Exhibit (a)-(1)

OSSEN INNOVATION CO., LTD.

_________, 2021

Shareholders of Ossen Innovation Co., Ltd.

Re: Notice of Extraordinary General Meeting of Shareholders

Dear Shareholder:

You are cordially invited to attend an extraordinary general meeting of shareholders of Ossen Innovation Co., Ltd. (the “Company”) to be held on_________, 2021 at ________(Beijing Time). The meeting will be held at 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China. The attached notice of the extraordinary general meeting and proxy statement provide information regarding the matters to be acted on at the extraordinary general meeting, including at any adjournment or postponement thereof.

On December 17, 2020, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with New Ossen Group Limited, an exempted company with limited liability incorporated under the laws of the British Virgin Islands (“Parent”), and New Ossen Innovation Limited, an exempted company with limited liability incorporated under the laws of the British Virgin Islands and a wholly-owned Subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”) and cease to exist, with the Company continuing as the surviving company (“Surviving Company”) and becoming a wholly owned subsidiary of Parent. At the extraordinary general meeting, you will be asked to consider and vote upon a proposal to authorize and approve the Merger Agreement, the articles of merger and plan of merger required to be filed with the Registrar of Corporate Affairs of the British Virgin Islands as provided in Section 171(2) of the BVI Companies Act for the purpose of the Merger and substantially in the form attached as Appendix A to the Merger Agreement (the “Plan of Merger”), and the transactions contemplated by the Merger Agreement, including the Merger. A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement.

Parent and Merger Sub are formed solely for purposes of the Merger. Parent is currently beneficially owned by (a) Pujiang International Group Limited, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (the “Rollover Shareholder” or “Pujiang”), which has elected to roll-over all of its interests in the Company in connection with the Merger, (b) Acme Innovation Limited, a company with limited liability incorporated under the laws of the British Virgin Islands (“Acme”) and wholly owned by Pujiang, (c) Elegant Kindness Limited, a company with limited liability incorporated under the laws of the British Virgin Islands (“Elegant”) and controlled by Dr. Liang Tang, and (d) Dr. Liang Tang (“Dr. Tang”), the chief executive officer and chairman of the board of directors of the Company. Dr. Tang, Elegant, Pujiang, Acme, Parent and Merger Sub are collectively referred to as the “Buyer Group.” The Rollover Shareholder will have the Rollover Shares (as defined below) cancelled in the Merger and pursuant to the terms of the Merger Agreement, no Merger consideration will be paid to such shareholder, and it will receive newly issued shares of Parent.

As of the date of this proxy statement, the Rollover Shareholder beneficially owns, in the aggregate, 13,050,000 ordinary shares, par value US$0.01 per share, of the Company (each, a “Share,” and collectively, the “Shares”), representing approximately 65.9% of the Company’s outstanding Shares. If the Merger is consummated, the Company will continue its operations as a privately held company under the name “Ossen Innovation Co., Ltd.” As a result of the Merger, the Company’s American Depositary Shares (the “ADSs”) representing the Shares will no longer be listed on the NASDAQ and the ADS program will terminate.

If the Merger is completed, at the effective time of the Merger (the “Effective Time”), except as described below, (i) each Share (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$1.70 per Share in cash and without interest and (ii) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$5.10 per ADS (less US$0.05 per ADS cancellation fee payable pursuant to the terms of the deposit agreement dated June 30, 2020 (the “Deposit Agreement”) by and among the Company, the Bank of New York Mellon (the “ADS depositary”), and all holders and beneficial owners from time to time of ADSs issued thereunder). The following Shares of the Company will not be converted into the right to receive the consideration described in the immediately preceding sentence: (a) Shares (including ADSs corresponding to such Shares) beneficially owned by the Rollover Shareholder (the “Rollover Shares”); (b) Shares (the “Dissenting Shares”) owned by holders of Shares who have validly exercised and not effectively withdrawn or lost their appraisal rights pursuant to Section 179 of the BVI Business Companies Act, 2004, as amended (the “BVI Companies Act”) (the “Dissenting Shareholders”); and (c) Shares (if any) owned by the Company or any direct or indirect wholly-owned subsidiaries of the Company (or held in the Company’s treasury) and Shares held by Parent or any of its subsidiaries ((a), (b) and (c) collectively, the “Excluded Shares”). Each Excluded Share (excluding any Dissenting Share) issued and outstanding immediately prior to the Effective Time, will be cancelled and will cease to exist, and no Merger consideration will be delivered with respect thereto. Each Dissenting Share will be cancelled at the Effective Time for the right to receive the fair value of such Shares as determined in accordance with the provisions of the BVI Companies Act. The ADS depositary will call for surrender of all outstanding ADSs (other than any ADSs representing Excluded Shares) to be exchanged for the applicable merger consideration.

The Rollover Shareholder intends to fund the Merger consideration through a combination of (i) rollover equity (represented by the Rollover Shares) from the Rollover Shareholder, (ii) cash contribution in the amount of US$12.5 million contemplated by an equity commitment letter, dated as of December 17, 2020 (the “Equity Commitment Letter”), by and between Parent and the Rollover Shareholder. Please see “Special Factors - Financing” beginning on page 69 for more details of the Equity Commitment Letter.

An independent committee of the board of directors of the Company (the “Independent Committee”), composed solely of two independent and disinterested directors of the Company who are unaffiliated with the Buyer Group, the Company or any of the management members of the Company, Mr. Junhong Li and Mr. Zhongcai Wu, has reviewed and considered the terms and conditions of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger. On December 17, 2020, the Independent Committee unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders, including shareholders that are unaffiliated with the Buyer Group, (b) approved and declared it advisable for the Company to enter into the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, (c) recommended that the board of directors authorize and approve the entry into by the Company of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, and (d) recommended that the board of directors of the Company direct that the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of the board of directors that the shareholders of the Company authorize and approve by way of a shareholder resolution the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger.

On December 17, 2020, the board of directors of the Company, upon the unanimous determination and recommendation of the Independent Committee, had (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders (including those shareholders who are unaffiliated with the Buyer Group), (b) approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger and the consummation of the transactions contemplated thereby, including the Merger, and (c) resolved to direct that the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of the board of directors that the shareholders of the Company authorize and approve the Merger Agreement, the Plan of Merger and the consummation of the transactions contemplated thereby, including the Merger.

After careful consideration and upon the unanimous recommendation of the Independent Committee, and on behalf of the Company, the board of directors of the Company unanimously recommends that you vote FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received to pass the shareholders resolution during the extraordinary general meeting.

In considering the recommendation of the Independent Committee and the board of directors, you should be aware that some of the Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of the shareholders generally. The Rollover Shareholder has agreed with Parent pursuant to a rollover and support agreement (the “Support Agreement”) to vote its Shares in favor of the proposal to approve and authorize the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger. As of the date of this proxy statement, the Rollover Shareholder beneficially owns 13,050,000 Shares, which represent approximately 65.9% of the total number of outstanding Shares.

The accompanying proxy statement provides detailed information about the Merger and the extraordinary general meeting. We encourage you to read the entire document and all of the attachments and other documents referred to or incorporated by reference herein carefully. You may also obtain more information about the Company from documents the Company has filed with the Securities and Exchange Commission (the “SEC”), which are available for free at the SEC’s website www.sec.gov.

Regardless of the number of the Shares you own, your vote is very important. The Merger cannot be completed unless the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, are approved and authorized by an affirmative vote of shareholders representing at least a majority of the outstanding Shares of the Company, present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders. We expect that 19,791,110 Shares will be outstanding at the close of business in the British Virgin Islands on ________, 2021, the Share record date of the extraordinary general meeting of the shareholders.

Even if you plan to attend the extraordinary general meeting in person, we request that you submit your proxy in accordance with the instructions set forth on the proxy card as promptly as possible. The deadline to lodge your proxy card is ________, 2021 at ________ (Beijing time). Voting at the extraordinary general meeting will take place by poll voting if so demanded by the chairman of the meeting, or by any shareholder present in person or by proxy entitled to vote who disputes the announcement by the chairman of the result of the vote.

If you own ADSs as at the close of business in New York City on ________, 2021, the ADS record date, you may instruct the ADS depositary as the holder of the Shares underlying the ADSs, how to vote the Shares underlying your ADSs. However, you cannot vote at the extraordinary general meeting directly. As the holder of record for all the Shares represented by the ADSs, only the ADS depositary (or its nominee) may directly vote those Shares at the extraordinary general meeting. You should return your properly completed ADS Voting Instruction Card to the ADS depositary prior to ________ New York City time) on ________, 2021, which is the last date by which voting instructions may be received by the ADS depositary in order to directly vote the Shares underlying your ADSs at the extraordinary general meeting. The ADS depositary will endeavor, in so far as practicable, to vote or cause to be voted the number of Shares represented by your ADSs in accordance with your voting instructions. The ADS depositary will not vote or attempt to exercise the right to vote that attaches to your ADSs other than in accordance with the instructions given by you and received by the ADS depositary. Alternatively, you may vote directly at the meeting if you surrender your ADSs to the ADS depositary, pay the required ADS depositary fee for the cancellation of the ADSs (US$0.05 per ADS cancelled), provide instructions for the delivery and registration of the corresponding Shares, and certify that you have not given, and will not give, voting instructions as to the ADSs (or, alternatively, that you will not vote the Shares) prior to ________ (New York City time) on ________, 2021, and become a holder of Shares by the close of business in the British Virgin Islands on March ________, 2021. In addition, if you hold your Shares or ADSs through a financial intermediary such as a broker, bank or other nominee, you must rely on the procedures and timing of the financial intermediary through which you hold your Shares or ADSs if you wish to vote at the extraordinary general meeting.

Shareholders who dissent from the Merger will be entitled to seek appraisal and payment of the fair value of their Shares if the Merger is completed, subject to the condition that they deliver to the Company, before the vote is taken at the extraordinary general meeting, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 179 of the BVI Business Companies Act, 2004, as amended regarding the exercise of appraisal rights, a copy of which is attached as Annex C to the accompanying proxy statement. The fair value of your Shares as determined under that statute could be more than, the same as, or less than the Merger consideration you would receive pursuant to the Merger Agreement if you do not exercise appraisal rights with respect to your Shares.

ADS HOLDERS WILL NOT HAVE THE RIGHT TO SEEK APPRAISAL AND PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL NOT ATTEMPT TO EXERCISE ANY APPRAISAL RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE APPRAISAL RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY, PAY THE REQUIRED ADS DEPOSITARY FEE FOR THE CANCELLATION OF THE ADSs (US$0.05 PER ADS CANCELLED), PROVIDE INSTRUCTIONS FOR THE DELIVERY AND REGISTRATION OF THE CORRESPONDING SHARES, AND CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE, DIRECTLY OR INDIRECTLY, VOTING INSTRUCTIONS AS TO THE ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE SHARES) BEFORE ________ (NEW YORK CITY TIME) ON ________, 2021, AND BECOME REGISTERED HOLDERS OF SHARES BY THE CLOSE OF BUSINESS IN THE BRITISH VIRGIN ISLANDS ON ________, 2021. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING APPRAISAL RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 179 OF THE BVI BUSINESS COMPANIES LAW (2004). THE PROCESS OF SURRENDERING ADSs AND BECOMING A REGISTERED SHAREHOLDER OF THE COMPANY MAY TAKE A NUMBER OF DAYS. ADS HOLDERS WISHING TO DO SO SHOULD TAKE ACTION AS SOON AS POSSIBLE.

Neither the SEC nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this letter or in the accompanying notice of the extraordinary general meeting or proxy statement. Any representation to the contrary is a criminal offense.

On behalf of Ossen Innovation Corp. Ltd., we would like to thank all of our shareholders for their ongoing support as we prepare to take part in this important event in our history.

The accompanying proxy statement is dated ________, 2021, and is first being mailed to shareholders on or about five (5) business days after the filing date.

OSSEN INNOVATION CO., LTD.

NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON ________, 2021

Dear Shareholder:

Notice is hereby given that an extraordinary general meeting of the shareholders of Ossen Innovation Co., Ltd. referred to herein alternately as the “Company,” “us,” “our” or “we,” will be held on ________, 2021, beginning at ________ (Beijing time), at 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China.

Only registered holders of ordinary shares, par value US$0.01 per share, of the Company (each a “Share” and collectively, the “Shares”), at the close of business in the British Virgin Islands on ________, 2021, the Share record date of the extraordinary shareholder meeting, or their proxy holders are entitled to directly vote at this extraordinary general meeting or any adjournment or postponements thereof. At the meeting, you will be asked to consider and vote upon the following resolutions:

THAT the Agreement and Plan of Merger dated December 17, 2020 (the “Merger Agreement”) by and among New Ossen Group limited, an exempted company with limited liability incorporated under the laws of the British Virgin Islands (“Parent”), New Ossen Innovation Limited, a company with limited liability incorporated under the laws of the British Virgin Islands, all of the issued and outstanding shares of which are owned by Parent (“Merger Sub”), and the Company, and the articles of merger and plan of merger (the “Plan of Merger”) required to be filed with the Registrar of Corporate Affairs of the British Virgin Islands as provided in Section 171(2) of the BVI Companies Act for the purpose of the Merger, substantially in the form attached as Appendix A to the Merger Agreement (copies of such Merger Agreement and Plan of Merger being in the form attached to the proxy statement accompanying this notice, which will also be produced and made available for inspection at the meeting), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving company, and the transactions contemplated by the Merger Agreement, including the Merger, be approved and authorized by the Company; and

THAT the chairman of the extraordinary general meeting be instructed to adjourn or postpone the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the shareholders resolutions to be proposed at the extraordinary general meeting.

A list of the shareholders of the Company will be available at its principal executive office at 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China, during ordinary business hours for the two (2) business days immediately prior to the extraordinary general meeting.

After careful consideration and upon the unanimous recommendation of the independent committee of the board of directors of the Company (the “Independent Committee”) composed solely of independent and disinterested directors of the Company who are unaffiliated with the any of Parent, Merger Sub, the Buyer Group, or the management members of the Company, the Company’s board of directors has approved the Merger Agreement and recommends that you vote FOR the proposal to approve and authorize the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, and FOR the proposal to instruct the chairman of the extraordinary general meeting to adjourn or postpone the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the resolutions to be proposed at the extraordinary general meeting.

Pujiang International Group Limited (the “Rollover Shareholder” or “Pujiang”) has elected to roll-over all of Shares it beneficially owned in the Company in connection with the Merger pursuant to a rollover and support agreement, and has agreed, among other things, to direct the voting all of the Shares in favor of the proposal to approve and authorize the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger. The Rollover Shareholder beneficially owns 13,050,000 Shares, which represent approximately 65.9% of the total issued and outstanding Shares entitled to vote as of the date of this proxy statement. The Rollover Shareholder will beneficially own Parent immediately following the consummation of the Merger.

Regardless of the number of the Shares you own, your vote is very important. The Merger cannot be completed unless the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, are approved and authorized by an affirmative vote of shareholders representing at least a majority of the outstanding Shares of the Company, present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders. We expect that 19,791,110 Shares will be outstanding at the close of business in the British Virgin Islands on ________, 2021, the Share record date of the extraordinary general meeting of the shareholders.

Even if you plan to attend the extraordinary general meeting in person, we request that you submit your proxy in accordance with the instructions set forth on the proxy card as promptly as possible. The deadline to lodge your proxy card is ________, 2021 at ________ (Beijing time). Voting at the extraordinary general meeting will take place by poll voting if so demanded by the chairman of the meeting, or by any shareholder present in person or by proxy entitled to vote who disputes the announcement by the chairman of the result of the vote.

Completing the proxy card in accordance with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting and vote your Shares in person. Please note, however, that if your Shares are registered in the name of a broker, bank or other nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the record holder a proxy issued in your name.

If you fail to complete your proxy card in accordance with the instructions set forth on the proxy card or if you abstain from voting, your vote will not be counted.

If you receive more than one proxy card because you own Shares that are registered in different names, please vote all of your Shares shown on each of your proxy cards in accordance with the instructions set forth on each such proxy card.

If you submit your signed proxy card without indicating how you wish to vote, the Shares represented by your proxy card will be voted FOR the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, and FOR any adjournment of the extraordinary general meeting referred to above unless you appoint a person other than the chairman of the meeting as proxy, in which case the Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.

If you hold Shares through a financial intermediary such as a broker, bank, or other nominee, you must rely on the procedures and timing of the financial intermediary through which you hold your Shares if you wish to vote at the extraordinary general meeting.

When proxies are properly dated, executed and returned by holders of Shares, the Shares they represent will be voted at the extraordinary general meeting in accordance with the instructions of the shareholders. If no specific instructions are given by such holders, the Shares will be voted “FOR” the proposals as described above and in the proxy holder’s discretion as to other matters that may properly come before the extraordinary general meeting. Abstentions by holders of Shares are included in the determination of the number of Shares present and voting but are not counted as votes for or against a proposal.

If you own ADSs as at the close of business in New York City on ________, 2021, the ADS record date, you may instruct the ADS depositary, as the holder of the Shares underlying the ADSs, how to vote the Shares underlying your ADSs. However, you cannot vote at the extraordinary general meeting directly. As the holder of record for all the Shares represented by the ADSs, only the ADS depositary (or its nominee) may directly vote those Shares at the extraordinary general meeting. You should return your properly completed accompanying ADS Voting Instruction Card to the ADS depositary prior to ________(New York City time) on ________, 2021, which is the last date by which voting instructions may be received by the ADS depositary in order to vote the Shares underlying your ADSs at the extraordinary general meeting. The ADS depositary will endeavor, in so far as practicable, to vote or cause to be voted the number of Shares represented by ADSs in accordance with the voting instructions of an ADS holder. The ADS depositary will not vote or attempt to exercise the right to vote that attaches to the Shares other than in accordance with the instructions given by you and received by the ADS depositary. Alternatively, you may vote directly at the meeting if you surrender your ADSs to the ADS depositary, pay the required ADS depositary fee for the cancellation of the ADSs (US$0.05 per ADS cancelled), provide instructions for the delivery and registration of the corresponding Shares, and certify that you have not given, and will not give, voting instructions as to the ADSs (or, alternatively, that you will not vote the Shares) prior to ________(New York City time) on ________, 2021, and become a holder of Shares by the close of business in the British Virgin Islands on March ________, 2021. In addition, if you hold your ADSs through a financial intermediary such as a broker, bank or other nominee, you must rely on the procedures and timing of the financial intermediary through which you hold your ADSs if you wish to vote at the extraordinary general meeting.

Shareholders who dissent from the Merger will be entitled to seek appraisal and payment of the fair value of their Shares if the Merger is completed, subject to the condition that they deliver to the Company, before the vote is taken at the extraordinary general meeting, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 179 of the BVI Business Companies Act, 2004, as amended regarding the exercise of appraisal rights, a copy of which is attached as Annex C to the accompanying proxy statement. The fair value of your Shares as determined under that statute could be more than, the same as, or less than the Merger consideration you would receive pursuant to the Merger Agreement if you do not exercise appraisal rights with respect to your Shares.

ADS HOLDERS WILL NOT HAVE THE RIGHT TO SEEK APPRAISAL AND PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL NOT ATTEMPT TO EXERCISE ANY APPRAISAL RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE APPRAISAL RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY, PAY THE REQUIRED ADS DEPOSITARY FEE FOR THE CANCELLATION OF THE ADS (US$0.05 PER ADS CANCELLED), PROVIDE INSTRUCTIONS FOR THE DELIVERY AND REGISTRATION OF THE CORRESPONDING SHARES, AND CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE, DIRECTLY OR INDIRECTLY, VOTING INSTRUCTIONS AS TO THE ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE SHARES) BEFORE ________P.M (NEW YORK CITY TIME) ON ________, 2021, AND BECOME REGISTERED HOLDERS OF SHARES BY THE CLOSE OF BUSINESS IN THE BRITISH VIRGIN ISLANDS ON ________, 2021. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING APPRAISAL RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 179 OF THE BVI BUSINESS COMPANIES LAW (2004). THE PROCESS OF SURRENDERING ADSs AND BECOMING A REGISTERED SHAREHOLDER OF THE COMPANY MAY TAKE A NUMBER OF DAYS. ADS HOLDERS WISHING TO DO SO SHOULD TAKE ACTION AS SOON AS POSSIBLE.

Please do not send your share certificates at this time. If the Merger is completed, you will be sent instructions regarding the surrender of your share certificates.

The Merger Agreement, the Plan of Merger and the Merger are described in the accompanying proxy statement. Copies of the Merger Agreement and the Plan of Merger are included as Annex A to the accompanying proxy statement. We urge you to read the entire proxy statement carefully.

Notes:

(a)  if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member;

(b)  if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners, and

(c)  if two or more of the joint owners are present in person or by proxy they must vote as one.

