受制裁国家及出口管制

Effective October 9, 2019, the U.S. Department of Commerce designated “iFLYTEK” on the Entity List (the “Entity List Designation”).

In 2021, 2022, 2023 and the six months ended June 30, 2024, our revenue generated from sales to the Designated Entity accounted for approximately 2.59%, 1.65%, 1.08% and 2.50%, respectively.

To the best of our knowledge, only less than 1.0% of our Group’s total purchase amount related to R&D, production and project implementation during the Track Record Period were of U.S. brands.

In 2021, 2022, 2023 and the six months ended June 30, 2024, the amount of semiconductors incorporated into the Group's solutions that were sourced from the U.S. was approximately RMB52.1 million, RMB14.4 million, RMB21.9 million and RMB9.6 million, respectively, representing 20.9%, 5.3%, 5.6% and 6.7% of the total amount of semiconductors procured during the same period.

Aware of the U.S Chip Export Restrictions, we gradually reduced the use of semiconductors sourced from the U.S. and formulated plans to replace such semiconductors with semiconductors sourced from PRC or other countries.

Our Directors are of the view that the restrictions imposed by the EAR, including the BIS 2022/23 IFRs, had not negatively impacted our operations or financial performance as of the Latest Practicable Date.

During the Track Record Period, we recorded an insignificant portion of revenue from the sales of cobots to Russia (excluding Crimea, Luhansk, Donetsk, Zaporizhzhia and Kherson regions) which falls under the Relevant Custom Codes, such as our CR series (industrial robots), MG400 (industrial robots), integrated cobots for printing (machines for additive manufacturing by rubber or plastic deposit), and the accessories (parts of machines and mechanical appliances having individual functions; parts of machines for additive manufacturing), being nil, RMB2.2 million, RMB1.6 million and RMB3.1 million in 2021, 2022, 2023 and the six months ended June 30, 2024, respectively, representing nil, 0.9%, 0.5% and 2.6% of our total revenue in the same periods, respectively.

the Group was advised by our International Sanctions Legal Advisor that the Group did not implicate violations of U.S. sanctions laws, regulations and executive orders.

it is expected that such penalty should not exceed RMB1.8 million.

During the Track Record Period, we sold products, including APIs we produced, to certain customers in the Relevant Regions, contributing an aggregate of RMB123.2 million, RMB47.5 million, RMB38.2 million and RMB26.4 million for the years ended December 31, 2021, 2022, 2023 and the six months ended June 30, 2024, respectively, accounting for 9.4%, 4.2%, 3.0% and 3.8% of our total revenue during the respective period.

Our International Sanctions Legal Adviser has not identified apparent violations of International Sanctions by us after evaluating the sanctions risks of our historical business activities in relation to the Relevant Regions during the Track Record Period.

Based on our current understanding and as advised by our International Sanctions Legal Adviser, our Directors believe that we are not subject to sanctions risk that could have a material adverse effect on our transactions involving the Relevant Regions during the Track Record Period, and our Directors do not foresee any material adverse effect to our business or operations for continuing our business in relation to the Relevant Regions.

Our costs of procuring such testing services were approximately RMB400,000, RMB500, nil and nil, for the years/periods ended December 31, 2021, 2022 and 2023 and the five months ended May 31, 2024, respectively.

As advised by our International Sanctions Legal Advisors, our indirect transactions with the sanctioned receiving bank did not implicate limited restrictions applicable to such entity as an entity designated on Sectoral Sanctions Identifications List because (i) the transactions did not fall into the scope of such OFAC sectoral sanctions program as none of their transactions is made by a U.S. person or made within the United States; (ii) the limited activities involving USD payments were not restricted by the sectoral sanctions relating to new debt or equity; and (iii) the transactions were prior to its designation as a SDN.

Based on our current understanding and as advised by our International Sanctions Legal Advisors, we believe that we are not subject to sanctions risk that could have a material adverse effect on our historical procurement of testing services involving the Russia (excluding Crimea) during the Track Record Period.

(i) the Group provided container shipping services to one customer in Myanmar which was owned by an SDN during the period from March 31, 2021 to April 29, 2021, with a revenue from the transactions with this customer of US$87,990.

We have fully ceased any transaction with the customer in Myanmar which was owned by an SDN since April 29, 2021, and we will not deal with any customer who is an SDN or owned by an SDN in the future.

Therefore, our International Sanctions Legal Advisers have not recommended reporting of our historical business activities relating to the Relevant Regions during the Track Record Period, including voluntary self-disclosure to OFAC, and such reporting is not necessary as of the date of this prospectus.

We understand, after consultations with U.S. export control counsel and taking into account their view, that because the semiconductors incorporated into our solutions are not produced in or exported from the United States, these semiconductor items would not be subject to U.S. export controls under the EAR when being exported, reexported, or transferred entirely outside the United States, except in limited circumstances that could trigger the EAR’s de minimis rule or an FDPR:

Because we do not sell our solutions incorporating our semiconductors to any of these countries or territories or to or for these prohibited end uses or end users, the EAR, including the BIS 2022/23 IFRs, have not negatively impacted our operations or financial performance as of the Latest Practicable Date.

