GTECW Greenland Technologies Holding Corporation (PK)

RISK FACTORS

An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below and in the documents referenced above are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment.

Risks Related to Our Business

A disruption, termination or alteration of the supply of aluminum alloy or other critical materials due to natural disasters, political and economic turmoil, and widespread disease or pandemics (such as the recent coronavirus outbreak) could materially adversely affect the sales of our products.

Greenland’s sales and manufacturing processes depend on the supply of basic manufacturing materials and other critical components such as steel, copper, and components from certain parts manufacturers. We are reliant on a consistent supply of materials and parts in order to maintain our efficient manufacturing capability. If these suppliers and manufacturers experience production delays, we may receive a lower allocation of materials and parts than anticipated, or if the quality or design of their materials and parts changes, or if these suppliers and manufacturers implement recalls, we could incur substantive costs or disruptions to our business, which could have a material adverse effect on our net sales, financial condition, profitability and cash flows. We may also decide, from time to time, carry increased inventory to protect against these manufacturing risks, which in turn may negatively affect our results of operations.

In addition, volatility in the financial markets generally could affect the financial viability of our third-party suppliers, or could cause them to exit certain business lines, or change the terms on which they are willing to provide products. Further, any changes in quality or design, capacity limitations, shortages of raw materials or other problems could result in shortages or delays in the supply of certain wheelchair parts to us. Our business, operating results and financial condition could suffer if our suppliers reduce output or introduce new parts that are incompatible with our current wheelchair designs or manufacturing process.

Further, conditions such as public health crises could impair our ability to procure necessary materials or increase the cost of these materials. For example, since December 2019, an outbreak of a new strain of coronavirus in Wuhan, China (“COVID-19”), has resulted in widespread quarantines and travel bans by the Chinese government. Such government measures have imposed a substantial impact on our corporate operations in China. As of the date of this prospectus, China has shown signs of COVID-19 slowdown and Chinese industries have partially resumed businesses as government officials started to ease the restrictive measures. However, management is still uncertain about the exact extent to which COVID-19 affects our supply chain or results of operations, since risk factors such as low employee resumption rate and cessation of international trade still exist, even though our business operations have been recovered since late March. We have experience substantive sales decline in our transmission product during the first quarter. Our management believes that the Company’s overall revenues may decline for the fiscal year of 2020 due to the COVID-19 outbreak. Further, inflationary and other increases in costs of materials have occurred in the past and may recur from time to time. In addition, freight costs associated with shipping and receiving manufacturing materials are impacted by fluctuations in the cost of oil and gas. A reduction in the supply or increase in the cost of the manufacturing materials and parts could affect our ability to manufacture our products and could increase the cost of production, which could negatively impact our revenues and profitability.

Greenland’s revenues, expenses and profits are difficult to predict and vary significantly from quarter to quarter. This could cause the trading price of our Ordinary Shares to decline.

Greenland’s operating results vary significantly from quarter to quarter. Therefore, Greenland believes that period-to-period comparisons of its results of operations are not necessarily meaningful and should not be relied upon as an indication of its future performance. It is possible that in the future some of Greenland’s quarterly results of operations may be below the expectations of market analysts and our investors, which could lead to a significant decline in the trading price of our Ordinary Shares. Factors which affect the fluctuation of Greenland’s revenues, expenses and profits include:

A portion of Greenland’s expenses, particularly those related to personnel and facilities are generally fixed in advance of any particular quarter. As a result, unanticipated variations in the number and timing of Greenland’s purchase orders or prices of its raw materials may cause significant variations in its operating results in any particular quarter.

Greenland’s operations are cash intensive, and its business could be adversely affected if it fails to maintain sufficient levels of liquidity and working capital.

As of December 31, 2019, Greenland had approximately $5,717,207 of cash and cash equivalents (including restricted cash). Historically, Greenland has spent a significant amount of cash on its operational activities, principally to procure raw materials for its products. Greenland’s short-term loans are from Chinese banks and are generally secured by a portion of its fixed assets, land use right and/or guarantees by related parties. The term of a majority of such loans is one year. Historically, Greenland has rolled over such loans on an annual basis. However, it may not have sufficient funds available to pay all of its borrowings upon maturity in the future. Failure to roll over its short-term borrowings at maturity or to service its debt could result in the imposition of penalties, including increases in interest rates, legal actions against Greenland by its creditors, or even insolvency.