Registered Office:

Akara Bldg., 24 De Castro Street

Wickhams Cay 1

Road Town, Tortola

British Virgin Islands

SUMMARY TERM SHEET

This “Summary Term Sheet,” together with the “Questions and Answers about the Extraordinary General Meeting and the Merger,” highlights selected information contained in this proxy statement regarding the Merger and may not contain all of the information that may be important to your consideration of the Merger. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers for a more complete understanding of the matters being considered at the extraordinary general meeting. In addition, this proxy statement incorporates by reference important business and financial information about the Company. You are encouraged to read all of the documents incorporated by reference into this proxy statement and you may obtain such information without charge by following the instructions in “Where You Can Find More Information” beginning on page 122. In this proxy statement, the terms “we,” “us,” “our,” the “Company” refer to Ossen Innovation Co., Ltd. and its subsidiaries. All references to “dollars” and “$” in this proxy statement are to U.S. dollars.

The Parties Involved in the Merger 

The Company 

We manufacture and sell an array of plain surface prestressed steel materials and rare earth coated and zinc coated prestressed steel materials, which we believe is the most comprehensive array among our competitors in China. Our materials are used in the construction of bridges, highways and other infrastructure projects in the PRC and internationally. Our facilities are located in Maanshan City, Anhui Province and in Jiujiang City, Jiangxi Province in the PRC. Based on our extensive experience in the industry, we believe that Ossen is one of the leading enterprises in the PRC in the design, engineering, manufacture and sale of customized prestressed steel materials used in the construction of bridges, highways, and other infrastructure projects in China.

Our products are marketed under the “Ossen” brand name both domestically and internationally. We handle all aspects of market research, product design, engineering, manufacturing, sales and marketing. We conduct our manufacturing operations in our ISO 9001 manufacturing facilities in Maanshan City and Jiujiang City in the PRC.

In 2013, the Chinese market began to adopt zinc-aluminum alloy coated PC wires and PC strands, which have more corrosion-resistance and stronger protective effect than zinc coated PC wires and PC strands. Our research and development department is currently developing a method to apply rare earth materials to the zinc-aluminum alloy coating process. We have made progress in developing such product so far and we will continue our research and development efforts in 2020. We anticipate that additional time will be necessary for such products to pass government inspection and to gain acceptance in the market.

Ossen Materials, our operating subsidiary, was founded in 2004. In 2005, we expanded our manufacturing capabilities by acquiring a facility in Jiujiang City in the PRC and forming Ossen Jiujiang. The senior management team of Ossen were among the first in China to introduce and promote the use of prestressed steel materials in construction projects. They have been involved in producing prestressed materials since 1994 and each has accumulated nearly 25 years of experience in the prestressed materials industry

Our principal executive offices are located at 1 518 Shangcheng Road, Floor 17, Shanghai, People’s Republic of China. Our telephone number at this address is + 86 (21) 6888-8886 and our email is int.tr@ossengroup.com. Our registered office in the British Virgin Islands is at Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011. Our corporate website is http://www.osseninnovation.com.

For a description of our history, development, business and organizational structure, see our annual report on Form 20-F for the year ended December 31, 2019, filed with the Commission on May 18, 2020, which is incorporated herein by reference. Please see “Where You Can Find More Information” beginning on page 122 for a description of how to obtain a copy of our annual report. 

Parent

 New Ossen Group Limited is a company with limited liability incorporated under the laws of the British Virgin Islands and is a holding company formed solely for the purpose of holding the equity interest in Merger Sub and completing the transactions contemplated by the Merger Agreement, including the Merger (each as defined below). The registered address of Parent is Unit 8 ,3/F, Qwomar Trading Complex, Blackburne Road, Port Purcell, Road Town, Tortola, British Virgin Islands, VG1110. The business address of Parent is 16/F, No.518 Shangcheng Road, Pudong District, Shanghai, China.

Merger Sub 

New Ossen Innovation Limited is a company with limited liability incorporated under the laws of the British Virgin Islands and is a holding company formed solely for the purpose of completing the transactions contemplated by the Merger Agreement, including the Merger. The registered address of Merger Sub is Unit 8 ,3/F, Qwomar Trading Complex, Blackburne Road, Port Purcell, Road Town, Tortola, British Virgin Islands, VG1110. The business address of Merger Sub is 16/F, No.518 Shangcheng Road, Pudong District, Shanghai, China.

Buyer Group

Acme Innovation Limited (“Acme”) is a company with limited liability incorporated under the laws of the British Virgin Islands and is an investment holding company whose principal business is to hold, transact or otherwise deal in the securities of the Company. The registered address of Acme is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The business address of Acme is 16/F, No.518 Shangcheng Road, Pudong District, Shanghai, China.

Pujiang is an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands. Pujiang is a holding company whose principal business is to hold, transact or otherwise deal in the securities of Acme and other companies operating in China. The registered address of Pujiang is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The business address of Pujiang is 16/F, No.518 Shangcheng Road, Pudong District, Shanghai, China.

Elegant Kindness Limited (“Elegant”) is a company with limited liability incorporated under the laws of the British Virgin Islands and is an investment holding company whose principal business is to hold, transact or otherwise deal in the securities of Pujiang. The registered address of Elegant is Unit 8, 3/F, Qwomar Trading Complex, Blackburne Road, Port Purcell, Road Town, Tortola, British Virgin Islands, VG1110. The business address of Elegant is 16/F, No.518 Shangcheng Road, Pudong District, Shanghai, China. Elegant Kindness Limited is wholly owned by Dr. Liang Tang.

Dr. Liang Tang (“Dr. Tang”) is the chief executive officer and the president of the Company and is a citizen of the People’s Republic of China. Dr. Tang’s business address is No.49,Wanping Road, Xuhui District, Shanghai China, and his business telephone number is +86-21-6888-8886. Dr. Liang is a 64.39% shareholder and the chairman of Pujiang.

Throughout this proxy statement, Dr. Tang, Elegant, Pujiang, Acme, Parent and Merger Sub are collectively referred to as the “Buyer Group.”

Additional information regarding the parties to the Merger is set forth on Annex D, which is attached hereto and incorporated herein by reference.

The Merger (Page 88) 

You are being asked to vote to authorize and approve the agreement and plan of merger dated as of December 17, 2020 (the “Merger Agreement”) among the Company, Parent and Merger Sub, articles of merger and a plan of merger required to be filed with the Registrar of Corporate Affairs of the British Virgin Islands, substantially in the form attached as Appendix A to the Merger Agreement (the “Plan of Merger”) and the transactions contemplated by the Merger Agreement, including the Merger (the “Merger”). Once the Merger Agreement and the Plan of Merger are authorized and approved by the requisite vote of the shareholders of the Company and the other conditions to the consummation of the transactions contemplated by the Merger Agreement are satisfied or waived in accordance with the terms of the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving company. The Company, as the surviving company, will continue to do business under the name “Ossen Innovation Co., Ltd.” following the Merger. If the Merger is completed, the Company will cease to be a publicly traded company, and the Company will instruct the ADS depositary to terminate the Company’s ADS program. Copies of the Merger Agreement and the Plan of Merger are attached as Annex A to this proxy statement. You should read the Merger Agreement and the Plan of Merger in their entirety because they, and not this proxy statement, are the legal documents that govern the Merger. 

Merger consideration (Page 89) 

Under the terms of the Merger Agreement, at the Effective Time of the Merger, except as described below, (i) each Share (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$1.70 per Share in cash and without interest (the “Per Share Merger Consideration”) and (ii) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$5.10 per ADS (the “Per ADS Merger Consideration”) (less US$0.05 per ADS cancellation fee payable pursuant to the terms of the Deposit Agreement) (Collectively referred to as the “Merger Consideration”). The following Shares of the Company will not be converted into the right to receive the consideration described in the immediately preceding sentence: (a) Shares (including ADSs corresponding to such Shares) beneficially owned by the Rollover Shareholder (the “Rollover Shares”); (b) Shares (the “Dissenting Shares”) owned by holders of Shares who have validly exercised and not effectively withdrawn or lost their appraisal rights pursuant to Section 179 of the BVI Business Companies Act, 2004, as amended (the “BVI Companies Act”) (the “Dissenting Shareholders”); and (c) Shares (if any) owned by the Company or any direct or indirect wholly-owned subsidiaries of the Company (or held in the Company’s treasury) and Shares held by Parent or any of its subsidiaries ((a), (b) and (c) collectively, the “Excluded Shares”). Each Excluded Share (excluding any Dissenting Share) issued and outstanding immediately prior to the Effective Time, will be cancelled and will cease to exist, and no Merger Consideration will be delivered with respect thereto. Each Dissenting Share will be cancelled at the Effective Time for the right to receive the fair value of such Shares as determined in accordance with the provisions of the BVI Companies Act. Please see “Appraisal Rights” beginning on page 113 for additional information. 

Support Agreement (Annex E) 

Concurrently with the execution of the Merger Agreement, the Rollover Shareholder and Parent entered into a rollover and support agreement (the “Support Agreement”), pursuant to which the parties have agreed that (i) the Rollover Shares shall be cancelled for no consideration, (ii) the Rollover Shareholder shall subscribe for the number of newly issued ordinary shares of Parent, and (iii) the Rollover Shareholder shall vote the Rollover Shares in favor of the authorization and approval of the Merger Agreement and Plan of Merger and the consummation of the transactions contemplated therein, in each case, upon the terms and conditions set forth therein. See “Special Factors—Support Agreement” beginning on page 70 for additional information.

Record Date and Voting (Page 83) 

You are entitled to attend and directly vote at the extraordinary general meeting if you have Shares registered in your name at the close of business in the British Virgin Islands on ________, 2021, the Share record date for voting at the extraordinary general meeting. Each outstanding Share on the Share record date entitles the holder to one vote on each matter submitted to the shareholders for authorization and approval at the extraordinary general meeting and any adjournment thereof. We expect that, as of the Share record date, there will be 19,791,110 Shares entitled to be voted at the extraordinary general meeting. If you have Shares registered in your name on the Share record date, the deadline for you to lodge your proxy card and vote is ________, 2021 at ________(Beijing Time). See “Summary Term Sheet – Voting Information” below. 

If you own ADSs as at the close of business in New York City on ________, 2021, the ADS record date, and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below, you cannot vote at the extraordinary general meeting directly, but you may instruct the ADS depositary (as the holder of the Shares underlying the ADSs) on how to vote the Shares underlying your ADSs. The ADS depositary must receive your instructions no later than ________ (New York City time) on ________, 2021, in order to ensure your Shares are properly voted at the extraordinary general meeting. Alternatively, if you own ADSs on the ADS record date, you may directly vote at the extraordinary general meeting by cancelling your ADSs (and certifying you have not instructed, and will not instruct, the ADS depositary to vote the Shares represented by your ADSs) before ________ (New York City time) on ________, 2021 and becoming a registered holder of Shares prior to the close of business in the British Virgin Islands on ________, 2021, the Share record date.

Shareholder Vote Required to Authorize and Approve the Merger Agreement and Plan of Merger (Page 83) 

In order for the Merger to be completed, the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, must be authorized and approved by an affirmative vote of shareholders representing at least a majority of the outstanding Shares of the Company, present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders. The authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, are not subject to the authorization and approval of holders of a majority of the Shares unaffiliated with the Rollover Shareholder. 

Based on the 19,791,110 Shares expected to be issued and outstanding and entitled to vote on the record date, approximately 9,895,556 Shares must be voted in favor of the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, in order for the proposal to be authorized and approved, assuming all shareholders will be present and voting in person or by proxy at the extraordinary general meeting. 

As of the date of this proxy statement, the Rollover Shareholder beneficially owns 13,050,000 Shares, which represents 69.5% of the total outstanding voting Shares. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on page 118 for additional information. Pursuant to the terms of the Support Agreement, these Shares will be voted in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, at the extraordinary general meeting of the Company.

If your Shares are held in the name of a broker, bank or other nominee, your broker, bank or other nominee will not vote your Shares in the absence of specific instructions from you. These non-voted Shares are referred to as “broker non-votes.” 

Voting Information (Page 84) 

Before voting your Shares, we encourage you to read this proxy statement in its entirety, including all of the annexes, attachments, exhibits and materials incorporated by reference, and carefully consider how the Merger will affect you. To ensure that your Shares can be voted at the extraordinary general meeting, please complete the enclosed proxy card in accordance with the instructions set forth on the proxy card as soon as possible. The deadline for you to lodge your proxy card is ________, 2021 at ________ (Beijing Time).

If you own ADSs as of the close of business in New York City on ________, 2021, the ADSs record date, and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below, you cannot vote at the extraordinary general meeting directly, but you may instruct the ADS depositary (as the holder of the Shares underlying the ADSs) how to vote the Shares underlying your ADSs. The ADS depositary must receive such instructions no later than ________(New York City time) on ________, 2021 in order to ensure your Shares are properly voted at the extraordinary general meeting. Alternatively, you may directly vote at the extraordinary general meeting if you cancel your ADSs and become a holder of Shares prior to the close of business in the British Virgin Islands on ________, 2021. If you wish to cancel your ADSs for the purpose of voting Shares, you need to make arrangements to deliver your ADSs to the ADS depositary for cancellation before ________ (New York City time) on ________, 2021, together with (a) delivery instructions for the corresponding Shares (name and address of person who will be the registered holder of Shares); (b) payment of the ADS cancellation fee (US$0.05 per ADS cancelled) and any applicable taxes; and (c) a certification that you held the ADS as of the ADS record date and you have not given, and will not give, voting instructions to the ADS depositary as to the ADSs being cancelled. If you hold your ADSs in a brokerage, bank or nominee account, please contact your broker, bank or nominee to find out what actions you need to take to instruct the broker, bank or nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS depositary will arrange for the Hong Kong and Shanghai Banking Corporation Limited, the custodian holding the underlying Shares, to transfer registration of the Shares to the former ADS holder (or a person designated by the former ADS holder). If after registration of Shares in your name, you wish to receive a certificate evidencing the Shares registered in your name, you will need to request the registrar of the Shares to issue and mail a certificate to your attention.

The ADS depositary will endeavor, in so far as practicable, to vote or cause to be voted the number of Shares represented by ADSs in accordance with the voting instructions of an ADS holder. The ADS depositary will not vote or attempt to exercise the right to vote that attaches to the Shares other than in accordance with the instructions given by you and received by the ADS depositary.

Appraisal Rights of Shareholders (Page 113) 

Shareholders who dissent from the Merger will have the right to seek appraisal and payment of the fair value of their Shares if the Merger is completed, on the condition that they deliver to the Company, before the vote is taken, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 179 of the BVI Companies Act regarding the exercise of appraisal rights. The fair value of your Shares as determined under that statute could be more than, the same as, or less than the Merger consideration you would receive according to the Merger Agreement if you do not exercise appraisal rights with respect to your Shares. 

We encourage you to review carefully the section of this proxy statement entitled “Appraisal Rights” as well as Annex C to this proxy statement and to consult your British Virgin Islands legal counsel if you consider exercising your appraisal rights. 

ADS HOLDERS WILL NOT HAVE THE RIGHT TO SEEK APPRAISAL AND PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL NOT ATTEMPT TO EXERCISE ANY APPRAISAL RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE APPRAISAL RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY, PAY THE REQUIRED ADS DEPOSITARY FEE FOR THE CANCELLATION OF THE ADSs (US$0.05 PER ADS CANCELLED), PROVIDE INSTRUCTIONS FOR THE DELIVERY AND REGISTRATION OF THE CORRESPONDING SHARES, AND CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE, DIRECTLY OR INDIRECTLY, VOTING INSTRUCTIONS AS TO THE ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE SHARES) BEFORE ________ (NEW YORK CITY TIME) ON ________, 2021, AND BECOME REGISTERED HOLDERS OF SHARES BY THE CLOSE OF BUSINESS IN THE BRITISH VIRGIN ISLANDS ON ________, 2021. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING APPRAISAL RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 179 OF THE BVI BUSINESS COMPANIES LAW (2004). THE PROCESS OF SURRENDERING ADSs AND BECOMING A REGISTERED SHAREHOLDER OF THE COMPANY MAY TAKE A NUMBER OF DAYS. ADS HOLDERS WISHING TO DO SO SHOULD TAKE ACTION AS SOON AS POSSIBLE.

Purposes and Effects of the Merger (Pages 62 and 63) 

The purpose of the Merger is to enable Parent to acquire 100% control of the Company in a transaction in which the Company’s shareholders other than the holders of Excluded Shares will be cashed out in exchange for US$1.70 per Share in cash without interest, or US$5.10 per ADS (less US$0.05 per ADS cancellation fee payable pursuant the terms of the Deposit Agreement) in cash without interest, so that Parent will bear the rewards and risks of the sole ownership of the Company after the Merger, including any future earnings and growth of the Company as a result of improvements to the Company’s operations or acquisitions of other businesses. Please see “Special Factors – Purpose of and Reasons for the Merger” beginning on page 62 for additional information. 

The ADSs are currently listed on the NASDAQ Capital Market (“NASDAQ”) (under the symbol “OSN”). It is expected that, immediately following the completion of the Merger, the Company will cease to be a publicly traded company and will instead become a privately held company directly owned by Parent. Following the completion of the Merger, the ADS program of the Company will terminate, the ADSs will cease to be listed on any securities exchange or quotation system, including the NASDAQ, and price quotations with respect to sales of the Shares in the public market will no longer be available. In addition, registration of the ADSs and the underlying Shares under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) may be terminated upon the Company’s application to the SEC if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Shares. Ninety days after the filing of Form 15 in connection with the completion of the Merger or such longer period as may be determined by the SEC, registration of the ADSs and the underlying Shares under the Exchange Act will be terminated and the Company will no longer be required to file periodic reports with the SEC or otherwise be subject to the U.S. federal securities laws, including the Sarbanes-Oxley Act of 2002, applicable to public companies. Following the completion of the Merger, the Company’s shareholders will no longer enjoy the rights or protections that the U.S. federal securities laws provide to shareholders of public companies, including reporting obligations for directors, officers and principal securities holders of the Company. Please see “Special Factors – Effect of the Merger on the Company” beginning on page 63 for additional information. 

Plans for the Company after the Merger (Page 67) 

After the Effective Time, the Buyer Group anticipates that the Company’s operations will be conducted substantially as they are currently being conducted, except that the Company will cease to be a publicly traded company and will instead be a wholly owned subsidiary of Parent, which is wholly owned by Pujiang.

Recommendations of the Independent Committee and the Board of Directors (Page 40) 

The Independent Committee has unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders, including shareholders who are unaffiliated with the Buyer Group, (b) approved and declared it advisable for the Company to enter into the Merger Agreement, the Plan of Merger, and other transaction documents and the transactions contemplated thereby, including the Merger, and (c) recommended that the Board of Directors authorize and approve the entry into by the Company of the Merger Agreement, the Plan of Merger, and other transaction documents and the transactions contemplated thereby, including the Merger, and (d) recommended that the board of directors of the Company direct that the authorization and approval of the Merger Agreement, the Plan of Merger substantively in the form contained in Appendix A to the Merger Agreement, and the transactions contemplated under the Merger Agreement, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company, with the recommendation of the board of directors of the Company that the shareholders of the Company authorize and approve by way of a shareholder resolution the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger.

ACCORDINGLY, OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AUTHORIZE AND APPROVE THE MERGER AGREEMENT, THE PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER, AND FOR THE PROPOSAL TO ADJOURN THE EXTRAORDINARY GENERAL MEETING IN ORDER TO ALLOW THE COMPANY TO SOLICIT ADDITIONAL PROXIES IN THE EVENT THAT THERE ARE INSUFFICIENT PROXIES RECEIVED TO PASS THE SHAREHOLDERS RESOLUTION DURING THE EXTRAORDINARY GENERAL MEETING.

Position of the Buyer Group as to the Fairness of the Merger (Page 48) 

Each member of the Buyer Group believes that the Merger is fair, both substantively and procedurally, to the holders of the Shares and the ADSs of the Company (other than the holders of Excluded Shares and ADSs representing the Excluded Shares), and the unaffiliated security holders of the Company as such terms are defined in Rule 13e-3 of the Exchange Act (the “Unaffiliated Security Holders”). Their belief is based upon the factors discussed under the section entitled “Special Factors—Position of the Buyer Group as to the Fairness of the Merger” beginning on page 48.

Each member of the Buyer Group is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13E-3 and related rules under the Exchange Act. The views of each member of the Buyer Group as to the fairness of the Merger are not intended to be and should not be construed as a recommendation to any shareholder of the Company as to how that shareholder should vote on the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger.