Based on the reasons set forth above and the due diligence conducted by the Joint Sponsors, nothing has come to the attention of the Joint Sponsors that would reasonably cause the Joint Sponsors to disagree with the Directors’ view as set out above in any material respects.

We had transactions with certain companies on the Entity List and/or the list of Specially Designated Nationals and Blocked Persons (the “SDN List”) during the Track Record Period.

The transaction amount with such companies for the three years ended December 31, 2023 and the three months ended March 31, 2024 were RMB15.9 million, RMB85.0 million, RMB46.6 million and RMB11.8 million, which amounted to 1.2%, 10.2%, 4.8% and 4.9% of our total purchase amount, respectively.

The transaction amount with such companies for the three years ended December 31, 2023 and the three months ended March 31, 2024 were RMB4.3 million, RMB5.5 million, RMB12.2 million and RMB10.8 million, which amounted to 0.3%, 0.5%, 0.9% and 3.1% of our total sales amount, respectively.

On October 7, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) released an Interim Final Rule (the 2022 Rule) that implemented several new export controls to restrict China’s access from the U.S. and overseas sources relying on U.S. technology to certain advanced computing technology, semiconductors, and related items used in the manufacturing of semiconductors.

K&L Gates, our legal advisors as to U.S. export control laws, confirmed that during the Track Record Period, the arrangements between the Group, Shanghai International and TSMC are not materially impacted by any U.S. export restrictions currently in effect.

The Company’s sales transactions with Shanghai International and TSMC were not significantly impacted by the new U.S. export control restrictions, since the restrictions are broadly inapplicable to the products involved.

During the Track Record Period, we sold our products including process burners and SRU and VOCs incineration equipment directly and/or indirectly to four customers located in Russia who were operating in the engineering and manufacturing sectors of the Russian economy.

our Indirect Iran Sales and our direct and indirect sales to customers in Russia (a) did not constitute Primary Sanctioned Activity under U.S. law; and (b) did include certain transactions that might potentially qualify as Secondary Sanctioned Activity under U.S. law, and the risks that our Company might become subject to secondary sanctions under U.S. law as a result of our Indirect Iran Sales alone and our direct and indirect sales to customers in Russia alone are determined to be low

As at the Latest Practicable Date, our Group had already ceased to sell equipment to Iran; and except for the current sale orders on hand with Direct Russian Sales as abovementioned, we have already ceased to sell equipment to Russia.

One of our Controlling Shareholders, AVIC and certain of its subsidiaries ("Identified CMIC Entities"), were designated by the U.S. Department of the Treasury on the NS-CMIC List under Executive Order 13959 ("EO 13959"), on June 3, 2021, with an effective date of August 2, 2021.

During the Track Record Period, we entered into certain transactions with two customers, AG Huanan and AG Zhejiang, who were designated by BIS on the Military End-User List on December 23, 2020 and thus were restricted from receiving items subject to the EAR and listed in supplement no. 2 to part 744 of the EAR without a license.

We generated revenue of approximately US$17.2 million, US$13.6 million and US$3.8 million from transactions with AG Huanan for the years ended December 31, 2021, 2022 and 2023, respectively, representing approximately 2.3%, 1.5% and 0.4% of our Group's total revenue for the same years, respectively.

During the Track Record Period, we indirectly procured aluminium products from the Relevant Region through one of our suppliers in Singapore, who sourced from a sanctioned entity located in the Relevant Region.

Our cost of sales attributable to such indirect procurements from the Relevant Region were approximately S$0.3 million, nil and nil for the years ended 31 December 2022 and 2023 and up to the Latest Practicable Date, respectively, representing approximately 1.2%, nil and nil of our Group’s total cost of sales for the years ended 31 December 2022 and 2023 and up to the Latest Practicable Date, respectively, and approximately 8.1%, nil and nil of the total aluminium products the Group procured for the years ended 31 December 2022 and 2023 and up to the Latest Practicable Date, respectively.

Based on our best understanding and as advised by our International Sanctions Legal Advisers, we believe that we are not subject to sanctions risk that could have a material adverse effect due to our historical indirect transactions involving the Relevant Region during the Track Record Period.

We had transactions with Client I, which was on the Entity List during the Track Record Period.

The International Sanctions Legal Adviser is of the view that the sanction risk related to our transactions with Client I during the Track Record Period is low on the grounds that (i) the Group only operated and provided services to its clients in the PRC; and (ii) the Group only provided services but not servers or equipment to its clients.

As a result, the International Sanctions Legal Adviser is of the view, and the Directors concur that, as at the Latest Practicable Date, (1) there are no U.S. trade restrictions or regulations that place restrictions on the Group’s business;

During the Track Record Period, we purchased a large amount of KCL, directly and indirectly, from Supplier D in Belarus, which was one of our top five suppliers.