Although Greenland has been able to maintain adequate working capital primarily through cash from operations and short-term and long-term borrowings, any failure by its customers to settle outstanding accounts receivable, or Greenland’s inability to borrow sufficient capital from local banks, in the future could materially and adversely affect its cash flow, financial condition and results of operations.

Greenland grants relatively long payment terms for accounts receivable which can adversely affect its cash flow.

As is customary in China, for competitive reasons, Greenland grants relatively long payment terms to most of its customers. The reserves Greenland establishes for its receivables may not be adequate based on the current bad debts. Greenland is subject to the risk that it may be unable to collect accounts receivables in a timely manner. If the accounts receivables cannot be collected in time, or at all, a significant amount of bad debt expense will occur, and Greenland’s business, financial condition and results of operation will likely be materially and adversely affected.

Greenland faces short lead-times for delivery of products to customers. Failure to meet delivery deadlines could result in the loss of customers and damage to its reputation and goodwill.

Most of Greenland’s customers are large manufacturers, who generally place large orders for Greenland’s products and require prompt delivery. Greenland’s product sale agreements typically contain short lead-times for the delivery of products and tight production and manufacturer supply schedules that can reduce its profit margins on the products procured from its suppliers. Greenland’s suppliers may lack sufficient capacity at any given time to meet all of its customers’ demands if orders exceed their production capacity. Greenland strives for rapid response to customer demand which can lead to reduced purchasing efficiency, increased procurement costs and low profit margins. If Greenland is unable to meet the customer demands, it may lose customers. Moreover, failure to meet customer demands may damage its reputation and goodwill.

If existing sources of capital are insufficient to support its business and outstanding obligations, Greenland may issue debt and equity securities that are senior to its ordinary shares as to distributions and in liquidation, which could negatively affect the value of its ordinary shares, or Greenland may not be able to raise additional financing at all.

Greenland has operating and long-term and short-term loan obligations, as well as obligations to related parties. If available liquidity is not sufficient to meet its operating and loan obligations as they come due, Greenland’s plans include considering pursuing alternative financing arrangements, reducing expenditures as necessary, or limiting its plans for expansion to meet its cash requirements. However, there is no assurance that, if required, it will be able to raise additional capital, reduce discretionary spending or efficiently limit its expansion to provide the required liquidity. Currently, the capital markets for small capitalization companies are difficult and banking institutions have become stringent in their lending requirements. Accordingly, Greenland cannot ensure the availability or terms of any third-party financing. If Greenland is unable to raise additional financing, it may be unable to procure the raw materials it needs, implement its long-term business plan, develop or enhance its products, take advantage of future opportunities or respond to competitive pressures on a timely basis.

Alternatively, if the Company raises capital by issuing equity or convertible debt securities, such issuances could result in substantial dilution to its shareholders. In addition, the Company may issue senior notes, subordinated notes or preferred shares that have preference over its ordinary shares. In the event of its liquidation, any such lenders and holders of its debt or preferred securities would receive a distribution of its available assets before distributions to the holders of its ordinary shares. Greenland’s decision to incur debt and issue securities in future offerings will depend on market conditions and other factors beyond its control. The Company cannot predict or estimate the amount, timing or nature of future offerings and debt financings. Future offerings could reduce the value of our Ordinary Shares or dilute your investment.

To remain competitive and stimulate customer demand, Greenland must successfully manage the introduction and transition of its future automated products.

Greenland intends to introduce a new automated product. The success of the new product introduction depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, the ability to manage the risks associated with new product production ramp-up issues, the availability of materials needed for new products, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate quantities and at expected costs to meet anticipated demand and the risk that new products may have quality or other defects or deficiencies in the early stages of introduction. Accordingly, Greenland cannot determine in advance the ultimate effect of the new product introduction and transition.

Greenland faces intense competition, and if it is unable to compete effectively it may not be able to maintain profitability.

Greenland competes with many other companies located in the PRC and internationally that manufacture similar products. Many of its competitors are larger companies with greater financial resources. Intense competition in a challenging economic environment in the PRC has, in the past, put pressure on Greenland’s margins and may adversely affect its future financial performance. Moreover, intense competition may result in potential or actual litigation between Greenland and its competitors relating to such activities as competitive sales practices, relationships with its suppliers and customers or other matters.