Financing of the Merger (Page 69) 

The Company and the Buyer Group estimate that the total amount of funds necessary to complete the Merger and the related transactions, including payment of fees and expenses in connection with the Merger, would be approximately US$12.5 million, assuming no exercise of dissenter rights by shareholders of the Company. In calculating this amount, the Company and the Buyer Group did not consider the value of the Rollover Shares which will, in connection with and concurrently with the closing of the Merger at the Effective Time, be cancelled for no consideration in the Merger, and the Rollover Shareholder, in lieu of receiving US$1.70 per Share held by it will be issued newly issued shares of Parent pursuant to the Support Agreement.

The Buyer Group expects this amount to be provided through a combination of (i) rollover equity (represented by the Rollover Shares) from the Rollover Shareholder, and (ii) cash contribution in the amount of US$12.5 million contemplated by that certain equity commitment letter, dated as of December 17, 2020 (the “Equity Commitment Letter”), by and between Parent and the Rollover Shareholder.

See “Special Factors—Financing” beginning on page 69 for additional information.

Limited Guarantee (Annex F) 

Concurrently with the execution of the Merger Agreement, Pujiang entered into a limited guarantee (the “Limited Guarantee”) with the Company, pursuant to which Pujiang irrevocably guaranteed, subject to certain conditions, Parent’s payment obligations to pay a termination fee in the amount of US$680,000 pursuant to Section 8.06(b) of the Merger Agreement (the “Parent Termination Fee”), if the Parent Termination Fee becomes payable by Parent. The Rollover Shareholder also agreed to pay all reasonable and documented out-of-pocket expenses (including reasonable fees and expenses of counsel) incurred by the Company in connection with the enforcement of its rights thereunder.

Support Agreement (Annex E) 

Concurrently with the execution of the Merger Agreement, the Rollover Shareholder and Parent entered into a rollover and support agreement (the “Support Agreement”), pursuant to which the parties have agreed that (i) the Rollover Shares shall be cancelled for no consideration in the Merger, (ii) the Rollover Shareholder shall subscribe for the number of newly issued ordinary shares of Parent, and (iii) the Rollover Shareholder shall vote the Rollover Shares in favor of the authorization and approval of the Merger Agreement and the consummation of the Transactions, in each case, upon the terms and conditions set forth therein.

Share Ownership of the Company Directors and Officers and Voting Commitments (Page 118) 

As of the record date, we expect that the Buyer Group will beneficially own approximately 65.9% of our issued and outstanding Shares entitled to vote. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on page 118 for additional information. 

Pursuant to the Support Agreement, the Rollover Shareholder has agreed to vote all Shares it beneficially owned in favor of the Merger Agreement and consummation of the transactions contemplated thereby, including the Merger. If completed, the Merger will result in the Company becoming a privately held company and its ADSs will no longer be listed on the NASDAQ. 

Opinion of the Independent Committee’s Financial Advisor (Annex B) 

The Independent Committee retained Houlihan Lokey (China) Limited (“Houlihan Lokey”) to act as its financial advisor in connection with the Merger. On December 17, 2020, Houlihan Lokey orally rendered to the Independent Committee its opinion (which was subsequently confirmed in writing by delivery on the same date of Houlihan Lokey’s written opinion addressed to the Independent Committee) as to the fairness, from a financial point of view, of the Merger Consideration to be received by the Unaffiliated Security Holders in the Merger pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in preparing its opinion.

Houlihan Lokey’s opinion was directed to the Independent Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, of the Merger Consideration to be received by the Unaffiliated Security Holders pursuant to the Merger Agreement, as of the date of such opinion and did not address any other aspect or implication of the Merger or any other agreement, arrangement, or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to the Independent Committee, the Board, any shareholder or holder of ADSs or any other person as to how to act with respect to any matter relating to the Merger. See “Special Factors — Opinion of the Independent Committee’s Financial Advisor” beginning on Page 55.

Interests of the Company’s Executive Officers and Directors in the Merger (Page 72) 

In considering the recommendations of the board of directors, the Company’s shareholders should be aware that certain of the Company’s directors and executive officers have interests in the transaction that are different from, and/or in addition to, the interests of the Company’s shareholders generally. These interests include, among others:

The Independent Committee and our board of directors were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions and recommendations with respect to the Merger Agreement and related matters. Please see “Special Factors – Interests of Certain Persons in the Merger” beginning on page 72 for additional information. 

Conditions to the Merger (Page 106) 

The obligations of each party to complete the transactions contemplated by the Merger Agreement, including the Merger, are subject to the satisfaction, or waiver (where permissible under applicable laws), of the following conditions:

The obligations of Parent and Merger Sub to consummate the Merger are also subject to the satisfaction, or waiver (where permissible under applicable laws), of the following conditions:

The obligations of the Company to consummate the Merger are also subject to the satisfaction, or waiver by the Company, of the following conditions:

No Solicitation of Competing Transactions (Page 98) 

From the date of the Merger Agreement until the Effective Time of the Merger or, if earlier, the termination of the Merger Agreement, neither the Company nor any of its subsidiaries nor any investment banker, attorney or accountant retained by the Company and its subsidiaries will: (a) solicit, initiate or encourage the submission of any proposal or offer that constitutes, or may reasonably be expected to lead to, any Competing Transaction (as defined in the section entitled “Merger Agreement—No Solicitation of Competing Transactions” beginning on page 98 ), or any inquiries that may lead to any such Competing Transaction or offer; (b) enter into, maintain or continue discussions or negotiations with, or furnish to any person any non-public information with respect to the Company or any of its subsidiaries to facilitate, induce, or encourage any Competing Transaction; (c) agree to, approve, endorse, recommend or consummate, or enter into any letter of intent, agreement or agreement in principle with respect to a Competing Transaction; and (d) grant any waiver, amendment or release under any standstill, confidentiality or similar agreement or takeover, anti-takeover, moratorium, “business combination,” “fair price,” “control share” or other similar laws enacted under any laws applicable to the Company.

Notwithstanding the foregoing, prior to the receipt of the required shareholder authorization and approval of the Merger Agreement, if the Company has otherwise complied in all material respects with its obligations set forth in the preceding paragraph, following receipt by the Company of an unsolicited bona fide, written proposal or offer regarding a Competing Transaction, the Company and its representatives may, acting only under the direction of the Independent Committee:

provided that, the Independent Committee shall have provided written notice to Parent at least three business days prior to providing information or engaging or participating in any discussion as described above, and the Independent Committee shall have determined in its good faith judgment that such proposal or offer constitutes or would reasonably be expected to result in a Superior Proposal, and that failure to take such action would be inconsistent with the fiduciary duties of the Company’s board of directors under applicable laws.

Change of Recommendation (Page 100) 

The board of directors of the Company and the Independent Committee will not:

However, prior to, but not after, obtaining the required shareholder authorization and approval of the Merger Agreement, the board of directors of the Company, based on the unanimous recommendation of the Independent Committee, may (a) approve, recommend or otherwise declare advisable any Superior Proposal not solicited, entered into or agreed to in breach of obligations under the Merger Agreement, and/or authorize the Company to terminate the Merger Agreement or enter into an alternative acquisition agreement with respect to a superior proposal, in each case, if the board of directors of the Company (acting through the Independent Committee) determines in good faith, after consultation with outside legal counsel to the Independent Committee, that failing to do so is inconsistent with its fiduciary obligations under applicable laws; (b) withhold, withdraw, qualify or modify the company recommendation in a manner adverse to Parent or Merger Sub, and/or authorize the Company to terminate the Merger Agreement if any material development or material change in circumstances that affects the business, assets or operation of the Company (the “Intervening Event”) occurring or arising after the date thereof with respect to the Company.

Prior to making any such change of recommendation with respect to a Superior Proposal, the Company will

Prior to making any such change of recommendation with respect to an Intervening Event, the Company will:

Termination of the Merger Agreement (Page 107) 

The Merger Agreement may be terminated at any time prior to the Effective Time:

Termination Fee (Page 108) 

The Company is required to pay Parent a termination fee of US$340,000, if:

Parent is required to pay the Company a termination fee of US$680,000, if:

Fees and Expenses (Page 109) 

Whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the Merger and the other transactions contemplated by the Merger Agreement will be paid by the party incurring such expense. Please see “Special Factors – Fees and Expenses” beginning on page 75 for additional information.

The surviving corporation will pay any applicable fees, charges and expenses of the ADS depositary and government charges (other than withholding taxes, if any) due to or incurred by the ADS depositary in connection with distribution of the Per ADS Merger Consideration to holders of ADSs and the cancellation of ADSs (excluding any fees, including ADS cancellation or termination fees, payable by holders of ADSs in accordance with the Deposit Agreement).

Material U.S. Federal Income Tax Consequences (Page 76) 

The receipt of cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local and other tax laws. Please see “Special Factors – Material U.S. Federal Income Tax Consequences” beginning on page 76 for additional information. The tax consequences of the Merger to you will depend upon your personal circumstances. Because we may be or have been a passive foreign investment company, or PFIC, for U.S. federal income tax purposes during a U.S. Holder’s holding period for Shares or ADSs, any gain recognized by a U.S. Holder on the receipt of cash in exchange for such U.S. Holder’s Shares or ADSs may be taxed under special U.S. federal income tax rules, as described under “Material U.S. Federal Income Tax Consequences.” You should consult your tax advisors for a full understanding of the U.S. federal, state, local, foreign and other tax consequences of the Merger to you. 

Material PRC Income Tax Consequences (Page 79) 

Under the PRC Enterprise Income Tax Law, which took effect as of January 1, 2008 (the “EIT Law”), enterprises established under the laws of non-PRC jurisdictions but whose “de facto management body” are located in China are considered “resident enterprises” for PRC tax purposes. Under the implementation regulations issued by the State Council relating to the new tax law, “de facto management body” is defined as the body that has material and overall management control over the business, personnel, accounts and properties of an enterprise. The Company currently is not treated as a PRC resident enterprise by the relevant tax authorities. Since substantially all of the Company’s management is currently based in China and may remain in China in the future, the Company may be treated as a “resident enterprise” for the PRC tax purposes.

If the PRC tax authorities were to determine that the Company should be considered a resident enterprise, then gain recognized on the receipt of cash for the Shares pursuant to the Merger by shareholders who are not PRC residents could be treated as PRC-source income that would be subject to PRC income tax at a rate of 10% in the case of enterprises or 20% in the case of individuals (subject to applicable tax treaty relief, if any), and, even in the event that the Company is not considered a resident enterprise, gain recognized on the receipt of cash for Shares is subject to PRC tax if the holders of such Shares are PRC resident individuals. 

You should consult your own tax advisor for a full understanding of the tax consequences of the Merger to you, including any PRC tax consequences.

Material British Virgin Islands Tax Consequences (Page 79)

The British Virgin Islands currently have no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees or charges will be payable (either by direct assessment or withholding) to the government or other taxing authority in the British Virgin Islands under the laws of the British Virgin Islands in respect of the Merger or the receipt of cash for our Shares under the terms of the Merger. Please see “Special Factors – Material British Virgin Islands Tax Consequences” beginning on page 79 for additional information. 

Regulatory Matters (Page 76) 

The Company does not believe that any material federal or state regulatory approvals, filings or notices are required in connection with the Merger other than the approvals, filings or notices required under the federal securities laws and the filing of the Plan of Merger (and supporting documentation as specified in the BVI Companies Act) with the Registrar of Corporate Affairs of the British Virgin Islands and if the Registrar is satisfied that the requirements under the British Virgin Islands in respect of the merger have been complied with, the Registrar will issue a certificate of merger in the approved form. 

Accounting Treatment of the Merger (Page 75) 

Upon completion of the Merger, the Company would cease to be a publicly traded company, and the Company expects to account for the Merger at historical cost. 

Market Price of the Shares and the ADSs (Page 80) 

The closing price of the ADS on NASDAQ on September 15, 2020, the last trading date immediately prior to the Company’s announcement on September 16, 2020 that it had received “a going private” proposal, was US$3.68 per ADS. The Per ADS Merger Consideration of US$5.10 per Share (less US$0.05 per ADS cancellation fee payable pursuant to the Deposit Agreement), to be paid in the Merger represents a premium of approximately 38.6% to that closing price. 

QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER

The following questions and answers address briefly some questions you may have regarding the extraordinary general meeting and the Merger. These questions and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

Q:           What is the Merger? 

If you own ADSs and the Merger is completed, you will be entitled to receive US$5.10 per ADS in cash without interest (less US$0.05 per ADS cancellation fee payable pursuant to the Deposit Agreement), for each ADS you own as of the effective time of the Merger, unless you (a) surrender your ADS to the ADS depositary, pay the ADS depositary's fees required for the cancellation of ADSs (US$0.05 per ADS cancelled), provide instructions for the registration of the corresponding Shares, and certify that you have not given, and will not give, voting instructions as to the ADSs (or, alternatively, you will not vote the Shares) before ________ (New York City time) on ________, 2021, and become a registered holder of Shares by the close of business in the British Virgin Islands on ________, 2021, and (b) comply with the procedures and requirements for exercising Appraisal Rights for the Shares under Section 179 of the BVI Companies Act.

Please see “Special Factors – Material U.S. Federal Income Tax Consequences,” “Special Factors – Material PRC Income Tax Consequences” and “Special Factors – Material British Virgin Islands Tax Consequences” beginning on page 76 for a more detailed description of the tax consequences of the Merger. You should consult with your own tax advisor for a full understanding of how the Merger will affect your U.S. federal, state, local, foreign and other taxes. 

Q:            After the Merger is completed, how will I receive the Per Share Merger Consideration for my Shares? 

If your Shares are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee on how to surrender your Shares and receive the Per Share Merger Consideration for those Shares. 

Q:             After the Merger is completed, how will I receive the Per ADS Merger Consideration for my ADSs?

In the event of a transfer of ownership of ADSs that is not registered in the register of ADS holders maintained by the ADS depositary, the check for any cash to be exchanged upon cancellation of the ADSs will be issued to such transferee only if the ADRs, if applicable, are presented to the ADS depositary, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable ADS transfer taxes have been paid or are not applicable. The Per ADS Merger Consideration may be subject to backup withholding taxes if the ADS depositary has not received from the transferee a properly completed and signed U.S. Internal Revenue Service Form W–8 or W–9.

If your ADSs are held in "street name" by your broker, bank or other nominee, you will not be required to take any action to receive the net Merger consideration for your ADSs as the ADS depositary will arrange for the surrender of the ADSs and the remittance of the Per ADS Merger Consideration with The Depository Trust Company (the clearance and settlement system for the ADSs) for distribution to your broker, bank or nominee on your behalf. If you have any questions concerning the receipt of the Per ADS Merger Consideration, please contact your broker, bank or nominee.

Q:            When and where will the extraordinary general meeting be held? 

Q:            What matters will be voted on at the extraordinary general meeting? 

Q:            What vote of our shareholders is required to authorize and approve the Merger Agreement and the Plan of Merger? 

Q:            Who is entitled to vote at the extraordinary general meeting? 

Q:             What constitutes a quorum for the extraordinary general meeting? 

Q:             What effects will the Merger have on the Company? 

Q:             When do you expect the Merger to be completed? 

Q:            What happens if the Merger is not completed? 

Under specified circumstances in which the Merger Agreement is terminated, the Company may be required to pay Parent a termination fee, or Parent may be required to pay the Company a termination fee, in each case, as described under the caption “The Merger Agreement and Plan of Merger – Termination Fee” beginning on page 108. 

Q:            What do I need to do now? 

Q:           How do I vote if my Shares are registered in my name? 

Alternatively, you can attend the extraordinary general meeting and vote in person. If you decide to sign and send in your proxy card, and do not indicate how you want to vote, the Shares represented by your proxy will be voted FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and transactions contemplated by the Merger Agreement, including the Merger, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received to pass the shareholders resolution during the extraordinary general meeting unless you appoint a person other than the chairman of the meeting as proxy, in which case the Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines. If your Shares are held by your broker, bank or other nominee, please see below for additional information. 

Q:           How do I vote if I own ADSs?

If you own ADSs as of the close of business in New York City on ________, 2021, the ADS record date (and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below), you cannot vote at the meeting directly, but you may instruct the ADS depositary (as the holder of the Shares underlying your ADSs) how to vote the Shares underlying your ADSs by completing and signing the ADS voting instruction card and returning it in accordance with the instructions printed on it as soon as possible but, in any event, so as to be received by the ADS depositary no later than ________ (New York City time) on ________, 2021. The ADS depositary will endeavor, in so far as practicable, to vote or cause to be voted the number of Shares represented by your ADSs in accordance with your voting instructions. The ADS depositary will not vote or attempt to exercise the right to vote that attaches to the Shares other than in accordance with the instructions given by you and received by the ADS depositary.

Alternatively, you may directly vote at the extraordinary general meeting if you cancel your ADSs prior to the close of business in New York City on ________, 2021 and become a holder of Shares by the close of business in the British Virgin Islands on ________, 2021, the share record date. If you hold your ADSs through a financial intermediary such as a broker, you must rely on the procedures and timing of the financial intermediary through which you hold your ADSs if you wish to vote. If your ADSs are held by your broker, bank or other nominee, see below.

If you wish to cancel your ADSs, you need to make arrangements to deliver your ADSs to the ADS depositary for cancellation prior to ________ (New York City time) on ________ 2021, together with (a) delivery instructions for the corresponding Shares (name and address of person who will be the registered holder of Shares); (b) payment of the ADS cancellation fee (US$0.05 per ADS cancelled) and any applicable taxes; and (c) a certification that the ADS holder held the ADSs as of the ADS record date for the extraordinary general meeting and has not given, and will not give, voting instructions to the ADS depositary as to the ADSs being cancelled, or has given voting instructions to the ADS depositary as to the ADSs being cancelled but undertakes not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or nominee account, please contact your broker, bank or nominee to find out what actions you need to take to instruct the broker, bank or nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS depositary will arrange for the Hongkong and Shanghai Banking Corporation Limited, the custodian holding the Shares, to transfer registration of the Shares to the former ADS holder (or its designee). If, after registration of Shares in your name, you wish to receive a certificate evidencing the Shares registered in your name, you will need to request the registrar of the Shares to issue and mail a certificate to your attention. The process of surrendering ADSs and becoming a registered shareholder of the company may take a number of days. ADS holders wishing to do so should take action as soon as possible.

Q:           If my Shares or ADSs are held in a brokerage account, will my broker vote my Shares on my behalf? 

Q:            May I change my vote? 

If you hold Shares through a broker, bank or other nominee and have instructed the broker, bank or other nominee to vote your Shares, you must follow directions received from the broker, bank or other nominee to change your instructions. 

Holders of our ADSs may revoke their voting instructions by notification to the ADS depositary in writing at any time prior to ________ (New York City time) on ________, 2021. A holder of ADSs can do this in one of two ways:

If you hold your ADSs through a broker, bank or nominee and you have instructed your broker, bank or nominee to give ADS voting instruction to the ADS depositary, you must follow the directions of your broker, bank or nominee to change those instructions.

Q:             What should I do if I receive more than one set of voting materials? 

Q:           If I am a holder of certificated Shares or ADRs, should I send in my share certificates or my ADRs now? 

All holders of uncertificated Shares and uncertificated ADSs (i.e., holders whose Shares or ADSs are held in book entry) will automatically receive their cash consideration shortly after the Merger is completed without any further action required on the part of such holders. If your Shares or ADSs are held in “street name” by your broker, bank or other nominee you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your share certificates or ADRs in exchange for the Merger consideration. 

Q:           As a Shareholder, am I entitled to appraisal rights? 

We encourage you to read the information set forth in this proxy statement carefully and to consult your own British Virgin Islands legal counsel if you desire to exercise your appraisal rights. Please see “Appraisal Rights” beginning on page 113 as well as “Annex C – BVI Business Companies Act, 2004 – Section 179” to this proxy statement for additional information. 

Q:           If I own ADSs and seek to exercise appraisal rights, how do I convert my ADSs to Shares, and when is the deadline for completing the conversion of ADSs to Shares?

If you own ADSs and wish to exercise appraisal rights, you must surrender your ADSs to the ADS depositary (in the case of an ADR by delivering the ADR to the Bank of New York Mellon at ________, 2021). Upon your payment of the fees, including the applicable ADS cancellation fee (US$0.05 per ADS cancelled) and any applicable taxes, and a certification that you have not given, and will not give, voting instructions to the ADS depositary in respect of the ADSs being cancelled (or, alternatively, that you will not vote the Shares), the ADS depositary will transfer the Shares and any other deposited securities underlying the ADSs to such ADS holder or a person designated by such ADS holder. The deadline for surrendering ADSs to the ADS depositary for these purposes is ________, 2021 at ________ (New York City time).

You must become a registered holder of your Shares and lodge a written notice of objection to the Plan of Merger prior to the extraordinary general meeting.

We encourage you to read the information set forth in this proxy statement carefully and to consult your own British Virgin Islands legal counsel if you desire to exercise your appraisal rights. Please see "Appraisal Rights" beginning on page 113 as well as "Annex C—BVI Business Companies Act, 2004—Section 179" to this proxy statement for additional information.

