China Automotive Systems

Name of Entity · Product · (sq.m.) · (sq.m.) · Equipment · Site

Henglong · Automotive Parts · 97,818 · 20,226 · 62,573 · Jingzhou City, Hubei Province

13,393 · 13,707 · — · Wuhan City, Hubei Province

Jiulong · Power Steering Gear · 39,478 · 24,734 · 41,027 · Jingzhou City, Hubei Province

Shenyang · Automotive Steering Gear · 35,354 · 18,041 · 5,869 · Shenyang City, Liaoning Province

Chongqing · Power Steering Gear · 57,849 · 22,812 · 3,401 · Chongqing City

Jielong (1) · Electric Power Steering · — · — · 11,030 · Jingzhou City, Hubei Province

Wuhan Chuguanjie · Electric Power Steering · 53,675 · 44,054 · 8,315 · Wuhan City, Hubei Province

Henglong KYB (1) · Automotive Steering Gear · — · — · 21,409 · Jingzhou City, Hubei Province

Hubei Henglong · Automotive Steering Gear · 280,254 · 137,104 · 71,625 · Jingzhou City, Hubei Province

Wuhu · Automotive Steering Gear · 83,705 · 27,288 · 5,371 · Wuhu City, Anhui Province

Wuhu Hongrun(1) · High Polymer Materials · — · — · 1,033 · Wuhu City, Anhui Province

Total · 661,526 · 307,966 · 231,653

(1) · Jielong, Henglong KYB and Wuhu Hongrun do not own land use rights or buildings by themselves. They rent buildings from Jiulong, Hubei Henglong and Wuhu, respectively.

The Company is not involved in investments in real estate or interests in real estate, real estate mortgages, and securities of or interests in persons primarily engaged in real estate activities, as all of its land rights are used for production purposes.

• The Company’s management controls approximately 64.76% of its outstanding common stock and may have conflicts of interest with the Company’s minority stockholders.
• There is a limited public float of the Company’s common stock, which can result in the Company’s stock price being volatile and prevent the realization of a profit on resale of the Company’s common stock or derivative securities.
• The Company is subject to penny stock regulations and restrictions.
• Provisions in the Company’s certificate of incorporation and bylaws and the General Corporation Law of Delaware may discourage a takeover attempt.
• Failure to maintain effective internal control over financial reporting could have a material adverse effect on the Company’s business, results of operations and the trading price of its shares.
• The Company generally does not pay cash dividends on its common stock.
• Techniques employed by short sellers may drive down the market price of the Company’s common stock.
• The Company’s secured credit facilities contain certain financial covenants that it may not satisfy, which, if not satisfied, could result in the acceleration of the amounts due under the Company’s secured credit facilities and the limitation of the Company’s ability to borrow additional funds in the future.
• RISKS RELATED TO DOING BUSINESS IN CHINA AND OTHER COUNTRIES BESIDES THE UNITED STATES
• The Company may face a severe operating environment during times of economic recession.
• Inflation in China could negatively affect the Company’s profitability and growth.
• The Chinese government’s macroeconomic policies could have a negative effect on the Company’s business and results of operations.
• The economic, political and social conditions in China could affect the Company’s business.
• Because the Company’s operations are mostly located outside of the United States and are subject to Chinese laws, any change of Chinese laws may adversely affect its business.
• The Company’s international expansion plans subject it to risks inherent in doing business internationally.
• The Company faces risks associated with currency exchange rate fluctuations; any adverse fluctuation may adversely affect its operating margins.
• If relations between the United States and China worsen, the Company’s stock price may decrease and the Company may have difficulty accessing the U.S. capital markets.
• The Chinese government could change its policies toward private enterprise, which could adversely affect the Company’s business.
• Government control of currency conversion and future movements in exchange rates may adversely affect the Company’s operations and financial results.
• Because the Chinese legal system is different from the legal system in the United States, the Company and its security holders’ legal protections may be limited.
• The Company may be subject to fines and legal sanctions imposed by State Administration of Foreign Exchange, the “SAFE”, or other Chinese government authorities if it or its Chinese directors or employees fail to comply with Chinese regulations relating to employee share options or shares granted by offshore listed companies to Chinese domestic individuals.
• Capital outflow policies in China may hamper the Company’s ability to declare and pay dividends to its stockholders.
• The recent government regulations into business activities of U.S.-listed Chinese companies may negatively impact our operations.
• The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
• Our shares may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the shares, or the threat of their being delisted, may materially and adversely affect the value of your investment
• Proceedings instituted by the SEC against PRC affiliates of the “big four” accounting firms, including the Company’s independent registered public accounting firm, could result in the Company’s financial statements being determined to not be in compliance with the requirements of the Exchange Act.
• The non-U.S. activities of the Company’s non-U.S. subsidiaries may be subject to U.S. taxation.
• Information technology dependency and cyber security vulnerabilities could lead to reduced revenue, liability claims, or competitive harm.
• The Company’s business is subject to natural disasters, health epidemics and other catastrophic incidents.
• If the Company becomes directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matters. Any unfavorable results from the investigations could harm our business operations and our reputation.
• Because a majority of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. The Chinese government may exercise significant oversight and discretion over the conduct of our business and may influence our operations from time to time, which could result in a material change in our operations and/or the value of our securities.
• The PRC government has significant oversight over the conduct of the business of our PRC subsidiaries; such oversight could result in a material change in our operations and/or the value of our securities or could significantly limit our ability to offer or continue to offer securities and/or other securities to investors and cause the value of such securities to significantly decline.
• The approval of, or filing or other procedures with, the CSRC or other Chinese regulatory authorities may be required in connection with issuing our equity securities to foreign investors under Chinese law, and, if required, we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures. We are also required to obtain business licenses from Chinese authorities in connection with our general business activities currently conducted in China.
• The PRC government has significant oversight and discretion over the conduct of the business operations of our PRC subsidiaries or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.
• Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and changes in policies, laws and regulations in China could adversely affect us.
• It may be difficult to serve the Company with legal process or enforce judgments against the Company or its management.
• Changes in political, business, economic and trade relations between the United States and China may have a material adverse impact on our business, results of operations and financial condition.