Since Supplier D was designated by OFAC as an SDN, we have ceased entering into new purchase contracts with it.

The table below sets forth our overseas and domestic purchases of KCL originated from Russia, in absolute amount and as a percentage of our total purchases of KCL, for the years/periods indicated.

It is possible that these multinational conglomerates and technology corporations headquartered in the PRC and/or their products may be subject to export/import restrictions and/or sanctions imposed by certain foreign countries for use in these foreign countries from time to time.

Supplier I has been placed on a trade list by the U.S since 2019 which restricts most U.S. suppliers from shipping goods and technology to it unless they are granted licences issued by the Federal Communications Commission of the U.S.

In addition, our Directors confirm that during the Track Record Period, there has not been any material disruption to our supplies sourced from any of our suppliers by reason of any export or import restrictions or other sanctions imposed on any of our suppliers, their upstream players or their products.

Our procurement of semiconductor chips from U.S. suppliers accounted for 83.0%, 39.5%, 68.5% and 68.1% of the total procurement amount of semiconductor chips in 2020, 2021 and 2022 and the six months ended June 30, 2023, respectively, while procurement from PRC suppliers accounted for 17.0%, 60.5%, 31.5% and 31.9% in the same periods, respectively, based on our management accounts.

As of the Latest Practicable Date, we had not been added to any of the Relevant Lists, nor had there been any changes to the scope of U.S. export controls solely as a result of this request.

As of the Latest Practicable Date, based on the scope of the proposed regulation and our Company’s confirmation that our LiDAR products are intended for commercial use only, our legal advisor as to U.S. export controls, sanctions, customs, and foreign investment laws and regulations is of the view that even after it takes effect, the process is not likely to prohibit investment in our Company or the sale of our products.

During the Track Record Period, we sold consumer-level robots and other hardware devices to customers located in Belarus, Egypt, Hong Kong, Iraq, Russia, Serbia, Turkey and Ukraine (excluding Crimea, Luhansk, Donetsk, Zaporizhzhia and Kherson regions) and purchased certain promotional service from a service provider in Turkey.

To the best knowledge of our Directors, for FY2020, FY2021, FY2022 and 6M2023, our revenue derived from the sales to the Relevant Countries amounted to approximately RMB2.99 million, RMB5.13 million, RMB13.20 million and RMB3.00 million, respectively, representing approximately 0.40%, 0.63%, 1.31% and 1.15% of our total revenue for the same periods, respectively.

Our International Sanctions Legal Advisers have advised us that, based on the due diligence procedures that have been carried out to assess the sanctions risk, as well as the factors set out below, (i) none of our Group nor any of our counterparty customers, suppliers or service providers during the Track Record Period and up to the Latest Practicable Date was a Sanctioned Target listed on the SDN List or other restricted parties lists maintained by OFAC; and (ii) our Group’s business dealings with our counterparty customers and service providers during the Track Record Period and up to the Latest Practicable Date did not constitute Primary Sanctioned Activities or give rise to Secondary Sanctionable Activities:

To the best knowledge of our Directors, in 2020, 2021 and 2022, and for the four months ended April 30, 2023, our revenue generated from transactions related to Relevant Regions was approximately RMB13.9 million, RMB19.0 million, RMB24.0 million and RMB13.8 million, respectively, representing approximately 1.4%, 1.6%, 2.0% and 3.2% of our total revenue for the same periods, respectively.

The Iran USD Sales include 69 distinct transactions to 15 distinct Iran customers with delivery dates between December 2019 and April 2023, in which we received approximately USD1.8 million in payments denominated in USD to our bank accounts in China.

Accordingly, the Iran USD Sales and Syria USD sales likely constituted Primary Sanctioned Activity.

Effective March 2, 2023, the U.S. Department of Commerce’s Bureau of Industry and Security ("BIS") added certain entities to the entity list (the "Entity List"), including "4Paradigm Technology Co., Ltd." with aliases "4Paradigm," "4th Paradigm," and "Fourth Paradigm".

Moreover, sales of AIO products which do not contain U.S.-branded chips accounted for more than half of sales of our AIO solutions for each of the year ended December 31, 2022, and the three months ended March 31, 2023.

In light of the above, our Directors are of the view that the Entity List designation of the Listed Entities should not have any material adverse impact on our business and financial performance.

During the Track Record Period, we (i) engaged in transactions of selling containers and providing transportation services for the said containers to an entity which is based in Russia (excluding Crimea), and (ii) maintained operating entities, subsidiaries and affiliates in Hong Kong ("Hong Kong Operating Entities").

We have also entered into a termination agreement with the said Russia-based entity to cease the business relationship.

Therefore, our International Sanctions Legal Advisors have not recommended reporting of our historical business activities relating to the Relevant Regions during the Track Record Period, including voluntary self-disclosure to OFAC, and such reporting is not necessary as of the date of this prospectus.