Q:          Will any proxy solicitors be used in connection with the extraordinary general meeting? 

Q:           Do any of the Company’s directors or executive officers have interests in the Merger that may differ from those of other shareholders? 

Please see “Special Factors – Interests of Certain Persons in the Merger” beginning on page 72 for a more detailed discussion of how some of our Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of our shareholders generally. 

Q:             How will our directors and executive officers vote on the proposal to approve the Merger Agreement? 

Q:              Who can help answer my questions? 

SPECIAL FACTORS

Background of the Merger 

Events leading to the execution of the Merger Agreement described in this Background of the Merger occurred in China and Hong Kong. As a result, China Standard Time is used for all dates and times given.

Our board of directors (the “Board”) and senior management periodically review the Company’s long-term strategic plans with the goal of enhancing shareholder value. As part of this ongoing process, our board of directors and senior management, from time to time, have considered strategic alternatives that may be available to the Company. 

On September 15, 2020, Pujiang submitted a preliminary non-binding proposal letter (the “Proposal”) to the Board, proposing to acquire all of the outstanding Shares of the Company not already owned by Pujiang or its affiliates for US$1.667 in cash per Share, or US$5.00 in cash per ADS, subject to certain conditions, in a going private transaction (the “Proposed Transaction”). Pujiang indicated its intention to finance the Proposed Transaction with a combination of cash on hand and funds to be drawn from existing debt facilities. The Proposal stated that the price represented a premium of approximately 28.9% to the closing price of the Company’s ADSs on September 15, 2020 and a premium of approximately 44.3% to the volume-weighted average closing price of the ADSs during the last 180 trading days. On September 16, 2020, the Company issued a press release disclosing its receipt of the proposal letter.

The Board determined that it was in the best interests of the Company and its shareholders to form an independent committee (the “the Independent Committee”), consisting of the Board’s two independent and disinterested directors, Mr. Junhong Li (to serve as chairman of the Independent Committee) and Mr. Zhongcai Wu, to evaluate the Proposal submitted by Pujiang and other strategic alternatives for the Company. At the meeting of the Board on September 22, 2020, all members of the Board unanimously approved the establishment of the Independent Committee. The Board delegated full power and authority to the Independent Committee in connection with its evaluation of the Proposal and the Proposed Transaction, including, among other things, the power and authority to: (a) review and evaluate the Proposal and any alternative strategic options that the Company may pursue and negotiate and finalize definitive agreements, or terminate any such negotiation, in connection with the proposal as the Independent Committee deems appropriate and in the best interests of the Company and its shareholders, in accordance with applicable laws; (b) advise the Board whether the Proposal or any alternative transaction was advisable and fair to, and in the best interests of, the Company and the Unaffiliated Security Holders; (c) reject or approve the Proposal or any alternative transaction, or recommend such rejection or approval to the Board; and (d) engage legal, financial and other advisors and obtain any professional opinions from such advisors. The Board agreed that it would not recommend the Proposed Transaction or any alternative transaction for approval by the Company’s shareholders or otherwise approve the Proposed Transaction or any alternative transaction without a prior favorable recommendation by the Independent Committee. 

The Independent Committee reviewed pertinent documents and quotation from several legal counsels. Following a meeting with representatives from DLA Piper (UK) LLP (“DLA Piper”) to discuss the qualifications of DLA Piper’s attorneys and their experiences on similar transactions, the Independent Committee retained DLA Piper as its independent legal counsel on September 22, 2020. DLA Piper has not performed any work for the Rollover Shareholder, the Buyer Group or their respective affiliates prior to its engagement by the Independent Committee. 

On September 22, 2020, the Company issued a press release disclosing the formation of the Independent Committee and the engagement of its legal counsel to evaluate the Proposal.

From September 22 to October 2, 2020, the Independent Committee received proposals from, and conducted interviews with, several investment banking firms to act as independent financial advisor. On October 2, 2020, after deliberation on the experience, qualifications and reputation of each financial advisor candidate, the Independent Committee approved the engagement of Houlihan Lokey as its independent financial advisor. Among the reasons for Houlihan Lokey’s selection were its extensive experience in similar transactions, including representing special committees in going private transactions, its strong reputation, its extensive experience in dealing with China-based companies, its lack of existing material relationships with the Company or members of the Buyer Group, and its ability to interact in both English and Chinese. The Independent Committee subsequently entered into an engagement letter with Houlihan Lokey on October 2, 2020. On the same day, the Company issued a press release announcing the appointment of Houlihan Lokey as the independent financial advisor to assist the Proposed Transaction.

On October 12, 2020, the Independent Committee held a telephonic meeting with DLA Piper and Houlihan Lokey. At the meeting, DLA Piper discussed with the Independent Committee, among other things, Independent Committee’s role and responsibilities in such a transaction, including the fiduciary duty of care and the duty of loyalty to the shareholders of the Company that are unaffiliated with Pujiang or members of the Buyer Group, the best practices for the Independent Committee in the context of a going private transaction, and outside advisors’ respective roles in assisting the Independent Committee in performing its fiduciary duties. DLA Piper also discussed with each member of the Independent Committee as to whether he is aware of any conflict that would prevent him from objectively evaluating the Proposed Transaction. DLA Piper then described the general process and indicative timeline of a going private transaction, including SEC filings, the litigation and appraisal risk, and discussed with the Independent Committee key terms typically found in going private transaction documents, such as conditions precedents to closing, termination fees, market check process, in each case from a market practice perspective.

In the same meeting, Houlihan Lokey discussed with the Independent Committee the principal areas of work that they planned to undertake and explained to the Independent Committee the need for Houlihan Lokey to conduct financial due diligence on the Company in order to evaluate the fairness of the Proposed Transaction from a financial point of view and the methods Houlihan Lokey proposed to adopt when conducting its financial analysis. After the discussion, the Independent Committee instructed Houlihan Lokey to proceed with the financial due diligence on the Company.

On October 20, 2020, Wilson Sonsini Goodrich & Rosati (“Wilson Sonsini”), counsel to Pujiang and the Buyer Group, circulated the initial draft of the Merger Agreement to DLA Piper.

On October 26, 2020, at a meeting of the Independent Committee, DLA Piper and Houlihan Lokey discussed a number of key issues in the draft Merger Agreement circulated by Wilson Sonsini with members of the Independent Committee. Among other things, they discussed (a) payment of fees due to or incurred by the depositary in connection with the cancellation of ADSs and whether such fee would be paid by the Buyer Group or the ADS holders, (b) qualifications to the Company’s representations and warranties and covenants in light of Dr. Tang’s role in the Company’s management, (c) Pujiang’s financing plan, (d) the Independent Committee’s rights in dealing with any competing proposals from third parties, including the absence of a “go-shop” provision in the draft merger agreement, the advisability of conducting a “market check” and the rights of the Board to change its recommendation, (e) conditions precedent to the completion of the merger, including clearance of regulatory approval, and that holders of no more than 5% of the Shares shall have exercised dissenters’ rights, and (f) the amount and terms of termination fees payable by the Company and payable by Pujiang upon termination of the merger agreement under certain circumstances. Houlihan Lokey then orally briefed to the Independent Committee the use of a pre-signing “market check” and/or a “go shop” provision in similar prior “going private” transactions. The Independent Committee asked various questions regarding potential benefits, advantages, limitations, disadvantages of the use of a pre-signing “market check” and/or “go-shop” in a “going private” transaction, which Houlihan Lokey and DLA Piper answered. After extensive discussion of various related considerations among members of the Independent Committee and its advisors, which include, among other things, the fact that no potential buyer had approached the Company since the Company’s announcement of the Proposal by Pujiang on September 16, 2020 and the Pujiang’s beneficial ownership in the Company, which represented 65.9% of the Company’s outstanding Shares, the Independent Committee determined not to conduct such a “market check” or insist on a “go shop” provision, but would remain open to and evaluate any inbound inquiries and indications of interest.

The Independent Committee instructed DLA Piper to, among other things, (a) propose that fees due to or incurred by the ADS depositary in connection with the cancellation of ADSs shall be paid by Pujiang and the Buyer Group, (b) propose that the Company not make warranties against matters of which the Buyer Group has knowledge, (c) include Company as a third-party beneficiary of any equity commitment letter to be entered by Pujiang and Parent, (d) give the Board the power to change recommendation if not doing so would be inconsistent with its fiduciary duties, without conditioning such power on a superior competing proposal, and (e) further negotiate the dissenting shareholder condition with Pujiang.

On October 29, 2020, DLA Piper provided Wilson Sonsini with a draft of confidentiality agreement to be entered into by and between Pujiang and the Company. Wilson Sonsini sent to DLA Piper its comments on the draft confidentiality agreement on October 30, 2020.

On October 30, 2020, at the meeting of the Independent Committee, representatives from the Company provided the draft financial projections for the fiscal years ending 2020 through 2024, including projected revenue, projected costs and profit forecasts, to the Independent Committee, and shared with the independent directors the Company’s views on projected profit from the sale of plain surface PC strands, zinc coated PC wires and PC strands, and rare earth coated PC wires and PC strands. The representatives from the Company discussed the Covid-19 pandemic impact on the business of the Company, the status of new production line and market competition. During the meeting, Houlihan Lokey provided the Independent Committee with an overview of the financial projections of the Company, based on their understanding of the financial projections from their due diligence. Members of the Independent Committee discussed the financial projections extensively among themselves and with its advisors. Following this discussion, and after representatives from the Company had departed the meeting, the Independent Committee approved the financial projections, and instructed Houlihan Lokey to perform the valuation analysis of the Company based on the financial projections and other information that Houlihan Lokey deems appropriate and relevant.

On November 3, 2020, Mr. Junhong Li, the chairman of the Independent Committee, on behalf of the Company, entered into the confidential agreement with Pujiang. On the same day, DLA Piper circulated its comments on the draft Merger Agreement to Wilson Sonsini, which reflected discussions with the Independent Committee.

On November 7, 2020, Wilson Sonsini circulated the revised Merger Agreement, an initial draft of the equity commitment letter and an initial draft of a limited guarantee agreement to DLA Piper. Among other things, the revised Merger Agreement accepted certain revisions made by DLA Piper to exclude representations and warranties of the Company known by the Buyer Group but rejected certain revisions made to other provisions, including (i) giving the Board the power to change recommendation under certain circumstances, (ii) restoring the dissenting shareholder condition, and (iii) rejecting DLA Piper’s comments to the termination fee and counter-offering 3% of the Merger consideration for the Company termination fee and 6% of the merger consideration for the Parent termination fee.

On November 13, 2020, the Independent Committee held a telephonic meeting with DLA Piper and Houlihan Lokey. At the meeting, DLA Piper discussed certain terms of the revised Merger Agreement with the Independent Committee, including, among others, (a) market standard for closing conditions, (b) payment obligations of fees due to or incurred by the ADS depositary in connection with the cancellation of ADSs (c) the length of time for which the paying agent would hold funds intended for payment to shareholders of Company, and fees associated with retaining the services of a paying agent, (d) the extent to which Pujiang may rely on the Company’s representations and warranties to terminate the transaction, in light of Pujiang’s involvement in the Company’s operations; (e) the terms of covenants relating to Company’s post-signing operations, (f) the Independent Committee’s rights and obligations in dealing with any competing proposals from third parties and reversing a favorable recommendation and/or terminating the merger agreement, (g) the post-closing indemnification of the Independent Committee, (h) conditions precedent to the completion of merger, including clearance of regulatory issues pertaining to Chinese shareholders and the threshold for dissenting shareholder condition, and (i) the fairness of the proposed 3% of merger consideration for Company as termination fee and 6% of merger consideration of merger consideration as the Parent termination fee. DLA Piper then discussed the purpose and terms of equity commitment letter and the limited guarantee circulated by Wilson Sonsini on November 7, 2020, including but not limited to (a) the need to push back liability cap of Pujiang in the equity commitment letter and include the Company as a third-party beneficiary, and (b) with respect to the limited guarantee, the extent and terms under which Pujiang would be liable for the merger consideration and termination fee, the assignability of Pujiang’s guarantee, and time limit for the Company to exercise guaranteed rights against Pujiang. The Independent Committee then instructed DLA Piper to prepare an issues list of the Merger Agreement and other ancillary documents and further negotiate with Pujiang and its counsel. At the same meeting, Houlihan Lokey provided the Independent Committee with an update regarding its financial due diligence on the Company, and informed the Independent Committee that its work pertaining to its preliminary financial analysis was nearly complete, subject to internal approvals. Houlihan Lokey was also preparing a presentation for the Independent Committee and proposed to hold a meeting to discuss its preliminary financial analysis in the following week.

On November 17, 2020, Houlihan Lokey circulated to the Independent Committee a preliminary financial analysis report for its review and consideration. On November 20, 2020, the Independent Committee held a meeting to discuss the preliminary financial analysis presentation dated November 17, 2020 with Houlihan Lokey and DLA Piper. At the Meeting Houlihan Lokey discussed their preliminary views of the Company’s valuation and highlighted an adjustment to the proposed enterprise value and implied value of non-controlling interest of the Company based on the Company’s ownership in its operating subsidiaries. The adjustments were based upon, among others, the operating subsidiaries’ contribution of cash flow to the Company. The Independent Committee then discussed with its advisors the proposed merger consideration of US$5.00, as compared to the average closing price of the ADSs from periods ended on September 15, 2020. The parties then moved to discuss the Company’s financial information, including but not limited to (a) the Company’s turnover and profit margin derived from core products, (b) prospect for growth in light of sales and market share, and (c) capital expenditures. Houlihan Lokey discussed its preliminary discounted cash flow analysis of the Company and the justification for the discount rate and perpetual growth rate used in its analysis. Based on discounted cash flow analysis, Houlihan Lokey derived the implied per ADS value reference range of US$4.02 - US$6.53. Houlihan Lokey then moved to discuss market trading overview, a timeline of the Company’s ADS trading history, ADS trading activity prior to and after Pujiang’s Proposal. At this time, Houlihan Lokey was of the view that the mid-point of ADS value reference range of the company was approximately US$5.27 (based on a fair ADS value range of US$4.02 to US$6.53), which would give Company room to further negotiate the merger consideration and terms of the Merger Agreement in light of below mid-point offer price of US$5.00.

DLA Piper reiterated legal negotiation points of the transaction, principally with respect to deal certainty and representations and warranties. In particular, Pujiang was concerned about the concept of “fiduciary-out,” which would allow the Independent Committee to terminate the merger agreement after the signing of the Merger Agreement under certain circumstances. DLA Piper stressed the need for the Independent Committee to have the ability to terminate the Merger Agreement if a superior deal appears, in order to satisfy its fiduciary duty towards the Company and the Unaffiliated Security Holders. In addition, DLA Piper advised that the Independent Committee should be keep negotiating more definite terms for the equity commitment letter so as to ensure Pujiang’s funding. After Houlihan Lokey and DLA’s presentation, the Independent Committee asked questions concerning the valuation report, specifically, the source of information from which Houlihan Lokey determined that other than Pujiang, no shareholders hold more than 1% of the Company’s outstanding shares. Houlihan Lokey stated that such information was calculated and derived from public sources. The Independent Committee then decided to provide a price counter-offer prior to DLA Piper reverting to Wilson Sonsini with the Company’s issues list concerning the Merger Agreement.

From November 17, 2020 to November 27, 2020, DLA Piper and Wilson Sonsini, through exchange of drafts and telephonic meetings, continued to negotiate the terms of the Merger Agreement and other transaction documents. On November 27, 2020, as instructed by the Independent Committee, DLA Piper informed Wilson Sonsini that the Independent Committee would not be in a position to continue the negotiation without an upwards adjustment of the offer price to reflect the fair value of the Company’s ADSs. The parties then continued to discuss the acceptable merger consideration in multiple rounds of negotiations.

On December 11, 2020, based on the understanding after extensive negotiations that the revised proposal of US$1.70 per Share and US$5.10 (less the cancellation fee of US$0.05 per ADS) Per ADS Merger Consideration represented Pujiang’s best and final offer, the Independent Committee, Houlihan Lokey, and DLA Piper discussed extensively with respect to the fairness of the new merger consideration and the need to further negotiate the terms of the Merger Agreement and other transaction documents, in light of the new proposed merger consideration. The Independent Committee instructed DLA Piper to resume negotiation with Wilson Sonsini with respect to the terms of the Merger Agreement. Later that day, DLA Piper and Wilson Sonsini held a telephonic meeting to go through the key outstanding issues of the Merger Agreement. DLA Piper requested for a rollover and support agreement from Pujiang.

On December 14, 2020, Wilson Sonsini circulated the initial draft of Support Agreement. Meanwhile, after discussion with representative from Ogier, the Independent Committee engaged Ogier as the Independent Committee’s counsel with respect to BVI laws. After reviewing the relevant transaction documents, including the Merger Agreement, Ogier prepared a memorandum for the Independent Committee, detailing the fiduciary duty of the members of the Independent Committee to the Company’s shareholders unaffiliated with Pujiang or the Buyer Group in connection with the proposed going-private transaction under the laws of the British Virgin Islands, and advised the Independent Committee ways that the Independent Committee can better ensure that it has fulfilled its obligations under the laws of the British Virgin Islands.

On December 17, 2020, the Independent Committee and the representatives from DLA Piper, Houlihan Lokey held a telephonic meeting to discuss revised terms of the Merger Agreement. DLA Piper discussed material changes to key terms of the Merger Agreement since last meeting. It was noted that after multiple rounds of negotiations, the Merger consideration of the Company’s ADSs had been increased from US$5.00 per ADS to US$5.10 per ADS (less US$0.05 cancellation fee of the ADS, which shall be payable by the holders of ADSs). DLA Piper also explained to the Independent Committee about their ability to change recommendation with respect to the Merger if a superior proposal is made to the Company, or if an intervening event occurs before shareholders of the Company approve the Merger (an intervening event means any material development or change in circumstances that would affect the business, assets, or operations of the Company after the signing of the merger agreement that is not known or reasonably foreseeable for the Company). DLA Piper then discussed certain changes to the closing conditions from requiring that holders of no more than 5% of the shares shall have exercised dissenters’ rights to requiring that holders of no more than 10% of the shares shall have exercised dissenters’ rights, and informed the Independent Committee of the finalized termination fee and the closing date.

The Independent Committee’s then discussed the required shareholder votes to pass the Merger Agreement and the Merger, which is the affirmative vote of holders of shares representing at least a majority of the shares present and voting in person or by proxy at the Company’s shareholder meeting. DLA Piper reminded the Independent Committee that raising the voting threshold required for approving the Merger and the Merger Agreement will increase the influence and impact of the Unaffiliated Security Holders on the Merger. The parties at the meeting then discussed extensively on the shareholder voting threshold, and noted that in accordance with the BVI laws and the Company's articles of association, and as confirmed by the BVI counsel of the Company, the Merger (without the amendment of the articles of association of the Company) only requires the affirmative votes of the majority of the shares present and voting at the shareholder meeting. In was further noted that as the Buyer Group already held 65.9% of voting rights, increasing the voting threshold to 66^2/3% does not necessarily give significantly more influences to the Unaffiliated Security Holders of the Company. After extensive discussion among members of the Independent Committee and its advisors, the Independent Committee approved the proposed voting threshold, based on the need to protect the interest of the Unaffiliated Security Holders of the Company and the certainty of the transaction. Representatives from DLA Piper then briefly discussed the history and status of the parties’ negotiations on other transaction documents and discussed increases in equity commitment made by the Buyer Group to include expenses incurred by the Company in connection with the Merger.

Houlihan Lokey then presented to the Independent Committee its updated financial analysis with respect to the Company and the transaction proposed by Pujiang at the offer price of US$1.70 per Share without interest, or US$5.10 per ADS (less US$0.05 per ADS cancellation fee payable pursuant the terms of the Deposit Agreement). Houlihan Lokey reported that it had made certain updates to its last financial analyses made in November, to include among others, an increase in selected discount rate range due to updated market data. Houlihan Lokey then rendered its oral opinion to the Independent Committee, that, as of the date of the Meeting and based on the information available to Houlihan Lokey regarding the financial condition and prospects of the Company, the consideration to be received by the Unaffiliated Security Holders of the Company was fair to such Unaffiliated Security Holders from a financial point of view. Houlihan Lokey noted that it was prepared to execute and deliver a written fairness opinion to the Independent Committee on the same day of the Meeting. The full text of the written opinion of Houlihan Lokey is attached as Annex B to this proxy statement. For additional information regarding the financial analyses performed by and the opinion rendered by Houlihan Lokey, please refer to “Special Factors - Opinion of the Independent Committee’s Financial Advisor” beginning on page 55.