While Greenland believes that its manufacturing efficiency and capabilities provide it with a competitive advantage among its competitors, it is likely that its competitors will seek to develop similar competing products in the near future. Greenland intends to continue to expand research and development efforts to advance its transmission and robotic technology even further, including improving the design, application and manufacturing of internal combustion engines. However, there can be no assurance that Greenland’s initial competitive advantage will be retained and that one or more competitors will not develop products that are equal or superior in quality and are better priced than Greenland’s products.

Greenland’s revenues are highly dependent on a limited number of customers and the loss of any one of its major customers could materially and adversely affect its growth and revenues.

During the years ended December 31, 2019 and 2018, Greenland’s five largest customers contributed 43.62% and 40.58%, respectively, of its total revenues. In the same periods, Greenland’s single largest customer, Company A, accounted for 14.03% and 14.66%, respectively, of Greenland’s total revenue. As a result of its reliance on a limited number of customers, Greenland may face pricing and other competitive pressures, which may have a material adverse effect on its profits and its revenues. The volume of products sold for specific customers varies from year to year, especially since Greenland is not the exclusive provider for any customers. In addition, there are a number of factors, other than its performance, that could cause the loss of a customer or a substantial reduction in the products that Greenland provides to any customer and that may not be predictable. For example, Greenland’s customers may decide to reduce spending on its products or a customer may no longer need its products following the completion of a project. Furthermore, such customers do not have long-term contracts with Greenland requiring such customers to purchase a quantified number of products or at all. The loss of any one of its major customers, a decrease in the volume of sales to these customers or a decrease in the price at which Greenland sells its products to customers could materially adversely affect Greenland’s profits and revenues.

In addition, this customer concentration may subject Greenland to perceived or actual leverage that its customers may have in negotiations, given their relative size and importance to Greenland. If Greenland customers seek to negotiate their agreements on terms less favorable to Greenland and Greenland accepts such terms, such unfavorable terms may have a material adverse effect on Greenland’s business, financial condition and results of operations. Accordingly, unless and until it diversifies and expands its customer base, Greenland’s future success will significantly depend upon the timing and volume of business from its largest customers and the financial and operational success of these customers.

As Greenland expands its operations, it may need to establish a more diverse supplier network for its raw materials. The failure to secure a more diverse supplier network could have an adverse effect on its financial condition.

Greenland purchases its raw materials from various suppliers for use in the manufacture of its products. For the years ended December 31, 2019 and 2018, none of Greenland’s suppliers accounted for more than 10% of total procurement costs. In the event that Greenland needs to diversify its supplier network, it may not be able to procure a sufficient supply of raw materials at a competitive price, which could have an adverse effect on its results of operations, financial condition and cash flows. Furthermore, despite its efforts to control its supply of raw materials and maintain good relationships with its existing suppliers, Greenland could lose one or more of its existing suppliers at any time. The loss of one or more suppliers could increase its reliance on higher cost or lower quality supplies, which could negatively affect its profitability. Any interruptions to, or decline in, the amount or quality of its raw materials supply could materially disrupt its production and adversely affect its business, financial condition and financial prospects.

Volatile steel prices can cause significant fluctuations in Greenland’s operating results. Greenland’s revenues and operating income could decrease if steel prices increase or if it is unable to pass price increases on to its customers.

Greenland’s principal raw material are processed metal parts and components which are made of carburizing steel. The steel industry as a whole is cyclical and, at times, pricing and availability of steel can be volatile due to numerous factors beyond Greenland’s control, including general domestic and international economic conditions, labor costs, sales levels, competition, levels of inventory, consolidation of steel producers, higher raw material costs for steel producers, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials.

Greenland’s suppliers, like many other processed metal parts and components manufacturers, maintain substantial inventories of steel to accommodate the short lead times and just-in-time delivery requirements of customers. Accordingly, they purchase steel in an effort to maintain their inventory at levels that they believe to be appropriate to satisfy the anticipated needs of customers based upon historic buying practices, supply agreements with customers and market conditions. When steel prices increase, competitive conditions will influence how much of the price increase suppliers would pass on to Greenland and how much Greenland can pass on to its customers. To the extent Greenland is unable to pass on future price increases in raw materials to its customers, the revenues and profitability of Greenland’s business could be adversely affected.

