As filed with the Securities and Exchange Commission on December 22, 2017 .


Registration No. 333-            


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933



GOLDEN BULL LIMITED

(Exact name of Registrant as specified in its charter)



Not Applicable

(Translation of Registrant’s name into English)




Cayman Islands

6199

Not Applicable

(State or other jurisdiction of

(Primary Standard Industrial

(I.R.S. Employee

incorporation or organization)

Classification Code Number)

Identification number)



707 Zhang Yang Road, Sino Life Tower, F35,

Pudong, Shanghai, China 200120

Tel: + (86) 021-61659027

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)



Corporation Service Company

1180 Avenue of the Americas, Suite 210

New York, New York 10036

(800) 927-9801


(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

David Selengut, Esq.

Bill Huo, Esq.

Ari Edelman, Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas, 11th Floor

New York, New York 10105

Tel: (212) 370-1300

Fax: (212) 370-7889

 

Anthony W. Basch, Esq. 

Kaufman & Canoles, P.C. 

Two James Center, 14th Floor 

1021 East Cary Street 

Richmond, Virginia 23219 

Tel: (804) 771-5700

Fax: (888) 360-9092

 









Approximate date of commencement of proposed sale to the public : as soon as practicable after the effective date of this registration statement.


If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  


If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o


If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o


If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.                  Emerging growth company


If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 7(a)(2)(B) of the Securities Act. o


The term new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.











Calculation of Registration Fee

 

Title of Class of Securities to be Registered

Amount to Be Registered

Proposed Maximum Offering Price per Share

Proposed Maximum Aggregate Offering Price (1)

Amount of Registration Fee

Ordinary shares, par value $0.01 per share (2)

2,300,000

$

4.50

$

10,350,000

$

1,288.58

Underwriters’ warrants (2)(3)(4)

-

-

-

-

Ordinary shares underlying underwriters’ warrants (2)(3)

115,000

4.50

517,500

64.43

Total

2,415,000

 

$

10,971,000

$

1,353.01

 

(1)

The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o).

(2)

In accordance with Rule 416(a), the Registrant is also registering an indeterminate number of additional ordinary shares that shall be issuable pursuant to Rule 416 to prevent dilution resulting from share splits, share dividends or similar transactions.

(3)

We have agreed to issue, on the closing date of this offering, warrants to our underwriters, exercisable at a rate of one warrant per share to purchase 5% of the aggregate number of ordinary shares sold by the Registrant (the “Underwriters’ Warrants”). The exercise price of the Underwriters’ Warrants is equal to 120% of the price of the ordinary shares offered hereby. The ordinary shares underlying the Underwriters’ Warrants are exercisable for a period of three years following six months of the date of this offering and are deemed to commence simultaneously with the Underwriters’ Warrants.

(4)

No fee required pursuant to Rule 457(g) under the Securities Act.

 

 

 


The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 









The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS (Subject to Completion)                                Dated December 22, 2017


2,000,000 Ordinary Shares


[GOLDENBULLF1ACONTROLDOC001.JPG]


GOLDEN BULL LIMITED



This is the initial public offering of our ordinary shares. We are offering 2,000,000 ordinary shares.  We expect the initial public offering price of the shares to be between $4.00 and $4.50 per share.  Currently, no public market exists for our ordinary shares.  We intend to apply to have our ordinary shares listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “DNJR.”

 

We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, and will be subject to reduced public company reporting requirements.


Investing in our ordinary shares is highly speculative and involves a significant degree of risk.  See “Risk Factors” beginning on page 13 of this prospectus for a discussion of information that should be considered before making a decision to purchase our ordinary shares.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


 

 

Per Share

 

 

Total

 

Public offering price

 

$

 

 

 

$

 

 

Underwriting discount

 

$

 

 

 

$

 

 

Proceeds to us, before expenses

 

$

 

 

 

$

 

 

 

(1)

The underwriter will receive compensation in addition to such discount and commissions as set forth under “Underwriting.”

, Securities









We expect our total cash expenses for this offering (including cash expenses payable to our underwriter for its out-of-pocket expenses) to be approximately $1.09 million, exclusive of the above commissions. In addition, we will pay additional items of value in connection with this offering that are viewed by the Financial Industry Regulatory Authority, or FINRA, as underwriting compensation. These payments will further reduce proceeds available to us before expenses. See “Underwriting.”


This offering is being conducted on a firm commitment basis.  The underwriter, ViewTrade Securities Inc., is obligated to take and pay for all of the shares if any such shares are taken. We have granted the underwriter an option for a period of 45 days after the closing of this offering to purchase up to 15% of the total number of our ordinary shares to be offered by us pursuant to this offering (excluding shares subject to this option), solely for the purpose of covering over-allotments, at the initial public offering price less the underwriting discount. If the underwriter exercises the option in full, the total underwriting discounts and commissions payable will be between $552,000 and $621,000 based on an offering price between $4.00 and $4.50 per share, and the total proceeds to us, before expenses, will be between $8,648,000 and $9,729,000. If we complete this offering, net proceeds will be delivered to our company on the closing date. We will not be able to use such proceeds in China (except for $200,000 that is immediately available and will remitted to China to fund the registered capital of our wholly foreign owned entity), however, until we complete capital contribution procedures which requires prior approval from each of the respective local counterparts of MOFCOM, SAIC and SAFE in China. See remittance procedures in the section titled “Use of Proceeds” beginning on page 49.


The underwriter expects to deliver the ordinary shares against payment as set forth under “Underwriting”, on or about ____, 2018.



[GOLDENBULLF1ACONTROLDOC003.GIF]

The date of this prospectus is _______________, 2018










TABLE OF CONTENTS

 

Page

PROSPECTUS SUMMARY

1

RISK FACTORS

13

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

48

USE OF PROCEEDS

49

CAPITALIZATION

50

DILUTION

51

EXCHANGE RATE INFORMATION

52

ENFORCEABILITY OF CIVIL LIABILITIES

53

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

55

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


57

BUSINESS

79

MANAGEMENT

104

PRINCIPAL SHAREHOLDERS

108

RELATED PARTY TRANSACTIONS

110

DESCRIPTION OF SHARE CAPITAL

111

SHARES ELIGIBLE FOR FUTURE SALE

117

TAXATION

119

UNDERWRITING

126

EXPENSES RELATING TO THIS OFFERING

132

LEGAL MATTERS

132

EXPERTS

132

WHERE YOU CAN FIND ADDITIONAL INFORMATION

132

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

 

 

You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or any free-writing prospectus. We are offering to sell, and seeking offers to buy, the ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ordinary shares.



 








PROSPECTUS SUMMARY


This summary highlights certain information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including our financial statements and related notes and the risks described under “Risk Factors” beginning on page 13. We note that our actual results and future events may differ significantly based upon a number of factors.  The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.

 

All references to “we,” “us,” “our,” “Company,” “Registrant” or similar terms used in this prospectus refer to Golden Bull Limited, a Cayman Islands exempted company (“Golden Bull”), including its consolidated subsidiaries and variable interest entities (“VIEs”), unless the context otherwise indicates. We currently conduct our business through Shanghai Dianniu Internet Finance Information Service Co. Ltd. (“Dianniu”), our operating entity in China. We also have another VIE, Shanghai Baoxun Advertisement Design Co., Ltd. (“Baoxun”), which currently does not have any operation but we expect will in the future engage in the design and production of online advertisement and marketing survey services for online marketplaces.

 

“PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this prospectus, Taiwan, Hong Kong and Macau, “RMB” or “Renminbi” refers to the legal currency of China and “$”, “US$” or “U.S. Dollars” refers to the legal currency of the United States.


Our Business


We are an online finance marketplace, or “peer-to-peer” lending company, in China that provides borrowers access to short-term loans. The loans that we are currently arranging generally range from 30 days to 90 days, and are secured by borrowers’ automobiles. Through our online marketplace, we connect individual lenders with individual and small business borrowers. We currently conduct our business operations exclusively in China.


We believe our technology-driven marketplace provides eligible borrowers with a quick, accessible and affordable way to meet their liquidity needs. Our online marketplace may be accessed only by qualified borrowers, as discussed below in “Business— Our Platform.” We currently target borrowers who display stable credit performance and salary income. We implement a risk management process to try to minimize the risk of nonpayment to lenders. Such process involves a thorough review of credit reports prepared by third parties and may also include inquiries by us of employers or associates of potential borrowers.


Our marketplace also provides lenders with risk-adjusted returns that we believe are attractive. The average annualized return for lenders that have provided loans through our platform in 2016 was 11.64%, compared to a peer-to-peer industry average return rate of 10.45%, based on the Research Report on the Internet Finance Industry and Development Strategy for 2017 to 2022 (the “China IRN Report”), issued by ChinaIRN.com, an independent research institution in PRC that specializes in industry survey and research.


From our inception in November 2015 through June 30, 2017, we facilitated loans in the aggregate principal amount of approximately RMB 734.9 million ($108.8 million).  We generate revenues primarily from transaction fees, which averaged 2.31% and 2.84% of the principal amount loaned through our platform during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, and management fees, which averaged 3.1% and 4.1% of the principal amount loaned through our platform during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, each of which is charged to borrowers for our services and not included in the above return rates. Our revenues totaled approximately $3.7 million in 2016, our first year of operations, and approximately $2.8 million for the six months ended June 30, 2017. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Results of Operation–Revenue” for a description of our transaction and management fees.


We attract borrowers to our platform primarily through offline sources, including through relationships with traditional lending or guarantee institutions. In addition, we attract borrowers through referrals from existing borrowers and through online sources, including search engine marketing, search engine optimization, mobile application downloads through major application stores, partnering with online channels through application programming interfaces, as well as various marketing campaigns. The lending and guarantee institutions we work with are compensated directly by the borrowers, and not by us or the lenders we introduce. 

  



1






We have used various social media and mobile platforms and networks to market our platform to potential lenders. Currently, lenders through our platform consist of individuals of varying levels of net worth. We conduct a limited background check of individuals who lend money through our platform.  


As an intermediary, we do not use our own capital to invest in loans facilitated through our marketplace nor do we manage our borrowers and lenders’ account portfolios. We facilitate loans by connecting borrowers and lenders, preparing all necessary paperwork related to borrowers’ applications and assisting with securing collateral. However, we do not take control of funds that pass between such lenders and borrowers. Instead, payments are made through third party payment systems. Prior to August 2017, we used Shanghai PnR Data Service Co., Ltd. (“China PnR”), a reputable custodian for lending platforms, for payment services.  On June 15, 2017, Bank of Shanghai started to serve as the exclusive custodian for our lending platform, providing account management, funds depository, custodian, and account segregation services in connection with funds transfers in loan transactions facilitated via our platform.  For loan transactions facilitated through our platform, the bank sets up separate accounts for borrowers, lenders and guarantors and withdraws and deposits funds based on our instructions.  The bank also provides other ancillary services such as platform user identity verification and account statements preparation. In August 2017, we completed our transition from utilizing the custodian system of China PnR to the custodian system of Bank of Shanghai.


We currently facilitate loans exclusively to borrowers that provide an automobile as security to lenders, and in many instances third-party institutions provide a guarantee to lenders as additional security. The automobiles that are secured must be owned by the borrower and may not be encumbered by existing loans. We require that the size of each loan be no more than 70% of the value of the collateral of such loan.  However, since none of the loans facilitated through our platform has defaulted to date, neither our collateralization standards nor our collection efforts have been tested in practice.


Historically, we structured many of the loans facilitated through our platform such that representatives of traditional lending or guarantee institutions would borrow the funds from the lenders on our platform and in turn lend such funds to underlying individual or small company borrowers. Pursuant to our agreements with these institutions or their representatives, such institutions and the individuals controlling such institutions committed (i) to borrow from our lenders a target loan amount per month, (ii) to cover all costs incurred in connection with such institutions’ loans made by the institutions to underlying borrowers, (iii) to secure loans through security interests in cars of their underlying borrowers and (iv) to repay all loans made by our lenders to these institutions or their representatives. Under our old loan structure, underlying borrowers provided their automobiles as security to the representatives of financing institutions, including our major borrowers, who in turn borrowed funds through our platform. Such security arrangement did not directly involve us or our lenders. The financing institutions affiliated with our borrowers guaranteed the repayment of the respective loans facilitated through our platform. As of December 31, 2016, we partner with an aggregate of 4 lending and guarantee companies of loans facilitated through our platform.  As of June 30, 2017, we partnered with an aggregate of 11 lending and guarantee companies of loans facilitated through our platform.  


However, due to limitations on loan sizes to borrowers set forth in the P2P Measures (defined below), since the beginning of 2017, we begun to structure loans such that the underlying individual or small company borrowers borrow the funds directly from the lenders on our platform. The loan institutions that previously borrowed from our lenders are now guarantors of such loans. We believe that not all of the loans we facilitated were within the limitations set forth in the P2P Measures. Given that the P2P Measures are new and their implementation is just beginning, there is no guarantee that the relevant government authorities will deem our operations to be in full compliance with the P2P Measures once these measures are implemented. Furthermore, such lending and guarantee institutions are under no contractual obligation to continue partnering with us in the long-term pursuant to these new arrangements. As such, our revenues may decline and we may be subject to penalties imposed by the relevant governmental agencies in the event that we fail to comply with the P2P Measures.


Through September 30, 2016, all of the loans facilitated through our platform were made to borrowers that borrowed through our platform multiple times. During the quarters ended December 31, 2016, March 31, 2017 and June 30, 2017, approximately 66.7%, 48.5%, and 71.2%, respectively, of the loans facilitated through our platform were made to borrowers that borrowed through our platform multiple times. During the six months ended June 30, 2017, the average number of loans per individual borrower was 6.57 and the average number of loans per small business borrower was 7.53.


We do not allow borrowers to borrow through our platform unless their prior loans facilitated through our platform have previously been paid in full and we do not allow borrowers to repay their existing loans with new loans facilitated through our platform. Consequently, borrowers must repay loans using funds obtained from other sources other than our platform. Alternatively, the borrower can provide additional collateral, in which case we would allow the borrower to borrow 70% of the value of the additional collateral.



2







Our Strategy


We have a limited operating history. We plan to continue to expand our borrower base by continuing to attract traditional lending or guarantee institutions whose customers utilize our platform, and generating more referrals from existing clients, through offline marketing methods, and by attracting more individual borrowers directly through online methods such as search engine marketing, search engine optimization, mobile application downloads through major application stores, partnering with online channels through application programming interfaces, as well as various marketing campaigns. In addition, we plan to continue to expand our lender base using various social media and mobile platforms and networks to market our platform to potential lenders. In addition, we intend to branch out into new areas of peer to peer lending in the future by, for example, facilitating loans that are not secured by automobiles or attracting institutional lenders. However, there is no guarantee that our expansion plans will be successful.


In 2015 and 2016, we raised an aggregate of approximately $8.0 million through four private placements in China. We had approximately $5.6 million of cash as of June 30, 2017. We intend to continue to use such funds, and the funds we expect to raise in this offering, to grow our business primarily by:


·

enhancing our marketing efforts in order to increase awareness of our marketplace among potential lenders throughout China;


·

enhancing our online platform and mobile app;


·

hiring additional employees to enhance our business structure and management; and


·

increasing our efforts to expand our borrower base by utilizing social networks and e-commerce platforms.


Our Challenges


The online consumer finance marketplace industry in China is intensely competitive and we compete with many other consumer finance marketplaces. According to the China IRN Report, as of December 2016, there were 2,448 online consumer finance marketplaces in China. In light of the low barriers to entry in the online consumer finance industry in China, we expect more players to enter this market and increase the level of competition. We anticipate that more established internet, technology and financial services companies that possess large, existing user bases, substantial financial resources and established distribution channels may enter the market in the future.


Historically, we have been dependent on loans made to a limited number of traditional lending or guarantee institutions, their representatives or their clients. For the year ended December 31, 2016, fees generated from loans provided to two borrowers accounted for 45.8% and 31.1% of our revenues, respectively. For the six months ended June 30, 2017, fees generated from loans provided to two borrowers accounted for 30.4% and 14.5% of our revenues, respectively. For the six months ended June 30, 2016, fees generated from loans provided to two borrowers accounted for 72.6% and 27.4% of our revenues, respectively.  


As of June 30, 2017, no loans facilitated through our platform had defaulted and all payments were timely made. In the event that a loan facilitated through our platform defaults or a payment is not made timely, we are not obligated to repay, or otherwise pay any penalties to, lenders. As such, unlike some of our better capitalized competitors, we have not established a risk reserve fund designed to compensate lenders for any losses they incur in the event of default. Competitors that have established a risk reserve fund may be better positioned to attract lenders than we are.



3






The China Banking Regulatory Commission, Ministry of Industry and Information Technology and the Ministry of Public Security published Provisional Measures for Administration of Business Activities of Internet Lending Information Intermediaries (the “P2P Measures”) on August 17, 2016. According to the P2P Measures, effective August 17, 2017, the maximum loan balance at any given time for an individual shall be not more than RMB 200,000, and for a business enterprise not more than RMB 1,000,000, borrowed from a single internet lending information intermediary platform and not more than RMB 1 million for an individual and RMB 5 million for a business enterprise, respectively, in total from all platforms. If we were found to be in violation of the P2P Measures, a penalty of up to RMB30,000 would be imposed for such violation. We would not be fined for each violation; however, if there were repetitive violations, more severe penalties may be imposed. However, it is unclear from the P2P Measures as to the magnitude of such penalties. As of December 31, 2016, 13, or 86.67%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. As of June 30, 2017, 51, or 18.68%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. These loans were facilitated prior to the effectiveness of the P2P Measures and substantially all of them were paid off as of the date of this prospectus. We believe that we are in full compliance with the P2P Measures and that our new loan structure should continue to be in compliance with the P2P Measures.


We cooperate with Shanghai Credit Information Service Co., Ltd, by joining its internet financial credit information system (“NFCS”). NFCS is one of the primary systems to collect personal lending records for P2P companies. We utilize NFCS to determine whether borrowers obtain loans through other platforms.


In addition, our ability to achieve our goal and execute our strategy is subject to additional risks and uncertainties, including those relating to our ability to:


·

attract and retain borrowers and lenders on our marketplace in an effective and cost-efficient way;


·

effectively evaluate a borrower’s credit profile to appropriately price our loan products and maintain low default rates;


·

compete effectively; and


·

continue to establish successful strategic relationships with lending and referral institutions.


Mr. Zeng, our Chief Executive Officer and Chairman,  and Mr. Liu, a member of our board of directors, currently own 19.12% and 48.28% of our outstanding ordinary shares, respectively, and will beneficially own 16.57% and 41.84%, respectively, of our outstanding ordinary shares upon completion of our initial public offering. As a result of their significant shareholding, Messrs. Zeng and Liu have, and will continue to have, substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interests of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the market price of our ordinary shares. These actions may be taken even if they are opposed by our other shareholders. For more information regarding our principal shareholders and their affiliated entities, see “Principal Shareholders.”


We face additional risks and uncertainties related to our corporate structure and regulatory environment in China. Please see “Risk Factors” and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face.



4







Corporate History and Structure


We began our operations in China through Shanghai Dianniu Internet Finance Information Service Co. Ltd., which was formed in November 2015. In early 2017, we incorporated Golden Bull Limited under the laws of the Cayman Islands as our offshore holding company under our former name Point Cattle International Limited. In March 2017, we established our wholly owned Hong Kong subsidiary, Point Cattle Group Company Limited, which formed Shanghai Fuyu Information and Technology Co., Ltd., its wholly owned subsidiary in PRC (the “WFOE”). Through the contractual arrangements between the WFOE, Dianniu and the majority shareholders of Dianniu, we control 93.2% of Dianniu. These contractual arrangements allow us to effectively control and derive 93.2% of the economic interest from Dianniu.  


In addition to Dianniu, the WFOE has entered into a series of contracts with Shanghai Baoxun Advertisement Design Co., Ltd. (“Baoxun”), a company formed in February 2017 under the laws of PRC, and Baoxun’s shareholders.  Baoxun currently does not have any operations. However, we expect that in the future Baoxun will engage in the design and production of online advertisement and marketing survey services for online marketplaces.