Thereafter, members of the Independent Committee discussed Houlihan Lokey’s financial analyses and fairness opinion, following which the Independent Committee unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders who are unaffiliated with Pujiang and the Buyer Group, (b) approved and declared it advisable for the Company to enter into the Merger Agreement, the Plan of Merger, other transaction documents and the transactions contemplated thereby, including the Merger, (c) recommended that the Board authorize and approve the entry into by the Company of the Merger Agreement, the Plan of Merger, other transaction documents and the transactions contemplated thereby, including the Merger, and (d) recommended that the Board direct that the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of the Board that the shareholders of the Company authorize and approve by way of a shareholder resolution the Merger Agreement, the Plan of Merger and the transactions contemplated under the Merger Agreement, including the Merger. See “Special Factors - Reasons for the Merger and Recommendation of the Independent Committee and the Board” beginning on page 40 for a description of the resolutions of the Independent Committee at this meeting.

Following the meeting of the Independent Committee on December 17, 2020, the Board convened a meeting. During the meeting, upon the unanimous determination and recommendation of the Independent Committee and acting through the Independent Committee, the Board had (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders (including those shareholders who are unaffiliated with Pujiang and the Buyer Group), (b) approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger and the consummation of the transactions contemplated thereby, including the Merger, and (c) resolved to direct that the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of the Board that the shareholders of the Company authorize and approve the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger.

Later on December 17, 2020, (i) the Company, Parent, and Merger Sub executed the Merger Agreement, (ii) the Company and Pujiang executed the Limited Guarantee, (iii) Parent and Pujiang executed the Support Agreement, and (iv) Parent and Pujiang executed the Equity Commitment Letter. The Company then issued press release announcing the execution of the Merger Agreement and the ancillary documents and furnished the press release and the executed Merger Agreement to the SEC as exhibits to its current report on Form 6-K.

On December 18, 2020, Pujiang, Acme, Elegant Kindness, and Dr. Tang filed with the SEC an Amendment No. 3 to the Schedule 13D originally filed with SEC on August 20, 2010.

Reasons for the Merger and Recommendation of the Independent Committee and Our Board of Directors 

The Board, acting upon the unanimous recommendation of the Independent Committee, which Independent Committee acted with the advice and assistance of its independent financial and legal advisors, evaluated the Merger, including the terms and conditions of the Merger Agreement. 

At a meeting on December 17, 2020, after careful deliberation and consultation with its financial advisor and legal counsel, the Independent Committee unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders who are unaffiliated with the Buyer Group, (b) approved and declared it advisable for the Company to enter into the Merger Agreement, the Plan of Merger, other transaction documents and the transactions contemplated thereby, including the Merger, (c) recommended that the Board authorize and approve the entry into by the Company of the Merger Agreement, the Plan of Merger, other transaction documents and the transactions contemplated thereby, including the Merger, and (d) recommended that the Board direct that the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of the Board that the shareholders of the Company authorize and approve by way of a shareholder resolution the Merger Agreement, the Plan of Merger and the transactions contemplated under the Merger Agreement, including the Merger.

On the same date following the Independent Committee meeting, the Board convened a meeting. Upon the unanimous determination and recommendation of the Independent Committee and acting through the Independent Committee, the Board had (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company and its shareholders (including those shareholders who are unaffiliated with the Buyer Group), (b) approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger and the consummation of the transactions contemplated thereby, including the Merger, and (c) resolved to direct that the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of the Board that the shareholders of the Company authorize and approve the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger.

In the course of reaching their respective determinations, the Independent Committee and the Board considered the following substantive factors and potential benefits of the Merger, each of which the Independent Committee and the Board believed supported their respective decisions, but which are not listed in any relative order of importance:

In addition, the Independent Committee and the Board believed that sufficient procedural safeguards were and are present to ensure that the Merger is procedurally fair to the Unaffiliated Security Holders and to permit the Independent Committee and the Board to represent effectively the interests of such Unaffiliated Security Holders. These procedural safeguards, which are not listed in any relative order of importance, are discussed below:

The Independent Committee and the Board also considered a variety of potentially negative factors discussed below concerning the Merger Agreement and the Merger, which are not listed in any relative order of importance:

The forgoing discussion of information and factors considered by the Independent Committee and the Board is not intended to be exhaustive, but includes the material factors considered by the Independent Committee and the Board. In view of the wide variety of factors considered by the Independent Committee and our board of directors, neither the Independent Committee nor the Board found it practicable to quantify or otherwise assign relative weights to the foregoing factors in reaching its conclusions. In addition, individual members of the Independent Committee and the Board may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The Independent Committee recommended that the Board authorize and approve, and the Board authorized and approved, the Merger Agreement based upon the totality of the information presented to and considered by it. 

In the course of reaching its conclusion regarding the fairness of the Merger to the Unaffiliated Security Holders and its decision to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, the Independent Committee considered financial analyses presented by Houlihan Lokey as an indication of the going concern value of the Company. These analyses included, among others, a discounted cash flow analysis. The Independent Committee noted that the financial analyses performed by Houlihan Lokey relied only on a discounted cash flows analysis while also presenting information with respect to selected companies and selected transactions for information purposes. The Independent Committee also noted Houlihan Lokey’s view that the results derived from the selected companies analysis and selected transactions analysis do not provide a meaningful comparison to the Company because (i) there were not a sufficient number of meaningfully comparable companies to the Company to serve as a basis of comparison for the selected companies analysis, and (ii) there were not a sufficient number of transactions involving target companies that were meaningfully comparable to the Company for the selected transactions analysis. After reviewing the information with respect to selected companies and selected transactions presented by Houlihan Lokey and making inquiries about the availability of comparable companies and transactions for which financial information was publicly available, the Independent Committee concluded that the results derived from the selected company analysis and selected transactions analysis would not provide a meaningful comparison to the Company. The Independent Committee adopted Houlihan Lokey’s financial analyses as a whole, including its determinations that the selected companies analysis and transactions analysis did not result in meaningful comparisons with respect to the Company and the Merger. . All of the material analyses as presented to the Independent Committee on December 17, 2020 are summarized below under the caption “Special Factors - Opinion of the Independent Committee’s Financial Advisor” beginning on page 55. The Independent Committee expressly adopted these analyses and the opinion of Houlihan Lokey, among other factors considered, in reaching its determination as to the fairness of the transactions contemplated by the Merger Agreement, including the Merger. 

Neither the Independent Committee nor the Board considered the liquidation value of Company’s assets because each considers the Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations. In addition, the Independent Committee and the Board believe that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going concern value. In addition, the Independent Committee and the Board believe that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going concern value on the following grounds: (i) the realization of value in a liquidation would involve selling many distinct operating entities and such a process would likely be complex and time consuming, which might delay or impede such a process, (ii) a liquidation of some (but not all) assets would risk leaving unattractive, orphaned assets that would be difficult to monetize, (iii) the tax implications and lay-off costs in a liquidation are difficult to quantify, and could be significant relative to a sale of the Company as a going concern and (iv) neither the Independent Committee nor the Board were aware of any precedents of U.S.-listed PRC companies liquidating their entire business and returning the proceeds to shareholders. Each of the Independent Committee and the Board believes the analyses and additional factors it reviewed provided an indication of the Company’s going concern value. Each of the Independent Committee and the Board also considered the historical market prices of the Company’s ADSs as described under the caption “Market Price of the Company’s Shares and ADSs, Dividends and Other Matters - Market Price of the Shares and the ADSs” beginning on page 80.

Neither the Independent Committee nor the Board considered the Company’s net book value, which is defined as total assets minus total liabilities, attributable to the shareholders of the Company, as a factor. The Independent Committee and the Board believe that net book value is not a material indicator of the value of the Company as a going concern. The Company’s net book value per Share as of December 31, 2019 was US$6.60, which is based on the 19,791,110 issued and outstanding Shares as of December 31, 2019. Net book value does not take into account the future prospects of the Company, market conditions, trends in our industry or the business risks inherent in competing with larger companies in our industry. The Company is not aware of any firm offers made by any unaffiliated person, other than the filing persons, during the past two years for (i) the Merger or consolidation of the Company with or into another company, or vice-versa; (ii) the sale or other transfer of all or any substantial part of the assets of the Company; or (iii) a purchase of the Company’s securities that would enable the holder to exercise control of the Company.

In reaching its determination that the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger, are fair to and in the best interests of the Company and the Unaffiliated Security Holders and its decision to authorize and approve the Merger Agreement and recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger, by our shareholders, the Board, on behalf of the Company, considered the analysis and recommendation of the Independent Committee and the factors examined by the Independent Committee as described above under this section and adopted such recommendations and analysis.

For the foregoing reasons, each of the Company and the Board believes that the Merger Agreement, the Plan of Merger and the transactions contemplated thereby are substantively and procedurally fair to and in the best interests of the Company and the Unaffiliated Security Holders. 

Except as discussed in “Special Factors - Background of the Merger,” “Special Factors - Reasons for the Merger and Recommendation of the Independent Committee and our Board of Directors,” and “Special Factors - Opinion of the Independent Committee’s Financial Advisor,” no director who is not an employee of the Company has retained an unaffiliated representative to act solely on behalf of Unaffiliated Security Holders for purposes of negotiating the terms of the transaction and/or preparing a report concerning the fairness of the transaction. 

Position of the Buyer Group as to the Fairness of the Merger 

SEC rules governing going-private transactions, each member of the Buyer Group is required to express his or its belief as to the fairness of the Merger to the Unaffiliated Security Holders.

Each member of the Buyer Group is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the Buyer Group as to the fairness of the Merger are not intended to be and should not be construed as a recommendation to any shareholder as to how that shareholder should vote on the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger. Members of the Buyer Group have interests in the Merger that are different from, and/or in addition to, those of the other shareholders of the Company by virtue of their continuing interests in the Surviving Company after the completion of the Merger. These interests are described under the section entitled “Special Factors—Interests of Certain Persons in the Merger—Interests of the Buyer Group” beginning on page 72.

The Buyer Group believes that the interests of the Unaffiliated Security Holders were represented by the Independent Committee, which negotiated the terms and conditions of the Merger Agreement with the assistance of its independent legal and financial advisors. The Buyer Group attempted to negotiate a transaction that would be most favorable to the Buyer Group, rather than to the Unaffiliated Security Holders and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were substantively and procedurally fair to such holders. The Buyer Group did not participate in the deliberations of the Independent Committee regarding, and did not receive any advice from the Independent Committee’s independent legal or financial advisors as to, the fairness of the Merger to the Unaffiliated Security Holders. Furthermore, the Buyer Group did not itself undertake a formal evaluation of the fairness of the Merger. No financial advisor provided the Buyer Group with any analysis or opinion with respect to the fairness of the Per Share Merger consideration to the Unaffiliated Security Holders.

Based on their knowledge and analyses of available information regarding the Company, as well as discussions with the Company’s senior management regarding the Company and its business and the factors considered by, and findings of, the Independent Committee and the Board discussed under the section entitled “—Reasons for the Merger and Recommendation of the Independent Committee and Our Board of Directors” beginning on page 40, the Buyer Group believes that the Merger is substantively fair to Unaffiliated Security Holders based on the following factors, which are not listed in any relative order of importance:

The Buyer Group did not consider the liquidation value of the Company because the Buyer Group considers the Company to be a viable going concern and views the trading history of the Company’s ADSs as an indication of the Company’s going concern value, and, accordingly, did not believe liquidation value to be relevant to a determination as to the fairness of the Merger.

The Buyer Group did not consider the Company’s net book value, which is an accounting concept based on historical costs, as a factor because it believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs and therefore not a relevant measure in the determination as to the fairness of the Merger. See “Where You Can Find More Information” beginning on page 122 for a description of how to obtain a copy of the Company's Annual Report.

The Buyer Group did not establish, and did not consider, a going concern value for the Company as a public company to determine the fairness of the Merger consideration to the Unaffiliated Security Holders because, following the Merger, the Company will have a significantly different capital structure. However, to the extent the pre-Merger going concern value was reflected in the pre-announcement price of the Company’s ADSs, the Per ADS Merger Consideration of US$5.10 represents a premium to the going concern value of the Company.

The Buyer Group is not aware of, and thus did not consider, any offers or proposals made by any unaffiliated person during the past two years for (i) a Merger or consolidation of the Company with or into another company, (ii) a sale or transfer of all or substantially all of the Company’s assets or (iii) the purchase of all or a substantial portion of the Company’s ordinary shares that would enable such person to exercise control of or significant influence over the Company.

The Buyer Group did not perform or receive any independent reports, opinions or appraisals from any third party related to the Merger, and thus did not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the Merger to Unaffiliated Security Holders.

The Buyer Group believes that the Merger is procedurally fair to the Unaffiliated Security Holders based on the following factors, which are not listed in any relative order of importance:

The foregoing is a summary of the information and factors considered and given weight by the Buyer Group in connection with its evaluation of the fairness of the Merger to the Unaffiliated Security Holders, which is not intended to be exhaustive, but is believed by the Buyer Group to include all material factors considered by it. The Buyer Group did not find it practicable to assign, and did not assign, relative weights to the individual factors considered in reaching its conclusion as to the fairness of the Merger to the Unaffiliated Security Holders. Rather, its fairness determination was made after consideration of all of the foregoing factors as a whole.

The Buyer Group believes these factors provide a reasonable basis for its belief that the Merger is both substantively and procedurally fair to the Unaffiliated Security Holders. This belief, however, is not intended to be and should not be construed as a recommendation by the Buyer Group to any Unaffiliated Security Holder of the Company as to how such Unaffiliated Security Holder should vote with respect to the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the transactions contemplated under the Merger Agreement.

Certain Financial Projections 

The Company does not generally make public detailed financial forecasts or internal projections as to future performance, revenues, earnings or financial condition. However, the Company’s management prepared certain financial projections for the fiscal year ended December 31, 2020 through the fiscal year ending December 31, 2024 (the “Management Projections”) for the Independent Committee and Houlihan Lokey in connection with the financial analysis of the Merger. These financial projections, which were based on Company management’s estimates of the Company’s future financial performance as of the date provided, were prepared by the Company’s management for internal use and for use by Houlihan Lokey in its financial analyses, and were not prepared with a view toward public disclosure or compliance with published guidelines of the SEC regarding forward-looking information or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts or U.S. generally accepted accounting principles. 

The financial projections are not a guarantee of performance. They involve significant risks, uncertainties and assumptions. In compiling the projections, our management considered historical performance, combined with estimates regarding net revenue, gross profit, operating expenses, income from operations and net income. Although the projections are presented with numerical specificity, they were based on numerous assumptions and estimates as to future events made by our management that our management believed were reasonable at the time the projections were prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. In addition, factors such as industry performance, the market for our existing and new products, the competitive environment, expectations regarding future acquisitions or any other transactions and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict and beyond the control of our management, may cause actual future results to differ materially from the results forecasted in these financial projections. 

In addition, the projections do not take into account any circumstances or events occurring after the date that they were prepared. For instance, the projections do not give effect to completion of the Merger or any changes to our operations or strategy that may be implemented after the time the projections were prepared. As a result, there can be no assurance that the projections will be realized, and actual results may be significantly different from those contained in the projections. 

Neither our independent registered public accounting firm, BDO China Shu Lun Pan Certified Public Accountants LLP, nor any other independent accountants have examined, compiled, or performed any procedures with respect to the financial projections or any amounts derived therefrom or built thereupon, nor have they given any opinion or any other form of assurance on such information or its achievability. The financial projections included in this proxy statement are included solely to give shareholders access to certain information that was made available to the Independent Committee and Houlihan Lokey , and are not included in this proxy statement in order to induce any holder of Shares to vote in favor of approval of the Merger Agreement or to elect not to seek appraisal for his or her Shares. 

The following table summarizes the financial projections prepared by our management and considered by the Independent Committee and Houlihan Lokey in connection with their analyses of the proposed transaction: 

(1) Management projected gross profit and operating expenses exclude depreciation and amortization.

(2) “EBITDA” refers to earnings before interest, taxes, depreciation and amortization.

(3) “EBIT” refers to earnings before interest and taxes.

Opinion of the Independent Committee’s Financial Advisor 

The Independent Committee retained Houlihan Lokey to act as its financial advisor in connection with the Merger, and on December 17, 2020, Houlihan Lokey rendered its oral opinion, which it subsequently confirmed in writing, to the Independent Committee as to the fairness, from a financial point of view, of the Merger Consideration to be received by the Unaffiliated Security Holders in the Merger pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in preparing its opinion.

Houlihan Lokey’s opinion was directed to the Independent Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, of the Merger Consideration to be received by the Unaffiliated Security Holders in the Merger pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion and did not address any other aspect or implication of the Merger or any other agreement, arrangement, or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to the Independent Committee, the Board, any shareholder or any other person as to how to act or vote with respect to any matter relating to the Merger.

In arriving at its opinion, Houlihan Lokey, among other things:

conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

In giving its opinion, Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to Houlihan Lokey, discussed with or reviewed by Houlihan Lokey, or publicly available, and did not assume any responsibility with respect to such data, material and other information. In addition, management of the Company advised Houlihan Lokey, and Houlihan Lokey assumed, that the Management Projections (and adjustments thereto) reviewed by it were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the Company and the other matters covered thereby, and Houlihan Lokey expressed no opinion with respect to such projections or the assumptions on which they were based. Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Houlihan Lokey incomplete or misleading. The credit, financial and stock markets have recently been experiencing unusual volatility and Houlihan Lokey expressed no opinion or view as to any potential effects of such volatility on the Merger, and its opinion did not purport to address potential developments in any such markets. In addition, Houlihan Lokey expressed no view as to, and its opinion did not address, foreign currency exchange risks (if any) associated with the Merger, the Management Projections or otherwise.

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments that were referred to therein were true and correct, (b) each party to the Merger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, and (c) all conditions to the consummation of the Merger will be satisfied without waiver thereof, and (d) the Merger would be consummated in a timely manner in accordance with the terms described in the Merger Agreement and such other related documents and instruments, without any amendments or modifications thereto. Houlihan Lokey relied upon and assumed, without independent verification, that (i) the Merger would be consummated in a manner that complies in all respects with all applicable foreign, federal, and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would result in the disposition of any assets of the Company or the Parent, or otherwise have an effect on the Merger, or the Company that would be material to Houlihan Lokey’s analyses or its opinion. Houlihan Lokey also relied upon and assumed, without independent verification, at the direction of the Company, that any adjustments to the Merger Consideration pursuant to the Merger Agreement would not be material to its analyses or its opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final form of the Plan of Merger would not differ in any respect from the form attached as an annex to the Merger Agreement.

Furthermore, in connection with such opinion, Houlihan Lokey was not requested to make and did not make any physical inspection or independent appraisal or evaluation of any of the assets, properties, or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company, or any other party, nor was Houlihan Lokey provided with any such appraisal or evaluation. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of any entity or business. Houlihan Lokey undertook no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims, or other contingent liabilities, to which the Company was or may have been a party or was or may have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company was or may have been a party or was or may have been subject.

Houlihan Lokey was not requested to, and did not, (a) initiate any discussions or negotiations with, or solicit any indications of interest from, third parties with respect to the Merger, or the securities, assets, business or operations of the Company or any other party, or any alternatives to the Merger, (b) negotiate the terms of the Merger, or (c) advise the Independent Committee, the Board, the Company, or any other party with respect to alternatives to the Merger. Houlihan Lokey’s opinion was necessarily based on financial, economic, market, and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of such opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm, or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of such opinion.

Houlihan Lokey’s opinion was furnished for the use of the Independent Committee (in its capacity as such) in connection with the Independent Committee’s evaluation of the Merger, and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey has consented to the inclusion in this proxy statement of its opinion in its entirety and the description thereof. Houlihan Lokey’s opinion was not intended to be, and did not constitute, a recommendation to the Independent Committee, the Board, any security holder, or any other party as to how to act or vote with respect to any matter relating to the Merger or otherwise.

Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Independent Committee, the Board, the Company, or Parent, their respective security holders, or any other party to proceed with or effect the Merger, (ii) the terms of any arrangements, understandings, agreements, or documents related to, or the form, structure, or any other portion or aspect of, the Merger or otherwise (other than the Merger Consideration to the extent expressly specified in Houlihan Lokey’s opinion), (iii) the fairness of any portion or aspect of the Merger to the holders of any class of securities, creditors, or other constituencies of the Company, or to any other party, except if and only to the extent expressly set forth in the last sentence of Houlihan Lokey’s opinion, (iv) the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available for the Company, Parent or any other party, (v) the fairness of any portion or aspect of the Merger to any one class or group of the Company’s, Parent’s or any other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s, Parent’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not the Company or its security holders, Parent, or its security holders, or any other party is receiving or paying reasonably equivalent value in the Merger, (vii) the solvency, creditworthiness, or fair value of the Company, Parent, or any other participant in the Merger, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance, or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature, or any other aspect of any compensation to or consideration payable to or received by any officers, directors, or employees of any party to the Merger, any class of such persons or any other party, relative to the Merger Consideration or otherwise. Furthermore, no opinion, counsel, or interpretation was intended in matters that require legal, regulatory, accounting, insurance, tax, or other similar professional advice. Houlihan Lokey assumed that such opinions, counsel, or interpretations were or would be obtained from appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the Independent Committee, on the assessments by the Independent Committee, the Board, the Company, Parent, and their respective advisors as to all legal, regulatory, accounting, insurance, tax, and other similar matters with respect to the Company and the Merger or otherwise.