Greenland is subject to various risks and uncertainties that might affect its ability to procure quality raw materials.

Greenland’s performance depends on its ability to procure low cost, high quality raw materials on a timely basis from its suppliers. Greenland’s suppliers are subject to certain risks, including availability of raw materials, labor disputes, inclement weather, natural disasters, and general economic and political conditions, which might limit the ability of Greenland’s suppliers to provide low cost, high quality merchandise on a timely basis. Furthermore, for these or other reasons, one or more of Greenland’s suppliers might not adhere to Greenland’s quality control standards, and Greenland might not identify the deficiency. Our suppliers’ failure to supply quality materials at a reasonable cost on a timely basis could reduce Greenland’s net sales or profits, damage its reputation and have an adverse effect on its financial condition.

Greenland may lose its competitive advantage, and its operations may suffer, if it fails to prevent the loss or misappropriation of, or disputes over, its intellectual property.

Greenland relies on a combination of patents, trademarks, trade secrets and confidentiality agreements to protect its intellectual property rights. While Greenland is not currently aware of any infringement on its intellectual property rights, its ability to compete successfully and to achieve future revenue growth will depend, in significant part, on its ability to protect its proprietary technology. Despite many laws and regulations promulgated, as well as other efforts made, by China over the past several years in an attempt to protect intellectual property rights, intellectual property rights are not as certain in China as they would be in many Western countries, including the United States. Furthermore, enforcement of such laws and regulations in China has not been fully developed. Neither the administrative agencies nor the court systems in China are as equipped as their counterparts in developed countries to deal with violations or handle the nuances and complexities between compliant technological innovation and non-compliant infringement.

Greenland’s transmission technology is protected through a combination of patents, trade secrets, confidentiality agreements and other methods. However, its competitors may independently develop similar proprietary methodologies or duplicate its products, or develop alternatives, which could have a material adverse effect on Greenland’s business, results of operations and financial condition. The misappropriation or duplication of Greenland’s intellectual property could disrupt its ongoing business, distract its management and employees, reduce its revenues and increase its expenses. Greenland’s may need to litigate to enforce its intellectual property rights. Any such litigation could be time consuming and costly and the outcome of any such litigation cannot be guaranteed.

Greenland has limited insurance coverage and may incur losses resulting from product liability claims, business interruption or natural disasters.

Greenland is exposed to risks associated with product liability claims in the event that the use of its products results in property damage or personal injury. Since its products are ultimately incorporated into forklifts, it is possible that users of forklifts or people installing Greenland’s products could be injured or killed, whether as a result of defects, improper installation or other causes. Because Greenland continues to expand its customer base and because its products are used for long periods of time, Greenland is unable to predict whether product liability claims will be brought against it in the future or to predict the impact of any resulting adverse publicity on its business. The successful assertion of product liability claims against Greenland could result in potentially significant monetary damages and require Greenland to make significant payments. Greenland does not carry product liability insurance and may not have adequate resources to satisfy a judgment in the event of a successful claim against it. Any business interruption or natural disaster could result in substantial losses and diversion of Greenland’s resources and materially and adversely affect its business, financial condition and results of operations.

If labor costs in the PRC increase substantially, Greenland’s business and costs of operations may be adversely affected.

In recent years, the Chinese economy has experienced inflation and labor cost increases. Average wages are projected to continue to increase. Further, under PRC law, Greenland’s operating subsidiaries are required to pay various statutory employee benefits, including pensions, housing funds, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of its employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. Greenland expects that its labor costs, including wages and employee benefits, will continue to increase based on the past trends. If Greenland is unable to control its labor costs or pass such increased labor costs on to Greenland’s customers, its financial condition and results of operations may be adversely affected.

Competition for Greenland’s employees is intense, and it may not be able to attract and retain the highly skilled employees needed to support its business.

As Greenland continues to experience growth, it believes its success depends on the efforts and talents of its employees, including engineers, financial personnel and marketing professionals. Its future success depends on its continued ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for highly skilled engineering, sales, technical and financial personnel is extremely intense. Greenland may not be able to hire and retain these personnel at compensation levels consistent with its existing compensation and salary structure. Many of the companies with which Greenland competes for experienced employees have greater resources than Greenland has and may be able to offer more attractive terms of employment.

