAOB is unable to conduct full inspections of our auditor, such uncertainty could cause the market price of our securities to be materially and adversely affected, and our securities could be prohibited from being traded “over-the-counter” and remain delisted from any national securities exchange. If our securities were unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our securities.
PRC regulations of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our offshore financing to make loans or additional capital contributions to the operating entities, which could materially and adversely affect our liquidity and business.
We may transfer funds to the PRC operating entities or finance the PRC operating entities by means of shareholders’ loans or capital contributions. Any loans to the PRC operating entities, which are foreign-invested enterprises, or FIEs, cannot exceed a statutory limit, and shall be filed with SAFE, or its local counterparts. Furthermore, any capital contributions we make to the PRC operating entities shall be registered with the PRC State Administration for Market Regulation or its local counterparts and filed with MOFCOM or its local counterparts.
On March 30, 2015, SAFE promulgated the Circular on Reforming the Administration Measures on Conversion of Foreign Exchange Registered Capital of Foreign-invested Enterprises, or SAFE Circular 19. SAFE Circular 19 allows FIEs in China to use their registered capital converted from foreign currencies and settled in RMB to make equity investments, but not to be used, among other things, for investment in the securities markets, or offering entrustment loans, unless otherwise regulated by other laws and regulations. On June 9, 2016, SAFE further issued the Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, which, among other things, amended certain provisions of Circular 19. On December 4,2023, SAFE issued the Circular of Further Deepening the Reform to Facilitate Cross-border Trade and Investment, or SAFE Circular 28 (2023), which, among other things, amended certain provisions of Circular 16. According to SAFE Circular 19, SAFE Circular 16 and SAFE Circular 28 (2023), the flow and use of the RMB capital converted from foreign currency-denominated registered capital of an FIE is regulated such that Renminbi capital may not be directly or indirectly used for securities investment or other investment and wealth management (except for wealth management products and structured deposits with risk rating results of not higher than Grade II), for granting loans to non-affiliated enterprises (except for circumstances where it is specified in the scope of business, or in four pilot areas), or for purchasing residential real estate not for self-use (except for enterprises engaging in real estate development and leasing operation). On October 23, 2019, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-Border Trade and Investment, or SAFE Circular 28 (2019), along with SAFE Circular 28 (2023), removing the restrictions on making domestic equity investments by non-investment FIEs with their capital funds, provided that certain conditions are met. On April 10, 2020, SAFE promulgated the Circular of SAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business, pursuant to which the reform of facilitating the payments of incomes under the capital accounts shall be promoted nationwide. Violations of these circulars or any future foreign exchange related rules could result in severe monetary or other penalties. The applicable foreign exchange circulars and rules may limit our ability to transfer funds, which may adversely affect the PRC operating entities’ business, our financial condition and results of operations.
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PRC regulations relating to offshore investment activities by domestic residents may subject our domestic resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit ability of our PRC subsidiaries to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires domestic residents (including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose) to register with SAFE or its local branches in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing with such domestic residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. SAFE Circular 37 is applicable to our shareholders who are domestic residents and may be applicable to any offshore acquisitions that we make in the future.
We are committed to complying with these regulations and to ensuring that our shareholders and beneficial owners who are subject thereto will comply with the SAFE rules and regulations. However, because the implementation of the regulatory requirements by the PRC authorities will be determined on an ad hoc basis depending on the facts and circumstances, we cannot assure you that such registration will always be practically available in all circumstances as provided in those regulations.
We have requested shareholders or beneficial owners who directly or indirectly hold shares in our BVI holding company and are known to us as being domestic residents to complete their registration with or to obtain approval by the local SAFE, the NDRC, or MOFCOM branches. However, we may not be informed of the identities of all the PRC individuals or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with the SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are domestic residents have complied with, and will in the future make, obtain or update any applicable registrations or approvals required by SAFE, the NDRC and MOFCOM regulations. Any failure or inability by such shareholders, beneficial owners or our subsidiaries to comply with SAFE, the NDRC and MOFCOM regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or ability of our PRC subsidiaries to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.
Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiary of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options will be subject to these regulations. Failure to complete the SAFE registrations may subject them to fines and legal sanctions, there may be additional restrictions on the ability of them to exercise their stock options or remit proceeds gained from the sale of their stock into the PRC. We also face regulatory uncertainties that could restrict our ability to adopt incentive plans for our directors, executive officers and employees under PRC laws.
Recent litigation and negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our common shares.
We believe that recent litigation and negative publicity surrounding companies with operations in China that are listed in the United States have negatively impacted the stock prices of these companies. Certain politicians in the United States have publicly warned investors to shun China-based companies listed in the United States. The SEC and the PCAOB also issued a joint statement on April 21, 2020, reiterating the disclosure, financial reporting and other risks involved in the investments in companies that are based in emerging markets as well as the limited remedies available to investors who might take legal action against such companies. Furthermore, various equity-based research organizations have recently published reports on China-based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges. Any similar scrutiny on us, regardless of its lack of merit, could cause the market price of our shares to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance.
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Increases in labor costs in China, and enforcement of more stringent labor laws and regulations in China, may adversely affect our business, financial condition and results of operations.
The overall economy and the average wage in China have increased in recent years and are expected to continue to grow. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to those who pay for our services, our results of operations may be materially and adversely affected.
In addition, we have been subject to stricter regulatory requirements in terms of entering labor contracts with their employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance to designated government agencies for the benefit of our employees. As the labor-related laws and regulations may be subject to future amendments and the interpretation and implementation thereof is subject to change, we cannot assure you that our employment practice does not and will not violate labor-related PRC laws and regulations, which may subject them to labor disputes or government investigations. If we are deemed to have violated relevant labor-related laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations may be materially and adversely affected.