In performing its analyses, Houlihan Lokey considered general business, economic, industry, and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, transaction or business used in Houlihan Lokey’s analyses for comparative purposes is identical to the Company or the proposed Merger and an evaluation of the results of those analyses is not entirely mathematical. The estimates contained in the Management Projections prepared by members of the management of the Company and the implied reference range values indicated by Houlihan Lokey’s analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses, or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of the Company. Much of the information used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

Houlihan Lokey’s opinion was only one of many factors considered by the Independent Committee and the Board in evaluating the proposed Merger. Neither Houlihan Lokey’s opinion nor its analyses were determinative of the Merger Consideration or of the views of the Independent Committee or the Board with respect to the Merger or the Merger Consideration. Under the terms of its engagement by the Company, neither Houlihan Lokey’s opinion nor any other advice or services rendered by it in connection with the proposed Merger or otherwise should be construed as creating, and Houlihan Lokey should not be deemed to have, any fiduciary duty to, or agency relationships with, the Independent Committee, the Board, the Company, Parent, any security holder or creditor of the Company, Parent, or any other person, regardless of any prior or ongoing advice or relationships. The type and amount of consideration payable in the Merger were determined through negotiation between the Independent Committee on the one hand and the Buyer Group on the other hand, and the decision to enter into the Merger Agreement was solely that of the Independent Committee and the Board.

Financial Analyses

In preparing its opinion to the Independent Committee, Houlihan Lokey performed a variety of analyses. The summary of Houlihan Lokey’s analyses is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative, and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses are readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology, or factor. While the results of each analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies, and factors, without considering all analyses, methodologies, and factors, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion.

The following is a summary of the material financial analyses performed by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the Independent Committee on December 17, 2020. The order of the analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey.

For purposes of its analysis, Houlihan Lokey reviewed a number of financial metrics, including:

The estimates of the future financial performance of the Company relied upon for the financial analyses described below were based on the Management Projections.

Selected Companies Analysis. Houlihan Lokey considered performing a selected companies analysis. However, due to the limited comparability of the Company to other public companies, Houlihan Lokey concluded that it would not be able to derive a meaningful result for which an implied valuation range could be concluded based on an analysis of comparable companies.

Selected Transactions Analysis. Houlihan Lokey considered performing a selected transactions analysis. However, due to the limited comparability of the Company to other companies subject to transactions for which financial information was made publicly available, Houlihan Lokey concluded that it would not be able to derive a meaningful result for which an implied valuation range could be concluded based on an analysis of comparable transactions.

Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted cash flow analysis of the Company by calculating the estimated net present value of the projected unlevered, after-tax free cash flows of the Company based on the Management Projections. Houlihan Lokey calculated terminal values for the Company by applying a range of perpetuity growth rates of 0.0% to 1.0% to the Company’s normalized 2024 unlevered free cash flows, which rate was derived based on Company management’s expected long-term growth rate for the Company and the industry. The net present values of the Company’s projected future cash flows and terminal values were then calculated using discount rates ranging from 18.0% to 21.0%, which was derived based on certain financial metrics, including betas, capital structures and tax rates for the Company and the selected companies as presented in Houlihan Lokey’s discussion materials for the Independent Committee, as well as risk-free rates for the U.S. and China, and size premium data as provided by third party sources. The discounted cash flow analysis indicated an implied per Share reference range of US$4.34 to US$6.23 per ADS, as compared to Merger Consideration of US$5.10 per ADS.

Houlihan Lokey was engaged by the Independent Committee to act as its financial advisor in connection with the Merger and provide financial advisory services to the Independent Committee, including an opinion as to the fairness from a financial point of view of the Merger Consideration to be received by the Unaffiliated Security Holders. The Independent Committee engaged Houlihan Lokey based on Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Pursuant to its engagement by the Independent Committee, Houlihan Lokey is entitled to a fixed fee of US$450,000, US$150,000 of which became payable upon execution of Houlihan Lokey’s engagement letter, US$100,000 of which became payable at the beginning of the third week following the date of Houlihan Lokey’s engagement letter, US$200,000 of which became payable upon the delivery of Houlihan Lokey’s opinion at the request of the Independent Committee. No portion of Houlihan Lokey’s fee is contingent upon any conclusions set forth in Houlihan Lokey’s opinion. The Company has also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates, and certain related parties against certain liabilities and expenses, including certain liabilities under the federal securities laws, arising out of or related to Houlihan Lokey’s engagement.

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold, or sell long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, Parent, or any other party that may be involved in the Merger and their respective affiliates or security holders or any currency or commodity that may be involved in the Merger.

Neither Houlihan Lokey nor any of its affiliates has in the past two years provided or is currently providing any investment banking, financial advisory and/or other financial or consulting services to the Company, Parent and their respective affiliates. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to the Company, the Parent, other participants in the Merger or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. In addition, Houlihan Lokey and certain of its affiliates and certain of our and their respective employees may have committed to invest in private equity or other investment funds managed or advised by the Company, the Parent, other participants in the Merger or certain of their respective affiliates or security holders, and in portfolio companies of such funds, and may have co-invested with the Company, the Parent, other participants in the Merger or certain of their respective affiliates or security holders, and may do so in the future. Furthermore, in connection with bankruptcies, restructurings, distressed situations and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, the Company, the Parent, other participants in the Merger or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.

Buyer Group, Parent and Merger Sub's Purpose of and Reasons for the Merger 

Under the SEC rules governing going-private transactions, each member of the Buyer Group is required to express his or its reasons for the Merger to the Company’s Unaffiliated Security Holders, as defined in Rule 13e-3 of the Exchange Act.

Each member of the Buyer Group is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. For the Buyer Group, the purpose of the Merger is to enable Parent to acquire 100% control of the Company, in a transaction in which the Company’s ordinary shares (other than the Excluded Shares and the Dissenting Shares) will be cancelled in exchange for US$1.70 per ordinary share, so that Parent will bear the rewards and risks of the sole ownership of the Company after the Merger, including any future earnings and growth of the Company as a result of improvements to the Company’s operations or acquisitions of other businesses. In addition, the Merger will allow Dr. Tang, together with his affiliates, to increase his ownership percentage in the Company through his indirect ownership in Parent and maintain his leadership role with the Surviving Company.

The Buyer Group believes the operating environment has changed in a significant manner since the Company’s initial public offering and these changes have increased the uncertainty and volatility inherent in the business model of companies similar to the Company. As a result, the Buyer Group is of the view that there is potential for considerably greater short- and medium-term volatility in the Company’s earnings. Responding to current market challenges will require tolerance for volatility in the performance of the Company’s business and a willingness to make business decisions focused on improving the Company’s long-term profitability. The Buyer Group believes that these strategies would be most effectively implemented in the context of a private company structure. As a privately held entity, the Company’s management will have greater flexibility to focus on improving long-term profitability without the pressures exerted by the public market’s valuation of the Company and its emphasis on short-term period-to-period performance. Further, as a privately held entity, the Company will be relieved of many of the expenses, burdens and constraints imposed on companies that are subject to the public reporting requirements under the U.S. federal securities laws, including the Exchange Act and the Sarbanes-Oxley Act of 2002. The Buyer Group decided to undertake the going-private transaction at this time because it wants to take advantage of the benefits of the Company being a privately held company as described above. In the course of considering the going-private transaction, the Buyer Group did not consider alternative transaction structures because the Buyer Group believed the Merger was the most direct and effective way to enable the Buyer Group to acquire ownership and control of the Company.

The Company’s Purpose of and Reasons for the Merger

The Company’s purpose for engaging in the Merger is to enable its shareholders to receive US$1.70 per Share in cash without interest or US$5.10 per ADS (less US$0.05 cancellation fee pursuant to the Depositary Agreement) in cash without interest by the Company’s ADS holders. The Company has determined to undertake the Merger at this time based om the analyses, determinations and conclusions of the Independent Committee and the board of the directors described in detail under the caption “Special Factors – Reasons for the Merger and Recommendation of the Independent Committee and the Board.”

Effect of the Merger on the Company 

Private Ownership 

The Company’s ADSs are currently listed on NASDAQ under the symbol “OSN.” It is expected that, immediately following the completion of the Merger, the Company will cease to be a publicly traded company and will instead become a privately held company directly owned by Parent. Following the completion of the Merger, the ADSs will cease to be listed on NASDAQ, and price quotations with respect to sales of the ADSs in the public market will no longer be available. The Company will instruct the ADS depositary to terminate the ADS program. In addition, registration of the Shares and the ADSs under the Exchange Act may be terminated upon the Company’s application to the SEC if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Shares. Ninety days after the filing of Form 15 in connection with the completion of the Merger or such longer period as may be determined by the SEC, registration of the Shares under the Exchange Act will be terminated. At such time, the Company will no longer be required to file periodic reports with the SEC or otherwise be subject to the United States federal securities laws, including Sarbanes-Oxley, applicable to public companies, and our shareholders will no longer enjoy the rights or protections that the United States federal securities laws provide, including reporting obligations for directors, officers and principal securities holders of the Company.

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, except as described below, (i) each Share (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$1.70 per Share in cash and without interest and (ii) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$5.10 per ADS (less US$0.05 per ADS cancellation fee payable pursuant to the terms of the Deposit Agreement), and all holders from time to time of American depositary receipts issued thereunder. The Excluded Shares, which include (a) the Rollover Shares, (b) the Dissenting Shares, and (c) Shares (if any) owned by the Company or any direct or indirect wholly-owned subsidiaries of the Company (or held in the Company’s treasury) and Shares held by the Parent or any of its subsidiaries, will not be converted into the right to receive the consideration described in the immediately preceding sentence. Each Excluded Share (excluding any Dissenting Share) issued and outstanding immediately prior to the Effective Time , will be cancelled and will cease to exist, and no Merger consideration will be delivered with respect thereto. Each Dissenting Share will be cancelled at the Effective Time for the right to receive the fair value of such Shares as determined in accordance with the provisions of the BVI Companies Act. The ADS depositary will call for surrender of all outstanding ADSs (other than any ADSs representing Excluded Shares) to be exchanged for the applicable merger consideration.

Directors and Management of the Surviving Company 

The director of Merger Sub immediately prior to the completion of the Merger will become the initial director of the Surviving Company, and the officers of the Company will become the initial officers of the Surviving Company, in each case, unless otherwise determined by Parent prior to the Effective Time.

Primary Benefits and Detriments of the Merger 

The primary benefits of the Merger to the Company’s Unaffiliated Security Holders include, without limitation, the following:

The primary detriments of the Merger to the Company’s Unaffiliated Security Holders include, without limitation, the following:

The primary benefits of the Merger to the Company’s directors and executive officers (other than the members of the Buyer Group) include, without limitation, the following:

The primary detriments of the Merger to the Company’s directors and executive officers (other than members of the Buyer Group) include they will resign from the Company and will no longer receive income from the Company. 

The primary benefits of the Merger to the Buyer Group include the following:

The primary detriments of the Merger to the Buyer Group include the following:

Effect of the Merger on the Company’s Net Book Value and Net Earnings 

Parent does not currently own any interest in the Company. Immediately after the closing of the Merger, Parent will own 100% of the outstanding Shares and will have a corresponding share in the Company’s net book value and net earnings. The Company’s net earnings attributable to the Company’s shareholders for the year ended December 31, 2019 was approximately US$0.56 and net book value attributable to the Company’s shareholders as of December 31, 2019 was approximately US$6.6.

The table below sets out the direct or indirect interest in the Company’s net book value and net earnings for the Buyer Group before and immediately after the Merger, based on the historical net book value as of December 31, 2019 and the net earnings of the Company for the fiscal year 2019. 

(1)       Ownership percentages prior to the Merger are based on 19,791,110 Shares issued and outstanding as of the date of this Proxy Statement.

Plans for the Company after the Merger 

Following the completion of the Merger, the Buyer Group will beneficially own 100% of the equity interests in the Surviving Company indirectly through Parent. The Buyer Group anticipates that the Company will continue to conduct its operations substantially as they are currently being conducted, except that the Company will cease to be a publicly traded company and will instead be a wholly owned subsidiary of Parent.

Following the completion of the Merger and the anticipated deregistration of the Company’s Shares and ADSs, the Company will no longer be subject to the Exchange Act and the compliance and reporting requirements of NASDAQ and the related direct and indirect costs and expenses, and may experience positive effects on profitability as a result of the elimination of such costs and expenses.

Except as set forth in this proxy statement and transactions already under consideration by the Company, the Buyer Group has no present plans or proposals that relate to or would result in an extraordinary corporate transaction involving the Company's corporate structure, business, or management, such as a Merger, reorganization, liquidation, relocation of any material operations, or sale or transfer of a material amount of assets. However, the Buyer Group will continue to evaluate the Company’s entire business and operations from time to time, and may propose or develop plans and proposals which they consider to be in the best interests of the Company and its equity holders, including the disposition or acquisition of material assets, alliances, joint ventures, and other forms of cooperation with third parties or other extraordinary transactions, including the possibility of relisting the Company or a substantial part of its business on another stock exchange. The Buyer Group expressly reserves the right to make any changes they deem appropriate to the operation of the Surviving Company in light of such evaluation and review as well as any future developments.

Alternatives to the Merger 

The board of directors of the Company did not independently determine to initiate a process for the sale of the Company. The Independent Committee was formed on September 22, 2020, in response to the receipt of the going private proposal letter from Pujiang on September 15, 2020. The Independent Committee discussed with its advisors other potential alternatives available to the Company, including the possibility of remaining as an independent company, and reviewed and discussed the proposed process to conduct a pre-signing market check through a third-party solicitation process.

In light of  (i) the beneficial ownership of the Buyer Group of approximately 65.9% of the entire issued and outstanding Shares (as of the date of this proxy statement), and (ii) the fact that, since the announcement of the proposed transaction and prior to the entry into the Merger Agreement, no party other than the members of the Buyer Group has contacted the Company or the Independent Committee expressing an interest in exploring an alternative transaction with the Company, the Independent Committee determined that (1) there were no other interested buyers and (2) no viable alternative to the proposed sale of the Company to the Buyer Group.

The Independent Committee also took into account that the Company can terminate the Merger Agreement in order to enter into an alternative acquisition agreement with respect to a Superior Proposal, prior to obtaining required shareholder approval of the Merger Agreement, subject to the payment to Parent of a termination fee of US$340,000. In this regard, the Independent Committee recognized that it has flexibility under the Merger Agreement to respond to an alternative transaction proposed by a third party that is or is reasonably likely to result in a Superior Proposal, including the ability to provide information to and engage in discussions and negotiations with such party (and, if such proposal is a Superior Proposal, recommend such proposal to the Company’s shareholders).

In addition, the Independent Committee also considered, as an alternative available to the Company to enhance shareholder value, that the Company remain as a public company. However, the Independent Committee did not believe such options to be equally or more favorable in enhancing shareholder value, after considering factors such as the forecasts of future financial performance prepared by management unaffiliated with the Buyer Group, the offer premium implied by the merger consideration, the increased costs of regulatory compliance for public companies, the challenges to the Company’s efforts to increase shareholder value as an independent publicly-traded company, and the requirement, as an SEC-reporting company, to disclose a considerable amount of business information to the public which will limit the Company’s ability to compete in the market.

Considering the possible alternatives to the Merger (including the possibility of continuing to operate the Company as an independent entity and the perceived risks of that alternative), the range of potential benefits to its shareholders of the possible alternatives and the timing and the likelihood of accomplishing the goals of such alternatives, the Independent Committee determined that none of these alternatives were reasonably likely to present superior opportunities for the Company or to create greater value for its shareholders than the proposed sale of the Company to the Buyer Group, taking into account risks of execution as well as business, financing, regulatory approval, competitive, industry and market risks.

Effects on the Company if the Merger is not Completed 

If the Merger Agreement and the Plan of Merger are not authorized and approved by the Company’s shareholders or if the Merger is not completed for any other reason, shareholders will not receive any payment for their Shares in connection with the Merger. Instead, the Company will remain a publicly traded company, the Shares will continue to be listed and traded on NASDAQ, provided that the Company continues to meet NASDAQ’s listing requirements, and the Company will remain subject to SEC reporting obligations. Therefore, the Company’s shareholders will continue to be subject to similar risks and opportunities as they currently are with respect to their ownership of our Shares. Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your Shares, including the risk that the market price of the Shares and the ADSs may decline to the extent that the current market price reflects a market assumption that the Merger will be completed. 

Under specified circumstances in which the Merger Agreement is terminated, the Company may be required to pay Parent a termination fee of US$340,000, or Parent may be required to pay the Company a termination fee of US$680,000, in each case, as described under the caption “The Merger Agreement and Plan of Merger - Termination Fee” beginning on page 108. 

If the Merger is not completed, from time to time, the Company’s board of directors will evaluate and review, among other things, the business, operations, dividend policy and capitalization of the Company and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If the Merger Agreement is not authorized and approved by the Company’s shareholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Company will be offered, or that the business, prospects or results of operations of the Company will not be adversely impacted. 

Financing 

The Company and the Buyer Group estimate that the total amount of funds necessary to complete the Merger and the related transactions, including payment of fees and expenses in connection with the Merger, would be approximately US$12.5 million, assuming no exercise of dissenter rights by shareholders of the Company. In calculating this amount, the Company and the Buyer Group did not consider the value of the Rollover Shares which will, in connection with and concurrently with the closing of the Merger at the Effective Time, be cancelled for no consideration in the Merger, and the Rollover Shareholder, in lieu of receiving US$1.70 per ordinary share held by it will be issued newly issued shares of Parent pursuant to the Support Agreement.

The Buyer Group expects this amount to be provided through a combination of (i) rollover equity (represented by the Rollover Shares) from the Rollover Shareholder, (ii) cash contribution in the amount of US$12.5 million contemplated by the Equity Commitment Letter, by and between Parent and the Rollover Shareholder. Pursuant to the Equity Commitment Agreement, Pujiang has committed, subject to the terms and conditions therein, to purchaser, or cause the purchaser of, equity securities of Parent, prior to the Effective Time, in an aggregate cash amount of US$12.5 million.

The funding of Pujiang’s equity commitment under the Equity Commitment Letter is conditioned upon (i) the satisfaction in full or waiver (if permissible) of the conditions to Parent’s and Merger Sub’s obligations to complete the Merger under the Merger Agreement (other than any conditions that by their nature are to be satisfied at the closing of the Merger but subject to the prior or substantially concurrent satisfaction of such conditions), and (ii) the substantially contemporaneous consummation of the closing of the Merger. The obligation of Pujiang to fund the equity commitment under the Equity Commitment Letter will terminate automatically and immediately upon the earliest to occur of the (i) the valid termination of the Merger Agreement in accordance with its terms, (ii) the closing of the Merger, at which time such obligation will be discharged but subject to the performance of such obligation, (iii) the Company or any of its affiliates directly or indirectly (a) asserting a claim or initiating a proceeding against Parent, Merger Sub, Pujiang, any Non-Recourse Party (as defined in the relevant Limited Guarantee) in connection with or relating to the Equity Commitment Letter, the Merger Agreement, the Limited Guarantee, or any of the Transactions, or (b) asserting that the cap on Pujiang’s aggregate liabilities under the Equity Commitment Letter is illegal, invalid or unenforceable in whole or in part, and (iv) any event which, by the terms of the Limited Guarantee, is an event which terminates Pujiang’s liabilities under the Limited Guarantee.

The Company is an express third-party beneficially of the Equity Commitment Letter. Pujiang may assign or delegate all or a portion of its obligations to fund its equity commitment to any of Pujiang’s subsidiaries or affiliates so long as Pujiang remains liable for the obligations under the Equity Commitment Letter.

A copy of the Equity Commitment is attached as Annex G to this proxy statement and is incorporated herein by reference.

Support Agreement

Concurrently with the execution of the Merger Agreement, the Rollover Shareholder and Parent entered into the Support Agreement, pursuant to which the parties have agreed that (i) the Rollover Shares shall be cancelled for no consideration, (ii) the Rollover Shareholder shall subscribe for the number of newly issued ordinary shares of Parent as set forth in the Support Agreement, and (iii) the Rollover Shareholder shall vote the Rollover Shares in favor of the authorization and approval of the Merger Agreement and the consummation of the Transactions, in each case, upon the terms and conditions set forth therein.