In addition, Greenland invests significant time and expense in training its employees, which increases their value to competitors who may seek to recruit them. If Greenland fails to retain its employees, it could incur significant expenses in hiring and training their replacements, and the quality of its services and its ability to serve customers could diminish, resulting in a material adverse effect on its business.

Greenland’s business depends on the continued efforts of its senior management. If one or more of its key executives were unable or unwilling to continue in their present positions, its business may be severely disrupted.

Greenland’s business operations depend on the continuing services of its senior management, particularly Raymond Z. Wang, its Chief Executive Officer, and its other executive officers named in this prospectus. While Greenland has provided incentives to its management, it cannot assure you that it can continue to retain its officers and directors’ services. If one or more of Greenland’s key executives were unable or unwilling to continue in their present positions, it may not be able to replace them easily or at all, its future growth may be constrained, its business may be severely disrupted and its financial condition and results of operations may be materially and adversely affected, and it may incur additional expenses to recruit, train and retain qualified personnel. In addition, if any dispute arises between Greenland and its current or former officers, it may have to incur substantial costs and expenses in order to enforce such agreements in China or it may be unable to enforce them at all.

If the status of Zhejiang Zhongchai as a “High and New Technology Enterprise” is revoked or expires, it may have to pay additional taxes or make up any previously unpaid taxes and may be subject to a higher tax rate, which would adversely affect its results of operations.

The PRC Enterprise Income Tax Law generally imposes a uniform income tax rate of 25% on all enterprises, but grants preferential treatment to “High and New Technology Enterprises” (“HNTEs”), pursuant to which HNTEs are instead subject to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years. During this three-year period, an HNTE must conduct a qualification self-review each year to ensure it meets the HNTE criteria, and will be subject to the regular 25% income tax rate for any year in which it does not meet the criteria. Zhejiang Zhongchai is qualified as an HNTE and therefore enjoyed 15% preferential income tax rate for the three years starting January 1, 2016 through December 31, 2019. Zhejiang Zhongchai received its renewed HNTE qualification in December 4, 2019 for another three year until December 4, 2022.

There are uncertainties regarding future interpretation and implementation of the PRC Enterprise Income Tax Law and its implementing regulations. It is possible that the HNTE qualification of Zhejiang Zhongchai, or its entitlement to an income tax exemption or refund of their value-added tax, will be challenged by tax authorities and be repealed, or that there will be future implementing regulations that are inconsistent with current interpretation of the PRC Enterprise Income Tax. If Zhejiang Zhongchai cannot qualify for such preferential income tax status, its effective income tax rate will be increased significantly and it may have to pay additional income taxes to make up the previously unpaid taxes, which would reduce Zhongchai Holding’s net income.

Risks Related to Doing Business in the PRC

A severe or prolonged downturn in the global or Chinese economy could materially and adversely affect our business and our financial condition.

Although the Chinese economy has grown steadily in the past decade, there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the People’s Bank of China and financial authorities of some of the world’s leading economies, including the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility in oil and other markets. There have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. 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, results of operations and financial condition.

Changes in the policies of the PRC government could have a significant impact upon our ability to operate profitably in the PRC.

Currently, we conduct all of our operations and all of our revenue is generated in the PRC. Accordingly, economic, political and legal developments in the PRC will significantly affect our business, financial condition, results of operations and prospects. Policies of the PRC government can have significant effects on economic conditions in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation that may affect our ability to operate as currently contemplated.

Because our business is dependent upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate profitably, if at all.

Although the PRC government has been pursuing a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that encourage private ownership of businesses. We cannot assure you that the PRC government will pursue policies favoring a market-oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.

PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business. 

Because our business is conducted in RMB and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.

Our business is conducted in the PRC, our books and records are maintained in RMB, which is the currency of the PRC, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets and the results of our operations in United States dollars. The value of the RMB against the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial condition. Further, our Ordinary Shares offered by this prospectus are denominated in United States dollars, we will need to convert the net proceeds we receive into RMB in order to use the funds for our business. Changes in the conversion rate between the United States dollar and the RMB will affect that amount of proceeds we will have available for our business.

Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

The EIT Law and its implementing rules provide that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de facto management bodies” as a management body that substantially manages, or has control over the business, personnel, finance and assets of an enterprise. In April 2009, the State Administration of Taxation, or the “SAT,” issued a circular known as “SAT Circular 82” (partially abolished on December 29, 2017), which provides certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise that is incorporated offshore are located in China. There are, however, no further detailed rules or precedents governing the procedures and specific criteria for determining “de facto management body.” Although our board of directors and management are located in the PRC, it is unclear if the PRC tax authorities would determine that we should be classified as a PRC “resident enterprise.”

If we are deemed as a PRC “resident enterprise,” we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to us from our existing PRC subsidiaries and any other PRC subsidiaries which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered a PRC “resident enterprise”, any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty). It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect on the value of your investment in us and the price of our Ordinary Shares.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

Under the PRC EIT Law and its implementation rules, the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside the PRC, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and the PRC and the Notice of the SAT on Issues Regarding the Implementation of Dividend Provisions in Tax Treaties, or the “SAT Circular 81,” issued by the SAT, such rate may be reduced to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to the distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the China-Hong Kong special arrangement and other applicable PRC laws. Furthermore, under the SAT’s Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties effective in August 2015, non-resident taxpayers shall determine whether they are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities. See “Taxation—People’s Republic of China Taxation.” We have determined that we are qualified to enjoy the preferential tax treatment. However, we cannot assure you that our determination will not be challenged by the relevant PRC tax authority or we will be able to complete the necessary filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the China-Hong Kong special arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kong subsidiary.

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 SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or “SAT Bulletin 7,” which was partially abolished in 2017. Pursuant to this bulletin, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. SAT Bulletin 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.

There is uncertainty as to the application of SAT Bulletin 7. We face uncertainties as to the reporting and other implications of certain future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our Company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our Company is transferee in such transactions under SAT Bulletin 7. For transfer of shares in our Company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

If we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price, and reputation.

U.S. public companies that have substantially all of their operations in China have been the subject of intense 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 a result of the scrutiny, criticism, and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity will have on us, our business, and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our business. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our stock.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings or any of our other public pronouncements.

Risks Related to this Offering and the Trading Market

You will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased.

The public offering price of our Ordinary Shares is substantially higher than the (pro forma) net tangible book value per share of our Ordinary Shares. Consequently, upon completion of the offering and the issuance of 2,461,000 Ordinary Shares upon the exercise of warrants, you will incur immediate dilution of $5.47 per share at a public offering price of $11.50. See “Dilution.” In addition, you may experience further dilution to the extent that additional Ordinary Shares are issued upon exercise of outstanding options we may grant from time to time.

Substantial future sales of our Ordinary Shares or the anticipation of future sales of our Ordinary Shares in the public market could cause the price of our Ordinary Shares to decline.

Sales of substantial amounts of our Ordinary Shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our Ordinary Shares to decline. An aggregate of 10,021,142 Ordinary Shares are outstanding before the consummation of this offering and 12,482,142 Ordinary Shares will be outstanding immediately after the consummation of this offering. Sales of these shares into the market could cause the market price of our Ordinary Shares to decline.

Since our Directors and Executive Officers will own 70.8% of our Ordinary Shares following the public offering, they will have the ability to elect directors and approve matters requiring shareholder approval by way of resolution of members.

Mr. Peter Zuguang Wang, our Chairman of the Board of Directors and a Director of the Company, is currently the beneficial owner of 7,500,000, or 74.84% of our outstanding Ordinary Shares. Mr. Yanming Liu, a Director of the Company, is currently the beneficial owner of 1,337,000, or 13.34% of our outstanding Ordinary Shares. If we complete the public offering of our Ordinary Shares, Mr. Wang and Mr. Liu will collectively have the right to vote 70.8% of the issued and outstanding Ordinary Shares. They are expected to have the power to elect all directors and approve all matters requiring shareholder approval without the votes of any other shareholder. They are expected to have significant influence over a decision to enter into any corporate transaction and have the ability to prevent any transaction that requires the approval of shareholders, regardless of whether or not our other shareholders believe that such transaction is in our best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our Ordinary Shares or prevent our shareholders from realizing a premium over the then-prevailing market price for their Ordinary Shares.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.

If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline.

Any trading market for our Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.

Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance our results of operations or the price of our Ordinary Shares.