Risks Related to Our Common Shares
The market price of our shares will likely be subject to substantial price and volume fluctuations.
The markets for equity securities have been volatile and the price of our common shares has been, and could continue to be, subject to wide fluctuations in response to variations in our operating results, news announcements, trading volume, sales of common shares by our officers, directors and our principal shareholders, customers, suppliers or other publicly traded companies, general market trends both domestically and internationally, currency movements and interest rate fluctuations. Other events, such as the issuance of common shares upon the exercise of our outstanding stock options and the execution of private investment in public equity could also materially and adversely affect the prevailing market price of our common shares.
We have experienced low trading volume on our common shares in recent years. We cannot assure you that as an existing shareholder, you will be able to sell part of or all of your shares or increase your share position in a reasonable bid-ask spread due to the low turnover.
Further, the stock markets have often experienced extreme price and volume fluctuations that have affected the market prices of the equity securities of many companies and such fluctuations have been unrelated or disproportionate to the operating performance of such companies. These fluctuations may materially and adversely affect the market price of our common shares.
Our ability to relist on a major exchange is subject to a rigorous, multi-stage approval process, with no assurance of success within any specific timeframe.
Our objective of relisting our common shares on a major national securities exchange, such as the NYSE or NASDAQ, is critical to restoring liquidity and enhancing shareholder value. However, achieving this objective depends on the successful completion of a rigorous, multi-faceted approval process involving several independent and demanding stages.
The initial step requires the completion and filing of audited financial statements for the years 2020 through 2024 with the SEC, and the remediation of any material weaknesses in our internal controls, both as attested by our independent auditor. On January 26, 2026, we filed our annual report on Form-20 for the years 2020 through 2024 with the SEC. Subsequently, we must undergo comprehensive due diligence by external legal counsel to ensure our compliance and corporate governance meet all applicable regulatory standards.
Upon the completion of these independent assessments, we will seek to secure approvals from multiple regulatory authorities. This may include a filing and review under the overseas listing regime of the China Securities Regulatory Commission (CSRC), followed by a thorough review of our registration statement by the SEC. Ultimately, we must also satisfy all the initial listing standards set forth by our chosen exchange. Each of these bodies operates independently, and approval from one does not guarantee approval from another.
Despite the substantial investment of time and financial resources required to complete this complex process, there is a significant risk that it may not result in approval or could be subject to material delays. Any such failure or delay would cause our shares to continue trading on a market with limited liquidity, which could materially and adversely affect our share price and ability to access the public capital markets.
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Pending litigation and other material uncertainties may render the Company unsuitable for listing.
The lingering effects of shareholder disputes, including any ongoing litigation or arbitration, constitute material uncertainties. The exchange may consider the company unsuitable for listing if these uncertainties are so severe that they hinder investors from making an informed assessment of the Company’s value and risks or threaten its operational stability.
The Company may fail to meet or maintain the continued listing standards of the exchange.
Beyond initial relisting approval, the Company must demonstrate its ability to maintain compliance with the continued listing standards of any major U.S. stock exchange. This includes maintaining a minimum share price (e.g., above $1.00 on average), a certain market capitalization, and a sufficient number of shareholders. The prolonged delisting and trading on OTC markets may have eroded investor confidence, making it challenging to meet these quantitative metrics.
The Company may be unable to regain market confidence sufficient to support a public listing.
A history of delisting, financial opacity, and internal conflict can lead to an enduring “reputational discount.” If the market perceives the Company as too risky, low trading volume and poor investor interest post-relisting could itself become a reason for failing to meet ongoing listing standards in the future.
We may raise additional capital through the sale of additional equity or debt securities, which could result in additional dilution to our shareholders, or impose upon us additional financial obligations.
We may require additional cash resources to finance our continued growth or other future developments, including any investments or acquisitions we may decide to pursue. The amount and timing of such additional financing needs will vary depending on the timing of our property developments, investments and/or acquisitions, and the amount of cash flow from our operations. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities. Sales of additional equity or convertible securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations, including our ability to pay dividends or redeem stock. We cannot guarantee that financing will be available in amounts or on terms acceptable to us, if at all.
Future issuances of preference shares could materially and adversely affect the holders of our common shares or delay or prevent a change of control.
Our Board of Directors may amend our Amended and Restated Memorandum and Articles of Association without shareholder approval to create and issue, from time to time, one or more classes of preference shares (which are analogous to preferred stock of corporations organized in the United States). While we have never issued any preference shares and none are currently outstanding, we could issue preference shares in the future. Future issuance of preference shares could materially and adversely affect the rights of the holders of our common shares, or delay or prevent a change of control.
The sale or availability for sale of substantial amounts of our common shares could adversely affect their market price.
Sales of substantial amounts of our common shares in the public market, or the perception that these sales could occur, could adversely affect the market price of our shares and could materially limit our ability to raise capital through future equity offerings. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or other shareholders or the availability of these securities for future sale, may have on the market price of our common shares.
Techniques employed by short sellers may drive down the market price of our common shares.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
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Public companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.
It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in the common shares could be greatly reduced or even rendered worthless.
There is uncertainty as to whether we will declare a dividend in the future.
Since 2019, the Company’s operations have been adversely affected by the COVID-19 pandemic and shareholder proxy disputes, resulting in declining performance. Subsequently, the Company was delisted from the NYSE and relegated to over-the-counter (OTC) markets. Whether future dividends will be declared again will depend on our future growth and earnings, of which there can be no assurance, and our cash flow needs for our business. Accordingly, there can be no assurance that cash dividends on our common shares will be declared again, what the amounts of such dividends will be or whether such dividends, once declared, will continue for any future period, or at all.