A copy of the Support Agreement is attached as Annex E to this proxy statement and is incorporated herein by reference.

As of the date of this proxy statement, the Rollover Shareholder indirectly owns 13,050,000 Rollover Shares, representing approximately 65.9% of the total voting power of the outstanding ordinary shares in the Company.

Limited Guarantee

Concurrently with the execution of the Merger Agreement, Pujiang made the Limited Guarantee, pursuant to which Pujiang irrevocably guaranteed, subject to certain conditions, Parent’s payment obligations under the Merger Agreement to pay the termination fee if that fee becomes payable by Parent and certain reimbursement obligations set forth therein.

The Limited Guarantee will terminate on the earliest to occur of (a) the Effective Time, (b) the termination of the Merger Agreement in accordance with its terms in any circumstances other than pursuant to which Parent and Merger Sub would be obligated to make a payment of Parent termination fee pursuant to the Merger Agreement, (c) the payment in full of the obligations under the Limited Guarantee, and (d) one hundred twenty (120) days after any termination of the Merger Agreement in accordance with its terms in any circumstances pursuant to which Parent and Merger Sub would be obligated to make a payment of Parent termination fee pursuant to the Merger Agreement, unless the Company has initiated a bona fide claim or proceeding in accordance with the terms of the Merger Agreement; provided further that if the Company has initiated such claim or proceeding on or before such 120^th day of the termination of the Merger Agreement, the Limited Guarantee shall terminate upon the date such claim or proceeding is resolved by a final and non-appealable judicial or arbitral decision or as agreed in writing by the parties to the Limited Guarantee or otherwise satisfied.

Remedies and Limitations on Liability 

The parties to the Merger Agreement will be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in any court of competent jurisdiction, pursuant to the Merger Agreement, this being in addition to any other remedy to which they are entitled under the terms of the Merger Agreement at law or in equity. Each party to the Merger Agreement accordingly agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of such party under the Merger Agreement. While the Company, Parent and Merger Sub may pursue both a grant of specific performance and monetary damages, none of them will be permitted or entitled to receive both a grant of specific performance that results in the completion of the Merger and monetary damages. 

Interests of Certain Persons in the Merger 

Interests of the Buyer Group

As a result of the Merger, Parent will own 100% of the equity interest in the Surviving Company immediately following the completion of the Merger. The Buyer Group will directly or indirectly enjoy the benefits from any future earnings and growth of the Company after the Merger which, if the Company is successfully managed, could result in an increase in the value of their investments in the Company. The Buyer Group will also bear the corresponding risks of any possible decreases in the future earnings, growth or value of the Company. As there will be no public trading market for the Surviving Company’s shares, the Buyer Group will have no certainty of any future opportunity to sell such shares at an attractive price, or that any dividend paid by the Surviving Company will be sufficient to recover their respective investments in the Company.

The Merger may also provide additional means to enhance shareholder value for the Buyer Group, including improved profitability due to the elimination of the expenses associated with public company reporting and compliance, increased flexibility and responsiveness in management of the business to achieve growth and respond to competition without the restrictions of short-term earnings comparisons, and additional means for making liquidity available to the Buyer Group, such as through dividends or other distributions.

Shares and Options Held by Officers and Directors 

As of the date of this proxy statement, our directors and executive officers (as set forth in “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on page 118), as a group beneficially own an aggregate of 13,050,000 Shares.

The following table summarizes, the number of issued and outstanding Shares beneficially held by our directors and executive officers as of the date of this proxy statement.

Indemnification

Pursuant to the Merger Agreement, Parent and Merger Sub have agreed that:

The Independent Committee 

On September 22, 2020, our board of director established an Independent Committee of directors to consider the proposal from Pujiang and to take any actions it deems appropriate to assess the fairness and viability of such proposal. The Independent Committee is composed of independent and disinterested directors: Mr. Junhong Li (who serves as the chairman), and Mr. Zhongcai Wu. All such directors are free from any affiliation with the Buyer Group, and none of such directors is or was ever an employee of the Company or any of its subsidiaries or has any financial interest in the Merger that is different from that of the Unaffiliated Security Holders other than (i) the director’s receipt of board compensation in the ordinary course, (ii) Independent Committee members’ compensation in connection with its evaluation of the Merger (which is not contingent upon the completion of the Merger or the Independent Committee’s or board’s recommendation of the Merger), and (iii) the director’s indemnification rights under the Merger Agreement. Our board of directors did not place any limitations on the authority of the Independent Committee regarding its investigation and evaluation of the Merger. 

The Company has compensated the members of the Independent Committee in exchange for their service in such capacity. The monthly compensation is US$3,000 for Mr. Junhong Li and Mr. Zhongcai Wu, (the payment of which is not contingent upon the completion of the Merger or the Independent Committee’s or the board’s recommendation of the Merger). 

Position with the Surviving Company 

After completion of the Merger, the Chairman expects to continue to serve as chairman of the board of directors of the surviving company and chief executive officer of the surviving company. It is anticipated that the other executive officers of the Company will hold positions with the surviving company that are substantially similar to their current positions. 

Related Party Transactions 

We have adopted an audit committee charter, which requires the audit committee to review and approve all related party transactions on an ongoing basis. For a description of our related party transactions, please see “Item 7. Major Shareholders and Related Party Transactions” included in our annual report on Form 20-F for the fiscal year ended December 31, 2019, incorporated by reference into this proxy statement. Please see “Where You Can Find More Information” beginning on page 122 for a description of how to obtain a copy of our annual report. 

Fees and Expenses

Fees and expenses incurred or to be incurred by the Company and the Buyer Group in connection with the Merger are estimated at the date of this proxy statement to be as follows:

These fees and expenses will not reduce the Merger Consideration to be received by the Company’s shareholders and ADS holders. Whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement, the Plan of Merger and the Merger, will be paid by the party incurring such costs and expenses.

Voting by the Rollover Shareholder at the Extraordinary General Meeting 

Pursuant to the Voting Agreement, the Rollover Shareholder has agreed to vote all of the Shares it beneficially owns in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, at the extraordinary general meeting of the Company. As of the record date, the Rollover Shareholder is expected to beneficially own, in the aggregate, 13,050,000 Shares, which represents 65.9% of the total issued and outstanding Shares entitled to vote. 

Accounting Treatment of the Merger 

Upon completion of the Merger, the Company would cease to be a publicly traded company, and the Company expects to account for the Merger at historical cost. 

Regulatory Matters 

The Company does not believe that any material federal or state regulatory approvals, filings or notices are required in connection with the Merger other than the approvals, filings or notices required under the federal securities laws and the registration of the Plan of Merger (and supporting documentation as specified in the BVI Companies Act) with the Registrar of Corporate Affairs of the British Virgin Islands and if the Registrar is satisfied that the requirements under the British Virgin Islands in respect of the merger have been complied with, the Registrar will issue a certificate of merger in the approved form. 

Appraisal Rights 

Please see “Appraisal Rights” beginning on page 113. 

Material U.S. Federal Income Tax Consequences 

The following is a discussion of certain material U.S. federal income tax consequences of the Merger to U.S. Holders (as defined below) of the Shares or ADSs who exchange their Shares or ADSs solely for cash pursuant to the Merger Agreement or receive cash as a result of exercising their Appraisal Rights. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the “Code”, existing and proposed Treasury regulations promulgated under the Code, published rulings, and administrative and judicial interpretations of the Code, all as currently in effect as of the date of hereof, all of which are subject to change, possibly with retroactive effect. 

This discussion does not address any U.S. federal estate, gift, or other non-income tax, or any state, local, or non-U.S. tax, consequences of the Merger. For purposes of this discussion, the term “U.S. Holder” means (except as described in the preceding paragraph) a beneficial owner of the Company’s ADSs or ordinary shares that is, for United States federal income tax purposes, (i) an individual U.S. citizen or resident, (ii) a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States or any political subdivision thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust if either (x) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (y) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. A beneficial owner of the Company’s ADSs or ordinary shares (other than a partnership or an entity treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is referred to below as a “Non-U.S. Holder.”

If a partnership, or an entity treated for U.S. federal income tax purposes as a partnership, such as a limited liability company, holds the Company’s ADSs or ordinary shares, the tax treatment of a partner in such partnership will depend on the status of the partner and upon the activities of the partnership. Any partner of a partnership holding Shares or ADSs is urged to consult its own tax advisor.

ALL HOLDERS OF SHARES OR ADSS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PARTICULAR SITUATIONS, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER LAWS.

Consequences of the Merger Generally

The receipt of cash by a U.S. Holder in exchange for ordinary shares pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, subject to the "passive foreign investment company," or "PFIC," discussion below, a U.S. Holder who receives cash in exchange for ordinary shares pursuant to the Merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) the U.S. Holder's adjusted tax basis in those shares. If a U.S. Holder acquired different blocks of ordinary shares at different times and different prices, that holder generally must determine its adjusted tax basis and holding period separately with respect to each block of ordinary shares. The deductibility of capital losses is subject to limitations. Subject to the PFIC rules discussed below, capital gain recognized by an individual U.S. Holder is generally eligible for the preferential long-term capital gains rate if such individual U.S. Holder's holding period in its ordinary shares exchanged in the Merger is greater than one year as of the effective date of the Merger.

Any capital gain or loss will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. In the event that we are deemed to be a PRC resident enterprise under PRC tax law, and gain from the disposition of the ordinary shares would be subject to tax in the PRC, as described in "Special Factors—PRC Income Tax Consequences," such gain may be treated as PRC-source gain for U.S. foreign tax credit purposes under the U.S.-PRC income tax treaty. U.S. Holders should consult their tax advisors regarding the tax considerations if a foreign tax is imposed on a disposition of our ordinary shares, including the availability of the foreign tax credit under their particular circumstances.

PFIC Considerations 

The Company will be a passive foreign investment company (a “PFIC”) if, after applying certain pass-through rules, either: (i) 75% or more of the Company’s gross income in any taxable year consists of “passive income” (including dividends, interest, gains from the sale or exchange of investment property and certain rents and royalties); or (ii) at least 50% of our assets in any taxable year (averaged over the year and generally determined on a quarterly basis) produce or are held for the production of passive income.

The Company does not believe that it was a PFIC for its 2019 taxable year. However, because the determination of its PFIC status is based on such factual matters as the composition of the Company’s income and the valuation of its assets, and its market capitalization, there is no assurance that the United Stated Internal Revenue Service (“IRS”) will agree with the Company’s position for the 2019 taxable year or any prior taxable year. In addition, there can be no assurance that the Company will not become a PFIC for the taxable year ended December 31, 2020 or in future taxable years.

If the Company were to be treated as a PFIC for any taxable year during the period in which a U.S. Holder owns its ADSs or ordinary shares (and regardless of whether it remains a PFIC for subsequent taxable years), each U.S. Holder who is treated as owning the Company’s Shares or ADSs for purposes of the PFIC rules would be liable to pay U.S. federal income tax at the highest applicable income tax rates on ordinary income upon the receipt of “excess distributions” (i.e., the portion of any distributions received by the U.S. Holder on ADSs or ordinary shares in a taxable year in excess of 125 percent of the average annual distributions received by the U.S. Holder in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for the ADSs or ordinary shares) and on any gain from the disposition of the ADSs or ordinary shares, plus interest on a portion of such amounts, as if such excess distributions or gain had been recognized ratably over the U.S. Holder’s holding period of the Company’s ADSs or ordinary shares.

The above rules relating to the taxation of excess distributions and dispositions will not apply to a U.S. Holder who has made a timely “qualified electing fund” (“QEF”) election for all taxable years that the holder has held the ADSs or ordinary shares and if the Company complies with certain reporting requirements. Instead, each U.S. Holder who has made a timely QEF election is required for each taxable year that the Company is a PFIC to include in income a pro rata share of the Company’s ordinary earnings as ordinary income and a pro rata share of the Company’s net capital gain as long term capital gain, regardless of whether the Company has made any distributions of the earnings or gain. The U.S. Holder’s basis in the ADSs or ordinary shares will be increased to reflect taxed but undistributed income. Distributions of income that had been previously taxed will result in a corresponding reduction in the basis of the ADSs or ordinary shares and will not be taxed again once distributed. A U.S. Holder making a QEF election will generally recognize capital gain or loss on the sale, exchange or other taxable disposition of ADSs or ordinary shares. If the Company determines that it is a PFIC for any taxable year, the Company may provide each U.S. Holder with all necessary information in order to make the QEF election described above.

Alternatively, if the Company were to be treated as a PFIC for any taxable year and provided that its ADSs or ordinary shares are treated as “marketable stock” (e.g., “regularly traded” on the NASDAQ) a U.S. Holder may make a mark-to-market election. Under a “mark-to-market” election, in any taxable year that the Company is a PFIC, any excess of the fair market value of the ADSs or ordinary shares at the close of any taxable year over the U.S. Holder’s adjusted tax basis in the ADSs or ordinary shares is included in the U.S. Holder’s income as ordinary income. In addition, the excess, if any, of the U.S. Holder’s adjusted tax basis at the close of any taxable year over the fair market value of the ADSs or ordinary shares is deductible in an amount equal to the lesser of the amount of the excess or the amount of the net mark-to-market gains that the U.S. Holder included in income in prior years. A U.S. Holder’s tax basis in its ADSs or ordinary shares would be adjusted to reflect any such income or loss. For any taxable year that the Company is a PFIC, gain realized on the sale, exchange or other disposition of the ADSs or ordinary shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the ADSs or ordinary shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the U.S. Holder. There can be no assurances that there will be sufficient trading volume with respect to the ADSs or ordinary shares for the ADSs or ordinary shares to be considered “regularly traded,” or that the ADSs or ordinary shares will continue to trade on the Nasdaq Capital Market. Accordingly, there are no assurances that the Company’s ADSs or ordinary shares will be marketable stock for these purposes.

A U.S. Holder who holds the Company’s ADSs or ordinary shares during a period when the Company is a PFIC will be subject to the foregoing rules for that taxable year and all subsequent taxable years with respect to that U.S. Holder’s holding of the ADSs or ordinary shares, even if the Company ceases to be a PFIC, subject to certain exceptions for U.S. Holders who made a timely mark-to-market or QEF election. U.S. Holders are urged to consult their tax advisors regarding the PFIC rules in the event that the Company is a PFIC, including as to the advisability and consequences of making a QEF or mark-to -market election.

Material PRC Income Tax Consequences 

Under the PRC Enterprise Income Tax Law, which took effect as of January 1, 2008, enterprises established under the laws of non-PRC jurisdictions but whose “de facto management body” are located in China are considered “resident enterprises” for PRC tax purposes. Under the implementation regulations issued by the State Council relating to the new tax law, “de facto management body” is defined as the body that has material and overall management control over the business, personnel, accounts and properties of an enterprise. The Company is not currently treated as a PRC resident enterprise by the relevant tax authorities. Since substantially all of the Company’s management is currently based in China and may remain in China in the future, the Company may be treated as a “resident enterprise” for the PRC tax purposes.

If the PRC tax authorities were to determine that the Company should be considered a resident enterprise, then gain recognized on the receipt of cash for the Shares pursuant to the Merger by shareholders who are not PRC residents could be treated as PRC-source income that would be subject to PRC income tax at a rate of 10% in the case of enterprises or 20% in the case of individuals (subject to applicable tax treaty relief, if any), and, even in the event that the Company is not considered a resident enterprise, gain recognized on the receipt of cash for Shares is subject to PRC tax if the holders of such Shares are PRC resident individuals. 

You should consult your own tax advisor for a full understanding of the tax consequences of the Merger to you, including any PRC tax consequences. 

Material British Virgin Islands Tax Consequences 

The British Virgin Islands currently have no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees or charges will payable (either by direct assessment or withholding) to the government or other taxing authority in the British Virgin Islands under the laws of the British Virgin Islands in respect of the Merger or the receipt of cash for our Shares under the terms of the Merger.

The closing price of the ADSs on NASDAQ on September 15, 2020, the last trading date immediately prior to the Company’s announcement on September 16, 2020 that it had received “a going private” proposal, was US$3.68 per ADS. The Per ADS Merger Consideration of US$5.10 per Share (less US$0.05 per ADS cancellation fee payable pursuant to the Deposit Agreement), to be paid in the Merger represents a premium of approximately 38.6% to that closing price. 

 You are urged to obtain a current market price quotation for the ADSs in connection with voting your Shares and your ADSs represented by Shares.

Dividend Policy 

Since our inception, we have not declared or paid any dividends on our ordinary shares. We do not anticipate paying any cash dividends in the foreseeable future and the Merger Agreement prohibits us from paying dividends without the prior written consent of Parent. 

Cash dividends on our Shares and ADSs, if any, will be paid in U.S. dollars. If we pay any dividends, the ADS depositary will pay our ADS holders the dividends it receives on our Shares, after deducting its fees and expenses as otherwise provided in the Deposit Agreement. Other distributions, if any, will be paid by the ADS depositary to the holders of ADSs in U.S. dollars after deducting its fees and expenses or as otherwise provided in the Deposit Agreement.

THE EXTRAORDINARY GENERAL MEETING  

We are furnishing this proxy statement to you, as a holder of our Shares, as part of the solicitation of proxies by the Company’s board of directors for use at the extraordinary general meeting described below.

Date, Time and Place of the Extraordinary General Meeting 

The extraordinary general meeting will be held on _________, at _________ (Beijing Time) at 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China. 

Proposals to be Considered at the Extraordinary General Meeting 

At the meeting, you will be asked to consider and vote upon: 

THAT the Agreement and Plan of Merger dated December 17, 2020 (the “Merger Agreement”) by and among New Ossen Group limited, an exempted company with limited liability incorporated under the laws of the British Virgin Islands (“Parent”), New Ossen Innovation Limited, a company with limited liability incorporated under the laws of the British Virgin Islands, all of the issued and outstanding shares of which are owned by Parent (“Merger Sub”), and the Company, and the articles of merger and plan of merger (the “Plan of Merger”) required to be filed with the Registrar of Corporate Affairs of the British Virgin Islands as provided in Section 171(2) of the BVI Companies Act for the purpose of the Merger, substantially in the form attached as Appendix A to the Merger Agreement (copies of such Merger Agreement and Plan of Merger being in the form attached to the proxy statement accompanying this notice, which will also be produced and made available for inspection at the meeting), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving company, and the transactions contemplated by the Merger Agreement, including the Merger, be approved and authorized by the Company; and

THAT the chairman of the extraordinary general meeting be instructed to adjourn or postpone the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the shareholders resolutions to be proposed at the extraordinary general meeting.

If the Merger is completed, at the effective time of the Merger (the “Effective Time”), except as described below, (i) each Share (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$1.70 per Share in cash and without interest and (ii) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$5.10 per ADS (less US$0.05 per ADS cancellation fee payable pursuant to the terms of the deposit agreement (the “Deposit Agreement”) dated June 30, 2020 by and among the Company, the Bank of New York Mellon (the “ADS depositary”), and all holders and beneficial owners from time to time of ADSs issued thereunder. The following Shares of the Company will not be converted into the right to receive the consideration described in the immediately preceding sentence: (a) Shares (including ADSs corresponding to such Shares) beneficially owned by the Rollover Shareholder (the “Rollover Shares”); (b) Shares (the “Dissenting Shares”) owned by holders of Shares who have validly exercised and not effectively withdrawn or lost their appraisal rights pursuant to Section 179 of the BVI Business Companies Act, 2004, as amended (the “BVI Companies Act”) (the “Dissenting Shareholders”); and (c) Shares (if any) owned by the Company or any direct or indirect wholly-owned subsidiaries of the Company (or held in the Company’s treasury) and Shares held by Parent or any of its subsidiaries ((a), (b) and (c) collectively, the “Excluded Shares”). Each Excluded Share (excluding any Dissenting Share) issued and outstanding immediately prior to the Effective Time , will be cancelled and will cease to exist, and no Merger Consideration will be delivered with respect thereto. Each Dissenting Share will be cancelled at the Effective Time of the Merger for the right to receive the fair value of such Shares as determined in accordance with the provisions of the BVI Companies Act. The ADS depositary will call for surrender of all outstanding ADSs (other than any ADSs representing Excluded Shares) to be exchanged for the applicable merger consideration.

Our Board’s Recommendation 

Our board of directors, acting upon the unanimous recommendation of the Independent Committee of our board of directors:

Quorum 

A quorum of our shareholders is necessary to have a valid shareholders’ meeting. The required quorum for the transaction of business at the extraordinary general meeting is the presence, in person or by proxy, of shareholders holding not less than an aggregate of fifty percent of the votes of Shares that are entitled to vote on the record date. We expect, as of the record date, there will be 19,791,110 Shares entitled to be voted at the extraordinary general meeting. In the event that a quorum is not present at the extraordinary general meeting, we currently expect that we will adjourn the extraordinary general meeting to solicit additional proxies in favor of the adoption of the Merger Agreement. 