We anticipate that we will use the net proceeds from this offering for working capital and other corporate purposes. Our management will have significant discretion as to the use of the net proceeds to us from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the market price of our Ordinary Shares.

 The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations nonetheless increases our legal, accounting, and financial compliance costs and investor relations and public relations costs, making some activities more difficult, time-consuming or costly. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results as well as proxy statements.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition are visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation, and results of operations.

The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.

As a public company, we are required to file periodic reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our Company and shareholders. Although we may be able to attain confidential treatment of some of our developments, in some cases, we are mandated to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our Company. Similarly, as a U.S. public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public Company status could affect our results of operations.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the “SEC,” as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the “Sarbanes-Oxley Act,” adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Our management may conclude that our internal controls over our financial reporting are not effective. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future, which will significantly increase our operating expenses.

Under the supervision and with the participation of our Chief Executive Officer, we conducted an evaluation on the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation under this framework, Greenland’s management concluded that the Company’s internal control over financial reporting was ineffective as of the evaluation date due to the following material weakness: The insufficient number of skilled accounting personnel who are either qualified as Certified Public Accountants in the U.S. or who have received education from U.S. institutions or other educational programs. Based on the above factors, management concluded that our insufficient knowledge of US GAAP and SEC rules represents a material weakness in the Company’s internal control over financial reporting as of December 31, 2019.

We planned to remedy our material weaknesses and other control deficiencies in time to meet the deadline imposed by Section 404 of the Sarbanes-Oxley Act. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our Ordinary Shares.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior March 31, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costlier. After we are no longer an “emerging growth company,” or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

Because we are an “emerging growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence in us and our Ordinary Shares.

For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile. See “Implications of Our Being an ‘Emerging Growth Company’” on page 4.

The laws of the British Virgin Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.

Our corporate affairs are governed by our memorandum and articles of association, as amended, by the BVI Act and the common law of the British Virgin Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands. The common law in the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands and from English common law. For example, under the rule established in the English case known as Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the board of directors subject to a number of limited exceptions. Decisions of the Privy Council (which is the final Court of Appeal for British Overseas Territories such as the British Virgin Islands) are binding on a court in the British Virgin Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the British Virgin Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the British Virgin Islands has a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

If we are classified as a passive foreign investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our 2019 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, In which case we would be deemed a PFIC, which could have adverse US federal income tax consequences for US taxpayers who are shareholders. We will make this determination following the end of any particular tax year.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company” on page 78.

Recently introduced economic substance legislation of the British Virgin Islands may adversely impact us or our operations.

The British Virgin Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union (the “EU”) as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “Substance Law”) came into force in the British Virgin Islands introducing certain economic substance requirements for British Virgin Islands “relevant entities” which are engaged in certain banking, insurance, fund management, financing and leasing, headquarters, shipping, holding company, intellectual property or distribution and service center business (being “relevant activities”) and are in receipt of gross income arising from relevant activities in any relevant financial period. In the case of business companies incorporated before January 1, 2019, the economic substance requirements apply for financial years commencing June 30, 2019.

The economic substance requirements that are imposed include that in-scope companies be directed and managed in the British Virgin Islands, have core income generating activities in the British Virgin Islands, and have an adequate level of employees, expenditures, and premises in the British Virgin Islands. Business companies that carry on holding company business (which means it only holds equity participations in other entities and only earns dividends and capital gains) may be subject to reduced substance requirements.

Based on the Substance Law and announced guidance currently issued, it is anticipated that we will be subject to limited substance requirements applicable to a holding company. At present, it is unclear what we exactly will be expected to do in order to satisfy these requirements, but to the extent we are required to increase our substance in the British Virgin Islands, it could result in additional costs. Although it is presently anticipated that the Substance Law (including the ongoing EU review of the British Virgin Islands’ implementation of such law), will have minimal material impact on us or our operations, as the legislation and guidance are new and remain subject to further clarification, adjustment, interpretation, and the EU review, it is not currently possible to ascertain the precise impact of these developments on us, for example, whether we could also be treated as carrying out “headquarter business” in the British Virgin Islands (despite our headquarters physically being in China). It is therefore possible that we may be subject to additional requirements under the Substance Law in the future. Should that occur, it is our intention to seek appropriate advice and take appropriate steps to ensure that we (to the extent we fall within the scope of the Substance Law) are fully compliant.