1081206--3/31/2010--China_TransInfo_Technology

related topics

{regulation, change, law}

{operation, international, foreign}

{stock, price, share}

{product, market, service}

{investment, property, distribution}

{condition, economic, financial}

{regulation, government, change}

{system, service, information}

{acquisition, growth, future}

{stock, price, operating}

{product, liability, claim}

{control, financial, internal}

{provision, law, control}

{tax, income, asset}

{personnel, key, retain}

{property, intellectual, protect}

{debt, indebtedness, cash}

{interest, director, officer}

RISKS RELATED TO OUR BUSINESS In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership. If the PRC government determines that our agreements with these companies are not in compliance with applicable regulations, our business in the PRC could be materially adversely affected. We rely on contractual arrangements with our VIE Entities for our operations, which may not be as effective in providing control over these entities as direct ownership. The shareholders of the Group Company may have potential conflicts of interests with us, which may adversely affect our business. Our arrangements with the VIE Entities and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect on our income and expenses. The exercise of our option to purchase part or all of the equity interests in the VIE Entities under the Option Agreement might be subject to approval by the PRC government and foreign ownership restrictions on the VIE Entities current businesses under PRC laws. Our failure to purchase the equity of the VIE Entities without discontinuing the current businesses and operations of the VIE Entities may impair our ability to substantially control the VIE Entities and could result in actions by VIE Entities that conflict with our interests. We are highly dependent on the ITS, industry which is characterized by rapid technological change. A termination of our relationship with Peking University could have a negative impact on our future operating results. The recent global financial crisis could negatively affect our business, results of operations, and financial condition. We rely heavily on sales to the Chinese government and a significant decline in overall government expenditures or a delay in the payment of our invoices by the government could have a negative impact on our future operating results. We have experienced significant growth in the past, and we may not be able to maintain such growth in the future. We face risks associated with potential acquisitions, investments, strategic partnership or other ventures. We rely on our management to understand and react to our rapidly evolving and highly competitive GIS software development and application total solution industry and our failure to react to such changes or to introduce new products and product enhancements could adversely affect our business. We may not be able to adequately protect our proprietary intellectual property and technology, which may harm our competitive position and result in increased expenses incurred to enforce our rights. Product branding is important to us and if our brands are misappropriated such that our reputation could be harmed, this could result in lower sales having a negative impact on our financial results. If we are unable to compete effectively with existing or new competitors, our resulting loss of competitive position could result in price reductions, fewer customer orders, reduced margins and loss of market share. Our products are complex and errors or defects could result in the rejection of our products and damage to our reputation, as well as lost revenues and increased costs. We do not carry any business interruption insurance, product liability or recall insurance or third-party liability insurance. We may be exposed to potential risks relating to our internal control over financial reporting and our independent auditors may not attest to the effectiveness of our internal control. We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business. Since we depend heavily on key personnel, turnover of key employees and senior management could harm our business. RISKS RELATED TO DOING BUSINESS IN CHINA Adverse changes in political and economic policies of the PRC government could impede the overall economic growth of China, which could reduce the demand for our products and damage our business. Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us. If we are found to have failed to comply with applicable laws, we may incur additional expenditures or be subject to significant fines and penalties. The PRC government exerts substantial influence over the manner in which we must conduct our business activities. Restrictions on currency exchange may limit our ability to receive and use our sales revenue effectively. Fluctuations in exchange rates could adversely affect our business and the value of our securities. Restrictions under PRC law on our PRC subsidiary s ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our businesses. Future inflation in China may inhibit our ability to conduct business profitably in China. Dividends payable to us by our PRC subsidiary may be subject to PRC withholding taxes, we may be subject to PRC taxation on our worldwide income, and dividends distributed to our non-PRC investors may be subject to PRC withholding taxes under the PRC Enterprise Income Tax Law. Our holding company structure may restrict our ability to receive dividends from, or transfer funds to, our PRC subsidiary and our VIE Entities, which could restrict our ability to act in response to changing market conditions and reallocate funds among our Chinese entities timely. We may be subject to fines and legal sanctions if we or our Chinese employees fail to comply with PRC regulations relating to employee stock options granted by overseas listed companies to PRC citizens. SAFE rules and regulations may limit our ability to convert and transfer the net proceeds from this offering to our VIE Entities in the PRC, which may adversely affect the business expansion of our VIE Entities, and we may not be able to convert the net proceeds from this offering into RMB to invest in or acquire any other PRC companies or establish other VIE Entities in the PRC. The discontinuation or reduction of any preferential tax treatments currently available to us in the PRC may have a negative impact on our results of operations. Our business and financial performance may be materially adversely affected if the PRC regulatory authorities determine that our acquisition of PKU constitutes a Round-trip Investment without MOFCOM approval. The M A Rule establishes more complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. You may have difficulty enforcing judgments against us. RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when you want to sell your holdings. Although publicly traded, the trading market in our common stock has been substantially less liquid than the average trading market for a stock traded on the Nasdaq Stock Market and this low trading volume may adversely affect the price of our common stock. We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock. Certain of our stockholders hold a significant percentage of our outstanding voting securities and accordingly may make decisions regarding our daily operations, significant corporate transactions and other matters that other stockholders may believe are not in their best interests. Certain provisions of our Articles of Incorporation may make it more difficult for a third party to effect a change-of-control. We do not intend to pay dividends on shares of our common stock for the foreseeable future.

Full 10-K form ▸

1081206--3/31/2010--China_TransInfo_Technology_Corp.