Record Date; Shares and ADSs Entitled to Vote 

You are entitled to attend and directly vote at the extraordinary general meeting if you have Shares registered in your name at the close of business in the British Virgin Islands on _________, 2021, the Share record date for voting at the extraordinary general meeting. If you own ADSs as at the close of business in New York City on _________, 2021, the ADS record date, and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below, you cannot vote at the extraordinary general meeting directly, but you may instruct the ADS depositary (as the registered holder of the Shares underlying the ADSs) on how to vote the Shares underlying your ADSs. The ADS Depositary must receive your instructions no later than _________ (New York City time) on _________, 2021 in order to ensure your Shares are properly voted at the extraordinary general meeting. Alternatively, if you own ADSs on the ADS record date, you may vote directly at the extraordinary general meeting by cancelling your ADSs (and certifying you have not instructed, and will not instruct, the ADS depositary to vote the Shares represented by your ADSs) before the close of business in New York City on _________, 2021 and becoming a holder of Shares prior to the close of business in the British Virgin Islands on _________, 2021, the share record date. Each outstanding Share on the share record date entitles the holder to one vote on each matter submitted to the shareholders for authorization and approval at the extraordinary general meeting and any adjournment thereof. We expect that, as of the Share record date, there will be 19,791,110 Shares entitled to be voted at the extraordinary general meeting. If you have Shares registered in your name on the Share record date, the deadline for you to lodge your proxy card and vote is _________, 2021 at ________ (Beijing Time).

Please see “The Extraordinary General Meeting—Shareholders and ADS Holders Entitled to Vote; Voting Materials” below for additional information. If the Merger is not completed, the Company would continue to be a public company in the U.S. and the Company's ADSs would continue to be listed on NASDAQ. The Company's Shares are not listed and cannot be traded on any stock exchange other than NASDAQ, and in such case only in the form of ADSs. As a result, if you have cancelled your ADSs to attend the extraordinary general meeting and the Merger is not completed and you wish to be able to sell your Shares on a stock exchange, you would need to deposit your Shares into the Company's ADS program for the issuance of the corresponding number of ADSs, subject to the terms and conditions of applicable laws and the deposit agreement, including, among other things, payment of relevant fees of the ADS Depositary for the issuance of ADSs (up to US$0.05 per ADS issued) and any applicable stock transfer taxes (if any) and related charges pursuant to the Deposit Agreement.

Vote Required 

Under the BVI Companies Act and the Merger Agreement, we cannot complete the Merger unless the Merger Agreement, the transactions contemplated under the Merger Agreement, including the Merger, are adopted by an affirmative vote of shareholders representing at least a majority of the outstanding Shares of the Company, present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders. As of the date of this proxy statement, the Rollover Shareholder beneficially owns 13,050,000 Shares, which represents 65.9% of the total issued and outstanding Shares entitled to vote. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on page 118 for additional information. Pursuant to the terms of the Support Agreement, these Shares will be voted in favor of the authorization and approval of the Merger Agreement, the Plan of Merger the transactions contemplated by the Merger Agreement, including the Merger, at the extraordinary general meeting of the Company.

Shareholders and ADS Holders Entitled to Vote; Voting Materials 

Only holders of Shares entered in the register of members of the Company at the close of business on ________, 2021 (British Virgin Islands time), the share record date, will receive the final proxy statement and proxy card directly from the Company. Shareholders registered in the register of members of the Company as of the share record date or their proxy holders are entitled to vote and may participate in the extraordinary general meeting or any adjournment thereof. Shareholders wanting to vote by proxy should simply indicate on their proxy card how they want to vote, sign and date the proxy card, and mail the proxy card in the return envelope as soon as possible but in any event so that it is received by the Company no later than ________ (Beijing Time) on ________, 2021.

Holders of ADSs as of the close of business on ________, 2021 (New York City time), the ADS record date, will receive the final proxy statement and ADS voting instruction card either directly from the Company's ADS depositary (in the case of holders of ADSs who hold the ADSs in certificated form, i.e., in the form of ADRs) or these materials will be forwarded to them by a third party service provider (in the case of beneficial owners of ADSs who do not hold the ADSs in the form of ADRs). Holders of ADSs as of the close of business on ________, 2021 (New York City time) (who do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained in the following paragraph) cannot attend or vote at the extraordinary general meeting directly, but may instruct the ADS depositary how to vote the Shares underlying the ADSs by completing and signing an ADS voting instruction card provided by the ADS depositary and returning it in accordance with the instructions printed on it. The ADS depositary must receive the ADS voting instruction card no later than ________(New York City time) on________, 2021. The ADS depositary will endeavor, in so far as practicable, to vote or cause to be voted the number of Shares represented by your ADSs in accordance with your voting instructions. The ADS depositary will not vote or attempt to exercise the right to vote that attaches to your ADSs other than in accordance with the instructions given by you and received by the ADS depositary.

Holders of ADSs may vote directly at the extraordinary general meeting if they cancel their ADSs and become a holder of Shares by the close of business on ________, 2021 (British Virgin Islands time). ADS holders wanting to cancel their ADSs need to make arrangements to deliver their ADSs to the ADS depositary for cancellation prior to the close of business in New York City on ________, 2021 and complete certain other procedures required by the ADS depositary. Persons who hold ADSs in a brokerage, bank or nominee account, must contact their broker, bank or nominee to find out what actions they need to take to instruct the broker, bank or nominee to cancel the ADSs on their behalf.

Persons holding ADSs in a brokerage, bank or nominee account should consult with their broker, bank or nominee to obtain directions on how to provide such broker, bank or nominee with instructions on how to vote their ADSs.

Each ADS represents three Shares. We expect that as of ________, 2021, there will be 19,791,110 Shares issued and outstanding (including Shares represented by ADSs), all of which are entitled to vote on the proposals at the extraordinary general meeting, subject to the procedures described above. As of ________, 2021, we expect that there will be approximately 2,247,036 ADSs outstanding; subject to the cancellation procedures described above, none of the holders of these ADSs may vote in person at the extraordinary general meeting.

Proxy Holders for Registered Shareholders 

Shareholders registered in the register of members of the Company as of the Share record date who are unable to participate in the extraordinary general meeting may appoint as a representative another shareholder, a third party or the Company as proxy holder by completing and returning the form of proxy in accordance with the instructions printed thereon. With regard to the items listed on the agenda and without any explicit instructions to the contrary, the Company as proxy holder will vote in favor of the Merger according to the recommendation of the board of directors of the Company. If new proposals (other than those on the agenda) are put forth before the extraordinary general meeting, the Company as proxy holder will vote in accordance with the position of the board of directors of the Company. 

Voting of Proxies and Failure to Vote

All Shares represented by valid proxies will be voted at the extraordinary general meeting in the manner specified by the holder. If a shareholder returns a properly signed proxy card but does not indicate how the shareholder wants to vote, Shares represented by that proxy card will be voted FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received to pass the shareholders resolution during the extraordinary general meeting unless the shareholder appoints a person other than the chairman of the meeting as proxy, in which case the Shares represented by that proxy card will be voted (or not submitted for voting) as the proxy determines. Shareholders who fail to cast their vote in person or by proxy will not have their votes counted. 

Revocability of Proxies 

Registered holders of our Shares may revoke their proxies in one of three ways:

If a shareholder holds Shares through a broker, bank or other nominee and has instructed the broker, bank or other nominee to vote the shareholder’s Shares, the shareholder must follow directions received from the broker, bank or other nominee to change those instructions. 

Holders of our ADSs may revoke their voting instructions by notification to the ADS depositary in writing at any time prior to ________(New York City time) on ________, 2021. A holder of ADSs can do this in one of two ways:

If you hold your ADSs through a broker, bank or nominee and you have instructed your broker, bank or nominee to give ADS voting instruction to the ADS depositary, you must follow the directions of your broker, bank or nominee to change those instructions.

Rights of Shareholders Who Object to the Merger 

Shareholders who continue to hold their Shares in their own name until the completion of the Merger will have the right to dissent from the Merger and receive payment of the fair value of their Shares if the Merger is completed, but only if they deliver to the Company, before the vote is taken, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 179 of the BVI Companies Act, which is attached as Annex C to this proxy statement, for the exercise of Appraisal Rights. The fair value of your Shares as determined under that statute could be more than, the same as, or less than the Merger consideration you would receive pursuant to the Merger Agreement if you do not exercise Appraisal Rights with respect to your Shares. 

ADS HOLDERS WILL NOT HAVE THE RIGHT TO DISSENT FROM THE MERGER AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL NOT ATTEMPT TO EXERCISE ANY APPRAISAL RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE APPRAISAL RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY, PAY THE ADS DEPOSITARY'S FEES REQUIRED FOR THE CANCELLATION OF THE ADSs (US$0.05 PER ADS CANCELLED), PROVIDE INSTRUCTIONS FOR THE REGISTRATION OF THE CORRESPONDING SHARES, AND CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THE ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE SHARES) BEFORE ________ (NEW YORK CITY TIME) ON ________, 2021 AND BECOME REGISTERED HOLDERS OF SHARES BY THE CLOSE OF BUSINESS IN THE BRITISH VIRGIN ISLANDS ON ________, 2021. THE PROCESS OF SURRENDERING ADSs AND BECOMING A REGISTERED SHAREHOLDER OF THE COMPANY MAY TAKE A NUMBER OF DAYS. ADS HOLDERS WISHING TO DO SO SHOULD TAKE ACTION AS SOON AS POSSIBLE.

THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING APPRAISAL RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 179 OF THE BVI COMPANIES ACT. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE U.S. AND THE COMPANY'S ADSs WOULD CONTINUE TO BE LISTED ON NASDAQ. THE COMPANY'S SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN NASDAQ, AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS OR HER ADSs TO EXERCISE APPRAISAL RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS OR HER SHARES ON A STOCK EXCHANGE, SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS OR HER SHARES INTO THE COMPANY'S ADS PROGRAM FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAWS AND THE DEPOSIT AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs (UP TO $0.05 PER ADS ISSUED) AND ANY APPLICABLE STOCK TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.

Whom to Call for Assistance 

If you have any questions or need assistance in voting your Shares, you may contact the Company’s investor relations firm GCI IR at + 1 -202-656-3688 or email at info@goldenir.com.

Other Business 

We are not currently aware of any business to be acted upon at the extraordinary general meeting other than the matters discussed in this proxy statement. 

THE MERGER AGREEMENT AND PLAN OF MERGER  

This section of the proxy statement describes the material terms of the Merger Agreement and the Plan of Merger but does not purport to describe all of the terms of the Merger Agreement and the Plan of Merger. The following summary is qualified in its entirety by reference to the complete text of the Merger Agreement and the Plan of Merger, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. You should read the Merger Agreement and the Plan of Merger in their entirety because they, and not this proxy statement, are the legal documents that govern the Merger. This description of the Merger Agreement and the Plan of Merger have been included to provide you with information regarding their terms.

Structure and Completion of the Merger 

The Merger Agreement provides for the merger of Merger Sub with and into the Company upon the terms, and subject to the conditions, of the Merger Agreement and the Plan of Merger, with the Company as the surviving entity of the Merger. If the Merger is completed, the Company will cease to be a publicly traded company. The closing will occur no later than the tenth (10th) business day immediately following the day on which all of the closing conditions have been satisfied or waived or another date agreed in writing by Parent and the Company. At the closing, Merger Sub and the Company will execute the Plan of Merger and register the Plan of Merger and other related documents with the Registrar of Corporate Affairs of the British Virgin Islands. The Merger will become effective at the time when the Plan of Merger has been registered by the Registrar of Corporate Affairs of the British Virgin Islands or at such other subsequent date (not exceeding 30 days after the date the Plan of Merger is registered) as Merger Sub and the Company may agree and specify in the Plan of Merger in accordance with the BVI Companies Act. 

We expect that the Merger will be completed in the first half of 2021, after all conditions to the Merger have been satisfied or waived. We cannot specify when, or assure you that, all conditions to the Merger will be satisfied or waived; however, we intend to complete the Merger as promptly as practicable. 

Memorandum and Articles of Association; Directors and Officers of the Surviving Company 

As of the Effective Time of the Merger, without any further action on the part of the parties, the memorandum and articles of association of Merger Sub then in effect will be the memorandum and articles of association of the surviving company, except that, at the Effective Time, references therein to the name and the authorized capital of Merger Sub will be amended to describe correctly the name and authorized capital of the surviving company, as provided in the Plan of Merger, until thereafter changed or amended as provided therein or by applicable laws. 

In addition, unless otherwise determined by Parent prior to the Effective Time of the Merger, the directors of Merger Sub at the Effective Time of the Merger (identified below in Annex D - “Directors and Executive Officers of Each Filing Person”) will become the directors of the surviving company and the officers (other than those officers who also were directors) of the Company immediately prior to the Effective Time of the Merger will become the officers of the surviving company, until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the memorandum and articles of association. 

Merger Consideration 

At the Effective Time of the Merger, except as described below, (i) each Share (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$1.70 per Share in cash and without interest (the “Per Share Merger Consideration”) and (ii) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$5.10 per ADS (the “Per ADS Merger Consideration”) (less US$0.05 per ADS cancellation fee payable pursuant to the terms of the Deposit Agreement) (together, the “Merger Consideration”). The following Shares of the Company will not be converted into the right to receive the Merger Consideration described in the immediately preceding sentence: (a) Shares (including ADSs corresponding to such Shares) beneficially owned by the Rollover Shareholder (the “Rollover Shares”); (b) Shares (the “Dissenting Shares”) owned by holders of Shares who have validly exercised and not effectively withdrawn or lost their appraisal rights pursuant to Section 179 of the BVI Business Companies Act, 2004, as amended (the “BVI Companies Act”) (the “Dissenting Shareholders”); and (c) Shares (if any) owned by the Company or any direct or indirect wholly-owned subsidiaries of the Company (or held in the Company’s treasury) and Shares held by the Parent or any of its subsidiaries ((a), (b) and (c) collectively, the “Excluded Shares”). Each Excluded Share (excluding any Dissenting Share) issued and outstanding immediately prior to the Effective Time, will be cancelled and will cease to exist, and no Merger Consideration will be delivered with respect thereto. Each Dissenting Share will be cancelled at the Effective Time for the right to receive the fair value of such Shares as determined in accordance with the provisions of the BVI Companies Act.

At the Effective Time, each ordinary share, par value US$1.00 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time of the Merger will be converted into one fully paid and non-assessable ordinary share, par value US$0.001 per share, of the surviving company. 

Exchange Procedures 

Prior to the Effective Time, Parent will designate a paying agent for making the payments required to be made pursuant to the Merger Agreement, and will enter into an agreement with the paying agent. At or prior to the Effective Time of the Merger, Parent will deposit, or will cause to be deposited, with the paying agent, for the benefit of the holders of Shares, and ADSs a cash amount in immediately available funds sufficient for the paying agent to make payments under the Merger Agreement. 

Promptly after the Effective Time (and in any event within five (5) business days following the closing date), the surviving company will cause the paying agent to mail (or, in the case of the depository trust company, to deliver), to each person who was, at the effective time of the Merger, a registered holder of Shares entitled to receive the Merger consideration pursuant to the Merger Agreement: (i) a letter of transmittal (which will be in customary form for a company listed on the NASDAQ reasonably acceptable to Parent and the Company (at the direction of the Independent Committee), and will specify how the delivery of the Merger consideration to registered holders of the Shares will be effected and contain such other provisions as Parent and the Company may mutually agree); and (ii) instructions for use in effecting the surrender of any issued share certificates and book-entry shares and/or such other documents as may be required in exchange for the per Share Merger consideration, as applicable. 

Prior to the Effective Time, Parent and the Company will establish procedures with the paying agent and the ADS depositary to ensure that (a) the paying agent will transmit to the ADS depositary as promptly as reasonably practicable following the Effective Time an amount in cash in immediately available funds equal to the product of (x) the number of ADSs issued and outstanding immediately prior to the Effective Time of the merger (other than ADSs representing the Excluded Shares) and (y) the Per ADS Merger Consideration; and (b) the ADS depositary will distribute the Per ADS Merger Consideration to holders of ADSs pro rata to their holdings of ADSs (other than ADSs representing the Excluded Shares) upon surrender by them of the ADSs. Pursuant to the terms of the Deposit Agreement, the ADS holders will pay any applicable fees, charges and expenses of the ADS Depositary, stock transfer or other taxes and other government charges due to or incurred by the ADS Depositary in connection with the cancellation of their ADSs. The Surviving Company will pay any applicable fees, charges and expenses of the Depositary and government charges (other than withholding taxes, if any, which shall be withheld by the ADS Depositary due to or incurred by the ADS Depositary in connection with distribution of the Per ADS Merger Consideration to holders of ADSs and the cancellation of ADSs (excluding any fees, including ADS cancellation or termination fees, payable by holders of ADSs in accordance with the Deposit Agreement).

Representations and Warranties 

The Merger Agreement contains representations and warranties made by the Company to Parent and Merger Sub and representations and warranties made by Parent and Merger Sub to the Company, in each case, as of specific dates. The statements embodied in those representations and warranties were made for purposes of the Merger Agreement and are subject to important qualifications and limitations agreed by the parties in connection with negotiating the terms of the Merger Agreement (including those set forth in the disclosure schedule delivered by the Company in connection therewith). In addition, some of those representations and warranties may be subject to a contractual standard of materiality different from that generally applicable to shareholders, may have been made for the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to close the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise and allocating risk between the parties to the Merger Agreement rather than establishing matters as facts. Moreover, the representations and warranties made by the Company were qualified by its public disclosure with the SEC prior to, and for the matters that members of the Buyer Group had knowledge of as of, the date of the Merger Agreement. 

The representations and warranties made by the Company to Parent and Merger Sub include representations and warranties relating to, among other things:

Many of the representations and warranties made by the Company are qualified as to “knowledge”, “materiality” or “Material Adverse Effect.” For purposes of the Merger Agreement, a “Material Adverse Effect” means any change, effect, event, circumstance, occurrence, development or fact (including any change in applicable laws or the interpretation or enforcement thereof or other regulatory change that affects the Company or any of its subsidiaries), that is, or would reasonably be expected to, either individually or in the aggregate, a) have a material adverse effect on the business, condition (financial or otherwise), assets, liabilities, properties or results of operations of the Company and its subsidiaries taken as a whole; or (b) prevent or materially delay the consummation of the transactions contemplated in the Merger Agreement or otherwise be materially adverse to the ability of the Company to perform its material obligations under the Merger Agreement, provided, however, that the foregoing clause (a) shall not include any fact, event, circumstance, change, condition, occurrence or effect occurring after the date of the Merger Agreement following or resulting from (i) geopolitical conditions, any outbreak or escalation of war or major hostilities or any act of sabotage or terrorism or natural or man-made disasters or epidemic-induced public health crises or other force majeure events, (ii) changes in laws, generally accepted accounting principles applicable to the Company or enforcement or interpretation thereof, in each case proposed, adopted or enacted after the date of Merger Agreement, (iii) changes or conditions that generally affect the industry and market in which the Company and its subsidiaries operate, (iv) changes in the financial, credit or other securities or capital markets, or in general economic, business, regulatory, legislative or political conditions, (v) the announcement, pendency or consummation of the transactions contemplated in the Merger Agreement, or (vi) any action taken by the Company or any of its subsidiaries at the written request, or with the written consent, of Parent or expressly required by Merger Agreement; except, in the case of clause (i), (ii), (iii) or (iv), to the extent having a materially disproportionate effect on the Company and its subsidiaries, taken as a whole, relative to other participants in the industry in which the Company and its Subsidiaries operates (in which case the incremental materially disproportionate impact or impacts may be taken into account in determining whether there has been a Company Material Adverse Effect).

The representations and warranties made by Parent and Merger Sub to the Company include representations and warranties relating to, among other things:

Conduct of Business Prior to Closing 

The Company agrees that, from the date of the Merger Agreement until the earlier of the Effective Time (or the termination of the Merger Agreement ), without the prior written consent of Parent or otherwise expressly required or permitted by the Merger Agreement or as required by law, (i) the businesses of the Company and its subsidiaries shall be conducted in the ordinary course of business and in a manner consistent with past practice; and (ii) the Company shall use its reasonable best efforts to preserve substantially intact the assets and the business organization of the Company and its subsidiaries, to keep available the services of the current officers and key employees of the Company and its subsidiaries and to maintain in all material respects the current relationships of the Company and its subsidiaries with existing customers, suppliers and other persons with which any Company or its subsidiaries has material business relations.

From the date of the Merger Agreement until the Effective Time (or the termination of the Merger Agreement), without the prior written consent of Parent or otherwise expressly required or permitted by the Merger Agreement or as required by law, the Company will not and will not permit any of its subsidiaries to, among other things: