As filed with the Securities and Exchange Commission on May 26, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-l
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST SHENZHEN SECURITIES CO., LTD
(Exact name of Registrant as specified in its charter)
HONG KONG(State or other
jurisdiction of incorporation
or organization)
6199
(Primary Standard Industrial (I.R.S. Employer
Classification Code Number)
Not Applicable
(LR.S. Employer
Identification Number)
38/F, One Century Center, Futian District, Shenzhen, Guangdong, China
518000
(Address, including zip code of Registrant's principal executive offices)
ROOM 517, NEW CITY CENTRE,
2 LEI YUE MUN ROAD,
KWUN TONG, KOWLOON.
HONG KONG
(Address, including zip code of Registrant's principal executive offices)
BIGC SECURITIES,INC.
228 PARK AVE S 79525 NEW YORK,
NEW YORK
(Name, address, including zip code of agent for service)
Copies to:
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this
Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the
same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act
of 1933. Emerging growth company
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check
mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2)(B) of the
Securities Act.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act, as amended, or until the registration
statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section
8(a) may determine.
PRELIMINARY PROSPECTUS
ORDINARY SHARES
We are offering( )ordinary shares. This is the initial public offering of
ordinary shares of ( ).The offering price of our ordinary
shares in this offering is expected to be $5.00 per share. Prior to this
offering, there has been no public market for our ordinary
shares.
We have applied to list our ordinary shares on the Nasdaq Capital
Market under the symbol 'FSZS'. There is no assurance that
such application will be approved, and if our application is not
approved, this offering may not be completed.
Investing in our ordinary shares involves a high degree of risk.
Before buying any shares, you should carefully read the discussion
of material risks of investing in our ordinary shares in'Risk Factors'.
We are an 'emerging growth company' as defined under the federal
securities laws and, as such, will be subject to reduced public
company reporting requirements. See 'Prospectus Summary-Implications
of Being an Emerging Growth Company' for additional information.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
We are not a Chinese operating company, but rather a holding company
incorporated in the Hong Kong. As a holding company
with no material operations of our own, we conduct a substantial majority
of our operations through our operating entities
established in the People's Republic of China (or the 'PRC'). The Ordinary
Shares offered in this prospectus are shares of the
Hong Kong company. Holders of our Class A Ordinary Shares do not
directly own any equity interests in our Chinese operating
subsidiaries, but will instead own shares of a Hong Kong holding company.
The Chinese regulatory authorities could disallow our
corporate structure, which would likely result in a material change in our
operations and/or a material change in the value of our
Ordinary Shares, including that it could cause the value of our Ordinary
Shares to significantly decline or become worthless.
Unless otherwise stated, as used in this prospectus and in the context
of describing our operations and consolidated financial
information, 'we,' 'us,' 'Company,' or 'our,' refers to First ShenZhen
Securities Co., Limited a Hong Kong holding company.
We face various legal and operational risks and uncertainties relating
to our operations in China. These risks, together with
uncertainties in China's legal system and the interpretation and
enforcement of Chinese laws, regulations, and policies, could
hinder our ability to offer or continue to offer our securities, result in
a material adverse effect on our business operations, and
damage our reputation, which could cause our shares to significantly
decline in value or become worthless. The Chinese
government may intervene or influence the operations of our PRC
subsidiaries at any time and may exert more control over
offerings conducted overseas and/or foreign investment in China-based
issuers, which could result in a material change in the
operations of our PRC subsidiaries and/or the value of our common stock.
Any actions by the Chinese government to exert more
oversight and control over offerings that are conducted overseas and/or
foreign investment in China-based issuers could
significantly limit or completely hinder our ability to offer or continue to
offer securities to investors and cause the value of such
securities to significantly decline or be worthless. Recently, the PRC
government adopted a series of laws, regulatory measures
and issued statements to regulate business operations in China, including
cracking down on illegal activities in the securities
market, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly
enforcement. The Cyberspace Administration of China ('CAC') has
opened cybersecurity probes into several U.S.-listed
technology companies focusing on anti-monopoly regulation, and
how companies collect, store, process and transfer data, among
other things. If we are subject to such a probe or are required to
comply with the stringent requirements of the new regulations,
our ability to conduct our business or list on a U.S. stock exchange
may be restricted. As of the date of this prospectus, we and our
subsidiaries have not been involved in any investigations on
cybersecurity review initiated by any Chinese regulatory authority,
nor has any of them received any inquiry, notice or sanction.
There are currently no relevant laws or regulations in China that
prohibit companies whose subsidiaries or entity interests are within
China from listing on overseas stock exchanges. However,
since these statements and regulatory actions are newly published,
official guidance and related implementation rules have not
been issued. It is highly uncertain what the potential impact such
modified or new policies and regulations will have on our daily
business operation, the ability to accept foreign investments and
our ability to continue trading on a U.S. securities marketplace or
stock exchange.
PER SHARE TOTAL
Initial public offering price $ $
Underwriting discounts and commissions $ $
Proceeds, before expenses, to us $ $
(1) Does not include accountable and non-accountable expense
allowance payable to underwriters. Please see the section of this
prospectus entitled 'Underwriting' for additional information regarding
underwriter compensation.
We expect our total cash expenses for this offering (including cash
expenses payable to our underwriters for their out-of-pocket
expenses) to be approximately $[ ], exclusive of the above commissions.
In addition, we will pay additional items of value in
connection with this offering that are viewed by the Financial Industry
Regulatory Authority, or FINRA, as underwriting
compensation. These payments will further reduce proceeds available
to us before expenses. See 'Underwriting.'
Neither we nor any of the underwriters have authorized anyone to provide
any information or to make any representations other
than those contained in this prospectus or in any free writing prospectuses
we have prepared. Neither we nor any of the
underwriters take responsibility for, and can provide no assurance as to the
reliability of, any other information that others may
give you. This prospectus is an offer to sell only the shares offered
hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus
is current only as of its date, regardless of the time of
delivery of this prospectus or of any sale of our common stock.
For investors outside the United States: Neither we nor any of the
underwriters have done anything that would permit this offering
or possession or distribution of this prospectus in any jurisdiction where
action for that purpose is required, other than in the
United States. Persons outside the United States who come into possession
of this prospectus must inform themselves about, and
observe any restrictions relating to, the offering of the shares of our
common stock and the distribution of this prospectus outside
the United States.
Neither the Securities and Exchange Commission nor any state securities
commission nor any other regulatory body has approved
or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
?
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY
5
OFFERINGS
13
RISK FACTORS
14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
40
USE OF PROCEEDS
42
DIVIDEND POLICY
43
CORPORATE STRUCTURE
44
BUSINESS
45
REGULATIONS
48
MANAGEMENT
56
PRINCIPAL SHAREHOLDERS
60
SHARES ELIGIBLE FOR FUTURE SALE
61
UNDERWRITING
63
LEGAL MATTERS
65
INDEX TO FINANCIAL STATEMENTS
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and
financial statements appearing elsewhere in this prospectus. In addition
to this summary, we urge you to read the entire prospectus
carefully, especially the risks of investing in our Ordinary Shares
discussed under 'Risk Factors' before deciding whether to buy
our Ordinary Shares.
Our Mission
Helping Chinese companies enter the capital market to go public at
home and abroad.
Overview of Our Company
First ShenZhen Securities is a professional capital operation platform
jointly owned by Qianhai Guochuang and Qianhai Venture.
It is a one-stop service platform to help Chinese enterprises from
entering the capital market to listing at home and abroad, and a
one-stop whole process to counsel and incubate enterprises to listing.
First ShenZhen Securities has a team of well-known industry experts
with an average of 10 years of experience, integrating
high-quality resources in the financial industry, and has helped more
than 3,00 enterprises to list and raise capital at home and
abroad.
The Industry
There are more than 80 million SMEs in China, which solve 80% of
urban employment, accomplish 70% of innovation, create 60%
of GDP and contribute 50% of tax revenue.
At present, Chinese SMEs have the problem of difficulty in financing.
Among various corporate financing methods, there are high
costs for private lending, high threshold requirements for bank
financing, and high thresholds, high fees and long lead times in
China's domestic capital markets.
Our Solution
We provide listing, full consultation and counseling, financing and
investment, domestic and international listing, investment and
M&A services for Chinese enterprises to solve the problems in their
development.
Our Services
I. Domestic and international listing: domestic main board, small and
medium-sized board, science and technology innovation
board, gem board, Hong Kong listing, U.S. listing, U.K. listing, etc.
II. Enterprise listing: New Third Board listing, U.S. OTC, New Fourth
Board listing, Shanghai Stock Exchange listing, Hong
Kong Stock Exchange listing, Qianhai New Fourth Board listing, various
provincial equity trading centers listing, etc.
III. Full consulting and counseling: business plan, enterprise valuation,
strategic positioning, brand, business model, top-level
design, equity structure, equity incentive, listing path planning, etc.
IV. Financing and investment: equity financing, debt financing, industry
chain financing, investment financing, venture capital docking, etc.
V. Investment and M&A: equity investment, M&A
Our Core Competencies
I. The original industry chain financing can help Chinese small and
medium-sized enterprises to finance the advantages of the capital
II. Professional team
III. Core listing counseling team resources all over China
IV. Our founder, Gang Li, has been engaged in capital operation industry
for 15 years, and has unique experience in enterprise
industry chain financing and listing.
V. Always put the service for enterprises in the first place in life, always
put the creation of value for enterprises in the first place in life.
Our Competitive Strengths
I. Market development and promotion advantages.
II. Professional team and core listing counseling team resources advantage
throughout China.
III. The advantage of the original industry chain financing, which can help
Chinese SMEs to finance.
IV. The advantage of long time experience in coaching enterprises.
Our Challenges
I. The number of competitors has increased.
II. Team personnel are constrained by funds, resulting in insufficient
manpower.
III. The industry price is becoming more and more transparent.
Our Corporate Structure
Our Strategy
I. Provide Chinese enterprises with listing, full consulting and combing
counseling, financing and investment, domestic and
foreign listing services, and solve the problems in the development of
enterprises. We hope to really help small and medium-sized
enterprises, can land, can see results, help enterprises to improve their
core competitiveness, cultivate internal strength, enhance
the value, long-term accompanying to domestic and foreign listings.
II. M&A of China's high-quality assets, the combination of industry and
finance, to do 4-8 listed companies
Risk Factors Summary
Risks Related to Our Business
We have grown rapidly in recent years and have limited experience
operating at our current scale of operations. If we are
unable to manage our growth effectively, our brand, company culture
and financial results may suffer.
We have limited sources of working capital and will need substantial
additional financing.
We are dependent on certain key personn
Our success depends on our ability to protect our intellectual property.
The global coronavirus COVID-19 pandemic has caused significant
disruptions in our business, which may continue to
materially and adversely affect our results of operations and financial
condition.
A severe or prolonged downturn in the global or Chinese economy
could materially and adversely affect our business and
our financial condition.
Risks Related to Doing Business in China
The Chinese government exerts substantial influence over the manner
in which we must conduct our business activities.
We are currently not required to obtain approval from Chinese authorities
to list on U.S exchanges, however, if our
subsidiaries or the holding company were required to obtain approval in
the future and were denied permission from
Chinese authorities to list on U.S. exchanges, we will not be able to
continue listing on U.S. exchange, which would
materially affect the interest of the investors.
Changes in China's economic, political or social conditions or government
policies could have a material adverse effect on
our business and results of operations.
The PRC government may impose restrictions on our ability to transfer cash
out of China and to U.S. investors.
To the extent cash or assets of our business, or of our PRC or Hong Kong
subsidiaries, is in the PRC or Hong Kong, such
cash or assets may not be available to fund operations or for other use
outside of the PRC or Hong Kong, due to
interventions in or the imposition of restrictions and limitations by the
PRC government to the transfer of cash or assets.
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.
Substantial uncertainties exist with respect to the enactment timetable
and final content of draft China Foreign Investment
Law and how it may impact the viability of our current corporate structure,
corporate governance and business
operations.
There are uncertainties under the PRC laws relating to the procedures for
U.S. regulators to investigate and collect
evidence from companies located in the PRC.
We rely on dividends, loans and other distributions on equity paid by
our PRC subsidiaries to fund any cash and financing
requirements we may have. Any limitation on the ability of our PRC
subsidiaries to make loans or payments to us could
have a material adverse effect on our ability to conduct our business.
Fluctuations in exchange rates could have a material adverse effect on
our results of operations and the price of our
ordinary shares.
PRC regulation of loans to, and direct investments in, PRC entities by
offshore holding companies may delay or prevent us
from making loans or additional capital contributions to our PRC
operating subsidiaries and thereby prevent us from
funding our business.
PRC regulations relating to the establishment of offshore special purpose
vehicles by PRC residents may subject our
PRC-resident beneficial owners or our PRC subsidiaries to liability or
penalties, limit our ability to make capital
contributions into our PRC subsidiaries, limit our PRC subsidiaries' ability
to distribute profits to us, or otherwise
adversely affect our financial position.
Governmental control of currency conversion may limit our ability to
utilize our net revenues effectively and affect the
value of your investment.
We must remit the offering proceeds to PRC before they may be used
to benefit our business in the PRC, and this process
may take several months.
Some of our shareholders are not in compliance with the PRC's regulations
relating to offshore investment activities by
PRC residents, and as a result, the shareholders may be subject to
penalties if we are not able to remediate the
non-compliance.
Failure to make adequate contributions to various employee benefit
plans required by PRC regulations may subject us to
penalties.
The M&A Rules and certain other PRC regulations establish complex
procedures for some acquisitions of Chinese
companies by foreign investors, making it more difficult for us to pursue
growth through acquisitions in China.
PRC regulations relating to offshore investment activities by PRC residents
may limit our PRC subsidiaries' ability to
increase their registered capital or distribute profits to us or otherwise
expose us or our PRC resident beneficial owners to
liability and penalties under PRC law.
If we are classified as a PRC resident enterprise for PRC income tax
purposes, such classification could result in
unfavorable tax consequences to us and our non-PRC shareholders.
Enhanced scrutiny over acquisition transactions by the PRC tax authorities
may have a negative impact on potential
acquisitions we may pursue in the future.
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,
share price and reputation.
The recent joint statement by the SEC and PCAOB, proposed rule
changes submitted by Nasdaq, and the Holding Foreign
Companies Accountable Act all call for additional and more stringent
criteria to be applied to emerging market companies
upon assessing the qualification of their auditors, especially the
non-U.S. auditors who are not inspected by the PCAOB.
These developments could add uncertainties to our offering.
Uncertainties in the interpretation and enforcement of Chinese laws
and regulations could limit the legal protections
available to us.
We may be adversely affected by the complexity, uncertainties and
changes in PRC regulation of internet-related
businesses and companies, and any lack of requisite approvals,
licenses or permits applicable to our business may have a
material adverse effect on our business and results of operations.
Increases in labor costs in the PRC may adversely affect our business
and our profitability.
Risks Related to the Offering and Our Ordinary Shares
The initial public offering price of our Ordinary Shares may not be
indicative of the market price of our Ordinary Shares
after this offering. In addition, an active, liquid and orderly trading
market for our Ordinary Shares may not develop or
be maintained, and our share price may be volatile.
There may not be an active, liquid trading market for our Ordinary
Shares.
Because we do not expect to pay dividends in the foreseeable future
after this offering, you must rely on a price
appreciation of the Ordinary Shares for a return on your investment.
A sale or perceived sale of a substantial number of our Ordinary Shares
may cause the price of our Ordinary Shares to
decline.
There can be no assurance that we will not be a passive foreign
investment company ('PFIC') for United States federal
income tax purposes for any taxable year, which could subject United
States holders of our Ordinary Shares to significant
adverse United States federal income tax consequences.
For as long as we are an emerging growth company, we will not be
required to comply with certain reporting requirements,
including those relating to accounting standards and disclosure about
our executive compensation, that apply to other
public companies.
If we fail to establish and maintain proper internal financial reporting
controls, our ability to produce accurate financial
statements or comply with applicable regulations could be impaired.
Nasdaq may apply additional and more stringent criteria for our initial
and continued listing because we plan to have a
small public offering and insiders will hold a large portion of the
company's listed securities.
If we cannot satisfy, or continue to satisfy, the initial listing
requirements and other rules of Nasdaq Capital Market,
although we exempt from certain corporate governance standards
applicable to US issuers as a Foreign Private Issuer, our
securities may not be listed or may be delisted, which could negatively
impact the price of our securities and your ability to
sell them.
The market price of our ordinary shares may be volatile or may decline
regardless of our operating performance, and you
may not be able to resell your shares at or above the public offering price.
We have broad discretion in the use of the net proceeds from our
public offering and may not use them effectively.
We will incur additional costs as a result of becoming a public company,
which could negatively impact our net income and
liquidity.
Trademarks
Implications of Being an Emerging Growth Company
Implications of Our Being an 'Emerging Growth Company'
On September 9, 2022, the SEC adopted inflation adjustments mandated
by the Jumpstart Our Business Startups Act of 2012 (the
'JOBS Act'). As a result, an 'emerging growth company' will lose its
emerging growth company status on the last day of the
fiscal year in which it has $1.235 billion or more in total. As a company
with less than $1.235 billion in revenue during our last
fiscal year, we qualify as an 'emerging growth company' as defined in
the JOBS Act. 'An 'emerging growth company' may take
advantage of reduced reporting requirements that are otherwise
applicable to larger public companies. In particular, as an
emerging growth company, we:
may present only two years of audited financial statements and
only two years of related Management's Discussion and
Analysis of Financial Condition and Results of Operations;
are not required to provide a detailed narrative disclosure discussing
our compensation principles, objectives and elements
and analyzing how those elements fit with our principles and objectives,
which is commonly referred to as compensation discussion and analysis,
are not required to obtain an attestation and report from our auditors
on our management's assessment of our internal control
over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
are not required to obtain a non-binding advisory vote from our
shareholders on executive compensation or golden parachute
arrangements (commonly referred to as the 'say-on-pay,' 'say-on
frequency' and 'say-on-golden-parachute' votes);
are exempt from certain executive compensation disclosure provisions
requiring a pay-for-performance graph and CEO pay
ratio disclosure;
are eligible to claim longer phase-in periods for the adoption of new or
revised financial accounting standards under 107 of
the JOBS Act; and
will not be required to conduct an evaluation of our internal control
over financial reporting until our second annual report on
Form 20-F following the effectiveness of our initial public offering.
We intend to take advantage of all of these reduced reporting
requirements and exemptions, including the longer phase-in periods
for the adoption of new or revised financial accounting standards
under 107 of the JOBS Act. Our election to use the phase-in
periods may make it difficult to compare our financial statements to
those of non-emerging growth companies and other emerging
growth companies that have opted out of the phase-in periods under
107 of the JOBS Act.
Under the JOBS Act, we may take advantage of the above-described
reduced reporting requirements and exemptions until we no
longer meet the definition of an emerging growth company. The JOBS
Act provides that we would cease to be an 'emerging
growth company' at the end of the fiscal year in which the fifth
anniversary of our initial sale of common equity pursuant to a
registration statement declared effective under the Securities Act of 1933,
as amended (the 'Securities Act') occurred, if we have
more than $1.235 billion in annual revenue, have more than $700 million
in market value of our Class A Ordinary Share held by
non-affiliates, or issue more than $1 billion in principal amount of
non-convertible debt over a three-year period.
Foreign Private Issuer Status
We are a foreign private issuer within the meaning of the rules under
the Securities Exchange Act of 1934, as amended (the
'Exchange Act'). As such, we are exempt from certain provisions
applicable to United States domestic public companies. For
example:
we are not required to provide as many Exchange Act reports, or as
frequently, as a domestic public company;
for interim reporting, we are permitted to comply solely with our home
country requirements, which are less rigorous than
the rules that apply to domestic public companies;
we are not required to provide the same level of disclosure on certain
issues, such as executive compensation;
we are exempt from provisions of Regulation FD aimed at preventing
issuers from making selective disclosures of material
information;
we are not required to comply with the sections of the Exchange Act
regulating the solicitation of proxies, consents, or
authorizations in respect of a security registered under the Exchange
Act; and
we are not required to comply with Section 16 of the Exchange Act
requiring insiders to file public reports of their share
ownership and trading activities and establishing insider liability for
profits realized from any 'short-swing' trading transaction.
Implications of Being a Controlled Company
Controlled companies are exempt from the majority of independent
director requirements. Controlled companies are subject to an
exemption from Nasdaq standards requiring that the board of a listed
company consist of a majority of independent directors
within one year of the listing date.
Public Companies that qualify as a 'Controlled Company' with securities
listed on the Nasdaq Stock Market (Nasdaq), must
comply with the exchange's continued listing standards to maintain
their listings. Nasdaq has adopted qualitative listing standards.
Companies that do not comply with these corporate governance
requirements may lose their listing status. Under the Nasdaq rules,
a 'controlled company' is a company with more than 50% of its voting
power held by a single person, entity or group. Under
Nasdaq rules, a controlled company is exempt from certain corporate
governance requirements including:
the requirement that a majority of the board of directors consist of
independent directors;
the requirement that a listed company have a nominating and
governance committee that is composed entirely of
independent directors with a written charter addressing the committee's
purpose and responsibilities;
the requirement that a listed company have a compensation committee
that is composed entirely of independent directors
with a written charter addressing the committee's purpose and
responsibilities; and
the requirement for an annual performance evaluation of the
nominating and governance committee and compensation
committee.
Controlled companies must still comply with the exchange's other
corporate governance standards. These include having an audit
committee and the special meetings of independent or non-management
directors.
OFFERINGS
Below is a summary of the terms of the offering:
Issuer
First ShenZhen Securities Co., Limited
Securities Being Offered
Ordinary Shares, par value US$0.0001 per share
Offering Price
We expect that the initial public offering price will be USD per
Ordinary Share.
Ordinary Shares Outstanding
Immediately Before This Offering
Ordinary Shares
Ordinary Shares Outstanding
Immediately After This Offering
Ordinary Shares (or Ordinary Shares if the underwriters
exercise their option to purchase additional Ordinary Shares in full).
Voting Rights
Each Ordinary Share is entitled to one vote.
Use of Proceeds
Proposed Nasdaq Trading Symbol
and Listing
FSZS
Lock-up
Our directors, executive officers, and shareholder who own 5% or more
of the
outstanding Ordinary Shares intended agreed with the underwriters not to
offer for sale, issue, sell, contract to sell, pledge or otherwise dispose
of any
of our Ordinary Shares or securities convertible into Ordinary Shares for
a period of 6 months commencing on the date of this prospectus.
The Company is also prohibited from conducting offerings during this
period and from re-pricing or changing the terms of existing options and
warrants. See 'Underwriting' for additional information.
Transfer Agent
Risk factors
See 'Risk Factors59 for a discussion of risks you should carefully consider
before investing in our Ordinary Shares.
13
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 Operations' 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
We have grown rapidly in recent years and have limited experience
operating at our current scale of operations. If we are
unable to manage our growth effectively, our brand, company culture
and financial results may suffer.
We have grown rapidly in the past year and our recent growth rates
and financial results should not be considered indicators of our
future performance. In order to effectively manage and leverage our
growth, we must continue to expand our sales and marketing,
focus on innovative product and website development, and upgrade
our management information systems. Our continued growth
has in the past and may in the future strain our existing resources and
we may experience ongoing operational difficulties in
managing our operations in numerous jurisdictions, including difficulties
in recruiting, training and managing a dispersed and
growing employee base. Failure to expand and maintain our company
culture through growth may harm our future success,
including our ability to retain and recruit personnel and to effectively
focus on and pursue our corporate goals.
The finance service industry is evolving rapidly and may not evolve as
we expect. Even if our net sales continue to grow, our net
sales growth rate may decline in the future due to a variety of factors,
including macroeconomic factors, changes in supply and
supply chain, changes in consumer preferences, increased competition
and the maturation of our business. Accordingly, you
should not rely on our net sales growth rates for any prior period as an
indicator of our future performance. Our overall growth in
net sales will depend on many factors, including our ability to:
1) price our products and services effectively so that we can attract new
customers and expand our relationships with existing
customers.
2) accurately forecast our net sales and plan our operating expenses.
3) compete successfully with other companies that are or may be entering
our competitive market in the future and respond to
developments in those competitors, such as pricing changes and the
introduction of new products and services.
4) Complying with existing and new laws and regulations that apply to
our business.
5) Successfully expanding into existing markets and entering new
markets, including new geographic areas and categories.
6) The successful introduction of new products and enhancements to
our products and services and their features, including in
response to new trends or competitive dynamics or customer needs
or preferences.
7) Successfully identifying and acquiring or investing in businesses,
products or technologies that we believe will complement or
expand our business.
8) Avoiding disruptions or interruptions in the distribution of our
products and services.
9) Providing quality support to our customers that meets their needs.
10) Hiring, integrating and retaining talented sales, customer service
and other personnel.
11) Effectively managing the growth of our business, personnel and
operations, including the opening of new showrooms.
12) Effectively managing the costs associated with our business and
operations.
13) Maintaining and enhancing our reputation and brand value.
Because of our limited history of operating our business at our current
scale, it is difficult to assess our current operations and
future prospects, including our ability to plan for and model future
growth. Our limited operating experience at this scale,
combined with the rapidly evolving nature of the markets in which
we sell our products and services, the significant uncertainty
about how these markets will develop and other economic factors
beyond our control, reduces our ability to accurately forecast
quarterly or annual revenues. Failure to effectively manage our future
growth could adversely affect our business, financial
condition and results of operations.
We have limited sources of working capital and will need substantial
additional financing.
The working capital required to implement our business strategy will
most likely be provided by funds obtained through offerings
of our equity, debt, debt-linked securities, and/or equity-linked
securities, and revenues generated by us. No assurance can be
given that we will have revenues sufficient to sustain our operations
or that we would be able to obtain equity/debt financing in
the current economic environment. If we do not have sufficient working
capital and are unable to generate sufficient revenues or
raise additional funds, we may delay the completion of or significantly
reduce the scope of our current business plan; postpone the
hiring of new personnel; or, under certain dire financial circumstances,
substantially curtail or cease our operations.
We may need to engage in capital-raising transactions in the near future.
Such financing transactions may well cause substantial
dilution to our shareholders and could involve the issuance of securities
with rights senior to the outstanding shares. Our ability to
complete additional financings is dependent on, among other things,
the state of the capital markets at the time of any proposed
offering, market reception of the Company and the likelihood of the
success of its business model and offering terms. There is no
assurance that we will be able to obtain any such additional capital
through asset sales, equity or debt financing, or any
combination thereof, on satisfactory terms or at all. Additionally, no
assurance can be given that any such financing, if obtained,
will be adequate to meet our capital needs and to support our
operations. If we do not obtain adequate capital on a timely basis and
on satisfactory terms, our revenues and operations and the value of
our Ordinary Shares and Ordinary Share equivalents would be
materially negatively impacted and we may cease our operations.
We are dependent on certain key personnel and loss of these key
personnel could have a material adverse effect on our
business, financial condition and results of operations.
Our success is, to a certain extent, attributable to the management,
sales and marketing of key personnel. We are dependent upon
the services of Mr. Gang Li, our President, Chairman of the Board,
for the continued growth and operation of our Company, due
to his industry experience, technical expertise, as well as his personal
and business contacts in the PRC. Additionally, Mr.
Liancheng Xie, Ms. Jialun Xie and Ms. Shufeng Liu, performs key
functions in the operation of our business. We may not be able
to retain Mr. Gang Li , Mr. Liancheng Xie, Ms. Jialun Xie and Ms.
Shufeng Liu for any given period of time. Although we have
no reason to believe that Mr. Gang Li , Mr. Liancheng Xie, Ms. Jialun
Xie and Ms. Shufeng Liu will discontinue their services
with us, the interruption or loss of his services would adversely affect
our ability to effectively run our business and pursue our
business strategy as well as our results of operations. We do not carry
key man life insurance for any of our key personnel, nor do
we foresee purchasing such insurance to protect against the loss of
key personnel.
Our success depends on our ability to protect our intellectual property.
Our success depends on our ability to obtain and maintain patent
protection for products developed utilizing our technologies, in
the PRC and in other countries, and to enforce these patents. There is
no assurance that any of our existing and future patents will
be held valid and enforceable against third-party infringement or that
our products will not infringe any third-party patent or
intellectual property. We own patents and have filed additional patent
applications with the Patent Administration Department of
the PRC; however, there is no assurance that our filed patent applications
will be granted.
Any patents relating to our technologies may not be sufficiently broad
to protect our products. In addition, our patents may be
challenged, potentially invalidated or potentially circumvented. Our
patents may not afford us protection against competitors with
similar technology or permit the commercialization of our products
without infringing third-party patents or other intellectual
property rights.
We also rely on or intend to rely on our trademarks, trade names and
brand names to distinguish our products from the products
of our competitors, and have registered or will apply to register a
number of these trademarks. However, third parties may oppose
our trademark applications or otherwise challenge our use of the
trademarks. In the event that our trademarks are successfully
challenged, we could be forced to rebrand our products, which could
result in loss of brand recognition and could require us to
devote resources to advertising and marketing these new brands.
Further, our competitors may infringe our trademarks, or we may
not have adequate resources to enforce our trademarks.
In addition, we also have trade secrets, non-patented proprietary
expertise and continuing technological innovation that we shall
seek to protect, in part, by entering into confidentiality agreements
with licensees, suppliers, employees and consultants. These
agreements may be breached and there may not be adequate remedies
in the event of a breach. Disputes may arise concerning the
ownership of intellectual property or the applicability of confidentiality
agreements. Moreover, our trade secrets and proprietary
technology may otherwise become known or be independently developed
by our competitors. If patents are not issued with
respect to products arising from research, we may not be able to maintain
the confidentiality of information relating to these
products.
The global coronavirus COVID-19 pandemic has caused significant
disruptions in our business, which may continue to
materially and adversely affect our results of operations and
financial condition.
On March 11, 2020, the World Health Organization declared the
COVID-19 outbreak a global pandemic. Many businesses and
social activities in China and other countries and regions were severely
disrupted in 2020, including those of our suppliers,
customers and employees. This pandemic has also caused market panics,
which materially and negatively affected the global
financial markets, such as the plunge of global stocks on major stock
exchanges in March 2020. Such disruption and slowdown of
the world's economy in 2020 and beyond had, and may continue to
have, a material adverse effect on our results of operations and
financial condition. We and our customers experienced significant
business disruptions and suspension of operations due to
quarantine measures to contain the spread of the pandemic, which
caused shortage in the supply of raw materials, reduced our
production capacity, increased the likelihood of default from our
customers and delayed our product delivery. All of these had
resulted in a material adverse effect on our results of operations and
financial condition in the fiscal year 2021. The extent to
which the COVID-19 pandemic may impact our business, operations
and financial results will depend on numerous evolving
factors that the Company cannot accurately predict at this time,
including the uncertainty on the potential resurgence of the
COVID-19 cases in China, the continual spread of the virus globally,
and the instability of local and global government policies
and restrictions. We are closely monitoring the development of the
COVID-19 pandemic and continuously evaluating any further
potential impact on our business, results of operations and financial
condition. If the pandemic persists or escalates, we may be
subject to further negative impact on our business operations and
financial condition.
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 expanded well in the last two decades,
the rapid growth of the Chinese economy has slowed
down since 2012, and 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.
Risks Related to Doing Business in China
The Chinese government exerts substantial influence over the manner
in which we must conduct our business activities.
We are currently not required to obtain approval from Chinese authorities
to list on U.S exchanges, however, if our
subsidiaries or the holding company were required to obtain approval in
the future and were denied permission from
Chinese authorities to list on U.S. exchanges, we will not be able to
continue listing on U.S. exchange, which would
materially affect the interest of the investors.
Because of our corporate structure as a Hong Kong holding company
with operations conducted by our PRC subsidiaries, it
involves unique risks to investors. Furthermore, Chinese regulatory
authorities could change the rules and regulations regarding
foreign ownership in the industry in which the company operates,
which would likely result in a material change in our operations
and/or a material change in the value of the securities we are registering
for sale, including that it could cause the value of such
securities to significantly decline or become worthless. The Chinese
government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. Under the current
government leadership, the government of the PRC has been pursuing
reform policies which have adversely affected China-based
operating companies whose securities are listed in the United States,
with significant policies changes being made from time to
time without notice. 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, or the enforcement and performance of our
contractual arrangements with borrowers in the event of the imposition
of statutory liens, death, bankruptcy or criminal
proceedings. Our ability to operate in China may be harmed by changes
in its laws and regulations, including those relating to
taxation, environmental regulations, land use rights, property and other
matters. The central or local governments of these
jurisdictions may impose new, stricter regulations or interpretations of
existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with
such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support
recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the implementation
of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could
require us to divest ourselves of any interest we then hold in
Chinese properties.
Given recent statements by the Chinese government indicating an
intent to exert more oversight and control over offerings that are
conducted overseas and/or foreign investment in China-based issuers,
any such action could significantly limit or completely
hinder our ability to offer or continue to offer securities to investors and
cause the value of such securities to significantly decline
or become worthless.
Recently, the General Office of the Central Committee of the Communist
Party of China and the General Office of the State
Council jointly issued the Opinions on Severely Cracking Down on Illegal
Securities Activities According to Law, or the Opinions,
which was made available to the public on July 6, 2021. The Opinions
emphasized the need to strengthen the administration over
illegal securities activities, and the need to strengthen the supervision
over overseas listings by Chinese companies. Effective
measures, such as promoting the construction of relevant regulatory
systems, will be taken to deal with the risks and incidents of
China-concept overseas listed companies. As of the date of this
prospectus, we have not received any inquiry, notice, warning, or
sanctions from PRC government authorities in connection with the
Opinions.
On June 10, 2021, the Standing Committee of the National People's
Congress of China, or the SCNPC, promulgated the PRC
Data Security Law, which took effect in September 2021. The PRC
Data Security Law imposes data security and privacy
obligations on entities and individuals carrying out data activities,
and introduces a data classification and hierarchical protection
system based on the importance of data in economic and social
development, and the degree of harm it will cause to national
security, public interests, or legitimate rights and interests of individuals
or organizations when such data is tampered with,
destroyed, leaked, illegally acquired or used. The PRC Data Security
Law also provides for a national security review procedure
for data activities that may affect national security and imposes export
restrictions on certain data an information.
In early July 2021, regulatory authorities in China launched cybersecurity
investigations with regard to several China-based
companies that are listed in the United States. The Chinese cybersecurity
regulator announced on July 2 that it had begun an
investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered
that the company's app be removed from smartphone
app stores. On July 5, 2021, the Chinese cybersecurity regulator launched
the same investigation on two other Internet platforms,
China's Full Truck Alliance of Full Truck Alliance Co. Ltd. (NYSE: YMM)
and Boss of KANZHUN LIMITED (Nasdaq: BZ). On
July 24, 2021, the General Office of the Communist Party of China
Central Committee and the General Office of the State
Council jointly released the Guidelines for Further Easing the Burden
of Excessive Homework and Off-campus Tutoring for
Students at the Stage of Compulsory Education, pursuant to which
foreign investment in such firms via mergers and acquisitions,
franchise development, and variable interest entities are banned from
this sector.
On August 17, 2021, the State Council promulgated the Regulations on
the Protection of the Security of Critical Information
Infrastructure, or the Regulations, which took effect on September 1, 2021.
The Regulations supplement and specify the
provisions on the security of critical information infrastructure as stated
in the Cybersecurity Review Measures. The Regulations
provide, among others, that protection department of certain industry
or sector shall notify the operator of the critical information
infrastructure in time after the identification of certain critical information
infrastructure.
On August 20, 2021, the SCNPC promulgated the Personal Information
Protection Law of the PRC, or the Personal Information
Protection Law, which took effect in November 2021. As the first
systematic and comprehensive law specifically for the
protection of personal information in the PRC, the Personal Information
Protection Law provides, among others, that (i) an
individual's consent shall be obtained to use sensitive personal
information, such as biometric characteristics and individual
location tracking, (ii) personal information operators using sensitive
personal information shall notify individuals of the necessity
of such use and impact on the individual's rights, and (iii) where
personal information operators reject an individual's request to
exercise his or her rights, the individual may file a lawsuit with a
People's Court.
As such, the Company's business segments may be subject to various
government and regulatory interference in the provinces in
which they operate. The Company could be subject to regulation by
various political and regulatory entities, including various
local and municipal agencies and government sub-divisions.
The Company may incur increased costs necessary to comply with
existing and newly adopted laws and regulations or penalties for any
failure to comply. Additionally, the governmental and
regulatory interference could significantly limit or completely hinder
our ability to offer or continue to offer securities to investors
and cause the value of such securities to significantly decline or be
worthless.
Furthermore, it is uncertain when and whether the Company will
be required to obtain permission from the PRC government to
list on U.S. exchanges in the future, and even when such permission
is obtained, whether it will be denied or rescinded. Although
the Company is currently not required to obtain permission from any
of the PRC federal or local government to obtain such
permission and has not received any denial to list on the U.S. exchange,
our operations could be adversely affected, directly or
indirectly, by existing or future laws and regulations relating to its
business or industry.
On December 24, 2021, the CSRC, together with other relevant
government authorities in China issued the Provisions of the State
Council on the Administration of Overseas Securities Offering and
Listing by Domestic Companies (Draft for Comments), and the
Measures for the Filing of Overseas Securities Offering and Listing by
Domestic Companies (Draft for Comments) ('Draft
Overseas Listing Regulations'). The Draft Overseas Listing Regulations
requires that a PRC domestic enterprise seeking to issue
and list its shares overseas ('Overseas Issuance and Listing') shall
complete the filing procedures of and submit the relevant
information to CSRC. The Overseas Issuance and Listing includes
direct and indirect issuance and listing. Where an enterprise
whose principal business activities are conducted in PRC seeks to
issue and list its shares in the name of an overseas enterprise
('Overseas Issuer') on the basis of the equity, assets, income or
other similar rights and interests of the relevant PRC domestic
enterprise, such activities shall be deemed an indirect overseas
issuance and listing ('Indirect Overseas Issuance and Listing')
under the Draft Overseas Listing Regulations. Therefore, the
proposed listing would be deemed an Indirect Overseas Issuance and
Listing under the Draft Overseas Listing Regulations. As such, the
Company would be required to complete the filing procedures
of and submit the relevant information to CSRC after the Draft
Overseas Listing Regulations become effective.
In addition, on December 28, 2021, the CAC, the National Development
and Reform Commission ('NDRC'), and several other
administrations jointly issued the revised Measures for Cybersecurity
Review, or the Revised Review Measures, which became
effective and has replaced the existing Measures for Cybersecurity
Review on February 15, 2022. According to the Revised
Review Measures, if an 'online platform operator' that is in possession
of personal data of more than one million users intends to
list in a foreign country, it must apply for a cybersecurity review. Based
on a set of Q&A published on the official website of the
State Cipher Code Administration in connection with the issuance of the
Revised Review Measures, an official of the said
administration indicated that an online platform operator should apply
for a cybersecurity review prior to the submission of its
listing application with non-PRC securities regulators. Given the recency
of the issuance of the Revised Review Measures and
their pending effectiveness, there is a general lack of guidance and
substantial uncertainties exist with respect to their
interpretation and implementation. For example, it is unclear whether
the requirement of cybersecurity review applies to follow-on
offerings by an 'online platform operator' that is in possession of
personal data of more than one million users where the offshore
holding company of such operator is already listed overseas.
Furthermore, the CAC released the draft of the Regulations on
Network Data Security Management in November 2021 for public
consultation, which among other things, stipulates that a data
processor listed overseas must conduct an annual data security
review by itself or by engaging a data security service provider and
submit the annual data security review report for a given year to
the municipal cybersecurity department before January 31 of the
following year. If the draft Regulations on Network Data Security
Management are enacted in the current form, we, as an overseas
listed company, will be required to carry out an annual data security
review and comply with the relevant reporting obligations.
As of the date of this prospectus, none of our PRC subsidiaries'
operations involve storing of personal information of PRC
individual clients. However, given the above uncertainties, it is unclear
how the Revised Review Measures and the final draft
Regulations on Network Data Security Management will affect us. We
have been closely monitoring the development in the
regulatory landscape in China, particularly regarding the requirement
of approvals, including on a retrospective basis, from the
CSRC, the CAC or other PRC authorities with respect to this offering,
as well as regarding any annual data security review or
other procedures that may be imposed on us. If any approval, review
or other procedure is in fact required, we are not able to
guarantee that we will obtain such approval or complete such review
or other procedure timely or at all. For any approval that we
may be able to obtain, it could nevertheless be revoked and the terms
of its issuance may impose restrictions on our operations and
offerings relating to our securities.
Changes in China's economic, political or social conditions or government
policies could have a material adverse effect on
our business and results of operations.
Substantially all of our operations are located in China. Accordingly,
our business, prospects, financial condition, and results of
operations may be influenced significantly by political, economic, and
social conditions in China generally and by continued
economic growth in China as a whole.
The Chinese economy differs from the economies of most developed
countries in many respects, including the amount of
government involvement, level of development, growth rate, control
of the foreign exchange, and allocation of resources.
Although the Chinese government has implemented measures
emphasizing the utilization of market forces for economic reform,
the reduction of state ownership of productive assets, and the
establishment of improved corporate governance in business
enterprises, a substantial portion of productive assets in China is still
owned by the government. In addition, the Chinese
government continues to play a significant role in regulating industry
development by imposing industrial policies. The Chinese
government also exercises significant control over China's economic
growth through allocating resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy,
and providing preferential treatment to particular industries or
companies.
While the Chinese economy has experienced significant growth over
the past decades, growth has been uneven, both
geographically and among various sectors of the economy. The
Chinese government has implemented various measures to
encourage economic growth and guide the allocation of resources.
Some of these measures may benefit the overall Chinese
economy but may harm us. For example, our financial condition and
results of operations may be adversely affected by
government control over capital investments or changes in tax
regulations. In addition, in the past, the Chinese government has
implemented certain measures, including interest rate increases,
to control the pace of economic growth. These measures may
cause decreased economic activity in China, and since 2012, China's
economic growth has slowed down. Any prolonged
slowdown in the Chinese economy may reduce the demand for our
products and services and materially and adversely affect our
business and results of operations.
We may also decide to finance our PRC subsidiaries using capital
contributions. The Ministry of Commerce ('MOC') or its local
counterpart must approve these capital contributions. On March
30, 2015, the State Administration of Foreign Exchange, or SAFE,
promulgated Circular of the State Administration of Foreign Exchange
on Reforming the Management Approach regarding the
Settlement of Foreign Exchange Capital of Foreign-invested Enterprises,
or Circular 19, which expands a pilot reform of the
administration of the settlement of the foreign exchange capitals of
foreign-invested enterprises nationwide. Circular 19 came into
force and replaced previous Circular 142 and Circular 36 on June 1,
2015. On June 9, 2016, SAFE promulgated the Circular of the
State Administration of Foreign Exchange on Reforming and Regulating
Policies on the Control over Foreign Exchange
Settlement of Capital Accounts, or Circular 16, to further expand and
strengthen such reform. Under Circular 19 and Circular 16,
foreign-invested enterprises in the PRC are allowed to use their foreign
exchange funds under capital accounts and RMB funds
from exchange settlement for expenditure under current accounts
within its business scope or expenditure under capital accounts
permitted by laws and regulations, except that such funds shall not
be used for (i) expenditure beyond the enterprise's business
scope or expenditure prohibited by laws and regulations; (ii) investments
in securities or other investments than principal-secured
products issued by banks; (iii) granting loans to non-affiliated enterprises,
except where it is expressly permitted in the business
license; and (iv) construction or purchase of real estate for purposes other
than self-use (except for real estate enterprises). In
addition, SAFE strengthened its oversight of the flow and use of the RMB
capital converted from foreign currency registered
capital of a foreign-invested company. The use of such RMB capital may
not be altered without SAFE's approval, and such RMB
capital may not, in any case, be used to repay RMB loans if the proceeds
of such loans have not been used. Violations of these
circulars could result in severe monetary or other penalties.
These circulars may significantly limit our ability to use RMB
converted from the cash provided by our offshore financing activities
to fund the establishment of new entities in China by our
PRC subsidiaries, to invest in or acquire any other PRC companies
through our PRC subsidiaries.
In light of the various requirements imposed by PRC regulations on
loans to and direct investment in PRC entities by offshore
holding companies, we cannot assure you that we will be able to
complete the necessary government registrations or obtain the
necessary government approvals on a timely basis, if at all, with
respect to future loans to our PRC subsidiaries or future capital
contributions by us to our PRC subsidiaries. If we fail to complete
such registrations or obtain such approvals, our ability to use
the proceeds we expect to receive from our initial public offering
to capitalize or otherwise fund our PRC operations may be
negatively affected, which could materially and adversely affect our
liquidity and our ability to fund and expand our business.
The PRC government may impose restrictions on our ability to
transfer cash out of China and to U.S. investors.
The PRC government imposes controls on the convertibility of
Renminbi into foreign currencies and, in certain cases, the
remittance of currency out of China. To the extent that our
income is received in Renminbi, shortages in foreign currencies may
restrict our ability to pay dividends or other payments, or otherwise
satisfy our foreign currency denominated obligations, if any.
Under existing PRC foreign exchange regulations, payments of current
account items, including profit distributions, interest
payments and expenditures from trade-related transactions, can be
made in foreign currencies without prior approval from the
State Administration of Foreign Exchange, or SAFE, as long as certain
procedural requirements are met. Approval from
appropriate government authorities is required if Renminbi is converted
into foreign currency and remitted out of China to pay
capital expenses such as the repayment of loans denominated in foreign
currencies. The PRC government may, at its discretion,
impose restrictions on access to foreign currencies for current account
transactions.
To address persistent capital outflows and the RMB's depreciation against
the U.S. dollar in the fourth quarter of 2016, the
People's Bank of China and the SAFE implemented a series of capital
control measures in the subsequent months, including
stricter vetting procedures for China-based companies to remit foreign
currency for overseas acquisitions, dividend payments and
shareholder loan repayments. The PRC government may continue to
strengthen its capital controls and our PRC subsidiaries'
dividends and other distributions may be subject to tightened scrutiny
in the future. The PRC government also imposes controls on
the conversion of RMB into foreign currencies and the remittance of
currencies out of the PRC. Therefore, we may experience
difficulties in completing the administrative procedures necessary to
obtain and remit foreign currency for the payment of
dividends from our profits, if any. Furthermore, there can be no
assurance that the PRC government will not intervene or impose
restrictions on our ability to transfer or distribute cash within our
organization or to foreign investors, which could result in an
inability or prohibition on making transfers or distributions outside
of China or Hong Kong and adversely affect our business as
well as your investment.
As of the date of this prospectus, we are not aware of other material
restrictions and limitations on our ability to distribute
earnings from our businesses, including our subsidiaries, to the parent
company and U.S. investors or our ability to settle amounts
owed, or on foreign exchange or our ability to transfer cash between
entities within our group, across borders, or to U.S. investors.
To the extent cash or assets of our business, or of our PRC or Hong
Kong subsidiaries, is in the PRC or Hong Kong, such
cash or assets may not be available to fund operations or for other
use outside of the PRC or Hong Kong, due to
interventions in or the imposition of restrictions and limitations by
the PRC government to the transfer of cash or assets.
The transfer of funds and assets among FSZS, its Hong Kong and
PRC subsidiaries is subject to restrictions. The PRC government
imposes controls on the conversion of the RMB into foreign currencies
and the remittance of currencies out of the PRC. In
addition, the PRC Enterprise Income Tax Law and its implementation
rules provide that a withholding tax at a rate of 10% will be
applicable to dividends payable by Chinese companies to
non-PRC-resident enterprises, unless reduced under treaties or
arrangements between the PRC central government and the
governments of other countries or regions where the
non-PRC-resident enterprises are tax resident.
As of the date of this prospectus, there are no restrictions or
limitations imposed by the Hong Kong government on the transfer of
capital within, into and out of Hong Kong (including funds from
Hong Kong to the PRC), except for the transfer of funds
involving money laundering and criminal activities. However, there
is no guarantee that the Hong Kong government will not
promulgate new laws or regulations that may impose such restrictions
in the future.
As a result of the above, to the extent cash or assets of our business,
or of our PRC or Hong Kong subsidiaries, is in the PRC or
Hong Kong, such funds or assets may not be available to fund
operations or for other use outside of the PRC or Hong Kong, due
to interventions in or the imposition of restrictions and limitations
by the PRC government to the transfer of cash or assets.
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.
Substantial uncertainties exist with respect to the enactment
timetable and final content of draft China Foreign Investment
Law and how it may impact the viability of our current corporate
structure, corporate governance and business
operations.
The MOFCOM published a discussion draft of the proposed Foreign
Investment Law in January 2015 (the 'Draft FIL'). The
Draft FIL embodies an expected Chinese regulatory trend to rationalize
its foreign investment regulatory regime in line with
prevailing international practice and the legislative efforts to unify the
corporate legal requirements for both foreign and domestic
investments.
Among other things, the Draft FIL expands the definition of foreign
investment and introduces the principle of 'actual control' in
determining whether a company is considered a foreign-invested
enterprise ('FIE'). The Draft FIL specifically provides that
entities established in China but 'controlled' by foreign investors will
be treated as FIEs, whereas an entity set up in a foreign
jurisdiction would nonetheless be, upon market entry clearance,
treated as a Chinese domestic investor provided that the entity is
'controlled' by Chinese entities and/or citizens. Once an entity is
determined to be an FIE, it will be subject to the foreign
investment restrictions or prohibitions set forth in a Negative List to
be separately issued by the State Council later. Unless the
underlying business of the FIE falls within the Negative List, which
calls for market entry clearance, prior approval from the
government authorities as mandated by the existing foreign investment
legal regime would no longer be required for
establishment of the FIE.
On December 27, 2021, the NDRC and MOFCOM, jointly issued the
Special Administrative Measures for Entry of Foreign
Investment (Negative List) (2021 Version), or the Negative List, which
became effective and replaced the previous version on
January 1, 2022. Pursuant to the Negative List, if a PRC company, which
engages in any business where foreign investment is
prohibited under the Negative List, or prohibited businesses, seeks an
overseas offering or listing, it must obtain the approval from
competent governmental authorities. Based on a set of Q&A published
on the NDRC's official website, a NDRC official indicated
that after a PRC company submits its application for overseas listing to
the CSRC and where matters relating to prohibited
businesses under the Negative List are implicated, the CSRC will consult
the regulatory authorities having jurisdiction over the
relevant industries and fields.
Because the Overseas Listing Rules are currently in draft form and given
the novelty of the Negative List, there remain substantial
uncertainties as to whether and what requirements, including filing
requirements, will be imposed on a PRC company with respect
to its listing and offerings overseas as well as with the interpretation and
implementation of existing and future regulations in this
regard. For example, it is unclear as to whether the approval requirement
under the Negative List will apply to follow-on offerings
by PRC companies engaged in prohibited businesses and whose offshore
holding company is listed overseas. If such approval is
in fact required and given the NDRC's indication of CSRC's involvement
in the approval process, there is also a lack of clarity on
the application procedure, requirement and timeline which may not be
resolved until the Overseas Listing Rules, which provide
for the filing procedures of the overseas offering and listing of a PRC
company with the CSRC, is enacted. If the Overseas
Listing Rules are enacted in the current form before the completion of
this offering, we will be required to make a filing with the
CSRC in connection with this offering within three business days after
its completion. If the approval requirement under the
Negative List applies to follow-on offerings by PRC companies whose
offshore holding company is listed overseas, we may be
required to obtain an approval for this offering or we may be required
to relinquish our licenses pertaining to prohibited businesses.
If we relinquish or are required to relinquish these licenses, while we
do not expect our business operation to be materially
adversely affected, we are uncertain whether or when the relevant
procedures will be completed.
There are uncertainties under the PRC laws relating to the procedures
for U.S. regulators to investigate and collect
evidence from companies located in the PRC.
According to Article 177 of the newly amended PRC Securities Law
which became effective in March 2020 (the 'Article 177'),
the securities regulatory authority of the PRC State Council may
collaborate with securities regulatory authorities of other
countries or regions in order to monitor and oversee cross border
securities activities. Article 177 further provides that overseas
securities regulatory authorities are not allowed to carry out investigation
and evidence collection directly within the territory of
the PRC, and that any Chinese entities and individuals are not allowed
to provide documents or materials related to securities
business activities to overseas agencies without prior consent of the
securities regulatory authority of the PRC State Council and
the competent departments of the PRC State Council.
Our principal business operation is conducted in the PRC. In the event
that the U.S. regulators carry out investigation on us and
there is a need to conduct investigation or collect evidence within the
territory of the PRC, the U.S. regulators may not be able to
carry out such investigation or evidence collection directly in the PRC
under the PRC laws. The U.S. regulators may consider
cross-border cooperation with securities regulatory authority of the
PRC by way of judicial assistance, diplomatic channels or
regulatory cooperation mechanism established with the securities
regulatory authority of the PRC.
We rely on dividends, loans and other distributions on equity paid
by our PRC subsidiaries to fund any cash and financing
requirements we may have. Any limitation on the ability of our PRC
subsidiaries to make loans or payments to us could
have a material adverse effect on our ability to conduct our business.
We are a holding company and rely on dividends, loans and other
distributions on equity paid by our PRC subsidiaries for our
cash and financing requirements, including the funds necessary to
pay dividends and other cash distributions to our shareholders
and service any debt or pay any expense we may incur. In the event
that our PRC subsidiaries incur debt on their own behalf in the
future, the instruments governing the debt may restrict their ability
to pay dividends or make other distributions to us. In addition,
the PRC tax authorities may require our PRC subsidiaries to adjust
their taxable income in a manner that would materially and
adversely affect their ability to pay dividends and other distributions
to us.
Under PRC laws and regulations, our PRC subsidiaries, as wholly
foreign-owned enterprises in China, may pay dividends only
out of their respective accumulated after-tax profits as determined
in accordance with PRC accounting standards and regulations.
In addition, a wholly foreign-owned enterprise is required to set
aside at least 10% of its accumulated after-tax profits each year, if
any, to fund certain statutory reserve funds until the aggregate
amount of such funds reaches 50% of its registered capital. At its
discretion, a wholly foreign-owned enterprise may allocate a portion
of its after-tax profits based on PRC accounting standards to
staff welfare and bonus funds. These reserve funds and staff welfare
and bonus funds are not distributable as cash dividends
Under existing PRC foreign exchange regulations, payment of current
account items, such as profit distributions and trade and
service-related foreign exchange transactions, can be made in foreign
currencies without prior approval from the State
Administration of Foreign Exchange, or the SAFE, by complying with
certain procedural requirements. Therefore, our PRC
subsidiaries are able to pay dividends in foreign currencies to us
without prior approval from SAFE, subject to the condition that
the remittance of such dividends outside of the PRC complies with
certain procedures under PRC foreign exchange regulations,
such as the overseas investment registrations by our shareholders
or the ultimate shareholders of our corporate shareholders who
are PRC residents. Approval from, or registration with, appropriate
government authorities is, however, required where the RMB
is to be converted into foreign currency and remitted out of China
to pay capital expenses such as the repayment of loans
denominated in foreign currencies. The PRC government may also
at its discretion restrict access in the future to foreign
currencies for current account transactions. Current PRC regulations
permit our PRC subsidiaries to pay dividends to the
Company only out of their accumulated profits, if any, determined
in accordance with Chinese accounting standards and
regulations. In response to the persistent capital outflow and the
Renminbi's depreciation against the U.S. dollar in the fourth
quarter of 2016, the People's Bank of China and the State
Administration of Foreign Exchange, or SAFE, have implemented a
series of capital control measures, including stricter vetting procedures
for China-based companies to remit foreign currency for
overseas acquisitions, dividend payments, and shareholder loan
repayments. The PRC government may continue to strengthen its
capital controls, and our PRC subsidiaries' dividends and other
distributions may be subjected to tighter scrutiny in the future. Any
limitation on the ability of our PRC subsidiaries to pay dividends or
make other distributions to us could materially and adversely
limit our ability to grow, make investments or acquisitions that could
be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.
Fluctuations in exchange rates could have a material adverse effect
on our results of operations and the price of our
ordinary shares.
Substantially, our revenues and expenditures are denominated in
RMB, whereas our reporting currency is the U.S. dollar. As a
result, fluctuations in the exchange rate between the U.S. dollar
and RMB will affect the relative purchasing power in RMB terms
of our U.S. dollar assets and the proceeds from our initial public
offering. Our reporting currency is the U.S. dollar, while the
functional currency for our PRC subsidiaries is RMB. Gains and losses
from the re-measurement of assets and liabilities
receivable or payable in RMB are included in our consolidated statements
of operations. The re-measurement has caused the U.S.
dollar value of our results of operations to vary with exchange rate
fluctuations, and the U.S. dollar value of our results of
operations will continue to vary with exchange rate fluctuations.
A fluctuation in the value of RMB relative to the U.S. dollar
could reduce our profits from operations and the translated value
of our net assets when reported in U.S. dollars in our financial
statements. This change in value could negatively impact our business,
financial condition, or results of operations as reported in
U.S. dollars. In the event that we decide to convert our RMB into U.S.
dollars to make payments for dividends on our ordinary
shares or for other business purposes, appreciation of the U.S. dollar
against the RMB will harm the U.S. dollar amount available
to us. In addition, fluctuations in currencies relative to the periods in
which the earnings are generated may make it more difficult
to perform period-to-period comparisons of our reported results of
operations.
The value of the RMB against the U.S. dollar and other currencies is
affected by, among other things, changes in China's political
and economic conditions and China's foreign exchange policies. On
July 21, 2005, the PRC government changed its decades-old
policy of pegging the value of the RMB to the U.S. dollar, and the
RMB appreciated more than 20% against the U.S. dollar over
the following three years. However, the PBOC regularly intervenes
in the foreign exchange market to limit fluctuations in RMB
exchange rates and achieve policy goals. Between July 2008 and
June 2010, the exchange rate between the RMB and the U.S.
dollar had been stable and traded within a narrow range. Since
June 2010, the RMB has fluctuated against the U.S. dollar, at times
significantly and unpredictably. Since October 1, 2016, Renminbi has
joined the International Monetary Fund (IMF)'s basket of
currencies that make up the Special Drawing Right (SDR) and the U.S.
dollar, the Euro, the Japanese yen, and the British pound.
In the fourth quarter of 2016, the RMB has depreciated significantly in
the backdrop of a surging U.S. dollar and persistent capital
outflows of China. With the development of the foreign exchange
market and progress towards interest rate liberalization and
Renminbi internationalization, the PRC government may announce
further changes to the exchange rate system. We cannot assure
you that the Renminbi will not appreciate or depreciate significantly
in value against the U.S. dollar in the future. It is difficult to
predict how market forces or PRC or U.S. government policy may
impact the exchange rate between the Renminbi and the U.S.
dollar in the future.
There remains significant international pressure on the PRC
government to adopt a flexible currency policy. Any significant
appreciation or depreciation of the RMB may materially and adversely
affect our revenues, earnings and financial position, and
the value of, and any dividends payable on, our ordinary shares in U.S.
dollars. For example, to the extent that we need to convert
U.S. dollars we receive from our initial public offering into RMB to pay
our operating expenses, appreciation of the RMB against
the U.S. dollar would adversely affect the RMB amount we would receive
from the conversion. Conversely, a significant
depreciation of the RMB against the U.S. dollar may significantly reduce
the U.S. dollar equivalent of our earnings, which in turn
could adversely affect the price of our ordinary shares.
Very limited hedging options are available in China to reduce our exposure
to exchange rate fluctuations. To date, we have not
entered into any hedging transactions to reduce our exposure to foreign
currency exchange risk. While we may decide to enter into
hedging transactions in the future, the availability and effectiveness of
these hedges may be limited. We may not be able to hedge
our exposure adequately. In addition, our currency exchange losses may
be magnified by PRC exchange control regulations that
restrict our ability to convert RMB into foreign currency. As a result,
fluctuations in exchange rates may have a material adverse
effect on the price of our ordinary shares.
PRC regulation of loans to, and direct investments in, PRC entities by
offshore holding companies may delay or prevent us
from making loans or additional capital contributions to our PRC
operating subsidiaries and thereby prevent us from
funding our business.
As an offshore holding company with PRC subsidiaries, we may
transfer funds to our PRC subsidiaries by means of loans or
capital contributions. Any loans to these PRC subsidiaries, which
are foreign-invested enterprises, cannot exceed statutory limits
based on the difference between the amount of our investments
and registered capital in such subsidiaries, and shall be registered
with SAFE, or its local counterparts. Furthermore, any capital increase
contributions we make to our PRC subsidiaries, which are
foreign-invested enterprises, shall be approved by MOFCOM, or its
local counterparts. We may not be able to obtain these
government registrations or approvals on a timely basis, if at all. If we
fail to receive such registrations or approvals, our ability to
provide loans or capital to increase contributions to our PRC subsidiaries
may be negatively affected, which could adversely affect
their liquidity and our ability to fund and expand their business.
PRC regulations relating to the establishment of offshore special purpose
vehicles by PRC residents may subject our
PRC-resident beneficial owners or our PRC subsidiaries to liability or
penalties, limit our ability to make capital
contributions into our PRC subsidiaries, limit our PRC subsidiaries' ability
to distribute profits to us, or otherwise
adversely affect our financial position.
Under several regulations promulgated by SAFE, PRC residents and PRC
corporate entities are required to register with and
obtain approval from local branches of SAFE or designated qualified
foreign exchange banks in mainland China in connection
with their direct or indirect offshore investment activities. In addition,
any PRC resident who is a direct or indirect shareholder of
an offshore company is required to update the previously filed registration
with the local branch of SAFE, with respect to any
material change involving that offshore company, such as an increase or
decrease in capital, transfer or swap of shares, merger or
division. These regulations apply to all direct and indirect shareholders
and beneficial owners of our company who are PRC
residents, or PRC-Resident Shareholders, and may apply to any offshore
acquisitions that we make in the future. To the best of our
knowledge, as of the date of this prospectus, each of our principal
shareholders who is required to make the foreign exchange
registration under SAFE Circular 37 had completed such registration.
However, we may not at all times be fully aware or
informed of the identities of all the PRC residents holding direct or
indirect interests in our company, and we cannot assure you
that all of our shareholders and beneficial owners who are PRC residents
will comply with these foreign exchange regulations.
If any PRC-Resident Shareholder fails to make the required registration
or update a previously filed registration, our PRC
subsidiaries may be prohibited from distributing their profits and proceeds
from any reduction in capital, share transfer or
liquidation to us, and we may also be prohibited from injecting additional
capital into our PRC subsidiaries. Moreover, failure to
comply with the various foreign exchange registration requirements
described above could result in liability on the related
PRC-Resident shareholder or our PRC subsidiaries under the PRC laws
for evasion of applicable foreign exchange restrictions.
Governmental control of currency conversion may limit our ability to
utilize our net revenues effectively and affect the
value of your investment.
The PRC government imposes controls on the convertibility of the RMB
into foreign currencies and, in certain cases, the
remittance of currency out of China. We receive substantially all of our
net revenues in RMB. Under our current corporate
structure, our company in the Hong Kong may rely on dividend payments
from our PRC subsidiaries to fund any cash and
financing requirements we may have. Under existing PRC foreign exchange
regulations, payments of current account items, such
as profit distributions and trade and service-related foreign exchange
transactions, can be made in foreign currencies without prior
approval from SAFE by complying with certain procedural requirements.
Therefore, our PRC subsidiaries are able to pay
dividends in foreign currencies to us without prior approval from SAFE,
subject to the condition that the remittance of such
dividends outside of the PRC complies with certain procedures under
PRC foreign exchange regulation, such as the overseas
investment registrations by the beneficial owners of our company who
are PRC residents. But approval from or registration with
appropriate government authorities is required where RMB is converted
into foreign currency and remitted out of China to pay
capital expenses such as the repayment of loans denominated in
foreign currencies.
In light of China's flood of capital outflows in 2016 due to the weakening
RMB, the PRC government has imposed more
restrictive foreign exchange policies and stepped up scrutiny of major
outbound capital movements. More restrictions and a
substantial vetting process are put in place by SAFE to regulate
cross-border transactions falling under the capital account. The
PRC government may also, at its discretion, restrict access in the
future to foreign currencies for current account transactions. In
the event that the foreign exchange control system prevents us
from obtaining sufficient foreign currencies to satisfy our foreign
currency demands, we may not be able to pay dividends in foreign
currencies to our shareholders.
We must remit the offering proceeds to PRC before they may be used
to benefit our business in the PRC, and this process
may take several months.
The proceeds of this offering must be sent back to the PRC, and the
process for sending such proceeds back to the PRC may take
several months after the closing of this offering. We may be unable
to use these proceeds to grow our business until we receive
such proceeds in the PRC. To remit the offering proceeds to the PRC,
we will take the following actions:
First, we will open a special foreign exchange account for capital
account transactions. To open this account, we must submit to
State Administration for Foreign Exchange ('SAFE') certain application
forms, identity documents, transaction documents, a
form of foreign exchange registration of overseas investments by
domestic residents, and foreign exchange registration certificate
of the invested company.
Second, we will remit the offering proceeds into this special foreign
exchange account.
Third, we will apply for settlement of the foreign exchange. To do so,
we must submit to SAFE certain application forms, identity
documents, payment order to a designated person, and a tax certificate.
The timing of the process is difficult to estimate because the efficiencies
of different SAFE branches can vary materially.
Ordinarily, the process takes several months to complete but is required
by law to be accomplished within 180 days of application.
Until the abovementioned approvals, the proceeds of this offering will
be maintained in an interest-bearing account maintained by
us in the United States.
Some of our shareholders are not in compliance with the PRC's regulations
relating to offshore investment activities by
PRC residents, and as a result, the shareholders may be subject to penalties
if we are not able to remediate the
non-compliance.
In July 2014, the State Administration of Foreign Exchange promulgated
the Circular on Issues Concerning Foreign Exchange
Administration over the Overseas Investment and Financing and Roundtrip
Investment by Domestic Residents via Special
Purpose Vehicles, or 'Circular 37'. According to Circular 37, prior registration
with the local SAFE branch is required for Chinese
residents to contribute domestic assets or interests to offshore companies,
known as SPVs. Circular 37 further requires amendment
to a PRC resident's registration in the event of any significant changes with
respect to the SPV, such as an increase or decrease in
the capital contributed by PRC individuals, share transfer or exchange,
merger, division, or other material event. Further, foreign
investment enterprises established by way of round-tripping shall complete
the relevant foreign exchange registration formalities
pursuant to the prevailing foreign exchange control provisions for direct
investments by foreign investors, and disclose the
relevant information such as actual controlling party of the shareholders
truthfully.
Currently, some of our shareholders have completed Circular 37
Registration and are in compliance. Some of our beneficial
owners, who are PRC residents, have not completed the Circular 37
Registration. All our significant shareholders, directors and
officers have completed Circular 37 Registration. We have asked our
shareholders who are Chinese residents to make the
necessary applications and filings as required by Circular 37. We
attempt to comply, and attempt to ensure that our shareholders
who are subject to these rules comply, with the relevant requirements.
We cannot, however, provide any assurances that all of our
and future shareholders who are Chinese residents will comply with our
request to make or obtain any applicable registration or
comply with other requirements required by Circular 37 or other related
rules. The Chinese resident shareholders' failure to
comply with Circular 37 registration may result in restrictions being
imposed on part of foreign exchange activities of the offshore
special purpose vehicles, including restrictions on its ability to receive
registered capital as well as additional capital from Chinese
resident shareholders who fail to complete Circular 37 registration; and
repatriation of profits and dividends derived from special
purpose vehicles to China, by the Chinese resident shareholders who
fail to complete Circular 37 registration, are also illegal. In
addition, the failure of the Chinese resident shareholders to complete
Circular 37 registration may subject each of the shareholders
to fines less than RMB50,000. We cannot assure you that each of our
Chinese resident shareholders will in the future complete the
registration process as required by Circular 37.
Failure to make adequate contributions to various employee benefit
plans required by PRC regulations may subject us to
penalties.
We are required under PRC laws and regulations to participate in
various government-sponsored employee benefit plans,
including certain social insurance, housing funds, and other
welfare-oriented payment obligations, and contribute to the plans in
amounts equal to certain percentages of salaries, including bonuses
and allowances, of our employees up to a maximum amount
specified by the local government from time to time at locations
where we operate our businesses. The requirement of employee
benefit plans has not been implemented consistently by the local
governments in China, given the different levels of economic
development in different locations. In the event that the local
governments deem our contribution to be not sufficient, we may be
subject to late contribution fees or fines in relation to any underpaid
employee benefits, and our financial condition and results of
operations may be adversely affected.
According to the Interim Regulations on the Collection and Payment
of Social Insurance Premiums, the Regulations on Work
Injury Insurance, the Regulations on Unemployment Insurance and
the Trial Measures on Employee Maternity Insurance of
Enterprises, enterprises in the PRC shall provide benefit plans for
their employees, which include basic pension insurance,
unemployment insurance, maternity insurance, work injury insurance
and basic medical insurance. An enterprise must provide
social insurance by making social insurance registration with local
social insurance agencies, and shall pay or withhold relevant
social insurance premiums for and on behalf of employees. The Law
on Social Insurance of the PRC, which was promulgated by
the SCNPC on October 28, 2010, became effective on July 1, 2011,
and was most recently updated on December 29, 2018, has
consolidated pertinent provisions for basic pension insurance,
unemployment insurance, maternity insurance, work injury
insurance and basic medical insurance, and has elaborated in
detail the legal obligations and liabilities of employers who do not
comply with laws and regulations on social insurance.
According to the Regulations on the Administration of Housing
Provident Fund, which was promulgated by the State Counsel and
became effective on April 3, 1999, and was amended on March
24, 2002 and was partially revised on March 24, 2019 by the
Decision of the State Council on Revising Some Administrative
Regulations (Decree No. 710 of the State Council), housing
provident fund contributions by an individual employee and housing
provident fund contributions by his or her employer shall
belong to the individual employee. Registration by PRC companies
with the applicable housing provident fund management
center is compulsory, and a special housing provident fund account
for each of the employees shall be opened at an entrusted
bank.
The government supervision of social insurance policy has not been
implemented consistently by the local governments in China
given the different levels of economic development in different locations.
According to the Social Insurance Law of the People's
Republic of China, we may be ordered to pay the outstanding social
insurance contributions within a prescribed deadline and
liable for a late payment fee equal to 0.05% of the outstanding amount
for each day of delay, in addition to a fine a fine ranging
from RMB 10,000 to RMB 50,000. Furthermore, we may be liable for a
fine of one to three times the amount of the outstanding
contributions, provided that we still fail to pay the outstanding social
insurance contributions within the prescribed deadline. In
addition, according to the Regulations on the Administration of Housing
Provident Fund, we may be ordered by the Housing
Accumulation Fund Management Center to deposit the outstanding funds
within a time limit. If we fail to deposit such amounts
within the time limit, the Center may petition a people's court to enforce
the payment. Additionally, the standard for fine
imposition has become highly discretional for the local government to
decide whether to enforce compliance with the employee
social fund regulations, if at all. As of the date of the prospectus, given
that (i) the requirement of social insurance and housing
fund has not been implemented consistently by the local governments
in China given the different levels of economic
development in different locations; (ii) pursuant to the Emergency Notice
on Practicing Principles of the State Council Executive
Meeting and Stabilizing Work on Collecting Social Insurance Premiums
promulgated by the Ministry of Human Resources and
Social Security on September 21, 2018, local authorities are prohibited
from recovering unpaid social insurance premiums from
enterprises; (iii) as of the date of this Prospectus, the Company had not
received any notice or order from the relevant government
authorities requesting us to pay the social insurance premiums or
housing funds in full; (iv) as of the date of this Prospectus, the
Company had not received any complaint or report on outstanding
social insurance premiums or housing funds, nor had them had
any labor dispute or lawsuit with their employees on payments of social
insurance premiums or housing provident fund; and (v)
the Company had not been subject to any administrative penalties, the
Company has not made any provisions in connection with
the shortfall of its social insurance contribution and housing provident
funds for the year ended December 31, 2021. Furthermore,
as of the date of the prospectus, we are not aware of any action, claim,
investigation or penalties being conducted or threatened by
any government authorities. However, if we are fined or otherwise
penalized by government authorities due to our failure to
adequately pay social insurance and housing provident fund contributions
for our employees, our financial condition may be
negatively impacted.
The M&A Rules and certain other PRC regulations establish complex
procedures for some acquisitions of Chinese
companies by foreign investors, making it more difficult for us to pursue
growth through acquisitions in China.
The Regulations on Mergers and Acquisitions of Domestic Companies by
Foreign Investors, or the M&A Rules, adopted by six
PRC regulatory agencies in August 2006 and amended in 2009, and some
other regulations and rules concerning mergers and
acquisitions established additional procedures and requirements that
could make merger and acquisition activities by foreign
investors more time consuming and complex, including requirements in
some instances that the MOC be notified in advance of
any change-of-control transaction in which a foreign investor takes
control of a PRC domestic enterprise. Moreover, the
Anti-Monopoly Law requires that the MOC shall be notified in advance
of any concentration of undertaking if certain thresholds
are triggered. In addition, the security review rules issued by the MOC
that became effective in September 2011 specify that
mergers and acquisitions by foreign investors that raise 'national
defense and security' concerns and mergers and acquisitions
through which foreign investors may acquire de facto control over
domestic enterprises that raise 'national security' concerns are
subject to strict review by the MOC, and the rules prohibit any
activities attempting to bypass a security review, including by
structuring the transaction through a proxy or contractual control
arrangement. In the future, we may grow our business by
acquiring complementary businesses. Complying with the requirements
of the above-mentioned regulations and other relevant
rules to complete such transactions could be time-consuming, and any
required approval processes, including obtaining approval
from the MOC or its local counterparts, may delay or inhibit our ability
to complete such transactions, which could affect our
ability to expand our business or maintain our market share.
PRC regulations relating to offshore investment activities by PRC
residents may limit our PRC subsidiaries' ability to
increase their registered capital or distribute profits to us or otherwise
expose us or our PRC resident beneficial owners to
liability and penalties under PRC law.
SAFE promulgated the Circular on Relevant Issues Relating to Domestic
Resident's Investment and Financing and Roundtrip
Investment through Special Purpose Vehicles, or SAFE Circular 37, in
July 2014 that requires PRC residents or entities to register
with SAFE or its local branch in connection with their establishment
or control of an offshore entity established for overseas
investment or financing. In addition, such PRC residents or entities
must update their SAFE registrations when the offshore
special purpose vehicle undergoes material events relating to any
change of basic information (including change of such PRC
citizens or residents, name and operation term), increases or decreases
in investment amount, transfers or exchanges of shares, or
mergers or divisions. SAFE Circular 37 is issued to replace the Notice
on Relevant Issues Concerning Foreign Exchange
Administration for PRC Residents Engaging in Financing and Roundtrip
Investments via Overseas Special Purpose. Vehicles, or
SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying
and Improving the Administration of the Foreign
Exchange Concerning Direct Investment in February 2015, which took
effect on June 1, 2015. This notice has amended SAFE
Circular 37 requiring PRC residents or entities to register with qualified
banks rather than SAFE or its local branch in connection
with their establishment or control of an offshore entity established for
overseas investment or financing.
In the event that our shareholders who are PRC residents or entities
do not complete their registration as required, our PRC
subsidiaries may be prohibited from distributing their profits and
proceeds from any reduction in capital, share transfer or
liquidation to us. We may be restricted in our ability to contribute
additional capital to our PRC subsidiaries. Moreover, failure to
comply with the SAFE registration described above could result in
liability under PRC laws for evasion of applicable foreign
exchange restrictions.
However, we may not be informed of the identities of all the PRC
residents or entities holding a direct or indirect interest in our
company, nor can we compel our beneficial owners to comply with
SAFE registration requirements. As a result, we cannot assure
you that all of our shareholders or beneficial owners who are PRC
residents or entities have complied with and will in the future
make or obtain any applicable registrations or approvals required by
SAFE regulations. Failure by such shareholders or beneficial
owners to comply with SAFE regulations, or failure by us to amend
the foreign exchange registrations of our PRC subsidiaries,
could subject us to fines or legal sanctions, restrict our overseas or
cross-border investment activities, limit our PRC subsidiaries'
ability to make distributions or pay dividends to us or affect our
ownership structure, which could adversely affect our business
and prospects.
If we are classified as a PRC resident enterprise for PRC income
tax purposes, such classification could result in
unfavorable tax consequences to us and our non-PRC shareholders.
Under the PRC Enterprise Income Tax Law and its implementation
rules, an enterprise established outside of the PRC with a 'defacto
management body' within the PRC is considered a resident
enterprise and will be subject to the enterprise income tax on its
global income rate of 25%. The implementation rules define the
term 'de facto management body' as the body that exercises full
and substantial control over and overall management of an enterprise's
business, productions, personnel, accounts, and properties.
In April 2009, the State Administration of Taxation issued a circular,
known as Circular 82, which provides certain specific criteria
for determining whether the 'de facto management body' of a
PRC-controlled enterprise incorporated offshore is located in China.
Although this circular only applies to offshore enterprises controlled
by PRC enterprises or PRC enterprise groups, not those
controlled by PRC individuals or foreigners like us, the criteria set
forth in the circular may reflect the State Administration of
Taxation's general position on how the 'de facto management
body' test should be applied in determining the tax resident status
of all offshore enterprises. According to Circular 82, an offshore
incorporated enterprise controlled by a PRC enterprise or a PRC
enterprise group will be regarded as a PRC tax resident by virtue
of having its 'de facto management body' in China and will be
subject to PRC enterprise income tax on its global income only if
all of the following conditions are met: (i) the primary location
of the day-to-day operational management is in the PRC; (ii) decisions
relating to the enterprise's financial and human resource
matters are made or are subject to approval by organizations or
personnel in the PRC; (iii) the enterprise's primary assets,
accounting books and records, company seals, and board and
shareholder resolutions, are located or maintained in the PRC; and
(iv) at least 50% of voting board members or senior executives
habitually reside in the PRC.
We believe none of our entities outside of China is a PRC resident
enterprise for PRC tax purposes. See 'Taxation People's
Republic of China Enterprise Taxation' on page 129. However, the
tax resident status of an enterprise is subject to determination
by the PRC tax authorities, and uncertainties remain with respect
to the interpretation of the term 'de facto management body.' As
substantially all of our management members are based in China, it
remains unclear how the tax residency rule will apply to our
case. In the event that the PRC tax authorities determine that Erayak
or any of our subsidiaries outside of China is a PRC resident
enterprise for PRC enterprise income tax purposes, Erayak or such
subsidiary could be subject to PRC tax at a rate of 25% on its
worldwide income, which could materially reduce our net income.
In addition, we will also be subject to PRC enterprise income
tax reporting obligations.
Furthermore, if the PRC tax authorities determine that we are a PRC
resident enterprise for enterprise income tax purposes, gains
realized on the sale or other disposition of our ordinary shares may
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), if such
gains are deemed to be from PRC sources. It is unclear whether
non-PRC shareholders of our company would be able to claim the
benefits of any tax treaties between their country of tax residence
and the PRC if we are treated as a PRC resident enterprise. Any
such tax may reduce the returns on the investment in our ordinary shares.
Enhanced scrutiny over acquisition transactions by the PRC tax authorities
may have a negative impact on potential
acquisitions we may pursue in the future.
The PRC tax authorities have enhanced their scrutiny over the direct
or indirect transfer of certain taxable assets, including, in
particular, equity interests in a PRC resident enterprise, by a non-resident
enterprise by promulgating and implementing Notice of
the Ministry of Finance and the State Administration of Taxation on
Several Issues Concerning the Enterprise Income Tax
Treatment on Enterprise Reorganization (Circular 59) and Announcement
No. 7 [2015] of the State Administration of
Taxation-Announcement on Several Issues concerning the Enterprise
Income Tax on Income from the Indirect Transfer of Assets
by Non-Resident Enterprises (Circular 7) which became effective in
February 2015. Under Circular 7, where a non-resident
enterprise conducts an 'indirect transfer' by transferring the equity
interests of a PRC 'resident enterprise' indirectly by disposing
of the equity interests of an overseas holding company, the non-resident
enterprise, being the transferor, may be subject to PRC
enterprise income tax, if the indirect transfer is considered to be an
abusive use of company structure without reasonable
commercial purposes. Circular 7 also provides that, where a non-PRC
resident enterprise transfers its equity interests in a PRC
resident enterprise to its related parties at a price lower than the fair
market value, the relevant tax authority has the power to make
a reasonable adjustment to the taxable income of the transaction.
Circular 7 extends its tax jurisdiction to indirect transfers and transactions
involving the transfer of other taxable assets through
the offshore transfer of a foreign intermediate holding company.
In addition, Circular 7 provides clear criteria on how to assess
reasonable commercial purposes and has introduced safe harbors
for internal group restructurings and the purchase and sale of
equity through a public securities market. Circular 7 also brings
challenges to both the foreign transferor and transferee (or other
person obligated to pay for the transfer) of the taxable assets.
Where a non-resident enterprise conducts an 'indirect transfer' by
transferring the taxable assets indirectly by disposing of the equity interests
of an overseas holding company, the non-resident
enterprise being the transferor, the transferee, or the PRC entity which
directly owned the taxable assets may report to the relevant
tax authority such indirect transfer. Using a 'substance over form' principle,
the PRC tax authority may disregard the existence of
the overseas holding company if it lacked a reasonable commercial purpose
and was established for the purpose of reducing,
avoiding, or deferring PRC tax.
According to the 'Enterprise Income Tax Law of the People's Republic of
China' (adopted on March 16, 2007, first amended on
February 24, 2017, and second amended on December 29, 2018), if the
business dealings between an enterprise and its affiliated
parties do not conform to the principle of independent transactions and
thus reduce the taxable income or income of the enterprise
or its affiliated parties, the tax authorities have the right to adjust in
accordance with reasonable methods. The cost incurred by an
enterprise and its related parties in developing and accepting intangible
assets or providing and receiving labor services together
shall be apportioned according to the principle of independent transaction
when calculating taxable income.
If a resident enterprise or an enterprise controlled by a resident enterprise
and a Chinese resident and established in a country
(region) whose actual tax burden is significantly lower than the tax rate
level of China's enterprise income tax, does not allocate or
reduce its profits due to reasonable business needs, the portion of the
above profits that should belong to the resident enterprise
shall be included in the current income of the resident enterprise.
Interest expenses incurred when the ratio of creditor's rights investment
to equity investment accepted by an enterprise from its
affiliated parties exceeds the prescribed standard shall not be deducted
in the calculation of taxable income.
If an enterprise reduces its taxable income or income by implementing
other arrangements without reasonable commercial
purposes, tax authorities have the right to adjust them in accordance
with reasonable methods.
We face uncertainties on the reporting and consequences on future
private equity financing transactions, share exchange, or other
transactions involving the transfer of shares in our company by investors
that are non-PRC resident enterprises. The PRC tax
authorities may pursue such non-resident enterprises with respect to a
filing or the transferees with respect to withholding
obligation and request our PRC subsidiaries to assist in the filing. As a
result, non-resident enterprises in such transactions may
become at risk of being subject to filing obligations or being taxed
under Circular 59 and Circular 7. They may be required to
expend valuable resources to comply with Circular 59and Circular 7
or establish that our non-resident enterprises should not be
taxed under these circulars, which may have a material adverse effect
on our financial condition and results from operations.
The PRC tax authorities have the discretion under SAT Circular 59
and Circular 7 to make adjustments to the taxable capital gains
based on the difference between the fair value of the taxable assets
transferred and the cost of investment. Although we currently
have no plans to pursue any acquisitions in China or elsewhere in the
world, we may pursue acquisitions in the future that may
involve complex corporate structures. If we are considered a non-resident
enterprise under the PRC Enterprise Income Tax Law
and if the PRC tax authorities make adjustments to the taxable income
of the transactions under SAT Circular 59 and Circular 7,
our income tax costs associated with such potential acquisitions will be
increased, which may have an 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,
share price and reputation.
US. 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. On December 7, 2018, the SEC and the PCAOB issued
a joint statement highlighting continued challenges
faced by the U.S. regulators in their oversight of financial statement audits
of U.S.-listed companies with significant operations in
China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman
William D. Duhnke III, along with other senior
SEC staff, released a joint statement highlighting the risks associated with
investing in companies based in or have substantial
operations in emerging markets including China, reiterating past SEC
and PCAOB statements on matters including the difficulty
associated with inspecting accounting firms and audit work papers in
China and higher risks of fraud in emerging markets and the
difficulty of bringing and enforcing SEC, Department of Justice and
other U.S., including in instances of fraud, in emerging
markets generally. As a result of this 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 share price. In the event that 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 growth. In the event that 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 share.
The recent joint statement by the SEC and PCAOB, proposed rule
changes submitted by Nasdaq, and the Holding Foreign
Companies Accountable Act all call for additional and more stringent
criteria to be applied to emerging market companies
upon assessing the qualification of their auditors, especially the non-U.S.
auditors who are not inspected by the PCAOB.
These developments could add uncertainties to our offering.
On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman
William D. Duhnke III, along with other senior SEC staff,
released a joint statement highlighting the risks associated with investing
in companies based in or have substantial operations in
emerging markets including China. The joint statement emphasized
the risks associated with lack of access for the PCAOB to
inspect auditors and audit work papers in China and higher risks of
fraud in emerging markets.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i)
apply minimum offering size requirement for companies
primarily operating in 'Restrictive Market', (ii) adopt a new requirement
relating to the qualification of management or board of
director for Restrictive Market companies, and (iii) apply additional and
more stringent criteria to an applicant or listed company
based on the qualifications of the company's auditors.
Uncertainties in the interpretation and enforcement of Chinese laws
and regulations could limit the legal protections
available to us.
The PRC legal system is based on written statutes and prior court
decisions have limited value as precedents. Since these laws and
regulations are relatively new and the PRC legal system continues
to rapidly evolve, the legal system in China, including risks and
uncertainties regarding the enforcement of laws and that rules and
regulations in China can change quickly with little advance
notice, and the interpretations of many laws, regulations and rules
are not always uniform and enforcement of these laws,
regulations and rules involves uncertainties.
Therefore, these risks may result in a material change in business
operations, significant depreciation of the value of our ordinary
shares, or a complete hinderance of our ability to offer or continue
to offer our securities to investors. Recently, the Chinese
government initiated a series of regulatory actions and statements
to regulate business operations in China with little advance
notice, including cracking down on illegal activities in the securities
market, enhancing supervision over China-based companies
listed overseas using a VIE structure, adopting new measures to
extend the scope of cybersecurity reviews, and expanding the
efforts in anti-monopoly enforcement. Since these statements and
regulatory actions are new, it is highly uncertain how soon
legislative or administrative regulation making bodies will respond
and what existing or new laws or regulations or detailed
implementations and interpretations will be modified or promulgated,
if any, and the potential impact such modified or new laws
and regulations will have on our daily business operation, the ability
to accept foreign investments and list on an U.S. or other
foreign exchange.
Although we have taken measures to comply with the laws and
regulations that are applicable to our business operations,
including the regulatory principles raised by the CBRC, and avoiding
conducting any activities that may be deemed as illegal
fund-raising, forming capital pool or providing guarantee to investors
under the current applicable laws and regulations, the PRC
government authority may promulgate new laws and regulations
regulating the direct lending service industry in the future. We
cannot assure you that our practices would not be deemed to violate
any PRC laws or regulations relating to illegal fund-raising,
forming capital pools or the provision of credit enhancement services.
Moreover, we cannot rule out the possibility that the PRC
government will institute a license requirement covering our industry
at some point in the future. If such a licensing regime were
introduced, we cannot assure you that we would be able to obtain
any newly required license in a timely manner, or at all, which
could materially and adversely affect our business and impede our
ability to continue our operations.
From time to time, we may have to resort to administrative and court
proceedings to enforce our legal rights. However, since PRC
administrative and court authorities have significant discretion in
interpreting and implementing statutory and contractual terms, it
may be more difficult to evaluate the outcome of administrative and
court proceedings and the level of legal protection we enjoy,
than in more developed legal systems. Furthermore, the PRC legal
system is based in part on government policies and internal
rules (some of which are not published in a timely manner or at all)
that may have a retroactive effect. As a result, we may not be
aware of our violation of these policies and rules until sometime after
the violation. Such uncertainties, including uncertainty over
the scope and effect of our contractual, property (including intellectual
property) and procedural rights, could materially and
adversely affect our business and impede our ability to continue our
operations.
We may be adversely affected by the complexity, uncertainties and
changes in PRC regulation of internet-related
businesses and companies, and any lack of requisite approvals, licenses
or permits applicable to our business may have a
material adverse effect on our business and results of operations.
The PRC government extensively regulates the internet industry,
including foreign ownership of, and the licensing and permit
requirements pertaining to, companies in the internet industry.
These internet-related laws and regulations are relatively new and
evolving, and their interpretation and enforcement involve significant
uncertainties. As a result, in certain circumstances it may be
difficult to determine what actions or omissions may be deemed to
be in violation of applicable laws and regulations.
The evolving PRC regulatory system for the internet industry may
lead to the establishment of new regulatory agencies. For
example, in May 2011, the State Council announced the establishment
of a new department, the State Internet Information Office
(with the involvement of the State Council Information Office, the
MITT, and the Ministry of Public Security). The primary role
of this new agency is to facilitate the policy-making and legislative
development in this field, to direct and coordinate with the
relevant departments in connection with online content administration
and to deal with cross-ministry regulatory matters in
relation to the internet industry.
The Circular on Strengthening the Administration of Foreign Investment
in and Operation of Value-added Telecommunications
Business, issued by the MITT in July 2006, prohibits domestic
telecommunication service providers from leasing, transferring or
selling telecommunications business operating licenses to any
foreign investor in any form, or providing any resources, sites or
facilities to any foreign investor for their illegal operation of a
telecommunications business in China. According to this circular,
either the holder of a value-added telecommunication services
operation permit or its shareholders must directly own the domain
names and trademarks used by such license holders in their provision
of value-added telecommunication services. The circular
also requires each license holder to have the necessary facilities, including
servers, for its approved business operations and to
maintain such facilities in the regions covered by its license. If an ICP
License holder fails to comply with the requirements and
also fails to remedy such non-compliance within a specified period of
time, the MITT or its local counterparts have the discretion
to take administrative measures against such license holder, including
revoking its ICP License.
The interpretation and application of existing PRC laws, regulations and
policies and possible new laws, regulations or policies
relating to the internet industry have created substantial uncertainties
regarding the legality of existing and future foreign
investments in, and the businesses and activities of, internet businesses
in China, including our business. We cannot assure you
that we have obtained all the permits or licenses required for conducting
our business in China or will be able to maintain our
existing licenses or obtain new ones. If the PRC government considers
that we were operating without the proper approvals,
licenses or permits or promulgates new laws and regulations that require
additional approvals or licenses or imposes additional
restrictions on the operation of any part of our business, it has the power,
among other things, to levy fines, confiscate our income,
revoke our business licenses, and require us to discontinue our relevant
business or impose restrictions on the affected portion of
our business. Any of these actions by the PRC government may have a
material adverse effect on our business and results of
operations.
Increases in labor costs in the PRC may adversely affect our business
and our profitability.
China's economy has experienced increases in labor costs in recent
years. China's overall economy and the average wage in China
are expected to continue to grow. The average wage level for our
employees has also increased in recent years. We expect that our
labor costs, including wages and employee benefits, will continue
to increase. Unless we are able to pass on these increased labor
costs to our customers by increasing prices for our products or
services, our profitability and results of operations may be
materially and adversely affected.
In addition, we have been subject to stricter regulatory requirements
in terms of entering into labor contracts with our employees
and paying various statutory employee benefits, including pensions,
housing fund, medical insurance, work-related injury
insurance, unemployment insurance, and maternity insurance to
designated government agencies for the benefit of our employees.
Pursuant to the PRC Labor Contract Law, or the 'Labor Contract Law,
' that became effective in January 2008 and its amendments
that became effective in July 2013 and its implementing rules that
became effective in September 2008, employers are subject to
stricter requirements in terms of signing labor contracts, minimum
wages, paying remuneration, determining the term of
employees' probation, and unilaterally terminating labor contracts.
In the event that we decide to terminate some of our employees
or otherwise change our employment or labor practices, the Labor
Contract Law and its implementation rules may limit our ability
to effect those changes in a desirable or cost-effective manner,
which could adversely affect our business and results of operations.
As the interpretation and implementation of labor-related laws and
regulations are still evolving, we cannot assure you that our
employment practice does not and will not violate labor-related laws
and regulations in China, which may subject us to labor
disputes or government investigations. If we are deemed to have violated
relevant labor laws and regulations, we could be
required to provide additional compensation to our employees and our
business, financial condition and results of operations could
be materially and adversely affected.
Risks Related to the Offering and Our Ordinary Shares
The initial public offering price of our Ordinary Shares may not be
indicative of the market price of our Ordinary Shares
after this offering. In addition, an active, liquid and orderly
trading market for our Ordinary Shares may not develop or
be maintained, and our share price may be volatile.
Prior to the completion of this offering, our Ordinary Shares
were not traded on any market. Any active, liquid and orderly trading
market for our Ordinary Shares may not develop or be maintained
after this offering. Active, liquid and orderly trading markets
usually result in less price volatility and more efficiency in carrying
out investors' purchase and sale orders. The market price of
our Ordinary Shares could vary significantly as a result of a number
of factors, some of which are beyond our control. In the event
of a drop in the market price of our Ordinary Shares, you could lose
a substantial part or all of your investment in our Ordinary
Shares. The initial public offering price will be determined by us, based
on numerous factors and may not be indicative of the
market price of our Ordinary Shares after this offering. Consequently,
you may not be able to sell our Ordinary Shares at a price
equal to or greater than the price paid by you in this offering.
The following factors could affect our share price:
? our operating and financial performance;
? quarterly variations in the rate of growth of our financial indicators,
such as net income per share, net income and revenues;
? the public reaction to our press releases, our other public announcements
and our filings with the SEC;
? strategic actions by our competitors;
? changes in revenue or earnings estimates, or changes in recommendations
or withdrawal of research coverage, by equity research
analysts;
? speculation in the press or investment community;
? the failure of research analysts to cover our Ordinary Shares;
? sales of our Ordinary Shares by us or other shareholders, or the
perception that such sales may occur;
? changes in accounting principles, policies, guidance, interpretations
or standards;
? additions or departures of key management personnel;
? actions by our shareholders;
? domestic and international economic, legal and regulatory factors
unrelated to our performance; and
? the realization of any risks described under this 'Risk Factors' section.
The stock markets in general have experienced extreme volatility
that has often been unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely
affect the trading price of our Ordinary Shares. Securities
class action litigation has often been instituted against companies
following periods of volatility in the overall market and in the
market price of a company's securities. Such litigation, if instituted
against us, could result in very substantial costs, diver our
management's attention and resources and harm our business,
operating results and financial condition.
There may not be an active, liquid trading market for our Ordinary
Shares.
Prior to the completion of this offering, there has been no public
market for our Ordinary Shares. An active trading market for our
Ordinary Shares may not develop or be sustained following this
offering. You may not be able to sell your shares at the market
price, if at all, if trading in our shares is not active. The initial public
offering price was determined by negotiations between us
and our advisors based upon a number of factors. The initial public
offering price may not be indicative of prices that will prevail
in the trading market.
Because we do not expect to pay dividends in the foreseeable future
after this offering, you must rely on a price
appreciation of the Ordinary Shares for a return on your investment.
We currently intend to retain most, if not all, of our available funds
and any future earnings after this offering to fund the
development and growth of our business. As a result, we do not
expect to pay any cash dividends in the foreseeable future.
Therefore, you should not rely on an investment in the Ordinary
Shares as a source for any future dividend income.
A sale or perceived sale of a substantial number of our Ordinary
Shares may cause the price of our Ordinary Shares to
decline.
If our shareholders sell substantial amounts of our Ordinary Shares
in the public market, the market price of our Ordinary Shares
could fall. Moreover, the perceived risk of this potential dilution
could cause shareholders to attempt to sell their shares and
investors to short our Ordinary Shares. These sales also make it more
difficult for us to sell equity-related securities in the future at
a time and price that we deem reasonable or appropriate.
There can be no assurance that we will not be a passive foreign
investment company ('PFIC') for United States federal
income tax purposes for any taxable year, which could subject
United States holders of our Ordinary Shares to significant
adverse United States federal income tax consequences.
A non-United States corporation will be a passive foreign investment
company, or PFIC, for United States federal income tax
purposes for any taxable year if either (i) at least 75% of its gross
income for such taxable year is passive income or (ii) at least 50%
of the value of its assets (based on average of the quarterly values
of the assets) during such year is attributable to assets that that
produce or are held for the production of passive income. Based
on the current and anticipated value of our assets and the
composition of our income assets, we do not expect to be a PFIC
for United States federal income tax purposes for our current
taxable year ended December 31, 2021 or in the foreseeable future.
However, the determination of whether or not we are a PFIC
according to the PFIC rules is made on an annual basis and depend
on the composition of our income and assets and the value of
our assets from time to time. Therefore, changes in the composition
of our income or assets or value of our assets may cause us to
become a PFIC. The determination of the value of our assets (including
goodwill not reflected on our balance sheet) may be based,
in part, on the quarterly market value of Ordinary Shares, which is
subject to change and may be volatile.
The classification of certain of our income as active or passive,
and certain of our assets as producing active or passive income,
and hence whether we are or will become a PFIC, depends on the
interpretation of certain United States Treasury Regulations as
well as certain IRS guidance relating to the classification of assets
as producing active or passive income. Such regulations
guidance is potentially subject to different interpretations. If due
to different interpretations of such regulations and guidance the
percentage of our passive income or the percentage of our assets
treated as producing passive income increases, we may be a PFIC
in one of more taxable years.
If we are a PFIC for any taxable year during which a United States
person holds Ordinary Shares, certain adverse United States
federal income tax consequences could apply to such United States
person.
For as long as we are an emerging growth company, we will not
be required to comply with certain reporting requirements,
including those relating to accounting standards and disclosure
about our executive compensation, that apply to other
public companies.
We are classified as an 'emerging growth company' under the
JOBS Act. For as long as we are an emerging growth company,
which may be up to five full fiscal years, unlike other public
companies, we will not be required to, among other things, (i)
provide an auditor's attestation report on management's assessment
of the effectiveness of our system of internal control over
financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley
Act, (ii) comply with any new requirements adopted by the
PCAOB requiring mandatory audit firm rotation or a supplement to
the auditor's report in which the auditor would be required to
provide additional information about the audit and the financial
statements of the issuer, (iii) provide certain disclosure regarding
executive compensation required of larger public companies, or
(iv) hold nonbinding advisory votes on executive compensation.
We will remain an emerging growth company for up to five years,
although we will lose that status sooner if we have more than
$1.235 billion of revenues in a fiscal year, have more than $700
million in market value of our Ordinary Shares held by
non-affiliates, or issue more than $1.0 billion of non-convertible
debt over a three-year period.
To the extent that we rely on any of the exemptions available
to emerging growth companies, you will receive less information
about our executive compensation and internal control over
financial reporting than issuers that are not emerging growth
companies. If some investors find our Ordinary Shares to be
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.
If we fail to establish and maintain proper internal financial reporting
controls, our ability to produce accurate financial
statements or comply with applicable regulations could be impaired.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required
to file a report by our management on our internal control
over financial reporting, including an attention report on internal
control over financial reporting issued by our independent
registered public accounting firm. However, while we remain an
emerging growth company, we will not be required to include an
attestation report on internal control over financial reporting issued
by our independent registered public accounting firm. The
presence of material weakness in internal control over financial
reporting could result in financial statement errors, which, in turn,
could lead to error our financial reports and/or delays in our financial
reporting, which could require us to restate our operating
results. We might not identify one or more material weaknesses in
our internal controls in connection with evaluating our
compliance with Section 404 of the Sarbanes-Oxley Act. In order to
maintain and improve the effectiveness of our disclosure
controls and procedures and internal controls over financial reporting.
We will need to expend significant resources and provide
significant management oversight. Implementing any appropriate
changes to our internal controls may require specific compliance
training of our directors and employees, entail substantial costs in
order to modify our existing accounting systems, take a
significant period of time to complete and divert management's
attention from other business concerns. These changes may not,
however, be effective in maintaining the adequacy of our internal control.
If we are unable to conclude that we have effective internal controls over
financial reporting, investors may lose confidence in our
operating results, the price of the Ordinary Shares could decline and we
may be subject to litigation or regulatory enforcement
actions. In addition, if we are unable to meet the requirements of Section
404 of the Sarbanes-Oxley Act, the Ordinary Shares may
not be able to remain listed on the exchange.
Nasdaq may apply additional and more stringent criteria for our initial
and continued listing because we plan to have a
small public offering and insiders will hold a large portion of the
company's listed securities.
Nasdaq Listing Rule 5101 provides Nasdaq with broad discretionary
authority over the initial and continued listing of securities in
Nasdaq and Nasdaq may use such discretion to deny initial listing,
apply additional or more stringent criteria for the initial or
continued listing of particular securities, or suspend or delist particular
securities based on any event, condition, or circumstance
that exists or occurs that makes initial or continued listing of the
securities on Nasdaq inadvisable or unwarranted in the opinion of
Nasdaq, even though the securities meet all enumerated criteria for
initial or continued listing on Nasdaq. In addition, Nasdaq has
used its discretion to deny initial or continued listing or to apply
additional and more stringent criteria in the instances, including
but not limited to: (i) where the company engaged an auditor that
has not been subject to an inspection by the Public Company
Accounting Oversight Board ('PCAOB'), an auditor that PCAOB cannot
inspect, or an auditor that has not demonstrated
sufficient resources, geographic reach, or experience to adequately
perform the company's audit; (ii) where the company planned
a small public offering, which would result in insiders holding a large
portion of the company's listed securities. Nasdaq was
concerned that the offering size was insufficient to establish the
company's initial valuation, and there would not be sufficient
liquidity to support a public market for the company; and (iii) where
the company did not demonstrate sufficient nexus to the U.S.
capital market, including having no U.S. shareholders, operations, or
members of the board of directors or management. Our
public offering will be relatively small, and our company's insiders will
hold a large portion of the company's listed securities.
Nasdaq might apply the additional and more stringent criteria for our
initial and continued listing, which might cause delay or
even denial of our listing application.
If we cannot satisfy, or continue to satisfy, the initial listing
requirements and other rules of Nasdaq Capital Market,
although we exempt from certain corporate governance
standards applicable to US issuers as a Foreign Private Issuer, our
securities may not be listed or may be delisted, which could negatively
impact the price of our securities and your ability to
sell them.
We will seek to have our securities approved for listing on the Nasdaq
Global Market upon consummation of this offering. We
cannot assure you that we will be able to meet those initial listing
requirements at that time. Even if our securities are listed on the
Nasdaq Capital Market, we cannot assure you that our securities will
continue to be listed on the Nasdaq Capital Market.
In addition, following this offering, in order to maintain our listing on
the Nasdaq Capital Market, we will be required to comply
with certain rules of Nasdaq Capital Market, including those regarding
minimum stockholders' equity, minimum share price, and
certain corporate governance requirements. Even if we initially meet
the listing requirements and other applicable rules of the
Nasdaq Capital Market, we may not be able to continue to satisfy
these requirements and applicable rules. If we are unable to
satisfy the Nasdaq Capital Market criteria for maintaining our listing,
our securities could be subject to delisting.
If the Nasdaq Capital Market does not list our securities or
subsequently delists our securities from trading, we could face
significant consequences, including:
limited availability for market quotations for our securities;
reduced liquidity with respect to our securities;
a determination that our Ordinary Share is a 'penny stock,' which
will require brokers trading in our Ordinary Share to
adhere to more stringent rules and possibly result in a reduced level
of trading activity in the secondary trading market for our
Ordinary Share;
limited amount of news and analyst coverage; and
a decreased ability to issue additional securities or obtain additional
financing in the future.
The market price of our ordinary shares may be volatile or may decline
regardless of our operating performance, and you
may not be able to resell your shares at or above the public offering price.
The public offering price for our ordinary shares will be determined
through negotiations between the underwriters and us and
may vary from the market price of our ordinary shares following our
public offering. If you purchase our ordinary shares in our
public offering, you may not be able to resell those shares at or
above the public offering price. We cannot assure you that the
public offering price of our ordinary shares, or the market price
following our public offering, will equal or exceed prices in
privately negotiated transactions of our shares that have occurred
from time to time prior to our public offering. The market price
of our ordinary shares may fluctuate significantly in response to
numerous factors, many of which are beyond our control,
including:
actual or anticipated fluctuations in our revenue and other operating
results; the financial projections we may provide to the public, any
changes in these projections or our failure to meet these
projections;
actions of securities analysts who initiate or maintain coverage of
us, changes in financial estimates by any securities
analysts who follow our company, or our failure to meet these estimates
or the expectations of investors;
announcements by us or our competitors of significant services or
features, technical innovations, acquisitions, strategic
relationships, joint ventures, or capital commitments;
price and volume fluctuations in the overall stock market, including
as a result of trends in the economy as a whole;
lawsuits threatened or filed against us; and
other events or factors, including those resulting from war or incidents
of terrorism, or responses to these events.
In addition, the stock markets have experienced extreme price and
volume fluctuations that have affected and continue to
affect the market prices of equity securities of many companies. Stock
prices of many companies have fluctuated in a manner
unrelated or disproportionate to the operating performance of those
companies. In the past, stockholders have filed securities class
action litigation following periods of market volatility. In the event that
we were to become involved in securities litigation, it
could subject us to substantial costs, divert resources and the attention
of management from our business, and adversely affect our
business.
We have broad discretion in the use of the net proceeds from our public
offering and may not use them effectively.
To the extent (i) we raise more money than required for the purposes
explained in the section titled 'Use of Proceeds' or (ii) we
determine that the proposed uses set forth in that section are no longer
in the best interests of our Company, we cannot specify
with any certainty the particular uses of such net proceeds that we will
receive from our public offering. Our management will
have broad discretion in the application of such net proceeds, including
working capital, possible acquisitions, and other general
corporate purposes, and we may spend or invest these proceeds in a
way with which our stockholders disagree. The failure by our
management to apply these funds effectively could harm our business
and financial condition. Pending their use, we may invest
the net proceeds from our public offering in a manner that does not
produce income or that loses value. As of the date of this
Prospectus, Management has not determined the types of businesses
that the Company will target or the terms of any potential
acquisition.
We will incur additional costs as a result of becoming a public company,
which could negatively impact our net income and
liquidity.
Upon completion of this offering, we will become a public company in
the United States. As a public company, we will incur
significant legal, accounting and other expenses that we did not incur
as a private company. In addition, Sarbanes-Oxley and rules
and regulations implemented by the SEC and the Nasdaq Global
Market require significantly heightened corporate governance
practices for public companies. We expect that these rules and
regulations will increase our legal, accounting and financial
compliance costs and will make many corporate activities more
time-consuming and costly.
We do not expect to incur materially greater costs as a result of
becoming a public company than those incurred by similarly sized
U.S. public companies. In the event that we fail to comply with
these rules and regulations, we could become the subject of a
governmental enforcement action, investors may lose confidence
in us and the market price of our ordinary shares could decline.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. In some cases, you can
identify forward-looking statements by the words 'may,' 'might,'
'will,' 'could,' 'would,' 'should,' 'expect,' 'intend,' 'plan,'
'objective,' 'anticipate,' 'believe,' 'estimate,' 'predict,' 'potential,'
'continue' and 'ongoing,' or the negative of these terms,
or other comparable terminology intended to identify statements
about the future. These statements involve known and unknown
risks, uncertainties and other important factors that may cause our
actual results, levels of activity, performance or achievements
to be materially different from the information expressed or implied
by these forward-looking statements. The forward-looking
statements and opinions contained in this prospectus are based upon
information available to us as of the date of this prospectus
and, while we believe such information forms a reasonable basis for
such statements, such information may be limited or
incomplete, and our statements should not be read to indicate that
we have conducted an exhaustive inquiry into, or review of, all
potentially available relevant information. Forward-looking
statements include statements about:
our future financial performance, including our expectations
regarding our revenue, cost of revenue, operating expenses,
including capital expenditures related to asset-intensive offerings,
our ability to determine reserves and our ability to achieve and
maintain future profitability;
our ability to develop and market new products;
the continued market acceptance of our products;
the sufficiency of our cash, cash equivalents and investments to
meet our liquidity needs;
our ability to manage operations-related risk;
our expectations and management of future growth;
our expectations concerning relationships with third parties;
the impact of COVID-19 on the Company;
our ability to maintain, protect and enhance our intellectual property;
our ability to successfully acquire and integrate companies and assets;
the increased expenses associated with being a public company;
exposure to product liability and defect claims;
protection of our intellectual property rights;
changes in the laws that affect our operations
inflation and fluctuations in foreign currency exchange rates;
our ability to obtain all necessary government
certifications, approvals, and/or licenses to conduct our business;
continued development of a public trading market for our securities;
the cost of complying with current and future governmental regulations
and the impact of any changes in the regulations on
our operations;
managing our growth effectively;
fluctuations in operating results;
dependence on our senior management and key employees; and
other factors set forth under 'Risk Factors.'
We caution you that the foregoing list may not contain all of the
forward-looking statements made in this prospectus.
You should not rely upon forward-looking statements as predictions
of future events. We have based the forward-looking
statements contained in this prospectus primarily on our current
expectations and projections about future events and trends that
we believe may affect our business, financial condition, results of
operations and prospects. The outcome of the events described
in these forward-looking statements is subject to risks, uncertainties
and other factors, including those described in the section
titled 'Risk Factors' and elsewhere in this prospectus. Moreover, we
operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time
and it is not possible for us to predict all risks and
uncertainties that could have an impact on the forward-looking
statements contained in this prospectus. We cannot assure you that
the results, events and circumstances reflected in the forward-looking
statements will be achieved or occur, and actual results,
events or circumstances could differ materially from those described
in the forward-looking statements.
Neither we nor any other person assumes responsibility for the
accuracy and completeness of any of these forward-looking
statements. Moreover, the forward-looking statements made in
this prospectus relate only to events as of the date on which the
statements are made. We undertake no obligation to update any
forward-looking statements made in this prospectus to reflect
events or circumstances after the date of this prospectus or to reflect
new information or the occurrence of unanticipated events,
except as required by law. We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking
statements and you should not place undue reliance on our
forward-looking statements. Our forward-looking statements do not
reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make.
In addition, statements that 'we believe' and similar statements reflect
our beliefs and opinions on the relevant subject. These
statements are based upon information available to us as of the date
of this prospectus, and while we believe such information
forms a reasonable basis for such statements, such information may
be limited or incomplete, and our statements should not be
read to indicate that we have conducted an exhaustive inquiry into,
or review of, all potentially available relevant information.
These statements are inherently uncertain and investors are cautioned
not to unduly rely upon these statements.
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of
approximately $ million after deducting estimated
underwriting discounts and commissions and the estimated offering
expenses payable by us and based upon an assumed initial
offering price of $5.00 per ordinary share (excluding any exercise of
the underwriters' over-allotment option).
A $ increase (decrease) in the assumed initial public offering price of
$5.00 per share would increase (decrease) the net
proceeds to us from this offering by approximately $ million, after
deducting the estimated underwriting discounts and
commissions and estimated aggregate offering expenses payable by
us and assuming no change to the number of ordinary share
offered by us as set forth on the cover page of this prospectus, provided,
however, that in no case would we decrease the initial
public offering price to less than $4.00 per share.
Description of Use
Estimated Amount of
Net Proceeds (US $)
Percentage
Brand promotion and marketing
Recruitment of talented personnel
Expansion of new offices and servicing scope
Enhancement of IT system
General working capital
The foregoing represents our current intentions based upon our
present plans and business conditions to use and allocate the net
proceeds of this offering. Our management, however, will have
some flexibility and discretion to apply the net proceeds of this
offering. If an unforeseen event occurs or business conditions
change, we may use the proceeds of this offering differently than as
described in this prospectus. To the extent that the net proceeds we
receive from this offering are not imminently used for the
above purposes, we intend to invest in short-term, interest-bearing
bank deposits or debt instruments.
The net proceeds from this offering must be remitted to China before
we will be able to use the funds to grow our business. The
procedure to remit funds may take several months after completion
of this offering, and we will be unable to use the offering
proceeds in China until remittance is completed. See 'Risk Factors' for
further information.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common
stock, and we do not currently intend to pay any cash
dividends on our common stock in the foreseeable future.
We currently intend to retain all available funds and any future earnings
to support operations and to finance the growth and
development of our business.
Any future determination to pay dividends will be made at the discretion
of our board of directors, subject to applicable laws, and
will depend upon, among other factors, our results of operations,
financial condition, contractual restrictions, and capital
requirements.
From time to time, we may also enter into other loan or credit agreements
or similar borrowing arrangements that may further
restrict our ability to declare or pay dividends on our common stock.
Our board of directors will have sole discretion in making
any future determination to pay dividends, subject to applicable laws,
taking into account, among other factors, our results of
operations, financial condition, contractual restrictions, and capital
requirements.
CORPORATE STRUCTURE
CORPORATE STRUCTURE
BUSINESS
Our Mission
Helping Chinese companies enter the capital market to go public at
home and abroad.
Overview of Our Company
First ShenZhen Securities is a professional capital operation platform
jointly owned by Qianhai Guochuang and Qianhai Venture.
It is a one-stop service platform to help Chinese enterprises from
entering the capital market to listing at home and abroad, and a
one-stop whole process to counsel and incubate enterprises to listing.
First ShenZhen Securities has a team of well-known industry experts
with an average of 15 years of experience, integrating
high-quality resources in the financial industry, and has helped more
than 3,000 enterprises to list and raise capital at home and
abroad.
The Industry
There are more than 80 million private enterprises in China, which solve
80% of urban employment, accomplish 70% of
innovation, create 60% of GDP and contribute 50% of tax revenue.
At present, Chinese SMEs have the problem of difficulty in financing.
Among various corporate financing methods, there are high
costs for private lending, high threshold requirements for bank
financing, and high thresholds, high fees and long lead times in
China's domestic capital markets.
Our Solution
We provide listing, full consultation and counseling, financing and
investment, domestic and international listing, investment and
M&A services for Chinese enterprises to solve the problems in
their development.
Our Services
I. Domestic and international listing: domestic main board, small
and medium-sized board, science and technology innovation
board, gem board, North Exchange listing, Hong Kong listing,
U.S. listing, U.K. listing, Australian listing, etc.
II. Enterprise listing: New Third Board listing, U.S. OTC, New Fourth
Board listing, Shanghai Stock Exchange listing, Hong
Kong Stock Exchange listing, Qianhai New Fourth Board listing,
various provincial equity trading centers listing, etc.
III. Full consulting and counseling: business plan, enterprise valuation,
strategic positioning, brand, business model, top-level
design, equity structure, equity incentive, listing path planning, etc.
IV. Financing and investment: equity financing, debt financing, industry
chain financing, investment financing, venture capital
docking, etc.
V. Investment and M&A: equity investment, M&A
Our Core Competencies
I. The original industry chain financing can help Chinese small and
medium-sized enterprises to finance the advantages of the
capital
II. Professional team
III. Core listing counseling team resources all over China
IV. Our founder, Gang Li, has been engaged in capital operation
industry for 10 years, and has unique experience in enterprise
industry chain financing and listing.
V. Always put the service for enterprises in the first place in life,
always put the creation of value for enterprises in the first place
in life.
Our Competitive Strengths
I. Market development and promotion advantages.
II. Professional team and core listing counseling team resources
advantage throughout China.
III. The advantage of the original industry chain financing, which
can help Chinese SMEs to finance.
IV. The advantage of long time experience in coaching enterprises.
Our Challenges
I. The number of competitors has increased.
II. Team personnel are constrained by funds, resulting in insufficient
manpower.
III. The industry price is becoming more and more transparent.
Our Corporate Structure
Our Strategy
I. Provide Chinese enterprises with listing, full consulting and combing
counseling, financing and investment, domestic and
foreign listing services, and solve the problems in the development of
enterprises. We hope to really help small and medium-sized
enterprises, can land, can see results, help enterprises to improve
their core competitiveness, cultivate internal strength, enhance
the value, long-term accompanying to domestic and foreign listings.
II. M&A of China's high-quality assets, the combination of industry
and finance, to do 4-8 listed companies
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REGULATIONS
Laws and Regulations Relating to Other Business Areas
Foreign Exchange
Pursuant to the Administrative Regulations of the PRC on Foreign
Exchange promulgated by the State Council on January 29,
1996 and amended on August 1, 2008 with effect from August
5, 2008, and various regulations issued by SAFE, and other PRC
regulatory agencies, foreign currency could be exchanged or paid
through two different accounts, namely current account and
capital account. Payment of current account items, including
commodity, trade and service-related foreign exchange transactions
and other current payment, may be made by conversion between
RMB and foreign currencies without approval of SAFE, but are
subject to procedural requirements including presenting relevant
documentary evidence of such transactions. Capital account
items, such as direct equity investment, loans and repatriation
of investment, require the prior approval from or registration with
SAFE or its local branch for conversion between RMB and the
foreign currency, and remittance of the foreign currency outside
the PRC.
Pursuant to the Notice on Administration of Foreign Exchange
Involved in Offshore Investment, Financing and Round-Trip
Investment Conducted by Domestic Residents Through Special
Purpose Vehicles, which was promulgated by SAFE and went into
effect on July 4, 2014, prior to making capital contribution in a
special purpose vehicle by a PRC resident using its legitimate
assets or interests in the PRC or overseas, the PRC resident shall
apply to the foreign exchange bureau for completion of foreign
exchange registration formalities for overseas investments. A
'domestic entity' referred to in this notice shall mean enterprise and
institutional legal persons and any other economic organizations
established in the PRC pursuant to the law; a 'PRC resident
individual' shall mean a PRC citizen holding a PRC resident identity
document, military personnel identity document or armed
police personnel identity document, and any foreign individual who
does not hold a PRC identity document but normally resides
in the PRC due to economic reasons.
Pursuant to the Notice on Further Simplification and Improvement
of Foreign Exchange Administration Policies for Direct
Investment, promulgated by SAFE on February 13, 2015 and effective
June 1, 2015, two administrative approval matters,
including foreign exchange registration approval under domestic
direct investment and foreign exchange registration approval
under overseas direct investment, shall be reviewed and processed
directly by banks. SAFE and its local bureaus shall implement
indirect supervision through the foreign exchange registration with
banks for direct investment.
Pursuant to the Notice of SAFE on Reforming the Mode of
Management of Settlement of Foreign Exchange Capital of
Foreign-Funded Investment Enterprises promulgated on March
30, 2015 and effective June 1, 2015, and the Notice of SAFE on
Reforming and Regulating the Policies for Administration of Foreign
Exchange Settlement under the Capital Account
promulgated on and effective June 9, 2016, the system of voluntary
foreign exchange settlement is implemented for the foreign
exchange earnings of foreign exchange capital of foreign-invested
enterprises. Foreign exchange capital in a foreign- invested
enterprise capital account, for which the monetary contribution has
been confirmed by SAFE (or for which the monetary
contribution has been registered for account entry), may
be settled at a bank as required by the actual management needs of the
enterprise. The voluntary settlement ratio of foreign-invested enterprise
foreign exchange capital projects has been temporarily set
at 100%. SAFE may make adjustments to the said ratio at appropriate
times based on the status of the international balance of
payments. In addition, foreign exchange earnings under capital projects
and the RMB funds obtained from the exchange
settlements thereof shall not be used by foreign-invested enterprises
for the following purposes: (1) direct or indirect payments of
expenditures exceeding its business scope or those being prohibited
by the laws and regulations of the PRC; (2) direct or indirect
uses in securities investments or investments other than
capital-protected banking products (except as otherwise expressly
provided); (3) issuance of loans to non-affiliated enterprises
(excluding those that are expressly permitted within their business
scope); and (4) construction or purchase of real estate not
for personal use (except for real estate enterprises).
Foreign Investment
In March 2019, the Standing Committee of the National
People's Congress of the PRC passed the Foreign
Investment Law of the
People's Republic of China, or the Foreign Investment Law.
Among other things, the Foreign Investment Law defines the 'foreign
investment' as the investment activities in China conducted by
foreign individuals, enterprises and other organizations, or the
Foreign Investors, in a direct or indirect manner. The PRC governmental
authorities will administrate foreign investment by
applying the principal of pre-entry national treatment together with a
negative list, to be specific, the Foreign Investors are
prohibited from making any investments in the fields cataloged into
prohibited industries for foreign investment based on the
negative list, while they are allowed to make investments in the restricted
industries provided that all the requirements and
conditions as set forth in the negative list have been satisfied; when the
Foreign Investors make investments in the fields other
than those included in the negative list, the national treatment principle
shall apply.
Pursuant to Provisions for Guiding the Foreign Investment Direction,
projects with foreign investment fall into 4 categories,
namely encouraged, permitted, restricted and prohibited. Projects
with foreign investment that are encouraged, restricted or
prohibited shall be listed in the Foreign Investment Catalog. Projects
with foreign investment not listed as encouraged, restricted
or prohibited projects are permitted projects.
Pursuant to the Special Administrative Measures for Access of Foreign
Investment (2021 Edition), or the 2021 Edition Negative
list, issued by the MOFCOM and the NDRC on December 27, 2021,
which came into effect on January 1, 2022. Our business
does not fall into the negative list and is permitted for foreign investment.
The Foreign Investment Law replaced the Law of the People's Republic
of China on Wholly Foreign-owned Enterprises. It stipulates that the PRC
implements a system of pre-establishment national treatment plus
negative list for the administration of
foreign investment. Foreign investors are not allowed to invest in
fields or sectors prohibited in the market access negative list for
foreign investment. Foreign investors that intend to invest in the
fields subject to access restrictions stipulated in the market access
negative list for foreign investment shall be required to satisfy the
conditions stipulated in such negative list. The PRC policies
supporting enterprise development are equally applicable to
foreign-invested enterprises. The PRC does not impose expropriation
on foreign investment. Under special circumstances, if it requires
imposing expropriation on foreign investment due to the need of
public interest, expropriation shall be imposed according to legal
procedures, and the foreign-invested enterprises concerned shall
receive fair and reasonable compensation. Foreign-invested enterprises
can raise funds through public issuance of stocks,
corporate bonds and other securities in accordance with the law.
Overall, The Foreign Investment Law establishes the clear
principle of applying national treatment to FIEs except those engaged
in industries on the 2021 Negative List. Since our current
and planned business is not on the 2021 Negative List, to the best of
our knowledge, it will not create any material adverse effect
to our Company's business.
Outbound Investment
Pursuant to the Measures for Administration of Overseas Investment
Management promulgated by the MOFCOM on September 6,
2014 and effective October 6, 2014 and the Measures for Administration
of Overseas Investment of Enterprises promulgated by
the NDRC on December 26, 2017 and effective March 1, 2018, a
domestic institution is required to undergo relevant procedures
for offshore investment prior to its overseas direct investment and
obtain relevant record-filing, approval, certificate or permit. If
an enterprise fails to complete the aforesaid procedures, it will be
required by the competent authorities to suspend or cease the
implementation of the project.
Laws and Regulations Relating to Taxation
Enterprise Income Tax
Pursuant to the EIT Law promulgated on March 16, 2007, amended
on and effective December 29, 2018, and the Regulation on
Implementation of the Enterprise Income Tax Law of the PRC, or
the EIT Implementation Rules, issued on December 6, 2007 and
effective April 23, 2019, EIT shall be applicable at a uniform rate of
25% to all resident or non-resident enterprises. EIT shall be
payable by a resident enterprise for income sourced within or outside
the PRC. EIT shall be payable by a non-resident enterprise,
for income sourced within the PRC by its institutions or premises
established in the PRC, and for income sourced outside the PRC
for which the institutions or premises established in the PRC have
a de facto relationship. Where the non-resident enterprise has
no institutions or premises established in the PRC or has income
bearing no de facto relationship with the institution or premises
established, EIT shall be payable by the non-resident enterprise only
for income sourced within the PRC.
Pursuant to the Administrative Measures on the Accreditation of
High and New Technology Enterprises high and new technology
enterprises accredited pursuant to these measures may make
declarations under and benefit from tax concession policies in
accordance with relevant regulations including the EIT Law and the
EIT Implementation Rules, the Law of the PRC on
Administration of Levying and Collection of Taxes and the Regulation
of Implementation of the Law of the PRC on
Administration of Levying and Collection of Taxes.
Pursuant to the Announcement on the Enterprise Income Tax Policies
for Promoting the High-quality Development of the
Integrated Circuit Industry and the Software Industry promulgated by
the Ministry of Finance, the State Taxation Administration,
the NDRC and the MIIT on December 12, 2020 and effective from
January 1, 2020, and the Announcement No. 9 [2021] of the
MIIT, the NDRC, the Ministry of Finance and the State Taxation
Administration, upon certification, an integrated circuit design,
equipment, materials, packaging, or testing enterprise or a software
enterprise shall be exempt from the EIT from the first to the
second year from the year when such enterprise makes profits, and
be subject to the EIT levied at half of the 25% statutory tax rate
from the third to the fifth year.
Tax on Dividends
Pursuant to the EIT Law and the EIT Implementation Rules, except as
otherwise provided by relevant tax treaties with the PRC
government, dividends paid by foreign-invested investment enterprises
to foreign investors which are non-resident enterprises and
which have not established or operated premises in the PRC, or which
have established or operated premises but where their
income has no de facto relationship with such establishment or
operation of premises shall be subject to a withholding tax of 10%.
Pursuant to the Arrangement between Mainland China and the Hong
Kong Special Administrative Region for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income entered into between the PRC
government and the Hong Kong Special Administrative Region, where
the beneficial owner is a company directly holding at least
25% of the equity interest of the company paying the dividends, the
tax charged shall not exceed 5% of the distributed dividends.
In any other case, the tax charged shall not exceed 10% of the
distributed dividends.
Pursuant to the Announcement on Issues Relating to 'Beneficial
Owner' in Tax Treaties promulgated by the SAT on February 3,
2018 and came effective April 1, 2018, a 'beneficial owner' shall
mean a person who has ownership and control over the income,
and the rights and property from which the income is derived.
Upon the determination of the 'beneficial owner' status of a
resident of the treaty counterparty who needs to enjoy the tax
treaty benefits (hereinafter referred to as the 'applicant'), a
comprehensive analysis shall be conducted taking into account
the actual conditions of the specific case. In general, the following
factors are unfavorable for the determination of 'beneficial owner'
status of an applicant: (1) the applicant is obligated to pay 50%
or more of the income, within 12 months from its receipt, to a
resident of a third country (region), where the term 'obligated'
includes agreed obligations and de facto payment for which there
is no agreed obligation; (2) the business activities undertaken by
the applicant do not constitute substantive business activities, where
substantive business activities shall include manufacturing,
distribution and management activities of a substantive nature, the
determination of whether the business activities undertaken by
the applicant are of a substantive nature shall be based on the
functions actually performed and the risks borne, and investment
holding management activities of a substantive nature undertaken
by the applicant may constitute substantive business activities
(where the applicant undertakes investment holding management
activities which do not constitute substantive business activities,
and simultaneously undertakes other business activities, if such other
business activities are not sufficiently significant, these shall
not constitute substantive business activities); (3) the treaty counterparty
country (region) does not levy, or exempts tax on the
relevant income, or levies tax but with a very low actual tax rate;
(4) in addition to the loan contract based on which interest is
derived and paid, there exists other loans or deposit contracts
between the creditor and the third party, of which factors such as the
amount, interest rate and date of execution are similar; and
(5) in addition to the transfer contract for rights to use such as
copyright, patent, technology, from which the royalties are derived
and paid, there exists other transfer contracts for rights to use
or ownership in relation to copyright, patent, technology between
the applicant and a third party.
Pursuant to the Notice of the SAT on the Relevant Issues Concerning
the Implementation of Dividend Clauses in Tax Treaties
promulgated by the SAT and effective February 20, 2009, all of the
following conditions shall be satisfied before the concession
tax rate in a tax treaty can be enjoyed: (1) the tax resident obtaining
dividends shall be restricted to the company as provided in the
tax treaty; (2) among all the ownership equity interests and voting
shares of the PRC resident company, the proportion directly
owned by the tax resident complies with the prescribed proportions
under the tax treaty; and (3) the proportion of the equity
interests of the PRC resident company directly owned by such tax
resident complies with, at all times within the twelve months
before obtaining the dividends, the proportions specified in the tax
treaty.
Pursuant to the Announcement of the State Taxation Administration on
Issuing the Administrative Measures for Entitlement to
Treaty Benefits for Non-resident Taxpayers promulgated by the SAT on
October 14, 2019 and effective January 1, 2020,
entitlement to treaty benefits for non-resident taxpayers shall be handled
by means of 'self-judgment of eligibility, declaration of
entitlement, and retention of relevant materials for future reference'.
Where non-resident taxpayers judge by themselves that they
meet the conditions for entitlement to treaty benefits, they may obtain
such entitlement themselves at the time of making tax
declarations, or at the time of making withholding declarations via with
holding agents. At the same time, they shall collect, gather
and retain relevant materials for future reference in accordance with the
provisions of these measures, and shall accept the
follow-up administration of tax authorities. Relevant information proving
the status of 'beneficial owner' shall be retained in the
case of entitlement to dividends, interest and treaty benefits of royalty
clauses.
Labor Contracts
The Labor Contract Law of the PRC, which was promulgated on June
29, 2007 and subsequently amended on December 28, 2012
and effective July 1, 2013, serves as the primary law regulating the
labor contract relationship between companies and employees.
Pursuant to this law, an employment relationship is established
between the employer and the worker since the day of employment.
The employer shall execute a written employment contract with the
worker. Furthermore, to safeguard the legal rights and
interests of workers, the way to calculate compensation for the
probation period and for damages shall be subject to the provisions
of the law.
Social Security and Housing Provident Fund
Pursuant to the Interim Regulations on Levying Social Insurance
Premiums promulgated on January 22, 1999 and amended on
March 24, 2019, Decisions of the State Council on Modifying the
Basic Endowment Insurance System for Enterprise Employees
promulgated on December 3, 2005, Decision on Establishment of
Basic Medical System for Urban Employee issued by State
Council with effect from December 14, 1998, the Regulations on
Unemployment Insurance effective from January 22, 1999,
Regulations on Work-Related Injury Insurance promulgated on
April 27, 2003 with effect from January 1, 2004, and as amended
on December 20, 2010, and the Interim Measures concerning the
Maternity Insurance for Enterprise Employees promulgated on
December 14, 1994 with effect from January 1, 1995, employers
are required to register with the competent social insurance
authorities and provide their employees with welfare schemes
covering pension insurance, unemployment insurance, maternity
insurance, work-related injury insurance and medical insurance.
Pursuant to the Social Insurance Law of the PRC, which became
effective on July 1, 2011 with last amendment on December 29,
2018, all employees are required to participate in basic pension
insurance, basic medical insurance schemes and unemployment
insurance, which must be contributed by both the employers and
the employees. All employees are required to participate in
work-related injury insurance and maternity insurance schemes,
which must be contributed by the employers. Employers are
required to complete registrations with local social insurance
authorities. Moreover, the employers must timely make all social
insurance contributions. Except for mandatory exceptions such
as force majeure, social insurance premiums may not be paid late,
reduced, or be exempted. Where an employer fails to make social
insurance contributions in full and on time, the social insurance
contribution collection agencies shall order it to make all or outstanding
contributions within a specified period and impose a late
payment fee at the rate of 0.05% per day from the date on which the
contribution becomes due. If such employer fails to make the
overdue contributions within such time limit, the relevant administrative
department may impose a fine equivalent to 1-3 times
the overdue amount.
Pursuant to the Administrative Regulations on the Housing Provident
Fund effective from April 3, 1999, amended on March 24,
2002 and March 24, 2019, enterprises are required to register with the
competent administrative centers of housing provident fund
and open bank accounts for housing provident funds for their employees.
Employers are also required to timely pay all housing
fund contributions for their employees. Where an employer fails to
submit and deposit registration of housing provident fund or
fails to go through the formalities of opening housing provident fund
accounts for its employees, the housing provident fund
management center shall order it to go through the formalities within
a prescribed time limit. Failing to do so at the expiration of
the time limit will subject the employer to a fine of not less than
RMB10,000 and up to RMB50,000. When an employer fails to
pay housing provident fund due in full and in time, housing provident
fund center is entitled to order it to rectify, failing to do so
would result in enforcement exerted by the court.
Laws and Regulations Relating to Intellectual Property
Trademarks
Pursuant to the Trademark Law of the PRC promulgated on August 23,
1982, amended on April 23, 2019 and effective November
1, 2019 and the Regulation on Implementation of the Trademark Law of
the PRC amended on April 29, 2014 and effective May 1,
2014, the right to the exclusive use of a registered trademark is limited to
the approved trademark registration, and to goods for
which the use of the trademark has been approved. The period of validity
of registered trademarks lasts for ten years from the day
of registration approval. Absent the authorization by the owner of the
registered trademark, the use of the registered trademark or a
similar trademark on the same category of goods or similar goods
constitutes an infringement of the right to exclusive use of the
registered trademark. The infringer shall, in accordance with the relevant
regulations, cease the infringement activities, take
correction actions, and compensate for losses.
Patents
Pursuant to the Patent Law of the PRC promulgated on March 12, 1984,
last amended on October 17, 2020 and effective June 1,
2021, and the Rules for the Implementation of the Patent Law of the PRC
amended on January 9, 2010 and effective February 1,
2010, after the grant of the patent right for inventions and utility models,
except otherwise regulated under the Patent Law, no
entity or individual may, without the authorization of the patent owner,
exploit such patent, that is to manufacture, use, offer to sell,
sell or import the patented product, or use the patented process, and use,
offer to sell, sell or import products directly obtained
from such patented process, for production or business purposes. After the
patent right is granted for a design, no unit or
individual shall, without the authorization of the patent owner, exploit such
patent, that is to manufacture, offer to sell, sell, or
import any product containing such patented design for production or
business purposes. Where infringement has been established,
the infringer shall, in accordance with the relevant regulations, be ordered
to cease the infringement activities, take corrective
actions, and compensate for losses.
Regulations in relation to M&A Rules and Overseas Listing
Accordance with the M&A Rules which was promulgated by the
MOFCOM, the State-owned Assets Supervision and
Administration Commission of the State Council, the SAT, the
State Administration for Industry and Commerce, the CSRC and
SAFE and took effect on September 8, 2006 and was subsequently
amended on June 22, 2009 by the MOFCOM, a foreign
investor was required to obtain necessary approvals when (i) a foreign
investor acquires equity in a domestic non-foreign invested
enterprise thereby converting it into a foreign-invested enterprise, or
subscribes for new equity in a domestic enterprise via an
increase of registered capital thereby converting it into a foreign-invested
enterprise; or (ii) a foreign investor establishes a
foreign-invested enterprise which purchase and operates the assets of a
domestic enterprise, or which purchases the assets of a
domestic enterprise and injects those assets to establish a
foreign-invested
enterprise. According to article 11 of the M&A Rules,
where a domestic company or enterprise, or a domestic natural
person, through an overseas company established or controlled by
it/him, acquires a domestic company which is related to or
connected with it/him, approval from MOFCOM is required.
According to the Manual of Guidance on Administration for
Foreign Investment Access issued by MOFOM on December 18,
2008, the equity transfer by the Chinese shareholders to the foreign
shareholders in an established foreign-invested enterprise shall
not be governed by the provisions on mergers and acquisitions.
It does not matter whether the Chinese party and the foreign party
are related parties or whether the foreign party is an existing
shareholder or a new investor.
On July 6, 2021, the State Council and General Office of the
of the Communist Party China Central Committee issued Opinions
on Strictly Cracking Down Illegal Securities Activities in Accordance
with the Law, which steps-up scrutiny of overseas listings
by companies and calls for strengthening cooperation in cross-border
regulation, improving relevant laws and regulations on cyber
security, cross-border data transmission and confidential information
management, including the confidentiality requirement and
file management related to the issuance and listing of securities overseas,
enforcing the primary responsibility of the enterprises
for information security of China based overseas listed companies
and promoting the construction of relevant regulatory systems
to deal with the risks and incidents faced by Ch
ina-based overseas-listed companies. Furthermore, establishing and
improving a system of extraterritorial application of laws in the capital
market are also mentioned, judicial interpretations and supporting rules
for extraterritorial application provisions of the Securities Law shall
be formulated as soon as possible.
On December 24, 2021, the CSRC issued Administrative Measures of
the State Council on Overseas Issuance and Listing of
Securities by Domestic Enterprises (Draft for Comment), which would
explicitly require domestic enterprises seeking to list their
securities overseas to file with the CSRC and sets forth the general
provisions for these record-filing requirements as well as the
specific circumstances under which an offshore listing would be
prohibited, and also includes provisions relating to data security,
internal control system, share registration, fund raising, supervision o
f intermediaries, among others. On the same day, the CSRC
issued Administrative Measures for the Record-filing of Overseas
Issuance and Listing of Securities by Domestic Enterprises
(Draft for Comment), according to which domestic enterprises
would be required to file a record with the CSRC for direct or
indirect listing. The indirect overseas listing of a domestic
enterprise refers to the occurrence of any of the following
circumstances of an issuer: (1) the revenue, total profits, total
assets or net assets of a domestic enterprise in the most recent fiscal
year accounts for more than 50% of the corresponding figure
in the issuer's audited consolidated financial statements for the same
period; and (2) a majority of the senior officers in charge of
business operation and management of such entity are Chinese
citizens or have a habitual residence in China, and the main
place of business operation is located in China or carried out mainly in
China. In addition, the domestic enterprise must report to the
CSRC the following circumstances after completion of offering and
listing: (1) any change of control of the issuer; (2) any measures
adopted or required by the foreign securities' regulatory
authorities or relevant competent authorities in connection with
a foreign listing such as investigation and punishment ; and (3) the
voluntary or compulsory termination of listing of any foreign s
ecurities by a domestic enterprise. This offering and listing and
trading of our common stocks on the Nasdaq will be subject to
the requirements of filing with the CSRC when the foregoing
regulatory guidance is officially promulgated and became effective.
Regulations Relating to Dividend Distributions
According to the PRC Company Law and Foreign Investment Law,
each of our PRC subsidiaries, as a foreign invested enterprise,
or FIE, is required to draw 10% of its after-tax profits each year, if
any, to fund a common reserve, and which may stop drawing
its after-tax profits if the aggregate balance of the common reserve
has already accounted for over 50% of its registered capital.
These reserves are not distributable as cash dividends. Furthermore,
under the EIT Law, which became effective in January 2008,
the maximum tax rate for the withholding tax imposed on dividend
payments from PRC foreign invested companies to their
overseas investors that are not regarded as 'resident' for tax purposes
is 20%. The rate was reduced to 10% under the
Implementing Regulations for the EIT Law issued by the State Council.
However, a lower withholding tax rate might be applied if
there is a tax treaty between China and the jurisdiction of the foreign
holding companies, such as tax rate of 5% in the case of
Hong Kong companies that holds at least 25% of the equity interests
in the foreign-invested enterprise, and certain requirements
specified by PRC tax authorities are satisfied.
Pursuant to the Notice on Improving the Check of Authenticity and
Compliance to Further Promote Foreign Exchange Control
promulgated by SAFE in January 2017, which stipulates several
capital control measures with respect to outbound remittance of
profits from domestic entities to offshore entities, including the
following: (1) under the principle of genuine transaction, banks
shall check board resolutions regarding profit distributions, the
original version of tax filing records and audited financial
statements; and (2) domestic entities shall hold income to account
for previous years' losses before remitting the profits. Moreover,
domestic entities shall make detailed explanations of sources of
capital and utilization arrangements, and provide board
resolutions, contracts and other proof when completing the
registration procedures in connection with an outbound investment.
Regulations in relation to Cyber Security and Data Protection
On November 7, 2016, the Standing Committee of the National
People's Congress (the 'SCNPC') promulgated the Cyber
Security Law of the PRC, or Cyber Security Law, which became
effective on June 1, 2017. The Cyber Security Law requires
network operators to perform certain functions related to cyber
security protection and strengthen the network information
management. On June 10, 2021, the SCNPC promulgated the Data
Security Law of the PRC, or the PRC Data Security Law,
which became effective on September 1, 2021. Pursuant to the PRC
Data Security Law, data refers to any record of information in
electronic or any other form and data processing including the
collection, storage, use, processing, transmission, provision, and
public disclosure of data.
On December 28, 2021, the Cyberspace Administration of China, or
the CAC, jointly with other twelve PRC governmental
authorities, promulgated the Measures for Cybersecurity Review, or
Cybersecurity Measures, which became effective on February
15, 2022. the Cybersecurity Measures provides that, among other
things, (i) online platform operators possessing personal
information of more than one million users must apply to the
Cybersecurity Review Office for a cybersecurity review before
conducting any listing in a foreign country, (ii) the purchase of
network products and services of a critical information
infrastructure operator and data processing activities of an online
platform operator that affect or may affect national security shall
be subject to the cybersecurity review, and (iii) the relevant
governmental authorities in the PRC may initiate cyber security
review if such governmental authorities determine any network
products and services and data processing activities affect or may
affect national security.
On November 14, 2021, the CAC promulgated the Regulations
on the Administration of Cyber Data Security (Draft for
Comments), or Draft Cyber Data Regulations. According to the
Draft Cyber Data Regulations, data processors shall, in
accordance with relevant PRC regulations, apply for cybersecurity
review when carrying out the following activities: (i) the
merger, reorganization or separation of online platform operators
that have acquired a large number of data resources related to
national security, economic development or public interests, which
affects or may affect national security; (ii) processing personal
information of more than one million individuals and seeking a
listing in a foreign country; (iii) applying for listing in Hong Kong,
which affects or may affect national security; and (iv) other data
processing activities that affect or may affect national security. As
at the date of this prospectus, the Draft Cyber Data Regulations
are still in draft form and subject to change with substantially
uncertainty.
Regulations on Employee Share Option Plans
Pursuant to the Notice of Issues Related to the Foreign Exchange
Administration for Domestic Individuals Participating in Stock
Incentive Plan of Overseas Listed Company, or SAFE Circular 7,
issued by the SAFE in February 2012, employees, directors,
supervisors, and other senior management participating in any
share incentive plan of an overseas publicly-listed company who
are PRC citizens or non-PRC citizens residing in China for a
continuous period of not less than one year, subject to a few
exceptions, are required to register with SAFE through a domestic
qualified agent, which may be a PRC subsidiary of such
overseas listed company, and complete certain other procedures.
See -Regulations on Foreign Exchange.'
In addition, the SAT has issued certain circulars concerning
employee share options and restricted shares. Under these circulars,
employees working in the PRC who exercise share options or are
granted restricted shares will be subject to PRC individual
income tax. The PRC subsidiaries of an overseas listed company
are obligated to file documents related to employee share options
and restricted shares with relevant tax authorities and to withhold
individual income taxes of employees who exercise their share
option or purchase restricted shares. If the employees fail to pay or
the PRC subsidiaries fail to withhold income tax in accordance
with relevant laws and regulations, the PRC subsidiaries may face
sanctions imposed by the tax authorities or other PRC
governmental authorities.
MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding our directors
and executive officers as of the date of this prospectus.
Name
Age
Position/Title
Gang Li
41
Chief Executive Officer and Chairman of the Board of Directors
Liancheng
72
Vice Chairman of the Board and General Manager
Jialun Xie
44
President, General Manager and Director
Shufen liu
69
Chief Operating Officer and Director
Qian Yu
27
Chief Financial Officer and Director
Gang Li is our Chief Executive Officer and Chairman of the Board
of Directors and has served as our chairman since our
inception in 2016. Since 2016, Mr. Li has served as the Chairman
of Shenzhen FUJUE (SHENZHEN) CAPITAL Co., Ltd. During
his tenure, Mr. Li has served more than 3,00 companies in total,
enabling them to complete listing in markets including
SHENZHEN QIANHAI EQUITY EXCHANGE and SHANGHAI EQUITY
EXCHANGE. Since September 2022,, In June 2013,
Mr. Li received a master's degree in management from Tsinghua
University. We believe that Mr. Li should serve as a member of
our Board of Directors because he is experienced in founding,
leading and managing companies.
Liancheng Xie is our Vice Chairman of the Board and General
Manager since 2021. From June 2021 to November 2021, Mr. Xie
holds the position of General Manager of Tradie center Branch.
From 2019 to June 2021, he holds the position of General
Manager of huatong company From 2017 to October 2019, he
worked for huayu Capital and from October 2016 to October 2017,
he worked for huayu Capital. We believe that Mr. xie should serve
as a member of our Board of Directors because he is
experienced in managing companies.
Jialun Xie is our President, General Manager and Director since 2020.
Ms. Xie specializes in business management and has
excellent strategic planning, organization, coordination and
implementation skills, familiar with market insight, competitive
analysis, strategic management methods and frameworks. She is
responsible for multi-regional market development, channel
planning and management, and leads business teams of hundreds
of people. She received her bachelor's degree in business
administration from beijing Business University. And Master's degree
in Financial Management from the Chinese University of
Hong Kong
Shufen li is our Chief Operating Officer and Director since 2022.
Ms. Li worked as Director of Finance Department of huatong
company from March 2021 to January 2022. We believe that Ms li
should serve as a member of our Board of Directors because he
is experienced in financial accounting.
Qian Yu is our Chief Operating Officer and Director since 2022. Ms.
yu worked as Director of Finance Department of huatong
company from March 2021 to now. We believe that Ms yu should
serve as a member of our Board of Directors because she is
experienced in financial accounting.
Family Relationships
None of the directors, director appointees, or executive officers has
a family relationship as defined in Item 401 of Regulation S-K.
Board of Directors
Our board of directors will consist of five directors upon the SEC' s
declaration of effectiveness of our registration statement on
Form F-1 of which this prospectus is a part, three of whom are
independent directors within the meaning of Nasdaq Marketplace
Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act.
Subject to the Nasdaq rules and disqualification by the chairman
of the relevant board meeting, a director may vote in respect of
any contract or proposed contract or transaction notwithstanding
that he may be interested therein provided that the nature of the
interest of any director in such contract or transaction shall be
disclosed by him or her at or prior to its consideration and any vote
on that matter, and if he or she does so his or her vote shall be
counted and he may be counted in the quorum at any meeting of the
directors at which any such contract or proposed contract or
transaction is considered. Our board of directors may exercise all the
powers of the company to borrow money, mortgage or charge its
undertaking, property and uncalled capital, and issue debentures,
debenture stock and other securities whenever money is borrowed or
as security for any debt, liability or obligation of the
company or of any third party. None of our directors has a service
contract with us that provides for benefits upon termination of
service as a director.
Board Committees
Prior to the completion of this offering, we intend to establish
an audit committee, a compensation committee and a nomination
and corporate governance committee under our board of directors.
We intend to adopt a charter for each of the committees prior to
the completion of this offering. Each committee's members and
functions are described below.
Audit Committee
The audit committee oversees our accounting and financial
reporting processes and the audits of the financial statements of our
company. The audit committee is responsible for, among other things:
appointing or removing the independent auditor and pre-approving
all auditing and non-auditing services permitted to be
performed by the independent auditor;
setting clear hiring policies for employees or former employees of
the independent auditor;
reviewing with the independent auditor any audit problems or
difficulties and management's response;
reviewing and approving all related-party transactions;
discussing the annual audited financial statements with management
and the independent auditor;
discussing with management and the independent auditor major issues
regarding accounting principles and financial statement
presentations;
reviewing analyzes or other written communications prepared by
management or the independent auditor relating to significant
financial reporting issues and judgments made in connection with
the preparation of the financial statements;
? reviewing with management and the independent auditor the
effect of key transactions, related-party transactions and off-balance
sheet transactions and structures;
reviewing with management and the independent auditor the effect
of regulatory and accounting initiatives;
reviewing policies with respect to risk assessment and risk management;
reviewing our disclosure controls and procedures and internal control
over financial reporting;
reviewing reports from the independent auditor regarding all critical
accounting policies and practices to be used by our
company;
establishing procedures for the receipt, retention and treatment of
complaints we received regarding accounting, internal
accounting controls or auditing matters and the confidential,
anonymous submission by our employees of concerns regarding
questionable accounting or auditing matters;
periodically reviewing and reassessing the adequacy of our audit
committee charter;
evaluating the performance, responsibilities, budget and staffing
of our internal audit function and reviewing and approving the
internal audit plan; and
reporting regularly to the board of directors.
Compensation Committee
Our compensation committee assists the board in reviewing and
approving the compensation structure, including all forms of
compensation, relating to our executive officers. The compensation
committee is responsible for, among other things:
reviewing and approving, or recommending to the board for its
approval, the compensation of our executive officers;
reviewing and evaluating our executive compensation and benefits
policies generally;
in consultation with our chief executive officer, periodically reviewing
our management succession planning;
reporting to our board of directors periodically;
evaluating its own performance and reporting to our board of
directors on such evaluation;
periodically reviewing and assessing the adequacy of the compensation
committee charter and recommending any proposed
changes to our board of directors; and
selecting compensation consultant, legal counsel or other adviser
only after taking into consideration all factors relevant to
that person's independence from management.
Nomination and Corporate Governance Committee
The nomination and corporate governance committee
assists the board in selecting individuals qualified to
become our directors
and in determining the composition of the board and its
committees. The nomination and corporate governance committee is
responsible for, among other things:
identifying and recommending to the board of directors
qualified individuals for membership on the board of directors and its
committees;
evaluating, at least annually, its own performance and reporting
to the board of directors on such evaluation;
leading our board of directors in a self-evaluation to determine
whether it and its committees are functioning effectively;
reviewing the evaluations prepared by each board committee of
such committee's performance and considering any
recommendations for proposed changes to our board of directors;
reviewing and approving compensation (including equity-based
compensation) for our directors;
overseeing compliance with the corporate governance guidelines
and code of business conduct and ethics and reporting on
such compliance to the board of directors; and
reviewing and assessing periodically the adequacy of its charter
and recommending any proposed changes to the board of
directors for approval.
Corporate Governance
Our board of directors has adopted a code of business conducts
and ethics, which is applicable to all of our directors, officers,
employees and advisors. We will make our code of business
conducts and ethics publicly available on our website. In addition, our
board of directors has adopted a set of corporate governance
guidelines. The guidelines reflect certain guiding principles with
respect to our board's structure, procedures and committees.
The guidelines are not intended to change or interpret any law, or our
memorandum and articles of association, as amended from time
to time. The code of business conducts and ethics and corporate
governance guidelines all become effective upon completion of
this offering.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of
our executive officers for a specified time period providing that the
agreements are terminable for cause at any time. The terms of these
agreement are substantially similar to each other. A senior
executive officer may terminate his or her employment at any time
by 30-day prior written notice. We may terminate the executive
officer's employment for cause, at any time, without advance notice
or remuneration, for certain acts of the executive officer, such
as conviction or plea of guilty to a felony or any crime involving
moral turpitude, negligent or dishonest acts to our detriment, or
misconduct or a failure to perform agreed duties.
Each executive officer has agreed to hold in strict confidence and
not to use, except for the benefit of our company, any
proprietary information, technical data, trade secrets and know-how
of our company or the confidential or proprietary information
of any third party, including our subsidiaries and our clients, received
by our company. Each of these executive officers has also
agreed to be bound by noncompetition and non-solicitation
restrictions during the term of his or her employment and typically for
two years following the last date of employment.
We expect to enter into indemnification agreements with our
directors and executive officers, pursuant to which we will agree to
indemnify our directors and executive officers against certain
liabilities and expenses incurred by such persons in connection with
claims made by reason of their being such a director or officer.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of our
common stock (i) as of and (ii) immediately following this offering,
as adjusted to reflect the sale of shares of common stock by us, in
each case, by the following individuals or groups:
each of our directors;
each of our named executive officers;
all of our directors and executive officers as a group; and
each person, or group of affiliated persons, who is known by us
to beneficially own more than 5% of our common stock.
We have determined beneficial ownership in accordance with the
rules of the SEC. These rules generally attribute beneficial
ownership of securities to persons who possess sole or shared voting
power or investment power with respect to those securities,
or have the right to acquire such powers within 60 days. Under these
rules, more than one person may be deemed beneficial owner
of the same securities and a person may be deemed to be a beneficial
owner of securities as to which such person has no economic
interest. In addition, the rules include shares of common stock issuable
pursuant to the exercise of stock options or warrants that
are either immediately exercisable or exercisable on or before , 2023,
which is 60 days after , 2023. These shares are deemed
to be outstanding and beneficially owned by the person holding those
options or warrants for the purpose of computing the
percentage ownership of that person, but they are not treated as
outstanding for the purpose of computing the percentage
ownership of any other person. The information contained in the
following table is not necessarily indicative of beneficial
ownership for any other purpose, and the inclusion of any shares
in the table does not constitute an admission of beneficial
ownership of those shares. Unless otherwise indicated, the persons
or entities identified in this table have sole voting and
investment power with respect to all shares shown as beneficially
owned by them, subject to applicable community property laws.
Directors and Executive Officers:
Ordinary Shares Beneficially
Owned Prior to This Offering
Shares Beneficially Owned
After This Offering
Number %
Number %
Gang Li 8,500,000
85%
Liancheng Xie
700,000
7%
Jialun Xie
500,000
5%
Shufen li
300,000
3%
All executive officers, continuing directors and director
nominees as a group (4 persons)
10,000,000
100%
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have Ordinary
Shares outstanding assuming the underwriters do not exercise their
over-allotment option to purchase additional Ordinary Shares.
Of that amount, Ordinary Shares will be publicly held by investors
participating in this offering, and Ordinary Shares will be held by
our existing shareholders, some of whom may be our 'affiliates'
as that term is defined in Rule 144 under the Securities Act. As
defined in Rule 144, an 'affiliate' of an issuer is a person that
directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, the issuer.
Prior to this offering, there has been no public market for our
Ordinary Shares. While we intend to list the Ordinary Shares on the
Nasdaq Capital market, we cannot assure you that a regular trading
market will develop in our Ordinary Shares.
Future sales of substantial amounts of our Ordinary Shares in the
public markets after this offering, or the perception that such
sales may occur, could adversely affect market prices prevailing
from time to time. As described below, only a limited number of
our Ordinary Shares currently outstanding will be available for sale
immediately after this offering due to contractual and legal
restrictions on resale. Nevertheless, after these restrictions lapse,
future sales of substantial amounts of our ordinary share,
including ordinary share issued upon exercise of outstanding options,
in the public market in the United States, or the possibility
of such sales, could negatively affect the market price in the United
States of our ordinary share and our ability to raise equity
capital in the future.
All of the ordinary shares sold in the offering will be freely transferable
by persons other than our 'affiliates' in the United States
without restriction or further registration under the Securities Act.
Ordinary shares purchased by one of our 'affiliates' may not be
resold, except pursuant to an effective registration statement or an
exemption from registration, including an exemption under
Rule 144 under the Securities Act described below.
The ordinary share held by existing shareholders are, and any ordinary
share issuable upon exercise of options outstanding
following the completion of this offering will be, 'restricted securities,'
as that term is defined in Rule 144 under the Securities
Act. These restricted securities may be sold in the United States only if
they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These
rules are described below.
Lock-Up Agreements
Our directors, executive officers and shareholders have agreed, subject
to limited exceptions, not to offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise dispose of, directly
or indirectly, or enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of
ownership of our Ordinary Shares or such other securities for a
period of 6 months after the date of this prospectus, without the prior
written consent of the presentative. The Company is also
prohibited from conducting offerings during this period and from
re-pricing or changing the terms of existing options and warrants.
See 'Underwriting.'
Rule 144
All of our Ordinary Shares outstanding prior to this offering are
'restricted shares' as that term is defined in Rule 144 under the
Securities Act and may be sold publicly in the United States only if
they are subject to an effective registration statement under the
Securities Act or pursuant to an exemption from the registration
requirements. Under Rule 144 as currently in effect, a person who
has beneficially owned our restricted shares for at least six months
is generally entitled to sell the restricted securities without
registration under the Securities Act beginning 90 days after the
date of this prospectus, subject to certain additional restrictions.
Our affiliates are subject to additional restrictions under Rule 144.
Our affiliates may only sell a number of restricted shares within
any three-month period that does not exceed the greater of the following:
1% of the then outstanding Ordinary Shares, which will equal
approximately Ordinary Shares immediately after this
offering; or
the average weekly trading volume of our Ordinary Shares during
the four calendar weeks preceding the date on which
notice of the sale is filed with the SEC.
Affiliates who sell restricted securities under Rule 144 may not solicit
orders or arrange for the solicitation of orders, and they are
also subject to notice requirements and the availability of current
public information about us.
Persons who are not our affiliates are only subject to one of these
additional restrictions, the requirement of the availability of
current public information about us, and this additional restriction
does not apply if they have beneficially owned our restricted
shares for more than one year.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who
purchases our Ordinary Shares from us in connection with a
compensatory stock or option plan or other written agreement relating
to compensation is eligible to resell such Ordinary Shares 90 days
after we became a reporting company under the Exchange Act
in reliance on Rule 144, but without compliance with some of the
restrictions, including the holding period, contained in Rule 144.
UNDERWRITING
In connection with this offering, we will enter into an underwriting
agreement with Bigc securities,inc., as representative of the
Underwriters, or the Representative, in this offering. The Representative
may retain other brokers or dealers to act as a sub-agents
or selected dealers on their behalf in connection with this offering.
The Underwriters will be agreed to purchase from us, on a firm
commitment basis, the number of ordinary shares set forth opposite
its name below, at the offering price less the underwriting
discounts set forth on the cover page of this prospectus:
Underwriters
Number of Shares
BIGC SECURITIES,INC.
Total
The underwriters are offering the Ordinary Shares subject to their
acceptance of the Ordinary Shares from us and subject to prior
sale. The underwriting agreement provides that the obligations of
the underwriters to pay for and accept delivery of the Ordinary
Shares offered by this prospectus are subject to the approval of
certain legal matters by its counsel and to other conditions. The
underwriters are obligated to take and pay for all of the Ordinary
Shares offered by this prospectus if any such Ordinary Shares are
taken. However, the underwriters are not required to take or pay
for the Ordinary Shares covered by the Representative's option to
purchase additional Ordinary Shares described below.
Certain of the underwriters are expected to make offers and sales
both inside and outside the United States through their respective
selling agents. Any offers or sales in the United States will be conducted
by broker-dealers registered with the SEC. Bigc
securities,inc is not a broker-dealer registered with the SEC and does
not intend to make any offers or sales of the ordinary shares
within the U.S. or to any U.S. persons.
Fees, Commissions and Expense Reimbursement
We will pay the Underwriter a discount equivalent to seven
percent (7%) of the gross proceeds of this offering. The Underwriter
proposes initially to offer the ordinary shares to the public at the
offering price set forth on the cover page of this prospectus and to
dealers at those prices less the aforesaid fee ('underwriting discount')
set forth on the cover page of this prospectus. If all of the
ordinary shares offered by us are not sold at the offering price, the
Underwriter may change the offering price and other selling
terms by means of a supplement to this prospectus
The following table shows the underwriting fees/commission payable
to the Underwriter with this offering:
Per Ordinary Share
Public offering price
Underwriting fees and commissions (7%)
Proceeds, before expenses, to us
In addition to the cash commission, we will also reimburse the
Underwriter for accountable out-of-pocket expenses not to exceed
$ . Such accountable out-of-pocket expenses include no more
than $ in Underwriter's legal counsel fees, due
diligence and other like expenses not to exceed $ and road show,
travel, on-boarding fees and other reasonable
out-of-pocket accountable expenses not to exceed $ , background
checks expenses not to exceed $ , and DTC
eligibility fees and expenses not to exceed $ . We have paid to $ in
accountable expenses as of the date hereof, which will
be refundable to us to the extent actually not incurred by the
Underwriter in accordance with FINRA Rule 5110(f)(2)(C).
We estimate that the total expenses payable by us in connection
with the offering, other than the underwriting fees and
commissions, will be approximately $.
We are discussing the offering with some underwriters. As of the date
of this prospectus, we have not yet determined that the
underwriters have entered into an underwriting agreement. The
underwriting data used below is derived from industry practice
and normal fees, which will not be formally recognized until an
underwriting agreement is reached. The foregoing does not
purport to be a complete statement of the terms and conditions
of the underwriting agreement and subscription agreement.
Lock-Up Agreements
Each of our directors, executive officers, and principal shareholders
(5% or more shareholders) of our Ordinary Shares has also
entered into a similar lock-up agreement for a period of six (6) months
from the effective date of this registration statement of
which this prospectus forms a part, subject to certain exceptions,
with respect to our Ordinary Shares and securities that are
substantially similar to our Ordinary Shares.
Pricing of the Offering
Prior to the completion of this offering, there has been no public
market for our Ordinary Shares. The initial public offering price
of the Ordinary Shares has been negotiated between us and the
underwriters. Among the factors considered in determining the
initial public offering price of the Ordinary Shares, in addition to
the prevailing market conditions, are our historical performance,
estimates of our business potential and earnings prospects, an
assessment of our management, and the consideration of the above
factors in relation to market valuation of companies in related
businesses.
Electronic Offer, Sale, and Distribution of Ordinary Shares
A prospectus in electronic format may be made available on the
websites maintained by the underwriters or selling group
members, if any, participating in this offering and the underwriters
may distribute prospectuses electronically. The underwriters
may agree to allocate a number of Ordinary Shares to selling group
members for sale to its online brokerage account holders. The
Ordinary Shares to be sold pursuant to internet distributions will be
allocated on the same basis as other allocations. Other than the
prospectus in electronic format, the information on these websites
is not part of, nor incorporated by reference into, this prospectus
or the registration statement of which this prospectus forms a part,
has not been approved or endorsed by us or the underwriters,
and should not be relied upon by investors.
Price Stabilization
The Underwriter will be required to comply with the Securities Act
and the Exchange Act, including without limitation, Rule
10b-5 and Regulation M under the Exchange Act. These rules and
regulations may limit the timing of purchases and sales of
shares of capital stock by the Underwriter acting as principal. Under
these rules and regulations, the Underwriter:
may not engage in any stabilization activity in connection with our
securities; and
may not bid for or purchase any of our securities or attempt to induce
any person to purchase any of our securities, other than as
permitted under the Exchange Act, until it has completed its
participation in the distribution.
Selling Restrictions
No action has been taken in any jurisdiction (except in the United
States) that would permit a public offering of the Ordinary
Shares, or the possession, circulation or distribution of this prospectus
or any other material relating to us or the Ordinary Shares,
where action for that purpose is required. Accordingly, the Ordinary
Shares may not be offered or sold, directly or indirectly, and
neither this prospectus nor any other offering material or
advertisements in connection with the Ordinary Shares may be
distributed or published, in or from any country or jurisdiction except
in compliance with any applicable rules and regulations of
any such country or jurisdiction.
LEGAL MATTERS
We are being represented by O&J Law Ltd with respect to certain legal
matters of U.S. federal securities.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1
(including the exhibits, schedules and amendments to the
registration statement) under the Securities Act with respect to the
shares of our common stock offered by this prospectus. This
prospectus does not contain all the information set forth in the
registration statement. For further information with respect to us
and the shares of our common stock to be sold in this offering,
we refer you to the registration statement. Statements contained in
this prospectus as to the contents of any contract, agreement or
other documents to which we make reference are not necessarily
complete. In each instance, we refer you to the copy of such contract,
agreement or other document filed as an exhibit to the
registration statement.
We file annual, quarterly and current reports, and other information
with the SEC. Our filings with the SEC are available to the
public on the SEC's website at http://www.sec.gov. The information we
file with the SEC or contained on or accessible through
our corporate web site or any other web site that we may maintain is
not part of this prospectus or the registration statement of
which this prospectus is a part. You may read and copy this information
at the Public Reference Room of the SEC located at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the
Public Reference Room. The SEC maintains an internet site that contains
periodic and current reports, information statements and
other information regarding issuers that file electronically with the SEC.
The address of the SEC's website is http://www.sec.gov.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Hong Kong law does not limit the extent to which a company's
articles of association may provide indemnification of officers and
directors, except to the extent any such provision may be held by
the Hong Kong courts to be contrary to the public interest, such
as indemnification against civil fraud or the consequences of
committing a crime. The registrant's articles of association provide
that each officer or director of the registrant shall be indemnified
out of the assets of the registrant against any liability incurred by
him or her in defending any proceedings, whether civil or criminal,
in which judgment is given in his or her favor, or where the
proceedings are otherwise disposed of without any finding or
admission of any material breach of duty on his or her part, or in
which he or she is acquitted or in connection with any application
in which relief is granted to him or her by the court from
liability for negligence, default, breach of duty or breach of trust in
relation to the affairs of the registrant.
ITEM 7.
FINANCIAL STATEMENT SCHEDULES.
Schedules have been omitted because the information required to
be set forth therein is not applicable or is shown in the
consolidated financial statements or the notes thereto.
ITEM 8
UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item
6, or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) under the Securities Act shall be
deemed to be part of this registration statement as of the
time it was declared effective.
(2)
For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3)
Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part
of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of
the registration statement or made in any such
document immediately prior to such date of first use.
(4)
For the purpose of determining liability under the Securities Act of 1933
to any purchaser each prospectus required to be
filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose
of providing the information required by section
10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of
the date such form of prospectus is first used after effectiveness or
the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for
liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new
effective date of the registration statement relating to the
securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided, however,
that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date.
(5)
For the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant undertakes
that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
I. Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed
pursuant to Rule 424;
II. Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned registrant or used or
referred to by the undersigned registrant;
III. The portion of any other free writing prospectus relating
to the offering containing material information about the
undersigned registrant or its securities provided by or on behalf of the
undersigned registrant; and
IV. iv.Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration statement
on Form F-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Shenzhen, China, on the June
6, 2023.
First Shenzhen securities co,. LTD By: /s/
Name: Gang Li
Title: Chairman of Board of Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the
following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature
Title
Date
Gang Li
Chairman of Board of Directors and Chief Executive Officer
June 6, 2023
Liancheng Xie
Vice Chairman of the Board and General Manager
June 6, 2023
Jialun Xie
President, General Manager and Director
June 6, 2023
Shufen li
Chief Operating Officer and Director
June 6, 2023
Qian Yu
Chief Financial Officer and Director
June 6, 2023
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