 

The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities, as of the date of this prospectus:


[GOLDENBULLF1ACONTROLDOC005.GIF]



5







* Huishi Equity Investment Fund Management (Shanghai) Co., Ltd. is a third party institutional investor in Dianniu and is not a party to any of the VIE Agreements described herein. Shanxi Xifeng Investment Co., Ltd., a former shareholder of Dianniu, transferred its 4.0625% equity interest in Dianniu to Xiaohui Liu for a consideration of RMB 3,000,000 on December 4, 2017.


Foreign Private Issuer Status


We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

 

·

we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;

·

for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;

·

we are not required to provide the same level of disclosure on certain issues, such as executive compensation;

·

we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;

·

we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and

·

Our insiders are not required to comply with Section 16 of the Exchange Act requiring such individuals, and entities to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.


Variable Interest Entity Arrangements


In establishing our business, we have used a variable interest entity, or VIE, structure. In the PRC, investment activities by foreign investors are principally governed by the Guidance Catalog of Industries for Foreign Investment, or the Catalog, which was promulgated and is amended from time to time by the PRC Ministry of Commerce, or MOFCOM, and the PRC National Development and Reform Commission, or NDRC. The Catalog divides industries into three categories: encouraged, restricted and prohibited. Industries not listed in the Catalog are generally open to foreign investment unless specifically restricted by other PRC regulations. Our Company and the WFOE are considered as foreign investors or foreign invested enterprises under PRC law. The provision of internet financing services providing value-add telecommunications business, which we conduct through our VIE, is within the category under the Catalog in which foreign investment is currently restricted, which makes a VIE structure necessary. In addition, we intend to centralize our management and operation in the PRC without being restricted to conduct certain business activities which are important for our current or future business but are restricted or might be restricted in the future.  As such, we believe the agreements between the WFOE and Dianniu are essential for our business operation. These contractual arrangements with Dianniu and its shareholders enable us to exercise effective control over Dianniu and hence consolidate its financial results as our VIE.

 

In our case, the WFOE effectively assumed management of the business activities of Dianniu through a series of agreements which are referred to as the VIE Agreements. The VIE Agreements are comprised of a series of agreements and amendments to some of the agreements, including Equity Pledge Agreements and an Amendment, a Technical Consultation and Service Agreement and an Amendment to it, a Business Cooperation Agreement and an Amendment to it, Equity Option Agreements and an Amendment, and Voting Rights Proxy and Finance Supporting Agreements and an Amendment. Through the VIE Agreements, the WFOE has the right to advise, consult, manage and operate Dianniu for an annual consulting service fee in the amount of 93.2% of Dianniu’s net profit.  Three Shareholders of Dianniu Erxin Zeng, Xiaohui Liu and Qian Lai Qian Wang (Shanghai) Equity Investment Fund Management Co., Ltd . (the “Dianniu Participating Shareholders”) have each pledged all of their right, title and equity interests in Dianniu as security for the WFOE to collect consulting services fees provided to Dianniu through the Equity Pledge Agreement.  In order to further reinforce the WFOE’s rights to control and operate Dianniu, the Dianniu Participating Shareholders have granted the WFOE an exclusive right and option to acquire all of their equity interests in Dianniu through the Equity Option Agreement.  

 



6







The material terms of the VIE Agreements with Dianniu are as follows:


Technical Consultation and Service Agreement .   Pursuant to the Technical Consultation and Service Agreement between WFOE and Dianniu dated June 8, 2017 , as amended by the Amendment to Technical Consultation and Service Agreement between WFOE and Dianniu dated December 4, 2017, WFOE has the exclusive right to provide consultation and services to Dianniu in the area of fund, human, technology and intellectual property rights. For such services, Dianniu agrees to pay service fees in the amount of 93.2% of its net income and also has the obligation to absorb 93.2% of Dianniu’s losses.  WFOE exclusively owns any intellectual property rights arising from the performance of this Technical Consultation and Service Agreement. The amount of service fees and payment term can be amended by the WFOE and Dianniu’s consultation and the implementation. The term of the Technical Consultation and Service Agreement is 20 years. WFOE may terminate this agreement at any time by giving 30 day’s written notice to Dianniu.


Business Cooperation Agreement .    Pursuant to the Business Cooperation Agreement between WFOE and Dianniu dated June 8, 2017 , as amended by the Amendment to Business Cooperation Agreement between WFOE and Dianniu dated December 4, 2017, WFOE has the exclusive right to provide Dianniu with technical support, business support and related consulting services, including but not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance. In exchange, WFOE is entitled to a service fee that equals to 93.2% of the net income of Dianniu determined by U.S. GAAP, the service fees may be adjusted based on the services rendered by WFOE in that month and the operational needs of Dianniu. WFOE also exclusively owns any intellectual property rights arising from the performance of the Business Cooperation Agreement. The Business Cooperation Agreement shall remain effective unless it is terminated or is compelled to terminate under applicable PRC laws and regulations. WFOE may terminate this Business Cooperation Agreement at any time by giving 30 days’ prior written notice to Dianniu.


Equity Pledge Agreement .     Pursuant to the Equity Pledge Agreements among WFOE, Dianniu and Dianniu Participating Shareholders dated June 8, 2017 and the Amendment to Equity Pledge Agreement among WFOE, Dianniu and Xiaohui Liu dated December 4, 2017, Dianniu Participating Shareholders pledged all of their equity interests in Dianniu to WFOE to guarantee Dianniu's performance of relevant obligations and indebtedness under the Technical Consultation and Service Agreement and other control agreements (“Control Agreement”). In addition, Dianniu Participating Shareholders have completed the registration of the equity pledge under the Equity Pledge Agreement with the competent local authority. If Dianniu breaches its obligation under the Control Agreement, WFOE, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests in order to recover these breached amounts. The Pledge shall be continuously valid until all of the Dianniu Participating Shareholders are no longer shareholders of Dianniu or the satisfaction of all its obligations by Dianniu under the Control Agreements.


Equity Option Agreement .     Pursuant to the Equity Option Agreements among WFOE, Dianniu and Dianniu Participating Shareholders dated June 8, 2017 and the Amendment to Equity Option Agreement among WFOE, Dianniu and Xiaohui Liu dated December 4, 2017, WFOE has the exclusive right to require each Dianniu Participating Shareholder to fulfill and complete all approval and registration procedures required under PRC laws for WFOE to purchase, or designate one or more persons to purchase, each Dianniu Participating Shareholder’s equity interests in Dianniu, once or at multiple times at any time in part or in whole at WFOE's sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The Equity Option Agreements shall remain effective until all the equity interest owned by each Dianniu Participating Shareholder has been legally transferred to WFOE or its designee(s).


Voting Rights Proxy and Financial Supporting Agreement .   Pursuant to the Voting Rights Proxy and Financial Supporting Agreements among WFOE, Dianniu and Dianniu Participating Shareholders dated June 8, 2017 and pursuant to the Amendment to Voting Rights Proxy and Financial Supporting Agreement among WFOE, Dianniu and Xiaohui Liu dated December 4, 2017, each Dianniu Participating Shareholder irrevocably appointed WFOE or WFOE’s designee to exercise all his or her rights as Dianniu Participating Shareholders under the Articles of Association of Dianniu, including but not limited to the power to exercise all shareholder's voting rights with respect to all matters to be discussed and voted in the shareholders’ meeting of Dianniu. The term of the Voting Rights Proxy and Financial Supporting Agreements is 20 years.



7







The WFOE has also entered into a series of VIE agreements with Baoxun, and Baoxun’s shareholders, upon the same materials terms as described above.  Baoxun currently does not have any operations. However, we expect that in the future Baoxun will engage in the design and production of online advertisement and marketing survey services for online marketplaces. Social survey, including marketing survey service, is within the category in which foreign investment is restricted pursuant to the Catalog.


The material terms of the VIE Agreements with Baoxun are as follows:


Technical Consultation and Service Agreement .   Pursuant to the Technical Consultation and Service Agreement between WFOE and Baoxun dated June 8, 2017, WFOE has the exclusive right to provide consultation and technology services to Baoxun in the areas of finance, human resource, technology and intellectual property rights. For such services, Baoxun agrees to pay an annual service fee in the amount of 100% of its net income as determined in accordance with U.S. GAAP and a quarterly flowing charge and also has the obligation to absorb 100% of Baoxun’s net loss determined in accordance with U.S. GAAP.  WFOE exclusively owns any intellectual property rights arising from the performance of this Technical Consultation and Service Agreement. The service fees can be adjusted by the parties upon the request of the WFOE. The term of the Technical Consultation and Service Agreement is 20 years. WFOE may terminate this agreement at any time by giving 30 days’ written notice to Baoxun.


Business Cooperation Agreement.    Pursuant to the Business Cooperation Agreement between WFOE and Baoxun dated June 8, 2017, WFOE has the exclusive right to provide Baoxun with technical support, business support and related consulting services, including but not limited to technical services, business consultation, equipment and property leasing, marketing consulting, system integration, product research and development, and system maintenance. In exchange, WFOE is entitled to a service fee that equals to 100% of the net income of Baoxun determined by U.S. GAAP and absorb all the losses of Baoxun determined in accordance with U.S. GAAP. The service fees may be adjusted based on the services rendered by WFOE in that month and the operational needs of Baoxun. WFOE also exclusively owns any intellectual property rights arising from the performance of the Business Cooperation Agreement. The Business Cooperation Agreement shall maintain effective unless it is terminated by WFOE upon 30 days’ written notice or in accordance with applicable PRC laws and regulations. WFOE may terminate this Business Cooperation Agreement at any time by giving 30 days’ prior written notice to Baoxun.


Equity Pledge Agreements.    Pursuant to the Equity Pledge Agreements among WFOE, Baoxun and all the shareholders of Baoxun (“Baoxun Shareholders”) dated June 8, 2017, Baoxun Shareholders pledged all of their equity interests in Baoxun to WFOE to guarantee Baoxun's performance of its obligations under the Technical Consultation and Service Agreement and other control agreements (“Baoxun Control Agreements”). The equity pledge shall become effective on such date when the pledge has been registered with relevant local authority. Baoxun Shareholders have completed the registration of the equity pledge with the competent local authority. If Baoxun breaches its obligation under the Baoxun Control Agreement, WFOE, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests. The Equity Pledge Agreement is valid until the satisfaction of all its obligations by Baoxun under the Baoxun Control Agreements.


Equity Option Agreements.    Pursuant to the Equity Option Agreements among WFOE, Baoxun and Baoxun Shareholders dated June 8, 2017, for a consideration of RMB 1, WFOE is granted an option to require each Baoxun Shareholder to fulfill and complete all approval and registration procedures required under PRC laws for WFOE or its designee to purchase   Baoxun Shareholders’ equity interests in Baoxun, once or at multiple times at any time in part or in whole at WFOE's sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The Equity Option Agreement shall remain effective until all the equity interest owned by each Baoxun Shareholder has been legally transferred to WFOE or its designee(s).


Voting Rights Proxy and Financial Supporting Agreements .   Pursuant to the Voting Rights Proxy and Financial Supporting Agreements among WFOE, Baoxun and Baoxun Shareholders dated June 8, 2017, each Baoxun Shareholder irrevocably appointed WFOE or its designee to exercise all his or her rights as Baoxun Shareholders under the Articles of Association of Baoxun, including but not limited to the power to exercise all shareholder's voting rights with respect to all matters to be discussed and voted in the shareholders’ meeting of Baoxun. The Baoxun Shareholders also agree to provide necessary financial support to Baoxun in connection with its operation. The term of the Voting Rights Proxy and Finance Supporting Agreements is 20 years.



8






We do not expect that the classification of either Dianniu or Baoxun under the Catalog will change or either of our VIE entities will be re-classified to a different industry in the near future.


Emerging Growth Company Status

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting and financial disclosure requirements that are applicable to other public companies, that are not emerging growth companies, including, but not limited to, (1) presenting only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations in this prospectus, (2) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), (3) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (4) exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these exemptions. As a result, investors may find investing in our ordinary shares less attractive.

  

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. As a result, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of such extended transition period.

 

We could remain an emerging growth company for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.


Corporate Information

Our principal executive offices are located at 707 Zhang Yang Road, Sino Life Tower, F35, Pudong, Shanghai, China 200120. Our telephone number at this address is (86) 021-61659027. Our registered office in the Cayman Islands is located at Corporate Filing Services Ltd., 3 rd Floor, Harbour Place, 103 South Church Street, Grand Cayman, KY 1-1002, Cayman Islands. Our agent for service of process in the United States is Corporation Service Company located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices.

Our website is http://www.dianniu98.com . The information contained on our website is not a part of this prospectus.


Recent Development


On November 3, 2017, our shareholders approved the subdivision of our 50,000 issued ordinary shares, par value US $1.00 per share, into 5,000,000 ordinary shares, par value US $0.01 per share, and the increase of our authorized share capital to 50,000,000 ordinary shares from 50,000 ordinary shares.   Simultaneously, our board of directors approved the issuance of an additional 8,000,000 ordinary shares to our existing shareholders proportionately with their respective existing ownership percentage immediately prior to this offering.  


The above transactions are considered as a 260 for 1 stock split of our ordinary shares and the original 50,000 ordinary shares were deemed part of our recapitalization to result in 13,000,000 ordinary shares issued and outstanding prior to this offering.


All shares and per share amounts used in the registration statement of which this prospectus forms a part have been retroactively restated to reflect the stock split.  



9






 

 

The Offering


Securities being offered:


2,000,000  ordinary shares (1) .

 

 

  

  

Initial offering price:

The purchase price for the shares will be between $4.00 and $4.50 per ordinary share.

 

 

Number of ordinary shares outstanding before the offering:

13,000,000 of our ordinary shares are outstanding as of the date of this prospectus.

 

 

Number of ordinary shares Outstanding After the Offering 1 :

15,000,000 ordinary shares

 

 

Gross proceeds to us, net of

underwriting discount

but before expenses:

Between $7,520,000 and $8,460,000, based on an offering price between $4.00 and $4.50.

 

 

Use of proceeds:

We intend to use the net proceeds of this offering to expand our marketing activities to reach more potential borrowers and lenders in China, for development of our online platform and mobile app, to hire more employees to enhance our business structure and management and for other general corporate purposes. For more information on the use of proceeds, see “Use of Proceeds” on page 49.

 

 

Indemnification Escrow

Net proceeds of this offering in the amount of $600,000 shall be used to fund an escrow account for a period of 24 months following the closing date of this offering, which account shall be used in the event we have to indemnify the underwriters pursuant to the terms of an underwriting agreement with the underwriters.

 

 

 Lock-up

All of our directors and officers and certain shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our ordinary shares or securities convertible into or exercisable or exchangeable for our ordinary shares for a period of 12 months after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

 

 

Proposed Nasdaq Symbol:

DNJR

 

 

Risk factors:

Investing in our ordinary shares involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 13.


11 In addition, we may issue up to 300,000 ordinary shares pursuant to the underwriters’ over-allotment option.

2 Excludes ordinary shares underlying underwriters’ warrants and ordinary shares pursuant to the underwriters’ over-allotment option.



10






SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA


The following summary consolidated financial statements for the period from November 2015 to December 2015 and the year ended December 31, 2016 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated financial statements for the six months ended June 30, 2017 and 2016 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.


Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements and related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.


The following table presents our summary consolidated statement of comprehensive income for the period from November 2015 to December 2015 and the year ended December 31, 2016 and the six months ended June 30, 2017 and 2016.


 

For the Year Ended

 

For the period from November 17, 2015 (inception) to

 

For the Six Months Ended

 

December 31, 2016

 

December 31, 2015

 

June 30, 2017

 

June 30, 2016

 

 

 

 

 

(Unaudited)

 

(Unaudited)

Summary Consolidated Statement of Comprehensive Income:

 

 

 

 

 

 

 

Operating revenue

$

3,705,770 

 

$

 

$

2,797,640 

 

$

1,117,596 

 

 

 

 

 

 

 

 

Operating expense

 

 

 

 

 

 

 

     Selling

(1,434,662)

 

(30,091)

 

(1,715,617)

 

(715,433)

     General and administrative

(1,636,353)

 

(81,659)

 

(1,680,715)

 

(670,283)

     Research and development

(417,901)

 

(29,943)

 

(204,691)

 

(240,679)

Total operating expenses

(3,488,916)

 

(141,693)

 

(3,601,023)

 

(1,626,395)

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Other income, net

2,895 

 

 

17,228 

 

964 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

219,749 

 

(141,692)

 

(786,155)

 

(507,835)

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

54,938 

 

(35,423)

 

(184,750)

 

(126,958)

 

 

 

 

 

 

 

 

Net income (loss)

164,811 

 

(106,269)

 

(601,405)

 

(380,877)

 

 

 

 

 

 

 

 

Less: Net income (loss) attributable to non-controlling interest

3,906 

 

 

(63,050)

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Golden Bull Limited

$

160,905 

 

$

(106,269)

 

$

(538,355)

 

$

(380,877)



11





The following table presents our summary consolidated balance sheet data as of December 31, 2016 and 2015 and as of June 30, 2017.

 

 

As of December 31,

 

As of June 30,

 

2016

 

2015

 

2017

 

 

 

 

 

(Unaudited)

Summary Consolidated Balance Sheet Data:

 

 

 

 

 

Cash and cash equivalents

$

7,378,920

 

$

674,515

 

$

5,565,815

Other assets

1,723,173

 

205,476

 

7,455,661

Total assets

9,102,093

 

879,991

 

13,021,476

Total liabilities

282,293

 

61,238

 

548,920

Total shareholders’ equity

$

8,819,800

 

$

818,753

 

$

12,472,556




12






RISK FACTORS


An investment in our ordinary shares involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ordinary shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ordinary shares could decline, and you may lose all or part of your investment.


Risks Related to Our Business


We have a limited operating history in a new and evolving market, which makes it difficult to evaluate our future prospects.


The market for online consumer finance marketplaces is new and may not develop as expected. The regulatory framework for this market is also evolving and may remain uncertain for the foreseeable future.  Potential borrowers and lenders may not be familiar with this market and may have difficulty distinguishing our services from those of our competitors. Convincing potential new borrowers and lenders of the value of our services is critical to increasing the volume of loan transactions facilitated through our marketplace and to the success of our business. We launched our online marketplace in January 2016 and have a limited operating history. As our business develops, or in response to competition, we may continue to introduce new products or make adjustments to our existing products, or make adjustments to our business model. In connection with the introduction of new products, or in response to general economic conditions, we may impose more stringent borrower qualifications to ensure the quality of loans on our platform, which may negatively affect the growth of our business. Any significant change to our business model may not achieve expected results and may have a material and adverse impact on our financial conditions and results of operations. It is therefore difficult to effectively assess our future prospects.


If we fail to educate potential borrowers and lenders about the value of our platform and services, if the market for our marketplace does not develop as we expect, or if we fail to address the needs of our target market, our business and results of operations will be harmed.

 

If we are unable to maintain or increase the volume of loan transactions facilitated through our marketplace or if we are unable to retain existing borrowers or lenders or attract new borrowers or lenders, our business and results of operations will be adversely affected.


The volume of loan transactions facilitated through our marketplace has grown rapidly since our inception. The total amount of loans facilitated through our marketplace was $108.8 million as of June 30, 2017, which increased substantially from $17.8 million as of June 30, 2016. In the six months ended June 30, 2017, the total amount of loans facilitated through our marketplace was $53.8 million, compared with $17.8 million in the six months ended June 30, 2016.  To maintain the high growth momentum of our marketplace, we must continuously increase the volume of loan transactions by retaining current participants and attracting more users. We intend to continue to dedicate significant resources to establishing new acquisition channels and introducing a wider range of loan products. Furthermore, if there are insufficient qualified loan requests, lenders may be unable to deploy their capital in a timely or efficient manner and may seek other investment opportunities. Furthermore, if there are insufficient lender commitments, borrowers may be unable to obtain capital through our marketplace and may turn to other sources for their borrowing needs and lenders who wish to exit their investments prior to maturity may not be able to do so in a timely manner.



13







The overall transaction volume may be affected by several factors, including our brand recognition and reputation, the interest rates offered to borrowers and lenders relative to market rates, the effectiveness of our risk management system, the repayment rate of borrowers on our marketplace, the efficiency of our platform, the macroeconomic environment, changes in the regulatory environment and other factors. In connection with the introduction of new products or in response to general economic conditions, we may also impose more stringent borrower qualifications to ensure the quality of loans on our platform, which may negatively affect the growth of loan volume. If any of our current user acquisition channels becomes less effective, if we are unable to continue to use any of these channels or if we are not successful in using new channels, we may not be able to attract new borrowers and lenders in a cost-effective manner or convert potential borrowers and lenders into active borrowers and lenders, and may even lose our existing borrowers and lenders to our competitors. If we are unable to attract qualified borrowers and sufficient lender commitments or if borrowers and lenders do not continue to participate in our marketplace at the current rates, we might be unable to increase our loan transaction volume and revenues as we expect, and our business and results of operations may be adversely affected.


Failure to manage our liquidity and cash flows may materially and adversely affect our financial conditions and results of operations. As a result, we may need additional capital, and financing may not be available on terms acceptable to us, or at all.


We generated negative cash flows from operating activities in the amount of approximately $1.1 million in 2016. In addition, we generated a net loss of approximately $0.6 million during the six months ended June 30, 2017.  We cannot assure you our business model will allow us to generate positive cash, given our substantial expenses in relation to our revenue at this stage of our company’s development. Inability to collect our fees from borrowers in a timely and sufficient manner, or the inability to offset our expenses with adequate revenue, may adversely affect our liquidity, financial condition and results of operations. Although we believe that our cash on hand and anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months, we cannot assure you this will be the case. We may need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions, or to grow our business organically. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.



14







The laws and regulations governing the peer-to-peer lending service industry in China are developing and evolving and subject to changes. If our practice is deemed to violate any PRC laws or regulations, our business, financial conditions and results of operations would be materially and adversely affected.


Due to the relatively short history of the peer-to-peer lending service industry in China, the regulatory framework governing our industry is under development by the PRC government. Currently, the PRC government has not promulgated any specific rules, laws or regulations to specially regulate the peer-to-peer lending service industry. See “Regulation—Regulations Relating to Peer-to-Peer Lending Business.” As of the date of this prospectus, we believe that we are in compliance with PRC laws and regulations, including those governing the peer-to-peer lending service industry in China and have not been subject to any material fines or other penalties under these laws or regulations. However, due to the lack of detailed regulations and guidance in the area of peer-to-peer lending services and the possibility that the PRC government authority may promulgate new laws and regulations regulating peer-to-peer lending services in the future, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations for the peer-to-peer lending service industry, and there can be no assurance that the PRC government authority will ultimately take a view that is consistent with us. For instance, we cannot rule out the possibility that the PRC government will change its regulatory framework to institute a licensing regime covering our industry. If such a licensing regime were introduced, we cannot assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.


In addition, the PRC laws and regulations relating to online peer-to-peer lending do not set out the liabilities that will be imposed on the service providers who fail to comply with the principles and requirements contained thereunder, nor do other applicable rules, laws and regulations contain specific liability provisions specially as to the peer-to-peer lending platform or similar online marketplace like us. However, if our practice is deemed to violate any rules, laws or regulations, we may face injunctions, including orders to cease illegal activities, and may be exposed to other penalties as determined by the relevant government authorities as well. If such situations occur, our business, financial condition and prospects would be materially and adversely affected.


The China Banking Regulatory Commission, Ministry of Industry and Information Technology and the Ministry of Public Security published the P2P Measures on August 17, 2016. According to the P2P Measures, effective August 17, 2017, the maximum loan balance at any given time for an individual or business enterprise shall be not more than RMB 200,000 and RMB 1,000,000, respectively, borrowed from a single internet lending information intermediary platform and not more than RMB 1 million for an individual or RMB 5 million for business enterprise, respectively, in total from all platforms. If we were found to be in violation of the P2P Measures, a penalty of up to RMB30,000 would be imposed for such violation. We would not be fined for each violation; however, if there were repetitive violations, more severe penalties may be imposed. However, it is unclear from the P2P Measures as to the magnitude of such penalties. Historically, we structured many of the loans facilitated through our platform such that traditional lending or guarantee institutions would borrow the funds from the lenders on our platform and in turn lend such funds to underlying individual or small company borrowers. However, due to limitations on loan sizes to borrowers set forth in the P2P Measures, we have begun to structure loans such that the underlying individual or small company borrowers borrow the funds directly from the lenders on our platform. We believe that not all of the loans we facilitated were within the limitations set forth in the P2P Measures. As of December 31, 2016, 13, or 86.67%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. As of June 30, 2017, 51, or 18.68%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. These loans were facilitated prior to the effectiveness of the P2P Measures and substantially all of them were paid off as of the date of this prospectus. Approximately 66% and 84.7% of our revenues were attributable to these borrowers for the year ended December 31, 2016 and the six months ended June 30, 2017. We believe that we are in full compliance with the P2P Measures that our new loan structure should continue to be in compliance with the P2P Measures. Given that the P2P Measures are new and their implementation is just beginning, there is no guarantee that the relevant government authorities will deem our operations to be in full compliance with the P2P Measures.




15






If our loan products do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.


Our existing or new loan products and changes to our platform could fail to attain sufficient market acceptance for many reasons, including but not limited to:


·

our failure to predict market demand accurately and supply loan products that meet this demand in a timely fashion;

·

borrowers and lenders using our platform may not like, find useful or agree with any changes;

·

our failure to properly price new loan products;

·

a substantial number of loan defaults by borrowers through our platform;

·

defects, errors or failures on our platform;

·

negative publicity about our loan products or our platform’s performance or effectiveness;

·

views taken by regulatory authorities that the new products or platform changes do not comply with PRC laws, rules or regulations applicable to us; and

·

the introduction or anticipated introduction of competing products by our competitors.


If our new loan products do not achieve adequate acceptance in the market, our competitive position, results of operations and financial condition could be harmed.


Our revenues for 2016 were highly dependent on loans made to a limited number of borrowers.  If such concentration continues, the loss of any of our major borrowers could materially and adversely affect our growth and our revenues.

 

For the year ended December 31, 2016, fees generated from two borrowers accounted for 45.8% and 31.1% of our revenues, respectively. For the six months ended June 30, 2017, fees generated from two borrowers accounted for 30.4% and 14.5% of our revenues, respectively. For the six months ended June 30, 2016, transaction and management fees generated through two borrowers accounted for 72.6% and 27.4% of our revenues, respectively. As a result of our reliance on a limited number of borrowers, we may face competitive pressures, which may have a material adverse effect on our profits and our revenues. In addition, there are a number of factors, other than our performance, that could cause the loss of a borrower. The loss of any of these lending or guarantee institutions or their customers or referrals, or a decrease in the number of borrowers, could materially adversely affect our profits and our revenues. Unless and until we diversify our base of borrowers, our future success will significantly depend upon the timing and volume of business from significant borrowers.


If we do not compete effectively, our results of operations could be harmed.


The online consumer finance marketplace industry in China is intensely competitive and evolving. According to the China IRN Report, as of December 2016, there were 2,448 online consumer finance marketplaces in China. With respect to borrowers, we primarily compete with traditional and other inline consumer finance companies, financial institutions, such as consumer finance business units in commercial banks, credit card issuers and a significant number of other unlike consumer finance companies such as ours. With respect to lenders, we primarily compete with other investment products and asset classes, such as equities, bonds, investment trust products, bank savings accounts, and real estate alternative asset classes.


Our competitors operate with different business models, have different cost structures or participate selectively in different market segments. They may ultimately prove more successful or more adaptable to new regulatory, technological and other developments. Many of our current and potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their platforms. Our competitors may also have longer operating histories, more extensive borrower or lender bases, greater brand recognition and brand loyalty and broader partner relationships than us. Additionally, a current or potential competitor may acquire one or more of our existing competitors or form a strategic alliance with one or more of our competitors. Our competitors may be better at



16






developing new products, offering more attractive investment returns or lower fees, responding faster to new technologies and undertaking more extensive and effective marketing campaigns. In response to competition and in order to grow or maintain the volume of loan transactions facilitated through our marketplace, we may have to offer higher investment returns to lenders or charge lower transaction fees, which could materially and adversely affect our business and results of operations. If we are unable to compete with such companies and meet the need for innovation in our industry, the demand for our marketplace could stagnate or substantially decline, we could experience reduced revenues or our marketplace could fail to achieve or maintain more widespread market acceptance, any of which could harm our business and results of operations.

 

Credit and other information that we receive from third parties about a borrower may be inaccurate or may not accurately reflect the borrower’s creditworthiness, which may compromise the accuracy of our credit assessment.


For the purpose of credit assessment, we obtain borrower credit information from third parties, such as financial institutions and e-commerce providers such as Alibaba Cloud, and assess applicants’ credit based on such credit information. A credit score assigned to a borrower may not reflect that particular borrower’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data. In addition, we currently do not have a comprehensive way to determine whether borrowers have obtained loans through other consumer finance marketplaces, creating the risk whereby a borrower may borrow money through our platform in order to pay off loans to lenders on other platforms. Additionally, there is a risk that, following our obtaining a borrower’s credit information, the borrower may have:

 

·

become delinquent in the payment of an outstanding obligation;

·

defaulted on a pre-existing debt obligation;

·

taken on additional debt; or

·

sustained other adverse financial events.


Such inaccurate or incomplete borrower credit information could compromise the accuracy of our credit assessment and adversely affect the effectiveness of our control over our default rates, which could in turn harm our reputation and materially and adversely affect our business, financial condition and results of operations.  


In addition, under the PRC Contract Law, if we fail to provide material information to lenders, or if we fail to identify false information received from borrowers or others and in turn provide such information to lenders, and in either case if we are also found to be at fault due to failure or deemed failure to exercise proper care, we could be held liable for damages caused to lenders as an intermediary pursuant to the PRC Contract Law. In addition, if we fail to complete our obligations under the agreements entered into with lenders and borrowers, we could also be held liable for damages caused to borrowers or lenders.


We may continue to incur net losses in the future.


We had net income of $0.16 million in 2016, the first year of our operations while we incurred net losses of $0.6 million for the six months ended June 30, 2017. We cannot assure you that we will be able to generate net income or will have retained earnings in the future. We anticipate that our operating expenses will increase in the foreseeable future as we seek to continue to grow our business, attract borrowers, lenders and partners and further enhance and develop our loan products and platform. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. As a result of the foregoing and other factors, we may incur additional net losses in the future and may not be able to maintain profitability on a quarterly or annual basis.





17






Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.


Our quarterly results of operations, including the levels of our net revenues, expenses, net (loss)/income and other key metrics, may vary significantly in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may not be meaningful, especially given our limited operating history. Accordingly, the results for any one quarter are not necessarily an indication of future performance. Fluctuations in quarterly results may adversely affect the market price of our ordinary shares. Factors that may cause fluctuations in our quarterly financial results include:


·

our ability to attract new borrowers and lenders and retain existing borrowers and lenders;

·

loan volumes and the channels through which borrowers and lenders are sourced, including the relative mix of online and offline channels;

·

changes in risk reserve liability related to changes in provisional expenses for expected default and payouts;

·

changes in our product mix and introduction of new loan products;

·

the amount and timing of operating expenses related to facilitating loans for new borrowers and lenders and the maintenance and expansion of our business, operations and infrastructure;

·

our decision to manage loan volume growth during the period;

·

network outages or security breaches;

·

general economic, industry and market conditions; and

·

the timing of expenses related to the development or acquisition of technologies or businesses.


Fraudulent activity on our marketplace could negatively impact our operating results, brand and reputation and cause the use of our loan products and services to decrease.


We are subject to the risk of fraudulent activity both on our marketplace and associated with borrowers, lenders and third parties handling borrower and lender information. Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraud. Increases in fraudulent activity, either on our marketplace or associated with participants of our marketplace, could negatively impact our brand and reputation, reduce the volume of loan transactions facilitated through our platform and lead us to take additional steps to reduce fraud risk, which could increase our costs. High profile fraudulent activity could even lead to regulatory intervention, and may divert our management’s attention and cause us to incur additional expenses and costs. Although we have not experienced any material business or reputational harm as a result of fraudulent activities in the past, we cannot rule out the possibility that any of the foregoing may occur causing harm to our business or reputation in the future. If any of the foregoing were to occur, our results of operations and financial conditions could be materially and adversely affected.


Despite our marketing efforts, we may not be able to promote and maintain our brand in an effective and cost-efficient way and our business and results of operations may be harmed accordingly.


We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing borrowers and lenders to our marketplace. Successful promotion of our brand and our ability to attract qualified borrowers and sufficient lenders depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our marketplace. As such, we have entered into marketing and promotion agreements with a network of advertising agencies in various regions in the PRC to promote our products and platform.  Our efforts to build our brand have caused us to incur marketing and advertising expenses in the amount of approximately $759,000 in 2016 in connection with lender acquisition. Despite our marketing efforts, it is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.



18







Our brand or reputation and the reputation of the online consumer finance marketplace industry may materially and adversely affected by factors outside of our control.


Enhancing the recognition and reputation of our brand is critical to our business and competitiveness. Factors that are vital to this objective include but are not limited to our ability to:


·

maintain the quality and reliability of our platform;

·

provide borrowers and lenders with a superior experience in our marketplace;

·

maintain accurate credit assessment tools and decision-making models;

·

effectively manage and resolve borrower and lender complaints; and

·

effectively protect personal information and privacy of borrowers and lenders.


Any malicious or innocent negative allegation made by the media or other parties about the foregoing or other aspects of our company, including but not limited to our management, business, compliance with law, financial conditions or prospects, whether with merit or not, could severely hurt our reputation and harm our business and operating results. In addition, the market for China’s online consumer finance marketplaces is new and the regulatory framework for this market is also evolving, negative publicity about this industry may arise from time to time. Negative publicity about China’s online consumer finance marketplace industry in general may also have a negative impact on our reputation, regardless of whether we have engaged in any inappropriate activities.




19






Certain factors that may adversely affect our reputation are beyond our control. Negative publicity about our partners, outsourced service providers or other counterparties, such as negative publicity about their debt collection practices and any failure by them to adequately protect the information of borrowers and lenders, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation. Furthermore, any negative development in the online consumer finance marketplace industry, such as bankruptcies or failures of other consumer finance marketplaces, and especially a large number of such bankruptcies or failures, or negative perception of the industry as a whole, such as that arises from any failure of other consumer finance marketplaces to detect or prevent money laundering or other illegal activities, even if factually incorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new borrowers and lenders. Negative developments in the online consumer finance marketplace industry, such as widespread borrower defaults, fraudulent behavior and/or the closure of other online consumer finance marketplaces, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by online consumer finance marketplaces like us. If any of the foregoing takes place, our business and results of operations could be materially and adversely affected.


Successful strategic relationships with traditional lending and guarantee institutions are important for our future success.


We anticipate that we will continue to leverage our existing strategic relationships with traditional lending and guarantee institutions to grow our business while we will also pursue new relationships with additional partners. Identifying, negotiating and documenting relationships with partners requires significant time and resources as does integrating third-party data and services into our system. Our current agreements with traditional lending and guarantee institutions do not prohibit them from working with our competitors or from offering competing services. Our competitors may be effective in providing incentives to such entities to favor their products or services, which may in turn reduce the volume of loans facilitated through our marketplace. In addition, partners may not perform as expected under our agreements with them, and we may have disagreements or disputes with such partners, which could adversely affect our brand and reputation. If we cannot successfully enter into and maintain effective strategic relationships with business partners, our business will be harmed.


If borrowers default on loans, lenders on our marketplace might not be able to collect principal and accrued interest.


We currently facilitate loans exclusively to borrowers that provide an automobile as security to lenders, and in many instances third-party institutions provide a guarantee to lenders as additional security. We require that the size of each loan be no more than 70% of the value of the collateral of such loan.  Because no loans facilitated through our platform have defaulted to date, neither our collateralization standards nor our collection efforts have been tested in practice. A borrower’s ability to repay us can be negatively impacted by increases in such borrower’s payment obligations to other lenders under mortgage, credit card and other loans, including student loans and home equity lines of credit. These changes can result from increases in base lending rates or structured increases in payment obligations and could reduce the ability of our borrowers to meet their payment obligations. Lenders on our marketplace therefore are limited in their ability to collect on the loans if a borrower is unwilling or unable to repay. Given such risks, our marketplace might be less attractive to existing and potential lenders, and as a results, our operating results might be adversely affected. Given such risks, our marketplace might be less attractive to existing and potential lenders, and as a results, our operating results might be adversely affected.






20





We are not obligated to repay lenders in the event of a defaulted loan, which may not be desirable to lenders.


Some of our competitors are obligated to repay lenders in the event that loans facilitated through their platform have defaulted and such competitors have set up risk reserve funds for such purpose. As such, these companies allow lenders to recover up to 100% of the outstanding principal and accrued interest upon loan defaults. According to the P2P Measures, online P2P lending marketplaces generally do not undertake the risk of lending contract breach and thus are not obligated by law to reimburse lenders for loan defaults. The fact that we do not allow lenders to recover 100% of the outstanding principal and accrued interest from us upon loan defaults, and do not have a related risk reserve fund, may not be desirable to lenders. A failure to attract lenders to our platform can cause a material adverse impact on our competitive position and results of operations.


Misconduct, errors and failure to function by our employees and third-party service providers could harm our business and reputation.


We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends on our employees and third-party service providers to interact with potential borrowers and lenders, process large numbers of transactions and support the loan collection process. We could be materially adversely affected if transactions were redirected, misappropriated or otherwise improperly executed. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interacting with borrowers and lenders, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability.


Furthermore, as we rely on certain third-party service providers, such as third-party payment platforms and custody and settlement service providers, to conduct our business, if these third-party service providers failed to function properly, we cannot assure you that we would be able to find an alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate our business, potential liability to borrowers and lenders, inability to attract borrowers and lenders, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

 

Fluctuations in interest rates could negatively affect transaction volume.


All loans facilitated through our marketplace are issued with fixed interest rates. If interest rates rise, lenders who have already invested in a loan at a fixed rate through our platform may lose the opportunity to take advantage of the higher rates. If interest rates decrease after a loan is made, borrowers through our platform may prepay their loans to take advantage of the lower rates. As a result, fluctuations in the interest rate environment may discourage lenders and borrowers from participating in our marketplace, which may adversely affect our business.





21





Our ability to protect the confidential information of our borrowers and lenders may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions.


Our platform collects, stores and processes certain personal and other sensitive data from our borrowers and lenders, which makes it an attractive target and potentially vulnerable to cyber attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect the confidential information that we have access to, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential borrower and lender information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with borrowers and lenders could be severely damaged, we could incur significant liability and our business and operations could be adversely affected.


Our operations depend on the performance of the internet infrastructure and fixed telecommunications networks in China.


Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. We cannot assure you that the internet infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.


In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.

 

Any significant disruption in service on our platform or in our computer systems, including events beyond our control, could prevent us from processing or posting loans on our marketplace, reduce the attractiveness of our marketplace and result in a loss of borrowers or lenders.


In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, process applications or make loans available on our marketplace would be materially and adversely affected. The satisfactory performance, reliability and availability of our platform and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and lenders. Much of our system hardware is hosted in a leased facility located in Shanghai that is operated by our IT staff. We also maintain a real-time backup system at a separate facility also located in Shanghai. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. If there is a lapse in service or damage to our leased Shanghai facilities, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities.




22






Any interruptions or delays in our service, whether as a result of third-party errors, our errors, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and lenders and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing or posting payments on loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and cause borrowers and lenders to abandon our marketplace, any of which could adversely affect our business, financial condition and results of operations.


Our platform and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.


Our platform and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data.  The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for borrowers and lenders using our platform, delay introductions of new features or enhancements, result in errors or compromise our ability to protect borrower or lender data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of borrowers or lenders or liability for damages, any of which could adversely affect our business, results of operations and financial conditions.


We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.


We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements with our employees and others to protect our proprietary rights. See “Business—Intellectual Property” and “Regulation—Regulation on Intellectual Property Rights.” Thus, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us with competitive advantages. In addition, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.


It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.



23






We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.


We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.


Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.


From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.


We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our marketplace and better serve borrowers and lenders. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.

 

Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:


·

difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business;

·

inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;

·

difficulties in retaining, training, motivating and integrating key personnel;

·

diversion of management’s time and resources from our normal daily operations;

·

difficulties in successfully incorporating licensed or acquired technology and rights into our platform and loan products;

·

difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;

·

difficulties in retaining relationships with customers, employees and suppliers of the acquired business;

·

risks of entering markets in which we have limited or no prior experience;

·

regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;



24





·

assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability;

·

failure to successfully further develop the acquired technology;

·

liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

·

potential disruptions to our ongoing businesses; and

·

unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.


We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced loan products and services or that any new or enhanced loan products and services, if developed, will achieve market acceptance or prove to be profitable.


Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.


Our business operations depend on the continued services of our senior management, particularly the executive officers named in this prospectus. While we have the ability to provide different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.


Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.


We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.


In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve borrowers and lenders could diminish, resulting in a material adverse effect to our business.



25






Increases in labor costs in the PRC may adversely affect our business and results of operations.


The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.


If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.


We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and cultivates creativity.  As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.


We do not have any business insurance coverage.


Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.


Risks Related to Our Corporate Structure


If the PRC government deems that the contractual arrangements in relation to our consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.


Foreign ownership of internet-based businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Guidance Catalog of Industries for Foreign Investment promulgated in 2007, as amended in 2011 and in 2015, respectively, and other applicable laws and regulations.


We are a Cayman Islands exempted company and our PRC subsidiary is considered a foreign invested enterprise. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements entered into among WFOE, our VIEs and the shareholders of our VIEs. As a result of these contractual arrangements, we exert control over our VIEs and consolidate their operating results in our financial statements under U.S. GAAP. For a detailed description of these contractual arrangements, see “Corporate History and Structure.”




26





In the opinion of our PRC counsel, Allbright Law Offices, our current ownership structure, the ownership structure of our PRC subsidiary and our consolidated VIEs, and the contractual arrangements among WFOE, our VIEs and the shareholders of our VIEs are not in violation of existing PRC laws, rules and regulations; and these contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect. However, Allbright Law Offices has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC counsel.


It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. In particular, in January 2015, the Ministry of Commerce, or MOFCOM, published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, variable interest entities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties. It is uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft. See “Regulation—Regulations Relating to Foreign Investment—The Draft PRC Foreign Investment Law” and “Risk Factors—Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.” If the ownership structure, contractual arrangements and business of our company, our PRC subsidiary or our consolidated variable interest entities are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our income or the income of our PRC subsidiary or consolidated variable interest entity, revoking the business licenses or operating licenses of our PRC subsidiary or consolidated variable interest entity, shutting down our servers or blocking our online platform, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from this offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of our consolidated variable interest entities, and/or our failure to receive economic benefits from our consolidated variable interest entities, we may not be able to consolidate its results into our consolidated financial statements in accordance with U.S. GAAP.


We rely on contractual arrangements with our VIEs and the shareholders of our VIEs for our business operations, which may not be as effective as direct ownership in providing operational control.


We have relied and expect to continue to rely on contractual arrangements with Dianniu and Dianniu Participating shareholders to operate our platform. We intend to rely on contractual arrangements with Baoxun and Baoxun Shareholders to engage in design and production of online advertisement and marketing survey services for online marketplace in the future. For a description of these contractual arrangements, see “Corporate History and Structure.” These contractual arrangements may not be as effective as direct ownership in providing us with control over our consolidated variable interest entities. For example, our consolidated variable interest entities and their shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.




27





If we had direct ownership of our VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our consolidated variable interest entities and their shareholders of their obligations under the contracts to exercise control over our consolidated variable interest entities. The shareholders of our consolidated variable interest entities may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with our consolidated variable interest entities. Although we have the right to replace any shareholder of our consolidated variable interest entities under the contractual arrangement, if any shareholder of our consolidated variable interest entities is uncooperative or any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC laws and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system. See “—Any failure by our consolidated variable interest entities or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.” Therefore, our contractual arrangements with our consolidated variable interest entities may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.


Any failure by our consolidated VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.


If our consolidated VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of our VIEs were to refuse to transfer their equity interest in the VIEs to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.


All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our consolidated variable interest entities, and our ability to conduct our business may be negatively affected. See “—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.”




28





The shareholders of our consolidated VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.


The equity interests of Dianniu are held by Erxin Zeng, Xiaohui Liu and Qian Lai Qian Wang (Shanghai) Equity Investment Fund Management Co., Ltd. and the equity interests of Baoxun are held by Erxin Zeng and Xiaohui Liu. Their interests in Dianniu and Baoxun may differ from the interests of our company as a whole. These shareholders may breach, or cause our consolidated variable interest entities to breach, the existing contractual arrangements we have with them and our consolidated variable interest entities, which would have a material adverse effect on our ability to effectively control our consolidated variable interest entities and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with Dianniu and/or Baoxun to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.


Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreements with these shareholders to request them to transfer all of their equity interests in Dianniu and/or Baoxun to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest or dispute between us and the shareholders of Dianniu and/or Banxun, we would have to rely on legal proceedings, which could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.


Contractual arrangements in relation to our consolidated variable interest entities may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC consolidated variable interest entities owe additional taxes, which could negatively affect our financial condition and the value of your investment.


Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The PRC enterprise income tax law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between WFOE, our wholly-owned subsidiary in China, our consolidated VIEs in China, and the shareholders of our VIEs were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust our VIEs’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by our VIEs for PRC tax purposes, which could in turn increase its tax liabilities without reducing WFOEs’ tax expenses. In addition, if WFOE requests the shareholders of our VIEs to transfer their equity interests in the VIEs at nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject our VIEs to PRC income tax. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on our VIEs for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if our consolidated variable interest entities’ tax liabilities increase or if it is required to pay late payment fees and other penalties.





29






We may lose the ability to use and enjoy assets held by our consolidated VIEs that are material to the operation of our business if the entities goes bankrupt or becomes subject to a dissolution or liquidation proceeding.


Our consolidated VIEs holds certain assets that are material to the operation of our business, including domain names and equipment for online lending marketplace. Under the contractual arrangements, our consolidated VIEs may not and their shareholders may not cause it to, in any manner, sell, transfer, mortgage or dispose of their assets or their legal or beneficial interests in the business without our prior consent. However, in the event our consolidated VIEs’ shareholders breach the these contractual arrangements and voluntarily liquidate our consolidated VIEs or our consolidated VIEs declare bankruptcy and all or part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If our consolidated VIEs undergo a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.


Risks Related to Doing Business in China


Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations.


All of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.


The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.


While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, China’s economic growth has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.


Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us.


The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.



30






In particular, PRC laws and regulations concerning the peer-to-peer lending service industry are developing and evolving. Although we have taken measures to comply with the laws and regulations that are applicable to our business operations, including the regulatory principles raised by the CBRC, and avoid conducting any activities that may be deemed as illegal fund-raising, forming capital pool or providing guarantees to lenders under the current applicable laws and regulations, the PRC government authority may promulgate new laws and regulations regulating the peer-to-peer lending service industry in the future. We cannot assure you that our practices would not be deemed to violate any PRC laws or regulations relating to illegal fund-raising, forming capital pools or the provision of credit enhancement services. Moreover, developments in the peer-to-peer lending service industry may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies that may limit or restrict online consumer finance marketplaces like us, which could materially and adversely affect our business and operations. Furthermore, we cannot rule out the possibility that the PRC government will institute a licensing regime covering our industry at some point in the future. If such a licensing regime were introduced, we cannot assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.


From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.


Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.


The MOFCOM published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The MOFCOM is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects.


Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs. Once an entity is considered to be an FIE, it may be subject to the foreign investment restrictions or prohibitions set forth in a “negative list” to be separately issued by the State Council later. If an FIE proposes to conduct business in an industry subject to foreign investment “restrictions” in the “negative list,” the FIE must go through a market entry clearance by the MOFCOM before being established. If an FIE proposes to conduct business in an industry subject to foreign investment “prohibitions” in the “negative list,” it must not engage in the business. However, an FIE that is subject to foreign investment “restrictions,” upon market entry clearance, may apply in writing for being treated as a PRC domestic investment if it is ultimately “controlled” by PRC government authorities and its affiliates and/or PRC citizens. In this connection, “control” is



31






broadly defined in the draft law to cover the following summarized categories: (i) holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a “negative list,” to be separately issued by the State Council at a later date, if the FIE is engaged in an industry listed in the negative list. Unless the underlying business of the FIE falls within the negative list, which calls for market entry clearance by the MOFCOM, prior approval from the government authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the FIE.


The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “—Risks Related to Our Corporate Structure” and “Our Corporate History and Structure.” Under the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is included in the “negative list” as restricted industry, the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal.


The draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the companies currently employing a VIE structure, whether or not these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point. In addition, it is uncertain whether the online consumer finance marketplace industry, in which our variable interest entity operates, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” that is to be issued. If the enacted version of the Foreign Investment Law and the final “negative list” mandate further actions, such as MOFCOM market entry clearance or certain restructuring of our corporate structure and operations, to be completed by companies with existing VIE structure like us, there may be substantial uncertainties as to whether we can complete these actions in a timely manner, or at all, and our business and financial condition may be materially and adversely affected.


The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from an investment implementation report and an investment amendment report that are required for each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.


We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.


The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.



32






We only have contractual control over our website. We do not directly own the website due to the restriction of foreign investment in businesses providing value-added telecommunication services in China, including internet information provision services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us.


The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information Office, the MITT, and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry.


Our online marketplace, operated by our consolidated variable interest entity, Dianniu, may be deemed to be providing commercial internet information services, which would require Dianniu to obtain an ICP License. An ICP License is a value-added telecommunications business operating license required for provision of commercial internet information services. Dianniu, our PRC consolidated variable interest entity is in the process of applying for an ICP license as an internet information provider. There can be no assurance that we will be able to obtain the ICP license in the near future.  Given the ambiguity of PRC laws and regulations, we cannot predict the impact of any delay or failure on our financial conditions and results of operations.  Furthermore, as we are providing mobile applications to mobile device users, it is uncertain if Dianniu will be required to obtain a separate operating license in addition to the ICP License. Although we believe that not obtaining such separate license is in line with the current market practice, there can be no assurance that we will not be required to apply for an operating license for mobile applications in the future.


The Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, issued by the MITT in July 2006, prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunications business operating licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunications business in China. According to this circular, either the holder of a value-added telecommunication services operation permit or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunication services. The circular also requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain such facilities in the regions covered by its license. Dianniu owns the relevant domain names in connection with our value-added telecommunications business and has the necessary personnel to operate our website. If, after obtaining its ICP license, Dianniu fails to comply with the requirements for ICP license holders and also fails to remedy such non-compliance within a specified period of time, the MITT or its local counterparts have the discretion to take administrative measures against Dianniu, including revoking its ICP License.


The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considers that we were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.

 




33






Any failure by us or our third-party service providers to comply with applicable anti-money laundering laws and regulations could damage our reputation


In cooperation with our partners, we have adopted various policies and procedures, such as internal controls and “know-your-customer” procedures, for anti-money laundering purposes. In addition, we rely on our third-party service providers, in particular the custody banks and payment companies that handle the transfer of funds between borrowers and lenders, to have their own appropriate anti-money laundering policies and procedures. The custody banks and payment companies are subject to anti-money laundering obligations under applicable anti-money laundering laws and regulations and are regulated in that respect by the People’s Bank of China, or the PBOC. If any of our third-party service provides fail to comply with applicable anti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financial condition and results of operations. Any negative perception of the industry, such as that arises from any failure of other consumer finance marketplaces to detect or prevent money laundering activities, even if factually incorrect or based on isolated incidents, could compromise our image or undermine the trust and credibility we have established.


The Guidelines (as defined below) jointly released by ten PRC regulatory agencies in July 2015 purport, among other things, to require internet finance service providers, including online peer-to-peer lending platforms, to comply with certain anti-money laundering requirements, including the establishment of a customer identification program, the monitoring and reporting of suspicious transactions, the preservation of customer information and transaction records, and the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters. The PBOC will formulate implementing rules to further specify the anti-money laundering obligations of internet finance service providers. We cannot assure you that the anti-money laundering policies and procedures we have adopted will be effective in protecting our marketplace from being exploited for money laundering purposes or will be deemed to be in compliance with applicable anti-money laundering implementing rules if and when adopted.


We rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business.


We are a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiary for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiary incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require Dianniu to adjust its taxable income under the contractual arrangements it currently has in place with our consolidated variable interest entities in a manner that would materially and adversely affect its ability to pay dividends and other distributions to us. See “—Risks Related to Our Corporate Structure—Contractual arrangements in relation to our consolidated variable interest entities may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC consolidated variable interest entity owe additional taxes, which could negatively affect our financial condition and the value of your investment.”


Under PRC laws and regulations, our PRC subsidiary, as a wholly foreign-owned enterprise in China, may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.



34






Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. See also “—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.”


PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.


Under PRC laws and regulations, we are permitted to utilize the proceeds from this offering to fund our PRC subsidiary by making loans to or additional capital contributions to our PRC subsidiary, subject to applicable government registration and approval requirements.


Any loans to our PRC subsidiary, which are treated as foreign-invested enterprises under PRC laws, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our PRC subsidiary to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of the State Administration of Foreign Exchange, or SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by the MOFCOM or its local counterpart and the amount of registered capital of such foreign-invested company.


We may also decide to finance our PRC subsidiary by means of capital contributions. These capital contributions must be approved by the MOFCOM or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and unless otherwise provided by law, may not be used for equity investments within the PRC. Although on July 4, 2014, the SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular 36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises in certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of the foreign-invested enterprises established within the designate areas and such enterprises mainly engaging in investment are allowed to use its RMB capital converted from foreign exchange capitals to make equity investment, our PRC subsidiary is not established within the designated areas. On March 30, 2015, SAFE promulgated Circular 19, to expand the reform nationwide. Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign exchange capital. However, Circular 19 continues to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not be altered without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations of these Circulars could result in severe monetary or other penalties. These circulars may significantly limit our ability to use RMB converted from the net proceeds of this offering to fund the establishment of new entities in China by our PRC subsidiary, to invest in or acquire any other PRC companies through our PRC subsidiary, or to establish new variable interest entities in the PRC.



35







In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from this offering to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.


Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.


Substantially all of our revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the proceeds from this offering. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiary and consolidated variable interest entity is RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.


There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from this initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the market price of our ordinary shares.


Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

 



36






Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.


The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our company in the Cayman Islands rely on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.


Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.


We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. As of the date of this prospectus, we believe that we have made adequate employee benefit payments. If we fail to make adequate payments in the future, we may be required to make up the contributions for these plans in the amount of 110% of the amount in the preceding month. If we fail to make or supplement contributions of social security premiums within the stipulated period, the social security premiums collection agency may enquire into the deposit accounts of the employer with banks and other financial institutions. In an extreme situation, where we failed to contribute social security premiums in full amount and do not provide guarantee, the social security premiums collection agency may apply to a Chinese court for seizure, foreclosure or auction of our properties of value equivalent to the amount of social security premiums payable, and the proceeds from auction shall be used for contribution of social security premiums.  If we are subject to deposit, seizure, foreclosure or auction in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.


The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, as amended, and, if required, we cannot predict whether we will be able to obtain such approval.


The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle seeking CSRC approval of its overseas listings. The application of the M&A Rules remains unclear.



37






Our PRC counsel, Allbright Law Offices, has advised us based on their understanding of the current PRC laws, rules and regulations that the CSRC’s approval is not required for the listing and trading of our ordinary shares on the NASDAQ in the context of this offering, given that:


we established our PRC subsidiary, WFOE, by means of direct investment rather than by merger with or acquisition of PRC domestic companies; and

no explicit provision in the M&A Rules classifies the respective contractual arrangements between WFOE, Dianniu and its shareholders as a type of acquisition transaction falling under the M&A Rules.


However, there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and the CSRC’s opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. If the CSRC or any other PRC regulatory agencies subsequently determines that we need to obtain the CSRC’s approval for this offering or if the CSRC or any other PRC government agencies promulgates any interpretation or implements rules before our listing that would require us to obtain CSRC or other governmental approvals for this offering, we may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. Sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of ordinary shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of ordinary shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur. In addition, if the CSRC or other PRC regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such approval requirement could have a material adverse effect on the trading price of ordinary shares.


The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.


The M&A Rules discussed in the preceding risk factor and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.



38






PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.


SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.


If our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiary may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.


Mr. Erxin Zeng and Mr. Xiaohui Liu, who directly or indirectly hold shares in our company and who are known to us as being PRC residents, have completed the foreign exchange registrations required in connection with our recent corporate restructuring. The remaining shareholders who directly or indirectly hold shares in our Company and who are known to us as being PRC residents are currently processing such registrations.


However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiary’ ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.


Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.


In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the



39






exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less than one year and who have been granted options or other awards will be subject to these regulations when our company becomes an overseas listed company upon the completion of this offering. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary and limit our PRC subsidiary’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Regulation—Regulations on Stock Incentive Plans.”

 

If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.


Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.


We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Taxation—People’s Republic of China Taxation.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” As all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our ordinary shares.



40






Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China.

From time to time, the Company may receive requests from certain U.S. agencies to investigate or inspect the Company’s operations, or to otherwise provide information. While the Company will be compliant with these requests from these regulators, there is no guarantee that such requests will be honored by those entities who provide services to us or with whom we associate, especially as those entities are located in China. Furthermore, an on-site inspection of our facilities by any of these regulators may be limited or entirely prohibited. Such inspections, though permitted by the Company and its affiliates, are subject to the unpredictability of the Chinese enforcers, and may therefore be impossible to facilitate.


Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.


The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.


Under Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.


In February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.



41







We face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59 or Circular 698 and Circular 7, and may be required to expend valuable resources to comply with Circular 59, Circular 698 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.


  The PRC tax authorities have the discretion under SAT Circular 59, Circular 698 and Circular 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59 or Circular 698 and Circular 7, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.


Risks Related to Our Ordinary Shares and This Offering


There has been no public market for our shares prior to this offering, and if an active trading market does not develop you may not be able to resell our shares at or above the price you paid, or at all.  


Prior to this public offering, there has been no public market for our ordinary shares. We intend to apply to have our ordinary shares listed on NASDAQ.  If an active trading market for our ordinary shares does not develop after this offering, the market price and liquidity of our ordinary shares will be materially adversely affected. The public offering price for our ordinary shares will be determined by negotiations between us and the underwriter and may bear little or no relationship to the market price for our ordinary shares after the public offering. You may not be able to sell any ordinary shares that you purchase in the offering at or above the public offering price.  Accordingly, investors should be prepared to face a complete loss of their investment. 


Our ordinary shares may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.  


Assuming our ordinary shares begin trading on NASDAQ, our ordinary shares may be “thinly-traded”, meaning that the number of persons interested in purchasing our ordinary shares at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that we are relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned.  As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  Broad or active public trading market for our ordinary shares may not develop or be sustained. 



42






The market price for our ordinary shares may be volatile.  


The market price for our ordinary shares may be volatile and subject to wide fluctuations due to factors such as: 


·

the perception of U.S. investors and regulators of U.S. listed Chinese companies; 

·

actual or anticipated fluctuations in our quarterly operating results; 

·

changes in financial estimates by securities research analysts; 

·

negative publicity, studies or reports; 

·

conditions in Chinese online consumer finance markets;

·

our capability to catch up with the technology innovations in the industry;

·

changes in the economic performance or market valuations of other online consumer finance companies; 

·

announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; 

·

addition or departure of key personnel; 

·

fluctuations of exchange rates between RMB and the U.S. dollar; and 

·

general economic or political conditions in China.


In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.  These market fluctuations may also materially and adversely affect the market price of our ordinary shares. 


Volatility in our ordinary shares price may subject us to securities litigation.


The market for our ordinary shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources. 


We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.  


Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could harm our business.


In order to raise sufficient funds to enhance operations, we may have to issue additional securities at prices which may result in substantial dilution to our shareholders.


If we raise additional funds through the sale of equity or convertible debt, our current shareholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of ordinary shares outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our ordinary shares. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations and financial condition.



43






We are not likely to pay cash dividends in the foreseeable future.


We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate. Should we determine to pay dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from WFOE. WFOE may, from time to time, be subject to restrictions on its ability to make distributions to us, including restrictions on the conversion of RMB into U.S. dollars or other hard currency and other regulatory restrictions.  


You may face difficulties in protecting your interests as a shareholder, as Cayman Islands law provides substantially less protection when compared to the laws of the United States and it may be difficult for a shareholder of ours to effect service of process or to enforce judgements obtained in the United States courts.


Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (2016 Revision) and common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law. Decisions of the Privy Council (which is the final court of appeal for British overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court of the United Kingdom and the Court of Appeal are generally of persuasive authority but are not binding on the courts of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provide significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the United States federal courts. The Cayman Islands courts are also unlikely to impose liabilities against us in original actions brought in the Cayman Islands, based on certain civil liability provisions of United States securities laws.


Currently, all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. All of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.


As a result of all of the above, our shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States. 




44






We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.  


We are a foreign private issuer within the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:


·

we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;

·

for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;

·

we are not required to provide the same level of disclosure on certain issues, such as executive compensation;

·

we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;

·

we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and

·

we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.


We currently intend to file annual reports on Form 20-F and reports on Form 6-K as a foreign private issuer. Accordingly, our shareholders may not have access to certain information they may deem important. 


We are an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make it more difficult to compare our performance with other public companies .

 

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.


As an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements. Such reduced disclosure may make our ordinary shares less attractive to investors.


For as long as we remain an “emerging growth company”, as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.  Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile. 



45






If we are classified as a passive foreign investment company, United States taxpayers who own our ordinary shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either

 

At least 75% of our gross income for the year is passive income; or

 

The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our ordinary shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our 2017 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.


For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”


We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”


Upon consummation of this offering, we will incur significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and NASDAQ Capital Market, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.  An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.



46






Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.


Two members of our management team will have substantial influence over our company and their interests may not be aligned with the interests of our other shareholders.


Mr. Zeng, our Chief Executive Officer and chairman and Mr. Liu, our director, currently own 19.12% and 48.28% of our outstanding ordinary shares, respectively, and will beneficially own [ · ]% and [ · ]%, respectively, of our outstanding ordinary shares upon completion of our initial public offering assuming a minimum offering or [ · ]% and [ · ]%, respectively assuming a maximum offering. As a result of their significant shareholding, Messrs. Zeng and Liu have, and will continue to have, substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interests of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the market price of our ordinary shares. These actions may be taken even if they are opposed by our other shareholders. For more information regarding our principal shareholders and their affiliated entities, see “Principal Shareholders.”


Following this offering, we may be a “controlled company” within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.


We do not believe we are a “controlled company” as defined under the NASDAQ Stock Market Rules. However, in the event that two of our principal shareholders, Messrs. Zeng and Liu, who will beneficially own more than 50% of our outstanding ordinary shares following this offering, decide to act as a group, we may be deemed to be a “controlled company”. For so long as we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including:


·

an exemption from the rule that a majority of our board of directors must be independent directors;


·

an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and


·

an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.


As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.



47






SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.


You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:


·

our goals and strategies;

·

our future business development, financial conditions and results of operations;

·

the expected growth of the online consumer finance marketplace market in China;

·

fluctuations in interest rates;

·

our expectations as to collectability of loans facilitated through our platform;

·

our expectations regarding demand for and market acceptance of our products and services;

·

our expectations regarding our relationships with lenders and borrowers;

·

competition in our industry; and

·

relevant government policies and regulations relating to our industry.


These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulation” and other sections in this prospectus. You should thoroughly read this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.


This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of our ordinary shares. In addition, the rapidly changing nature of the online consumer finance marketplace industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.


The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.



48





USE OF PROCEEDS


We estimate that we will receive net proceeds from this offering of approximately $6.9 million after deducting estimated underwriting discounts and commissions and the estimated offering expenses payable by us and based upon an assumed initial offering price of $4.25 per ordinary share (the mid-point of the estimated public offering price range shown on the cover page of this prospectus) (excluding any exercise of the underwriters over-allotment option). A $1.00 increase (decrease) in the assumed initial public offering price of $4.25 per share would increase (decrease) the net proceeds to us from this offering by approximately $1.9 million, after deducting the estimated underwriting discounts and commissions and estimated aggregate offering expenses payable by us and assuming no change to the number of ordinary share offered by us as set forth on the cover page of this prospectus, provided, however, that in no case would we decrease the initial public offering price to less than $4.00 per share.


Proceeds of this offering in the amount of $600,000 shall be used to fund an escrow account for a period of 24 months following the closing date of this offering, which account shall be used in the event we have to indemnify the underwriters pursuant to the terms of an underwriting agreement with the underwriters.


Excluding $600,000 shall be used to fund an escrow account, we plan to use approximately $2.0 million of the net proceeds we will receive from this offering to expand our marketing activities to reach more potential borrowers and lenders in China, approximately $2.0 million for development of our online platform and mobile app, approximately $0.6 million to hire additional employees to enhance our business structure and management, and approximately $0.2 million for general corporate purposes.


To the extent that a certain portion or all of the net proceeds we receive from this offering are not immediately applied for the above purposes, we plan to invest the net proceeds in short-term, interest-bearing debt instruments or bank deposits.


The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See “Risk Factors—Risks Related to This Offering and our Ordinary Shares—You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase the price of our ordinary shares.”


We plan to use approximately $1.5 million out of the proceeds to pay the costs and expenses associated with being a public company. This portion of the offering proceeds will be immediately available to us following the closing of the offering as it will not be remitted to China.


Approximately $200,000 of the proceeds will be immediately remitted to China following the completion of this offering to fund the registered capital of the WFOE. Except that, in using the proceeds of this offering, we are permitted under PRC laws and regulations as an offshore holding company to provide funding to our wholly foreign-owned subsidiary in China only through loans or capital contributions and to our consolidated variable interest entities only through loans, subject to the approval of government authorities and limit on the amount of capital contributions and loans. Subject to satisfaction of applicable government registration and approval requirements, we may extend inter-company loans to our wholly foreign-owned subsidiary in China or make additional capital contributions to our wholly-foreign-owned subsidiary to fund its capital expenditures or working capital. For an increase of registered capital of our wholly foreign-owned subsidiary, we need to obtain approval from the MOFCOM or its local counterparts, which will decide within 90 days after receiving the application. If we provide funding to our wholly foreign-owned subsidiary through loans, the total amount of such loans may not exceed the difference between the entity’s total investment as approved by the foreign investment authorities and its registered capital. Such loans must be registered with SAFE or its local branches, which usually takes up to 20 working days to complete. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors—Risks Related to Our Corporate Structure—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”




49






CAPITALIZATION


The following tables set forth our capitalization as of June 30, 2017:


·

on an actual basis (giving effect to the 260 for 1 split effected on November 3, 2017) ;


·

on a pro forma and as adjusted basis to reflect (i) the sale of 2,000,000 ordinary shares by us in this offering at the initial public offering price of US$4.25 per share (the mid-point of the estimated public offering price range shown on the cover of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


 

 

As of June 30, 2017

 

 

 

Actual

 

 

As Adjusted (1)

 

 

 

(in US$)

 

Equity:

 

 

 

 

 

 

 

 

Ordinary shares, US$0.01 par value, 50,000,000 shares authorized,

13,000,000 shares issued and outstanding on an actual basis and 15,000,000 ordinary shares outstanding on an as adjusted basis (1)

 

130,000 

 

 

 

 

150,000 

 

Shares subscription receivables

 

(45,457)

 

 

 

 

(45,457)

 

Additional paid-in capital

 

11,964,505 

 

 

 

 

18,848,882 

 

Statutory reserves

 

6,189 

 

 

 

 

6,189 

 

Retained earnings (accumulated deficit)

 

(489,908)

 

 

 

 

(489,908)

 

Accumulated other comprehensive loss

 

(12,183)

 

 

 

 

(12,183)

 

Total equity

 

11,553,146 

 

 

 

 

18,457,523 

 

 

 

 

 

 

 

 

 

 

Total capitalization

 

11,533,146 

 

 

 

 

18,457,523 

 






50






DILUTION

  

If you invest in our ordinary shares, you will incur immediate dilution since the public offering price per share you will pay in this offering is more than the net tangible book value per ordinary share immediately after this offering.


The net tangible book value of our ordinary shares as of June 30, 2017 was $11,553,146, or $0.89 per share based upon 13,000,000 ordinary shares outstanding.  Net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of ordinary shares outstanding. Tangible assets equal our total assets less goodwill and intangible assets.


The dilution in net tangible book value per share to new investors, represents the difference between the amount per share paid by purchasers of shares in this offering and the pro forma net tangible book value per share immediately after completion of this offering.  After giving effect to the sale of the 2,000,000 shares being sold pursuant to this offering at $4.25 per share (the mid-point of the estimated public offering price range shown on the cover page of this prospectus) and after deducting underwriting discount and commission payable by us in the amount of $660,000, and estimated offering expenses in the amount of approximately $0.9 million, our pro forma net tangible book value would be approximately $18.5 million or $1.23 per share of ordinary shares. This represents an immediate increase in net tangible book value of $0.34 per share to existing shareholders and an immediate decrease in net tangible book value of $1.23 per share to new investors purchasing the shares in this offering.

 

The following table illustrates this per share dilution:


 

 

 

As of

June 30, 2017

Public offering price per share (the mid-point of the estimated public offering price range shown on the cover page of this prospectus)

 

 $

4.25 

Net tangible book value per share as of June 30, 2017

 

  0.89

Increase in net tangible book value per share attributable to existing shareholders

 

 

0.34

Pro forma net tangible book value per share after this offering

 

 

1.23

Dilution per share to new investors

 

 $

3.02

 

A $1.00 increase (decrease) in the assumed public offering price would increase (decrease) our pro forma net tangible book value per share after this offering by approximately $1.9 million, and increase the value per share to new investors by approximately $0.13, after deducting the underwriting discount and estimated offering expenses payable by us.


The following table sets forth, on an as adjusted basis as of June 30, 2017, the difference between the number of ordinary shares purchased from us, the total cash consideration paid, and the average price per share paid by our existing shareholders and by new public investors before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, using an assumed public offering price of $4.25 per ordinary share: (the mid-point of the estimated public offering price range shown on the cover page of this prospectus):


 

 

Shares Purchased

 

 

Total Cash Consideration

 

 

 

 

 

 

Number

 

 

Percent

 

 

Amount

 

Percent

 

 

Average

Price Per

Share

 

Existing shareholders

 

 

13,000,000

 

 

 

86.7%

 

 

$

12,049,048

 

 

58.6%

 

 

$

0.93

 

New investors from public offering

 

 

2,000,000

 

 

 

13.3%

 

 

$

8,500,000

 

 

41.4%

 

 

$

4.25

 

Total

 

 

15,000,000

 

 

 

100%

 

 

$

20,549,048

 

 

100%

 

 

 

 





51






EXCHANGE RATE INFORMATION


Our business is primarily conducted in China and all of our revenues are received and denominated in RMB. Capital accounts of our condensed financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred.  Assets and liabilities are translated at the exchange rates as of the balance sheet date.  Income and expenditures are translated at the average exchange rate of the period.  RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.  No representation is made that the RMB amounts could have been, or could be, converted into United States dollars at the rates used in translation.

 

The following table sets forth information concerning exchange rates between the RMB and the United States dollar for the periods indicated.


Midpoint of Buy and Sell Prices for U.S. Dollar per RMB

Period

Period-End

Average

High

Low

2012

6.3090

6.3115

6.3862

6.2289

2013

6.1090

6.1938

6.3087

6.1084

2014

6.1484

6.1458

6.2080

6.0881

2015

6.4917

6.2288

6.4917

6.0933

2016

6.9448

6.6441

7.0672

6.4494

2017 (through December 15, 2017)

6.6099

6.7652

6.9448

6.4686

April

6.8969

6.8890

6.9094

6.8457

May

6.8284

6.8852

6.9063

6.8284

June

6.7774

6.8090

6.8381

6.7774

July

6.7252

6.7722

6.8054

6.7252

August

6.5944

6.6726

6.7320

6.5918

September

6.5525

6.5316

6.5692

6.4686

October

 

 

 

 

6.6324

 

 

 

 

 

6.6276

 

 

 

 

 

6.6564

 

 

 

 

 

6.5790

 

 

November

 

 

 

 

6.6133

 

 

 

 

 

6.6242

 

 

 

 

 

6.6415

 

 

 

 

 

6.5822

 

 

December (through December 15, 2017)

 

 

 

 

6.6099

 

 

 

 

 

6.6177

 

 

 

 

 

6.6221

 

 

 

 

 

6.6099

 

 


Source: www.oanda.com.


As of December 15, 2017 , the exchange rate is RMB 6.6099 to $1.00.

 



52






ENFORCEABILITY OF CIVIL LIABILITIES


We were incorporated in the Cayman Islands in order to enjoy the following benefits:


·

political and economic stability;

·

an effective judicial system;

·

a favorable tax system;

·

the absence of exchange control or currency restrictions; and

·

the availability of professional and support services.

 

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:


the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and


Cayman Islands companies may not have standing to sue before the federal courts of the United States.


Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated. Currently, all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. All of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.


We have appointed Corporation Service Company located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.


Harney Westwood & Riegels, our counsel as to Cayman Islands law, and Allbright Law Offices, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:


recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.


Harney Westwood & Riegels has informed us that it is uncertain whether the courts of the Cayman Islands will allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Harney Westwood & Riegels has further advised us that the courts of



53





the Cayman Islands would recognize as a valid judgment a final and conclusive judgment in personam obtained in the federal or state courts in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that: (a) such courts had proper jurisdiction over the parties subject to such judgment; (b) such courts did not contravene the rules of natural justice of the Cayman Islands; (c) such judgment was not obtained by fraud; (d) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands.


Allbright Law Offices has further advised us that the recognition and enforcement of foreign judgments are subject to compliance with the PRC Civil Procedures Law and relevant civil procedure requirements in the PRC. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.




54





SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA


The following selected consolidated financial statements for the period from November 17, 2015 (inception) to December 31, 2015 and for the year ended December 31, 2016 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated financial statements for the six months ended June 30, 2017 and 2016 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.


The consolidated statements of operations and comprehensive loss data and consolidated cash flow data for the six months ended June 30, 2017 and 2016 and consolidated balance sheet data as of June 30, 2017 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair statement of our financial position and operating results for the periods presented.


Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements and related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.


 

For the Year Ended

 

For the period from November 17, 2015 (inception) to

 

For the Six Months Ended

 

December 31, 2016

 

December 31, 2015

 

June 30, 2017

 

June 30, 2016

 

 

 

 

 

(Unaudited)

 

(Unaudited)

Summary Consolidated Statement of Comprehensive Income:

 

 

 

 

 

 

 

Operating revenue

$

3,705,770 

 

$

 

$

2,797,640 

 

$

1,117,596 

 

 

 

 

 

 

 

 

Operating expense

 

 

 

 

 

 

 

     Selling

(1,434,662)

 

(30,091)

 

(1,715,617)

 

(715,433)

     General and administrative

(1,636,353)

 

(81,659)

 

(1,680,715)

 

(670,283)

     Research and development

(417,901)

 

(29,943)

 

(204,691)

 

(240,679)

Total operating expenses

(3,488,916)

 

(141,693)

 

(3,601,023)

 

(1,626,395)

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Other income, net

2,895 

 

 

17,228 

 

964 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

219,749 

 

(141,692)

 

(786,155)

 

(507,835)

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

54,938 

 

(35,423)

 

(184,750)

 

(126,958)

 

 

 

 

 

 

 

 

Net income (loss)

164,811 

 

(106,269)

 

(601,405)

 

(380,877)

 

 

 

 

 

 

 

 

Less: Net income (loss) attributable to non-controlling interest

3,906 

 

 

(63,050)

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Golden Bull Limited

$

160,905 

 

$

(106,269)

 

$

(538,355)

 

$

(380,877)




55





The following table presents our summary consolidated balance sheet data as of December 31, 2016 and 2015 and June 30, 2017.


 

As of December 31,

 

As of June 30,

 

2016

 

2015

 

2017

 

 

 

 

 

(Unaudited)

Summary Consolidated Balance Sheet Data:

 

 

 

 

 

Cash and cash equivalents

$

7,378,920

 

$

674,515

 

$

5,565,815

Other assets

1,723,173

 

205,476

 

7,455,661

Total assets

9,102,093

 

879,991

 

13,021,476

Total liabilities

282,293

 

61,238

 

548,920

Total shareholders’ equity

$

8,819,800

 

$

818,753

 

$

12,472,556


 



56






MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS


The following management’s discussion and analysis of financial condition and results of operations contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus .


Overview


We have a limited operating history as an online finance marketplace, or “peer-to-peer” lending company, in China that provides borrowers access to short-term loans. The loans that we are arranging currently generally range from 30 days to 90 days and are, secured by borrowers’ automobiles. Through our online marketplace, we connect individual lenders with individual and small business borrowers. We currently conduct our business operations exclusively in China.


We believe our technology-driven marketplace provides eligible borrowers with a quick, accessible and affordable way to meet their liquidity needs. Our online marketplace may be accessed only by qualified borrowers, as discussed below under the heading “— Our Platform.” We currently target individual borrowers that display stable credit performance and salary income and small business borrowers that have stable cash income and are able to provide acceptable guarantee by their legal representatives. We implement a risk management process to try to minimize the risk of nonpayment to lenders. Such process involves a thorough review of credit reports prepared by third parties and may also include inquiries by us of employers or associates of potential borrowers.


Our marketplace also provides lenders with risk-adjusted returns that we believe are attractive. The average annualized return for lenders that have provided loans through our platform in 2016 was 11.64%, compared to a peer-to-peer industry average return rate of 10.45%, based on the China IRN Report, issued by ChinaIRN.com, an independent research institution in PRC that specializes in industry survey and research.  


From our inception in November 2015 through June 2017, we facilitated loans in the aggregate principal amount of approximately RMB 734.9 million ($108.8 million).  We generate revenues primarily from transaction fees, which averaged 2.3% and 2.84% of the initial principal amount loaned through our platform during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, and management fees, which averaged 3.1% and 4.1% of the initial principal amount loaned through our platform during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, each of which is charged to borrowers for our services. Our revenues totaled approximately $3.7 million in 2016, the first year of our operations, and approximately $2.8 million for the first six months of 2017.


We attract borrowers to our platform primarily through offline sources, including through relationships with traditional lending or guarantee institutions. In addition, we attract borrowers through referrals from existing borrowers and through online sources, including search engine marketing, search engine optimization, mobile application downloads through major application stores, partnering with online channels through application programming interfaces, as well as various marketing campaigns. The lending and guarantee institutions we work with are compensated directly by the borrowers, and not by us or the lenders we introduce. 


We have used various social media and mobile platforms and networks to market our platform to potential lenders. Currently, lenders through our platform consist of individuals of varying levels of net worth. We conduct a limited background check of individuals that lend money through our platform.  



57







As an intermediary, we do not use our own capital to invest in loans facilitated through our marketplace nor do we manage our borrowers and lenders’ account portfolios. We facilitate loans by connecting borrowers and lenders, preparing all necessary paperwork related to borrowers’ applications and assisting with securing collateral. However, we do not take control of funds that pass between such lenders and borrowers. Instead, payments are made through third party payment systems, such as China PnR.  We have arrangements with China PnR pursuant to which our fees are paid by the custodian directly. After each loan transaction is funded through our marketplace, we have access to the account management system of China PnR.  Based on information provided by such system, we calculate default rates of loans, if any, facilitated through our platform.   On August 13, 2017, we have switched the custodian in our platform from China PnR to Bank of Shanghai.


We currently facilitate loans exclusively to borrowers that provide an automobile as security to lenders, and in many instances third-party institutions provide a guarantee to lenders as additional security. The automobiles that are secured must be owned by the borrower and the lien imposed by our lenders must be a first lien. We require that the size of each loan be no more than 70% of the value of the collateral of such loan.  However, since none of the loans facilitated through our platform has defaulted to date, neither our collateralization standards nor our collection efforts have been tested in practice.


Through September 30, 2016, 100% of the loans facilitated through our platform were made to borrowers that have borrowed through our platform multiple times. During the quarters ended December 31, 2016, March 31, 2017 and June 30, 2017, approximately 66.7%, 48.5%, and 71.2% respectively, of the loans facilitated through our platform were made to borrowers that have borrowed through our platform multiple times. We do not allow borrowers to borrow through our platform unless their prior loans facilitated through our platform have previously been paid in full and we do not allow borrowers to repay their existing loans with new loans facilitated through our platform. Consequently, borrowers must repay loans using funds obtained from other sources other than our platform. Alternatively, the borrower can provide additional collateral, in which case we would allow the borrower to borrow 70% of the value of the additional collateral.  


In 2015 and 2016, we raised an aggregate of approximately $8.0 million through four private placements in China. We had approximately $5.6 million of cash as of June 30, 2017. We intend to continue to use such funds, and the funds we expect to raise in this offering, to grow our business primarily by:


·

enhancing our marketing efforts in order to increase awareness of our marketplace among potential lenders throughout China;

·

enhancing our online platform and mobile app;

·

hiring addition employees to enhance our business structure and management; and

·

increasing our efforts to expand our borrower base by utilizing social networks and e-commerce platforms.


Key Factors Affecting Our Results


We believe the key factors affecting our financial condition and results of operations include the following:




58






Reliance on Limited Number of Borrowers


Historically, we structured many of the loans facilitated through our platform such that individuals and referrals from traditional lending or guarantee institutions would borrow the funds from the lenders on our platform and in turn lend such funds to underlying individual or small company borrowers. Pursuant to our agreements with these institutions, such institutions and the individuals controlling such institutions committed (i) to borrow a target loan amount per month, (ii) to cover all costs incurred in connection with collections from underlying borrowers, (iii) to secure loans through security interests in cars of underlying borrowers and (iv) to repay all loans made by our lenders to these institutions or their representatives. Under our old loan structure, underlying borrowers provided their automobiles as security to the representatives of financing institutions, including our major borrowers, who in turn borrowed funds through our platform. Such security arrangement did not directly involve us or our lenders. The financing institutions affiliated with our borrowers guaranteed the repayment of the respective loans facilitated through our platform. As of December 31, 2016, we partnered with an aggregate of 4 lending and guarantee companies of loans facilitated through our platform.  As of June 30, 2017, we partnered with an aggregate of 11 lending and guarantee companies of loans facilitated through our platform.  


However, due to limitations on loan sizes to borrowers set forth in the P2P Measures (defined below), we have begun to structure loans such that the underlying individual or small company borrowers borrow the funds directly from the lenders on our platform. The loan institutions are guarantors of such loans. We believe that not all of the loans we facilitated were within the limitations set forth in the P2P Measures. As of December 31, 2016, 13, or 86.67%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. As of June 30, 2017, 51, or 18.68%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. These loans were facilitated prior to the effectiveness of the P2P Measures and substantially all of them were paid off as of the date of this prospectus. Approximately 66% and 84.7% of our revenues were attributable to these borrowers for the year ended December 31, 2016 and the six months ended June 30, 2017.We believe that we are in full compliance with the P2P Measures and that our new loan structure should continue to be in compliance with the P2P Measures.


Given that the P2P Measures are new and their implementation is just beginning, there is no guarantee that the relevant government authorities will deem our operations to be in full compliance with the P2P Measures once these measures are implemented. Furthermore, such lending and guarantee institutions are under no contractual obligation to continue partnering with us in the long-term pursuant to these new arrangements. As we further adjust our business due to the P2P Measures, our revenues may decline and we may be subject to penalties imposed by the relevant governmental agencies in the event that we fail to comply with the P2P Measures.


Competition


The online consumer finance marketplace industry in China is intensely competitive and we compete with other consumer finance marketplaces. According to the China IRN Report, as of December 2016, there were 2,448 online consumer finance marketplaces. Many of our competitors are more established and have greater resources than our company. In light of the low barriers to entry in the online consumer finance industry, we expect more players to enter this market and increase the level of competition. We anticipate that more established internet, technology and financial services companies that possess large, existing user bases, substantial financial resources and established distribution channels may enter the market in the future.


Supply and Demand for Consumer Credit in China


Our success is largely dependent on the demand for consumer credit in China and our ability to make our marketplace accessible to a large number of potential borrowers. According to the China IRN Report, the demand for consumer credit on peer-to-peer platforms in China in 2017 is approximately $3.2 trillion and is expected to grow to $4.0 trillion in the year 2018.  However, in the event that such demand decreases, or we are unable to attract borrowers to our platform and properly service their loans upon acceptable terms, we may not be successful.


PRC Regulatory Environment


The regulatory environment for the peer-to-peer lending industry in China is evolving. Most recently, multiple PRC governmental authorities have published and promulgated various new laws and rules to further regulate the marketplace lending industry in China. We have closely tracked the development and implementation of new rules and regulations likely to affect us. We will continue to ensure timely compliance with new rules, and believe that such timely compliance with these newly promulgated rules is essential to our growth. To the extent that we need to modify our operations to comply with relevant PRC laws and regulations, or implement certain compliance measures, such changes may increase our operating costs and impact our profitability.



59






The China Banking Regulatory Commission, Ministry of Industry and Information Technology and the Ministry of Public Security published the P2P Measures on August 17, 2016. According to the P2P Measures, effective August 17, 2017, the maximum loan balance at any given time for an individual shall be not more than RMB 200,000, and for a business enterprise not more than RMB 1,000,000, borrowed from a single internet lending information intermediary platform and not more than RMB 1 million for an individual, and RMB 5 million for a business enterprise, in total from all platforms. Pursuant to the P2P Measures,  if an online lending information service provider violates any applicable laws, regulations or relevant regulatory provisions relating to online lending information services, sanctions could be imposed by the local financial regulatory departments or other relevant regulatory departments, including, among others, supervision interviews, regulatory warning, correction order, condemnation, credit record modification, fine up to RMB30,000, and criminal liabilities if the act constitutes a criminal offense. Historically, we facilitated loans in excess of the RMB 200,000 limitation set forth in the P2P Measures. However, in advance of the implementation of the P2P Measures, we restructured our business model. In 2017, all of the loans we facilitated were within the limitations set forth in the P2P Measures.


Historically, we structured many of the loans facilitated through our platform such that representatives of traditional lending or guarantee institutions would borrow the funds from the lenders on our platform and in turn lend such funds to underlying individual or small company borrowers. Pursuant to our agreements with these institutions or their representatives, such institutions and the individuals controlling such institutions committed (i) to borrow from our lenders a target loan amount per month, (ii) to cover all costs incurred in connection with such institutions’ loans made by the institutions to underlying borrowers, (iii) to secure loans through security interests in cars of their underlying borrowers and (iv) to repay all loans made by our lenders to these institutions or their representatives. Under our old loan structure, underlying borrowers provided their automobiles as security to the representatives of financing institutions, including our major borrowers, who in turn borrowed funds through our platform. Such security arrangement did not directly involve us or our lenders. The financing institutions affiliated with our borrowers guaranteed the repayment of the respective loans facilitated through our platform. As of December 31, 2016, we partnered with an aggregate of 4 lending and guarantee companies of loans facilitated through our platform.  As of June 30, 2017, we partnered with an aggregate of 11 lending and guarantee companies of loans facilitated through our platform.  


However, due to limitations on loan sizes to borrowers set forth in the P2P Measures, since the beginning of 2017, we begun to structure loans such that the underlying individual or small company borrowers borrow the funds directly from the lenders on our platform. The loan institutions that previously borrowed from our lenders are now guarantors of such loans. We believe that not all of the loans we facilitated were within the limitations set forth in the P2P Measures. Given that the P2P Measures are new and their implementation is just beginning, there is no guarantee that the relevant government authorities will deem our operations to be in full compliance with the P2P Measures once these measures are implemented. Furthermore, such lending and guarantee institutions are under no contractual obligation to continue partnering with us in the long-term pursuant to these new arrangements. As such, our revenues may decline and we may be subject to penalties imposed by the relevant governmental agencies in the event that we fail to comply with the P2P Measures.


Investment Returns


Our success is largely dependent on our ability to provide lenders with opportunities to generate competitive returns on their investments through our platform. To the extent that returns that we offer lenders, based on interest rates that borrowers on our platform are willing to pay, are lower than rates offered by our competitors or other investment vehicles, or are deemed riskier than loans facilitated by our competitors or other investment opportunities that offer comparable return rates, we may be unable to attract lenders to our platform and grow our business.



60





Key Operating Metrics


Our management regularly reviews a number of metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions. The main metrics we consider, and are results for each quarter during the year ended December 31, 2016 and the six months ended June 30, 2017, are set forth in the table below.


 

 

 

For the three months ended

March 31, 2016

 

For the three months ended

June 30, 2016

 

For the three months ended

September30, 2016

 

 

For the three months ended

December 31, 2016

Number of loans facilitated (1)

 

 

143  

 

320  

 

 

347  

 

 

 

821  

Number of borrowers (2)

 

 

2  

 

2  

 

 

3  

 

 

 

15  

Loan volume (in $ millions) (3)

 

 

5.9  

 

11.6  

 

 

13.1  

 

 

 

24.4  

Reinvestment rate of existing lenders (4)

 

 

36.5%

 

18.9%

 

 

38.1%

 

 

 

25.7%

Number of new lenders that made a loan

 

 

2,059  

 

5,184  

 

 

4,978  

 

 

 

5,702  

Number of lenders that made a loan

 

 

2,059  

 

5,388  

 

 

5,647  

 

 

 

6,544  

Re-borrowing rate of existing borrowers

 

 

100.0%

 

100.0%

 

 

100.0%

 

 

 

66.7%

Number of new borrowers

 

 

2  

 

1  

 

 

0  

 

 

 

12 


 

 

 

For the three months ended

March 31, 2017

 

For the three months ended

June 30, 2017

 

Number of loans facilitated (1)

 

 

1034

 

1,162

 

 

Number of borrowers (2)

 

 

98

 

226

 

 

Loan volume (in $ millions) (3)

 

 

25.4

 

28.3

 

 

Reinvestment rate of existing lenders (4)

 

 


40.4%

 


22.1%

 

 

Number of new lenders that made a loan

 

 


4,426

 


10,714

 

 

Number of lenders that made a loan

 

 


5,480

 


        12,278

 

 

Re-borrowing rate of existing borrowers

 

 


48.5%

 


71.2%

 

 

Number of new borrowers

 

 

86

 

172

 

 


(1)

Number of loans facilitated is defined as the total number of loans initially facilitated on our marketplace during the relevant period.


(2)

Number of borrowers is defined as the total number of individual or small company borrowers that borrowed at least one loan through our marketplace during the relevant period. Historically, we structured many of the loans facilitated through our platform such that individuals affiliated with traditional lending or guarantee institutions would borrow the funds from the lenders on our platform and in turn lend such funds to underlying individual or small company borrowers. However, due to limitations on loan sizes to borrowers set forth in the P2P Measures, since the beginning of 2017, we begun to structure loans such that the underlying individual or small company borrowers borrow the funds directly from the lenders on our platform. Approximately 68% of our borrowers in the second quarter of 2017 were individuals and the remainder were small companies.


(3)

Loan volume is defined as the total principal amount of loans facilitated through our marketplace during the relevant period.


(4)

Reinvestment rate is equal to the existing lenders divided by the sum of existing lenders and new lenders during the quarter.



61






We believe that loan volume will continue to increase as our business grows.


The number of borrowers increased in large part because we changed our business model to loan directly to individual and small company borrowers rather than to the referrals from lending or guarantee institutions because of the P2P Measures. We would expect the number of borrowers to increase after this offering after we have had the opportunity to employ the capital raised to grow our marketing efforts and capabilities.


We expect reinvestment rates to fluctuate, as they have to date, because lenders often seek different opportunities in the market in ways that are difficult to predict. Our reinvestment rate of existing lenders decreased in the second quarter of 2017 as we have more new lenders invested during the quarter, which drove down the reinvestment rate of existing lenders.


Our re-borrowing rate decreased in the first quarter of 2017 as we changed our business model from lending to referrals from lending and guarantee institutions to lending directly to borrowers due to the P2P Measures. Our re-borrowing rate increased in the second quarter of 2017 as we believe our loan application process is simpler in contrast for the borrowers to go through the loan with banks. Banks often require deposits of up to 30% to 40% of the amount borrowed. We believe that the loans we facilitate are simple and quality credit products that make it easy for borrowers to budget their repayment obligations and meet their financial needs.


The above data and narrative disclosure may not accurately predict our future results, especially since we have a limited operating history. Our historical performance is based on a very limited amount of time. Furthermore, during such time, we adjusted our business model in order to comply with new regulations. In addition, as our business grows in the future, we cannot be certain as to whether or not historical trends will continue.


We don’t have any material spending on borrower acquisition because we attract borrowers primarily through lending and guarantee companies that receive payments from the borrowers they introduce to our platform. We do not pay such institutions. However, as we expand our borrower base, these costs may increase over time following this offering although we are unable to accurately calculate such potential costs at this time.


We calculate average lender acquisition costs as our total marketing expense divided by the number of lenders that loaned funds through our platform. Our average lender acquisition costs, on a quarterly basis, were as follows:


Our average lender acquisition costs, on a quarterly basis, were as follows:


Q1 2016

$83.43

Q2 2016

$100.75

Q3 2016

$64.30

Q4 2016

$85.89

Q1 2017

$159.31

Q2 2017

$74.72


Overall, our lender acquisition costs have decreased from $83.43 per person in the first quarter of 2016 to $74.72 per person in the second quarter of 2017 and we expect such trend to continue as our brand recognition increases.   We believe that the higher costs in the first quarter of 2017 resulted from the Chinese New Year.

 

Results of Operations


The tables in the following discussion summarize our consolidated statements of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily of the results that may be expected for any future period.


Revenue


Our primary sources of revenue consist of fees received for transactions through our platform and include transaction and management fees. The Company’s operating revenues consisted of the following:



62






 

 

For the year ended December 31, 2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

For the six months ended

June 30, 2017

 

For the six months ended

June 30, 2016

Operating revenues:  

 

 

 

 

 

 

 

 

 

 

Transaction Fee

 

 

$

1,561,172 

 

 

 

$

-

 

 

$

1,240,720 

 

$

437,802 

Management Fee

 

 

2,264,241 

 

 

 

-

 

 

1,685,693 

 

715,735 

Sales taxes

 

 

(119,643)

 

 

 

-

 

 

(129,043)

 

(35,941)

Total operating revenues

 

 

$

3,705,770 

 

 

 

$

-

 

 

$

2,797,640 

 

$

1,117,596 



Transaction Fee :  Transaction fees are paid by borrowers to the Company for the work the Company performs through its platform.  These fees are recognized as a component of operating revenue at the time of loan issuance.  The amount of these fees is based upon the loan amount and other terms of the loan, including credit grade, maturity and other factors.  These fees are non-refundable upon the issuance of loan.


Management Fee :  Loan borrowers pay a management fee on each loan payment to compensate us for services provided in connection with facilitation of the loan transactions, including review of a borrower’s application with required supporting documentation, evaluation of such borrower’s credit, assessing and verification of collaterals as well as the maintenance of profiles in our system. The Company records management fees as a component of operating revenue at the time of loan issuance.  The amount of these fees is based upon the loan amount and other terms of the loan, including credit grade, maturity and other factors.  These fees are non-refundable upon the issuance of loan.


Sales Taxes :  Transaction fee, management fee and license fee that are earned and received in the PRC are subject to a Chinese value-added tax (“VAT”) at a rate of 3% prior to March 2017 (6% starting in April 2017) of the gross proceed or at a rate approved by the Chinese local government. Transaction fees and management fees that are earned and received in the PRC are also subject to various miscellaneous sales taxes at a rate of 7% of the VAT.  VAT and miscellaneous sales taxes are accounted for as reduction of revenue.


Year Ended December 31, 2016 Compared to Year Ended December 31, 2015


Transaction Fees


 

 

For the Year ended December 31,  2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

 

 

 

 

 

 

Transaction Fees

 

 

$

1,561,172  

 

 

 

$

-

 

Loans

 

 

54,948,482  

 

 

 

-

 

Average Transaction fee in % (as a percentage of loan principal)

 

 

2.84%

 

 

 

 

 


Transaction fees increased $1,561,172, or 100% in 2016 from 2015. We were established on November 17, 2015 and we started our business operations in the end of January 2016. No revenue was generated in 2015.  In 2016, the average transaction fee as a percentage of the initial principal was 2.84% and the loans facilitated through our platform was $54.9 million.



63






Management Fee


 

 

For the Year ended December 31,  2016

 

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

  

 

 

 

 

 

 

 

Management fees

 

 

$

2,264,241  

 

 

 

 

$

-

 

Loans

 

 

54,948,482  

 

 

 

 

-

 

Average Management fee in % (as a percentage of loan principal)

 

 

4.1%

 

 

 

 

 

 


Management fees increased $2,264,241, or 100% in 2016 from 2015. We were established on November 17, 2015 and we began our operations in the end of January 2016. No revenue was generated in 2015.  In 2016, the average transaction fee as a percentage of the initial principal was 4.1% and the loans facilitated through our platform was $54.9 million.


Major Borrowers


For the year ended December 31, 2016, transaction and management fees generated from loans facilitated to two borrowers accounted for 45.8% and 31.1% of our revenues, respectively. The transaction fees and management fees paid by the borrowers and the borrowing amounts are as follows:   


For the year ended December 31, 2016


 

 

Borrower 1

 

 

Borrower 2

 

 

 

 

 

 

 

 

Loans

 

 

$

23,643,868  

 

 

 

$

17,460,885  

 

Transaction fees

 

 

$

666,782  

 

 

 

$

489,456  

 

Transaction fee in % (as a percentage of loan principal)

 

 

2.8%

 

 

 

2.8%

 

Management fees

 

 

$

1,086,340  

 

 

 

$

700,995  

 

Management fee in % (as a percentage of loan principal)

 

 

4.6%

 

 

 

4.0%

 


Operating Expenses


Our operating expenses consist of selling, research and development and general and administrative expenses.


 

 

For the Year ended December 31,  2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

$

1,434,662

 

 

 

$

30,091

 

 

$

1,404,571

 

4,668%

General and administrative

 

 

1,636,353

 

 

 

81,659

 

 

1,554,694

 

1,904%

Research and development

 

 

417,901

 

 

 

29,943

 

 

387,958

 

1,296%

Total operating expenses

 

 

$

3,488,916

 

 

 

$

141,693

 

 

$

3,347,223

 

2,362%



64






Selling Expenses


Selling expenses consist primarily of various marketing expenses, including those related to lender acquisition and retention, general brand and awareness building and salaries and benefits expense related to our sales and marketing team.   


Our selling expenses were $1,434,662 and $30,091 for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, respectively, an increase of $1,404,571 or 4,668%. We were established on November 17, 2015 and we began our operations at the end of January 2016.


Our major selling expenses comprised of the following items during the respective periods as follows:


 

 

For the Year ended December 31,  2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Advertisement

 

 

$

373,510

 

$

 

-

 

 

$

373,510

 

100%

Brand promotion

 

 

$

373,525

 

$

 

-

 

       

$         373,525

 

100%

Incentive

 

 

$

503,238

 

$

 

-

 

 

$

503,238

 

100%

Servicing expenses

 

 

$

105,386

 

$

 

-

 

 

$  

105,386

 

100%


This increase was primarily due to expenses in connection with advertisement that we have placed to promote our brand, and the implementation of our marketing strategy aiming at promoting brand recognition and attracting more lenders.  The increase also due to promotional incentives that we offered to our lenders to attract them to invest in our platform and service expenses that are paid by us to a third party platform provider on each deposit made by the lenders into their respective fund accounts held by the third party platform fund accounts.  We expect that our overall sales and marketing expenses, including but not limited to, advertisement, brand promotion, incentive and servicing expense, will continue to increase in the foreseeable future as our business further grows.  


General and Administrative Expenses


General and administrative expenses consist primarily of salaries and benefits expenses for our accounting and finance, business development, legal, human resources and other personnel, and outside professional services fees and facilities expenses.


Our general and administrative expenses were $1,636,353 and $81,659 for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, respectively, an increase of $1,554,694 or 1,904%.



65






Our major general and administrative expenses comprised of the following items during the respective periods as follows:


 

 

For the Year ended December 31,  2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Over-time meals

 

 

$

163,461

 

 

 

$

-

 

 

$

163,461

 

100%

Office space rental

 

 

$

359,448

 

 

 

$

40,618

 

 

$

318,830

 

785%

Salary

 

 

$

215,418

 

 

 

$

13,298

 

 

$

202,120

 

1,520%

Business consulting

 

 

$

530,636

 

 

 

$

11,113

 

 

$

519,523

 

4,675%


This increase was primarily due to higher expenses resulting from the expansion of our business operations, including but not limited to, increased overtime meals, salaries, business consulting and office space rent. We expect our general and administrative expenses, including but not to, salary and business consulting, to continue to increase in the foreseeable future, as our business further grows and as we become a public company upon the completion of this offering. We expect our rental expenses remain consistent unless we need to further expand our administrative office due to lack of office spaces.   We expect our meals expense will decrease as we have hired additional employees to cut down the overtime working hours of our employees.


Research and Development Expenses


Research and development expenses consist primarily of salaries and benefits expenses for engineering and product management teams, and outside contractors who work on the development and maintenance of our platform.


Our research and development expenses was $417,901 and $29,943 for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, respectively, an increase of $387,958 or 1,296%. The increase was primarily driven by investment in our platform.


Provision for Income Taxes


Provision for income taxes for the year ended December 31, 2016 increased by $90,361 to $54,938, compared to $35,423 of tax benefit generated for the period from November 17, 2015 (inception) to December 31, 2015.  We incurred an operating loss of $141,692 for the period from November 17, 2015 (inception) to December 31, 2015, the loss can be carried forward to offset taxable income for the next five years. We recorded non-current deferred tax assets of $35,082 as of December 31, 2015. For the year ended December 31, 2016, the Company generated an operating income of $219,749. 100% of the tax benefit from 2015 was recognized as of December 31, 2016.


The Company believes that a valuation allowance is not deemed necessary for the deferred assets because there will be sufficient operating income generated in future years based on the fact that the Company generated profits for the year ended December 31, 2016 and is expected to continue generate profits for future periods.


Net Income (Loss)


Net income for the year ended December 31, 2016 was $164,811 as compared to net loss of $106,269 for the period from November 17, 2015 (inception) to December 31, 2015.  There was no revenue generated for the period from November 17, 2015 (inception) to December 31, 2015 as the Company began its operations in January 2016.



66






Foreign Currency Translation Adjustment


Changes in foreign currency translation adjustment are mainly due to the fluctuation of foreign exchange rates between RMB (the functional currency of WFOE and our VIEs).


Foreign currency translation adjustment loss increased to $208,333 for the year ended December 31, 2016 from $11,578 for the period from November 17, 2015 (inception) to December 31, 2015.


Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016


Transaction Fees


 

 

For the six months ended June 30,  2017

 

 

For the six months ended June 30,  2016

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Transaction Fee

 

 

$

1,240,720  

 

 

 

$

437,803  

 

 

$

802,917

 

183%

Loans

 

 

53,826,654  

 

 

 

17,778,251  

 

 

36,048,403

 

203%

Average Transaction fee in (%)

 

 

2.3%

 

 

 

2.5%

 

 

(0.2%)

 

(6%)  


Transaction fees increased $802,917, or 183%, from $437,803 for the six months ended June 30, 2016 to $1,240,720 for the six months ended June 30, 2017. The increase was primarily due to an increase in loans facilitated through our platform of $36.0 million, or 203%, from $17.8 million for the six months ended June 30, 2016 to $53.8 million for the six months ended June 30, 2017. The average transaction fee as a percentage of the initial principal balance of the loan was 2.3% for the six months ended June 30, 2017 compared to 2.5% for the six months ended June 30, 2016. The Company lowered its transaction fee rate during the six months ended June 30, 2017 as compared to the same period in 2016 to attract more borrowers.   


Management Fee


 

 

For the six months ended June 30,  2017

 

 

For the six months ended June 30,  2016

 

 

Change

 

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

$

1,685,963  

 

 

 

$

715,735  

 

 

$

970,228

 

 

136%

Loans

 

 

53,826,654  

 

 

 

17,778,251  

 

 

36,048,403

 

 

203%

Average management fee in (as a percentage of loan principal)

 

 

3.1%

 

 

 

4.0%

 

 

(0.9%)

 

 

(22%) 


Management fees increased $970,228, or 136%, from $715,735 for the six months ended June 30, 2016 to $1,685,963 for the six months ended June 30, 2017. The increase was primarily due to an increase in loans facilitated through our platform of $36.0 million, or 203%, from $17.8 million for the six months ended June 30, 2016 to $53.8 million for the six months ended June 30, 2017. The average management fee as a percentage of the initial principal balance of the loan was 3.1% for the six months ended June 30, 2017 compared to 4.0% for the six months ended June 30, 2016. The Company lowered its management fee rate during the six months ended June 30, 2017 as compared to the same period in 2016 to attract more borrowers.   



67






Major Borrowers


For the six months ended June 30, 2017, transaction and management fees generated from loans facilitated to two borrowers accounted for 30.4% and 14.5% of our revenues, respectively. For the six months ended June 30, 2016, transaction and management fees generated from loans provided to two borrowers accounted for 72.6% and 27.4% of our revenues. The transaction fees and management fees paid by the borrowers and the borrowing amounts are as follows:   


For the Six Months Ended June 30, 2017


 

 

Borrower 1

 

 

Borrower 2

 

 

 

 

 

 

 

 

Loans

 

 

$

13,746,065  

 

 

$

6,476,287  

 

Transaction fees

 

 

$

343,652  

 

 

$

194,289  

 

Transaction fee in % (as a percentage of loan principal)

 

 

2.5%

 

 

3.0%

 

Management fees

 

 

$

549,843  

 

 

$

226,670  

 

Management fee in % (as a percentage of loan principal)

 

 

4.0%

 

 

3.5%

 


For the Six Months Ended June 30, 2016


 

 

Borrower 1

 

 

Borrower 2

 

 

 

 

 

 

 

 

Loans

 

 

$

11,796,069  

 

 

$

5,905,684  

 

Transaction fees

 

 

$

319,202  

 

 

$

118,496  

 

Transaction fee in % (as a percentage of loan principal)

 

 

2.7%

 

 

2.0%

 

Management fees

 

 

$

518,277  

 

 

$

197,366  

 

Management fee in % (as a percentage of loan principal)

 

 

4.4%

 

 

3.3%

 

 

 


Operating Expenses


Our operating expenses consist of selling, research and development and general and administrative expenses.


 

 

For the six months ended June 30,  2017

 

 

For the six months ended June 30,  2016

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

$

1,715,617

 

 

 

$

715,433

 

 

$

1,000,184 

 

140%

General and administrative

 

 

1,680,715

 

 

 

670,283

 

 

1,010,432 

 

151%

Research and development

 

 

204,691

 

 

 

240,679

 

 

(35,988)

 

(15%) 

Total operating expenses

 

 

$

3,601,023

 

 

 

$

1,626,395

 

 

$

1,974,628 

 

121%


Selling Expenses


Selling expenses consist primarily of various marketing expenses, including those related to lender acquisition and retention, general brand and awareness building and salaries and benefits expense related to our sales and marketing team.



68






Our major selling expenses comprised of the following items during the respective periods as follows:


 

 

For the Six months ended

June 30,  2017

 

 

For the Six months ended

June 30,  2016

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Advertisement

 

 

$

254,961

 

 

 

$

467,826

 

 

$

(212,865)

 

(46%) 

Brand promotion

 

 

$

507,708

 

 

 

$

92,925

 

 

$

414,783 

 

446%

Incentive

 

 

$

654,403

 

 

 

$

89,065

 

 

$

565,338 

 

635%

Servicing expenses

 

 

$

92,607

 

 

 

$

39,642

 

 

$

52,965 

 

134%


Our selling expenses were $1,715,617 and $715,433 for the six months ended June 30, 2017 and 2016, respectively, an increase of $1,000,184 or 140%. The increase was primarily due to approximately $415,000 increase in promotion expenses in connection with implementation of our marketing strategy aiming at promoting brand recognition and attracting more lenders, an approximately $565,000 increase in promotional incentive that we offered to our investors to attract them to invest in our platform, and an approximately $53,000 increase in servicing expenses that we paid to a third party platform provider on each deposit made by the lenders into their respective fund accounts held by the third party platform fund accounts, which was offset by approximately $213,000 decrease in advertising expenses as we focused more on the promotion of our brand instead of advertising during the six months ended June 30, 2017 as compared to the same period of 2016.


We expect that our overall sales and marketing expenses, including but not limited to, advertisement and brand promotion, incentive and servicing expense, will continue to increase in the foreseeable future as our business further grows.


General and Administrative Expenses


General and administrative expenses consist primarily of salaries and benefits expenses for our accounting and finance, business development, legal, human resources and other personnel, and outside professional services fees and facilities expenses.


Our major general and administrative expenses comprised of the following items during the respective periods as follows:


 

 

For the Six months ended

June 30,  2017

 

 

For the Six months ended

June 30, 2016

 

 

Change

 

Change (%)

 

 

 

 

 

 

 

 

 

 

 

Office space rental

 

 

$

188,312

 

 

 

$

166,344

 

 

$

21,968

 

13%

Salary

 

 

$

173,840

 

 

 

$

97,486

 

 

$

76,354

 

78%

Business consulting

 

 

$

529,300

 

 

 

$

182,090

 

 

$

260,955

 

143%

Professional fees

 

 

$

493,131

 

 

 

$

25,328

 

 

$

347,210

 

191%





69






Our general and administrative expenses were $1,680,715 and $670,283 for the six months ended June 30, 2017 and 2016, respectively, an increase of $1,010,432 or 151%. The increase was primarily due to approximately $77,000 in salary increase as we have hired more employees due to our operating needs, an approximately $347,000 increase in business consulting as we need to hire a professional team continuingly to monitor and ensure our platform are working properly and to resolve any issues encountered by the users of our platform, and an approximately $468,000 increase in professional fee on legal, audit, and advisory fees associated with our IPO process. We expect our general and administrative expenses, including but not to, salary and business consulting, to continue to increase in the foreseeable future, as our business further grows.  We expect our rental expenses to remain consistent unless we need to further expand our administrative office due to lack of office spaces. We expect our profession fees on legal, audit, and advisory fees will increase as we become a public company upon the completion of this offering.


Research and Development Expenses


Research and development expenses consist primarily of salaries and benefits expenses for engineering and product management teams, and outside contractors who work on the development and maintenance of our platform.


Our research and development expenses were $204,691 and $240,679 for the six months ended June 30, 2017 and 2016, respectively, a decrease of $35,988 or 15%. The decrease was primarily due to a decrease in the amount of investment in our platform and product development.  


Provision for Income Taxes


For the six months ended June 30, 2017, the Company incurred an operating loss and recorded non-current deferred tax assets on net operating losses of $195,111.


Net Income (Loss)


Net loss for the six months ended June 30, 2017 was $601,405 as compared to net loss of $380,877 for the same period last year.


Foreign Currency Translation Adjustment


Changes in foreign currency translation adjustment are mainly due to the fluctuation of foreign exchange rates between RMB (the functional currency of Golden Bull WFOE and our VIEs).


Foreign currency translation adjustment increased to $206,308 for the six months ended June 30, 2017 from loss of $30,165 for the same period last year.


Liquidity and Capital Resources


To date, we have financed our operations primarily through cash flows from operations and proceeds from private placements.





70





We incurred losses from operations of $141,693 for the period from November 17, 2015 (inception) to December 31, 2015 and generated an income of $216,854 from operations for the year ended December 31, 2016. We incurred losses from operations of $803,383 in the six months ended June 30, 2017. In 2015 and 2016, we raised an aggregate of approximately $8.0 million through four private placements in China. We had approximately $5.6 million of cash as of June 30, 2017. We intend to continue to use such funds, and the funds we expect to raise in this offering, to grow our business primarily by:


·

enhancing our marketing efforts in order to increase awareness of our marketplace among potential lenders throughout China; and

·

increasing our efforts to expand our borrower base by utilizing social networks and e-commerce platforms.


We believe that our current working capital is sufficient to support our operations for the next twelve months.


All of our revenue is denominated in RMB. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are required to set aside at least 10% of their after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their registered capital. These reserves are not distributable as cash dividends. Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with SAFE and its local branches. See “Risk Factors—Risks Relating to Doing Business in China—We rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business.”


Cash Flows


As of June 30, 2017, we had cash and cash equivalent approximately $5.6 million as compared to $7.4 million as of December 31, 2016. The table below sets forth a summary of our cash flows for the periods indicated:


 

 

For the year ended December 31, 2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

For the six months ended June 30, 2017

 

For the six months ended June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

$

(1,092,322)

 

 

 

$

(230,354)

 

 

$

(1,948,687)

 

$

(204,768)

Net cash used in investing activities

 

 

$

(108,757)

 

 

 

$

(21,552)

 

 

$

(16,808)

 

$

(94,023)

Net cash provided by financing activities

 

 

$

8,044,569 

 

 

 

$

936,600 

 

 

$

 

$

1,071,312 

 

Operating Activities


Net cash used in operating activities was approximately $1.1 million for the year ended December 31, 2016, which was attributable primarily to an approximately $1.5 million increase in prepaid for advertisement and was offset by unpaid expense of $0.3 million other payables and accrued liabilities and taxes payable.


Net cash used in operating activities for the period from November 17, 2015 (inception) to December 31, 2015 was approximately $0.2 million, attributable primarily to a net loss of approximately $0.1 million and $0.1 million paid for prepaid rent and security deposits.



71






Net cash used in operating activities was approximately $1.9 million for the six months ended June 30, 2017, which was attributable primarily to a net loss of approximately $0.6 million, an approximately $0.6 million increase in security deposits and approximately $0.8 million paid for prepaid advertisement, marketing promotion and professional services.


Net cash used in operating activities was approximately $0.2 million for the six months ended June 30, 2016, which was attributable primarily to a net loss of approximately $0.4 million, an approximate $0.5 million paid for prepaid advertisement and marketing promotion, an approximate $0.1 million of deferred tax benefit, and was offset by unpaid expense of $0.8 million other payables and accrued liabilities and taxes payable.


Investing Activities


Net cash used in investing activities was approximately $0.1 million for the year ended December 31, 2016, which was attributable primarily to the additional office equipment and furniture and leasehold improvements.


Net cash used in investing activities was approximately $22,000 for the year ended December 31, 2015, which was attributable primarily to purchase of office equipment and furniture and leasehold improvements.


Net cash used in investing activities was approximately $17,000 for the six months ended June 30, 2017, which was attributable primarily to $34,000 additional purchase of office equipment and leasehold improvements, and $18,000 cash acquired through variable interest entity.


Net cash used in investing activities was approximately $94,000 for the six months ended June 30, 2016, which was attributable primarily to the additional office equipment and furniture and leasehold improvements.


Financing Activities


Net cash provided by financing activities was approximately $8.0 million in the year ended December 31, 2016, which was attributable to proceeds from private placements of our operating entity’s securities, and approximately $0.9 million during the period from November 17, 2015 (inception) to December 31, 2015, which was attributable to additional capital contributions from our founders.  


Net cash provided by financing activities was approximately $1.1 million in the six months ended June 30, 2016, which was attributable to additional capital contribution from our founders.


Contractual Obligations


Our contractual obligations as of June 30, 2017 consisted of approximately $208,192 of lease commitment due within one year. We lease our office premises under a non-cancelable operating lease with an expiration date in January 2018.  


Off-Balance Sheet Arrangements


We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us. 



72






Critical Accounting Policies


Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.


While our significant accounting policies are described in Note 2 to our consolidated financial statements included elsewhere in this prospectus, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our management’s discussion and analysis:


Principles of consolidation


The consolidated financial statements include the accounts of the Company, its subsidiaries, and the VIEs. All intercompany transactions and balances between the Company, its subsidiaries and the VIE are eliminated upon consolidation.


Since Golden Bull, its subsidiaries and the VIEs are under common control, the consolidation of Dianniu has been accounted for as a reorganization of entities under common control at carrying value and prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements and the consolidation of Baoxun has been consolidated from February 22, 2017, the date of which Baoxun becomes under common control.


Fair value measurement


The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash and cash equivalents, other receivables, prepaid expenses, accounts payable, other payables and accrued liabilities, deferred rent liabilities and taxes payable to approximate their fair values because of their short term nature.

 

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:


Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.


Revenue recognition


Revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.



73






Transaction Fee:  Transaction fees are paid by borrowers to the Company for the work the Company performs through its platform.  These fees are recognized as a component of operating revenue at the time of loan issuance.  The amount of these fees is based upon the loan amount and other terms of the loan, including credit grade, maturity and other factors.  These fees are non-refundable upon the issuance of loan.


Management Fee:  Loan borrowers pay a management fee on each loan payment to compensate the Company for services provided in connection with facilitation of the loan transactions.  The Company records management fees as a component of operating revenue at the time of loan issuance.  The amount of these fees is based upon the loan amount and other terms of the loan, including credit grade, maturity and other factors.  These fees are non-refundable upon the issuance of loan.


Sales taxes :  Transaction fee, management fee and license fee that are earned and received in the PRC are subject to a Chinese value-added tax (“VAT”) at a rate of 3% prior to March 2017 (6% starting in April 2017) of the gross proceed or at a rate approved by the Chinese local government Transaction fee and management fee that are earned and received in the PRC are also subject to various miscellaneous sales taxes at a rate of 7% of the VAT.  VAT and miscellaneous sales taxes are accounted for as reduction of revenue.


Incentives


In order to incentivize lenders, the Company provides incentives to marketplace lenders, who commit a certain amount of money for a period of time.  During the relevant incentive program period, the Company set certain thresholds for the lender to qualify to enjoy the cash incentive. Such incentives generally consist of a credit to be used by a lender to invest in a future loan. When qualified investment is made by the lenders, the cash payment is provided to the lender as a percentage of investment amount at the time of loan issuance as part of its investment to the specified loan that he/she has invested. The incentive expenses are recognized in our selling expenses in the accompanying consolidated statements of operations and comprehensive loss.


Servicing Expense  


Servicing expenses are paid by the Company to a third party platform provider on each deposit made by the lenders into their respective fund accounts held by the third party platform fund accounts.  The amount of these expenses is based upon the deposit amount.   The servicing expenses are recognized in our selling expenses in the accompanying consolidated statements of operations and comprehensive loss


Income taxes


The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

 

The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 



74






Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.


An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.  PRC tax returns filed in 2016 are subject to examination by any applicable tax authorities.


Commitments and Contingencies

 

In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.


JOBS Act

 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.  


Quantitative and Qualitative Disclosures about Market Risks


Liquidity risk


We are exposed to liquidity risk, which is the risk that we will be unable to provide sufficient capital resources and liquidity to meet our commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will turn to other financial institutions to obtain short-term funding to meet the liquidity shortage.


Inflation risk


Inflationary factors, such as increases in raw material and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the selling prices of our products do not increase with such increased costs.



75






Interest rate risk


Our exposure to interest rate risk primarily relates to the interest rate we are subject to in connection with our short term bank loans, on the one hand, which can vary but not more than 110% of the People’s Bank of China benchmark interest rate, and the interest rates we impose on our borrowers or that our deposited cash can earn, on the other hand. We have not used any derivative financial instruments to manage our interest risk exposure. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates. An increase, however, may raise the cost of any debt we incur in the future.


Foreign currency translation and transaction


The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.


Recently Issued Accounting Pronouncements


In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes , to simplify the presentation of deferred income taxes. The update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The update applies to all entities that present a classified statement of financial position. For public business entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period. The Company has elected to early adopt the ASU, and its effects are reflected in the Company’s consolidated financial statements.


In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities , to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management plans to adopt this ASU after December 15, 2017 assuming the Company will remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In February 2016, the FASB issued ASU 2016-02 , Amendments to the ASC 842 Leases . This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management plans to adopt this ASU after December 15, 2018 assuming the Company will remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.



76






In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing . The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management plans to adopt this ASU after December 15, 2017 assuming the Company will remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.  The object is to address certain issues identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition.  The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.  Management plans to adopt this ASU after December 15, 2017 assuming the Company will remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. Management plans to adopt this ASU after December 15, 2017 assuming the Company will remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interests held through related parties that are under common control.  The amendments in this ASU require that the reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity.  The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.    Early adoption is permitted, including adoption in an interim period. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.



77






In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the definition of a business. The amendments in this ASU is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation.  The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management plans to adopt this ASU after December 15, 2017 assuming the Company will remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, this ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. Management plans to adopt this ASU after December 15, 2017 assuming the Company will remain an emerging growth company at that date. The adoption of this ASU would not have a material effect on the Company’s consolidated financial statements.


The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.




78





BUSINESS


Overview


We are an online finance marketplace, or “peer-to-peer” lending company, in China that provides borrowers access to short-term loans. The loans that we are currently arranging generally range from 30 days to 90 days, and are secured by borrowers’ automobiles. Through our online marketplace, we connect individual lenders with individual and small business borrowers. We currently conduct our business operations exclusively in China.


We believe our technology-driven marketplace provides eligible borrowers with a quick, accessible and affordable way to meet their liquidity needs. Our online marketplace may be accessed only by qualified borrowers, as discussed below in “Business— Our Platform.” We currently target borrowers that display stable credit performance and salary income. We implement a risk management process to try to minimize the risk of nonpayment to lenders. Such process involves a thorough review of credit reports prepared by third parties and may also include inquiries by us of employers or associates of potential borrowers.


Our marketplace also provides lenders with risk-adjusted returns that we believe are attractive. The average annualized return for lenders that have provided loans through our platform in 2016 was 11.64%, compared to a peer-to-peer industry average return rate of 10.45%, based on the Research Report on the Internet Finance Industry and Development Strategy for 2017 to 2022 (the “China IRN Report”), issued by ChinaIRN.com, an independent research institution in PRC that specializes in industry survey and research.  


From our inception in November 2015 through June 2017, we facilitated loans in the aggregate principal amount of approximately RMB 734.9 million ($108.8 million).  We generate revenues primarily from transaction fees, which averaged 2.31% and 2.84% of the principal amount loaned through our platform during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, and management fees, which averaged 3.1% and 4.1% of the principal amount loaned through our platform during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, each of which is charged to borrowers for our services. Our revenues totaled approximately $3.7 million in 2016, our first year of operations, and approximately $2.8 million for the six months ended June 30, 2017. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Results of Operation–Revenue” for a description of our transaction and management fees.


We attract borrowers to our platform primarily through offline sources, including through relationships with traditional lending or guarantee institutions. In addition, we attract borrowers through referrals from existing borrowers and through online sources, including search engine marketing, search engine optimization, mobile application downloads through major application stores, partnering with online channels through application programming interfaces, as well as various marketing campaigns. The lending and guarantee institutions we work with are compensated directly by the borrowers, and not by us or the lenders we introduce. 


We have used various social media and mobile platforms and networks to market our platform to potential lenders. Currently, lenders through our platform consist of individuals of varying levels of net worth. We conduct a limited background check of individuals that lend money through our platform.  


As an intermediary, we do not use our own capital to invest in loans facilitated through our marketplace nor do we manage our borrowers and lenders’ account portfolios. We facilitate loans by connecting borrowers and lenders, preparing all necessary paperwork related to borrowers’ applications and assisting with securing collateral. However, we do not take control of funds that pass between such lenders and borrowers. Instead, payments are made through third party payment systems. Prior to August 2017, we used China PnR for payment services.  On June 15, 2017, Bank of Shanghai started to serve as the exclusive custodian for our lending platform, providing account management, funds depository, custodian, and account segregation services in connection with funds transfers in loan transactions facilitated via our platform.  For loan transactions facilitated through our platform, the bank sets up separate accounts for borrowers, lenders and guarantors and withdraws and deposits funds based on instructions generated by our platform.  The bank also provides other ancillary services such as platform user identity verification and account statements preparation. In August 2017, we finished the transition from the custodian system of China PnR to the custodian system of Bank of Shanghai.




79





We currently facilitate loans exclusively to borrowers that provide an automobile as security to lenders, and in many instances third-party institutions provide a guarantee to lenders as additional security. The automobiles that are secured must be owned by the borrower and may not be encumbered by existing loans. We require that the size of each loan be no more than 70% of the value of the collateral of such loan.  However, since none of the loans facilitated through our platform has defaulted to date, neither our collateralization standards nor our collection efforts have been tested in practice.


Historically, we structured many of the loans facilitated through our platform such that representatives of traditional lending or guarantee institutions would borrow the funds from the lenders on our platform and in turn lend such funds to underlying individual or small company borrowers. Pursuant to our agreements with these institutions or their representatives, such institutions and the individuals controlling such institutions committed (i) to borrow from our lenders a target loan amount per month, (ii) to cover all costs incurred in connection with such institutions’ loans made by the institutions to underlying borrowers, (iii) to secure loans through security interests in cars of their underlying borrowers and to repay all loans made by our lenders to these institutions or their representatives. Under our old loan structure, underlying borrowers provided their automobiles as security to the representatives of financing institutions, including our major borrowers, who in turn borrowed funds through our platform. Such security arrangement did not directly involve us or our lenders. The financing institutions affiliated with our borrowers guaranteed the repayment of the respective loans facilitated through our platform.


However, due to limitations on loan sizes to borrowers set forth in the P2P Measures, since the beginning of 2017, we begun to structure loans such that the underlying individual or small company borrowers borrow the funds directly from the lenders we introduce. The loan institutions that previously borrowed from our lenders are now guarantors of such loans. We believe that not all of the loans we facilitated were within the limitations set forth in the P2P Measures. Given that the P2P Measures are new and their implementation is just beginning, there is no guarantee that the relevant government authorities will deem our operations to be in full compliance with the P2P Measures once these measures are implemented. Furthermore, such lending and guarantee institutions are under no contractual obligation to continue partnering with us in the long-term pursuant to these new arrangements. As such, our revenues may decline and we may be subject to penalties imposed by the relevant governmental agencies in the event that we fail to comply with the P2P Measures.


Through September 30, 2016, all of the loans facilitated through our platform were made to borrowers that borrowed through our platform multiple times. During the quarters ended December 31, 2016, March 31, 2017 and June 30, 2017, approximately 66.7%, 48.5%, and 71.2%, respectively, of the loans facilitated through our platform were made to borrowers that borrowed through our platform multiple times. During the six months ended June 30, 2017, the average number of loans per individual borrower was 6.57 and the average number of loans per small business borrower was 7.53.


We do not allow borrowers to borrow through our platform unless their prior loans facilitated through our platform have previously been paid in full and we do not allow borrowers to repay their existing loans with new loans facilitated through our platform. Consequently, borrowers must repay loans using funds obtained from other sources other than our platform. Alternatively, the borrower can provide additional collateral, in which case we would allow the borrower to borrow 70% of the value of the additional collateral.


Our Strategy


We have a limited operating history. We plan to continue to expand our borrower base by continuing to attract traditional lending or guarantee institutions whose customers utilize our platform, and generating more referrals from existing clients, through offline marketing methods, and by attracting more individual borrowers directly through online methods such as search engine marketing, search engine optimization, mobile application downloads through major application stores, partnering with online channels through application programming interfaces, as well as various marketing campaigns. In addition, we plan to continue to expand our lender base using various social media and mobile platforms and networks to market our platform to potential lenders. In addition, we intend to branch out into new areas of peer to peer lending in the future by, for example, facilitating loans that are not secured by automobiles or attracting institutional lenders. However, there is no guarantee that our expansion plans will be successful.



80







In 2015 and 2016, we raised an aggregate of approximately $8.0 million through four private placements in China. We had approximately $5.6 million of cash as of June 30, 2017. We intend to continue to use such funds, and the funds we expect to raise in this offering, to grow our business primarily by:


·

enhancing our marketing efforts in order to increase awareness of our marketplace among potential lenders throughout China;


·

enhancing our online platform and mobile app;


·

hiring additional employees to enhance our business structure and management; and


·

increasing our efforts to expand our borrower base by utilizing social networks and e-commerce platforms.


Our Challenges


The online consumer finance marketplace industry in China is intensely competitive and we compete with many other consumer finance marketplaces. According to the China IRN Report, as of December 2016, there were 2,448 online consumer finance marketplaces in China. In light of the low barriers to entry in the online consumer finance industry in China, we expect more players to enter this market and increase the level of competition. We anticipate that more established internet, technology and financial services companies that possess large, existing user bases, substantial financial resources and established distribution channels may enter the market in the future.


Historically, we have been dependent on a limited number of traditional lending or guarantee institutions, their representatives or their clients. For the year ended December 31, 2016, fees generated from loans provided to two borrowers accounted for 45.8% and 31.1% of our revenues, respectively. For the six months ended June 30, 2017, fees generated from loans provided to two borrowers accounted for 30.4% and 14.5% of our revenues, respectively. For the six months ended June 30, 2016, fees generated from loans provided to two borrowers accounted for 72.6% and 27.4% of our revenues.  


As of June 30, 2017, no loans facilitated through our platform had defaulted and all payments were timely made. In the event that a loan facilitated through our platform defaults or a payment is not made timely, we are not obligated to repay, or otherwise pay any penalties to, lenders. As such, unlike some of our better capitalized competitors, we have not established a risk reserve fund designed to compensate lenders for any losses they incur in the event of default. Competitors that have established a risk reserve fund may be better positioned to attract lenders than we are.


The China Banking Regulatory Commission, Ministry of Industry and Information Technology and the Ministry of Public Security published the P2P Measures on August 17, 2016. According to the P2P Measures, effective August 17, 2017, the maximum loan balance at any given time for an individual shall be not more than RMB 200,000, and for a business enterprise not more than RMB 1,000,000, borrowed from a single internet lending information intermediary platform and not more than RMB 1 million for an individual and RMB 5 million for a business enterprise, respectively, in total from all platforms. If we were found to be in violation of the P2P Measures, a penalty of up to RMB30,000 would be imposed for such violation. We would not be fined for each violation; however, if there were repetitive violations, more severe penalties may be imposed. However, it is unclear from the P2P Measures as to the magnitude of such penalties. As of December 31, 2016, 13, or 86.67%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. As of June 30, 2017, 51, or 18.68%, of our borrowers held loans exceeding the limitations set forth in the P2P Measures. These loans were facilitated prior to the effectiveness of the P2P Measures and substantially all of them were paid off as of the date of this prospectus. Approximately 66% and 84.7% of our revenues were attributable to these borrowers for the year ended December 31, 2016 and the six months ended June 30, 2017.We believe that we are in full compliance with the P2P Measures and that our new loan structure should continue to be in compliance with the P2P Measures.



81






We cooperate with Shanghai Credit Information Service Co., Ltd. NFCS is one of the primary systems to collect personal lending records for P2P companies. We utilize NFCS to determine whether borrowers obtain loans through other platforms.


Our Platform  


We are an online consumer finance marketplace in China connecting lenders with individual borrowers and small businesses. We believe that our marketplace embraces the significant opportunities presented by a financial system that leaves many creditworthy individuals underserved or even unserved. Our technology-driven platform allows us to efficiently match borrowers with lenders as an alternative means to obtain credits outside side of China’s traditional banking system.  


In order to qualify for a loan through our platform, an individual must be a Chinese national age 18 to 60 years. Such individual must possess a good credit score, adequate capability to repay his or her loan or have a capable guarantor, and must have a job that we do not consider to be high risk. We do not assign scores to a borrower. When we review the application, we will take into account a number of factors to evaluate the creditworthiness of an applicant such as his credit score and credit history from third party credit rating agencies.  Generally, the report showing an applicant with a Sesame score of 620 and above, no bad credit record and reasonable debt-asset ratio would be considered a good report. We generally consider a job high-risk if it does not pay the borrower on a regular and predictable basis. In order for a small business to qualify for a loan through our platform, such business must possess all required licenses, a good credit report and a qualified legal representative. In addition, an individual that controls such business must meet the same standards we set for individual borrowers and must provide collateral as required of individual borrowers.


Benefits to Borrowers


We believe that we provide the following benefits to borrowers:  


Access to consumer credit . Borrowers are significantly underserved by the current consumer finance system in China, which provides insufficient access to funds or, in some cases, no access at all. We provide qualified borrowers with access to consumer credit on terms that are adjusted to borrowers’ risk profiles and in amounts that are suitable to finance certain large consumption expenditures, such as those for home renovations, vehicle purchases, traveling and continuing education.


Quick and convenient access. We provide borrowers with an online loan application and management platform that can be accessed anytime, anywhere through our website and mobile applications. We also provide borrowers with access to live support and easy-to-use online tools throughout the application process and for the lifetime of the loan.

Fast credit approval. We leverage technology to quickly assess risk and determine creditworthiness. We provide borrowers with faster credit decisions compared to traditional sources of consumer credit in China, which may take weeks to provide a decision.  Generally, we make credit decisions within two to three days after a borrower’s initial application is submitted. Once we approve a borrower and post such borrower’s loan on our platform, it generally takes one to two days for lenders to fully subscribe for such loan and the borrower generally receives funds within seven days.


Transparent marketplace. We offer borrowers a transparent end-to-end process with foreseeable turnaround times and clear documentation requirements. All of the loans facilitated through our marketplace feature fixed interest rates, which together with service fees and late payment penalties, are clearly disclosed to borrowers during the application process. However, we do not engage in collection efforts directly or enforce payments. Instead, as disclosed on our website, we rely on our custodian, ChinaPnR, to process all payments between lenders and borrowers.

 




82






Benefits to Lenders


We believe that we provide the following benefits to lenders:


Access to a new asset class. We provide lenders with access to an investment opportunity that is outside the traditional investment channels available to lenders in China. We offer lenders the ability to invest on our marketplace with investment thresholds as low as RMB100 (approximately $15) and as high as RMB 200,000 (approximately $29,500), permitting diversification across multiple loans. In 2016, the average loan investment sizes through our marketplace were RMB 100,000 (approximately $14,751). Average loan amounts were $25,276 to individual borrowers and $14,123 to small business borrowers in the first quarter of 2017.


Attractive returns. We offer lenders attractive returns, which currently range from 6% to 16% on an annualized basis.  Our focus on borrowers with automobiles that are used as collateral and our credit screening capabilities help to improve the reliability of returns obtained through our marketplace.


Easy and quick access. We offer lenders 24/7 access to all available services through our website and mobile applications. We provide lenders with online tools that automatically invest a specified amount of funds committed by the lender according to lender-specified criteria, including desired rate of return and tenure.


Our Services


Through online marketplace, we connect borrowers and lenders with respect to short-term loans. Currently, the terms of loans are generally 30 days, 60 days, 90 days, 120 days and 180 days. There is no minimum loan requirement. The maximum loan requirement is the maximum allowed by PRC law. The annual interest rates paid by our borrowers in 2016 ranged between approximately 6% and approximately 16%, and the annual interest rates in the six months ended June 30, 2017 ranged between 3% and 12%, with the specific rate charged dependent upon our risk assessment of a borrower. The average interest rate in 2016 was 9%, and the average interest rate in the six months ended June 30, 2017 was 10%. Including our service and management fees, such rates ranged between approximately 10% and approximately 17% in 2016 and between 10% and 17% in the six months ended June 30, 2017. In addition to paying our fees, many borrowers pay additional fees to the lending and guarantee companies that are also guarantors of the loans. We believe that bank loan interest rates in China generally range between 5% and 15%. In contrast to traditional banks, our application process is simpler and banks often require deposits of up to 30% to 40% of the amount borrowed. We believe that the loans we facilitate are simple and quality credit products that make it easy for borrowers to budget their repayment obligations and meet their financial needs. Currently, all of our loan products are secured by automobiles and feature up-front transaction fees and fixed management fees.


We take a number of measures to try to provide security to lenders. For example, in many instances, we partner with third parties in approximately 20 cities that guarantee the loans we facilitate, and, in order to protect their interests and ours, secure garage space, and require the borrower to maintain the secured automobile in one of these garages during the term of the loan. The fees associated with the entities that store these automobiles in their garages are borne by the guarantee institutions we work with. The administrative services relating to these garages are performed by our guarantee company partners. We have employees that observe the operations of such garages. The cars that we secure must be owned by the borrower and the cars may not be subject to any other liens. Certain of the cars that are secured are not held in a garage, but the borrowers issue security on the title of the cars in connection with the loans we facilitate. 


We cannot be certain that we have taken all steps necessary to secure these vehicles prior to the funding of a loan and that no further actions are needed to secure such vehicles. Furthermore, since no loans have defaulted, our collection process has not yet been tested. In many instances third-party institutions provide a guarantee to lenders as additional security.



83






During 2016, 254 loans that we facilitated were guaranteed and during the six months ended June 30, 2017, 1,547 loans were guaranteed. Guarantors consist only of traditional guarantee and lending companies with we collaborate. Such entities are qualified once we have reviewed credit reports and business licenses of such entities and have verified their ability to repay the loans they guarantee. In the event of default, the guarantor would be obligated to pay our lenders the amount owed and the guarantor would take control of the borrower’s collateral.


Previously, we experimented with loans secured by real estate, but no longer provide such option to borrowers. As a result of our risk management process, as of June 30, 2017, no loans facilitated through our platform had defaulted.


To the extent a borrower were to default on a loan facilitated through our platform, we would expect to participate in the process to repossess the collateral underlying such loan or to collect from the guarantor of such loan. However, because there have been no defaults to date, our collection process has not been tested and we are uncertain as to the costs of any such process. To the extent the borrower’s car is held in a garage to which we or the guarantor of the loan has access, we believe that the costs should be nominal. The institutions with which we work are obligated to reimburse us for any such collection costs.


Although we facilitate loans by connecting borrowers and lenders, preparing all necessary paperwork related to borrowers’ applications and assisting with securing collateral, we do not take control of funds that pass between lenders and borrowers that we connect. Instead, payments are made through third party payment systems. Prior to August 2017, we used China PnR for payment services.  On June 15, 2017, Bank of Shanghai started to serve as the exclusive custodian for our lending platform, providing account management, funds depository, custodian, and account segregation services in connection with funds transfers in loan transactions facilitated via our platform.  For loan transactions facilitated through our platform, the bank sets up separate accounts for borrowers, lenders and guarantors and withdraws and deposits funds based on instructions generated by our platform.  The bank also provides other ancillary services such as platform user identity verification and account statements preparation. In August 2017, we finished the transition from the custodian system of China PnR to the custodian system of Bank of Shanghai.


Our Platform and the Transaction Process


We believe that our platform enables a fast loan application process and a superior overall user experience. Our platform touches each point of our relationship with our borrowers and lenders, from the application process through the funding and servicing of loans.


We provide a streamlined application process. To borrowers and lenders alike, the process is designed to be simple, seamless and efficient platform and our sophisticated and proprietary technology to make it possible. We work diligently to try to complete the application process, including a thorough credit assessment and all necessary paperwork, within two to three days.  


To ensure the quality of our service, we have an in-house R&D team consisting of 12 employees dedicated to the development of technologies related to our online platform and mobile applications.  We also engage third party service providers on a regular basis for platform and related hardware maintenance and updating.  


Stage 1: Application


As part of the application process, the prospective borrower is asked to provide various personal details. The specific personal details required will depend upon the borrower’s desired loan product, but typically include PRC identity card information, employer information, bank account information, proof of income and proof of employment.  We also collect information related to collateral.  For vehicles, the information we collect include registration, insurance policy, mileage information and valuation on certain credible automobile websites in the PRC.



84






Stage 2: Verification


Upon submission of a completed application by borrowers, our credit models are populated with all information contained in the submitted loan application. Additional data from a number of internal and external sources is then matched with the application, including credit reporting platforms of People’s Bank of China and third party credit systems such as Alibaba’s Sesame Credit system.  The data is then aggregated and used to verify an applicant’s identity, for possible fraud detection and for assessment and determination of creditworthiness.


Once we verify the applicant’s identity, address, employment and assets, and confirm that there are no bad records on such applicant, such as breach of contract or defaulted loan payments, we can proceed with the credit assessment of the applicant.


Stage 3: Credit Assessment and Decision-Making


Following initial qualification, we commence a credit review utilizing information provided by the borrower that drives the decision whether to extend credit. Our credit assessment team will first conduct an interview of the applicant by phone. After the initial verification interview, we will analyze the application including supporting documents, the borrower’s credit and loan history as well as credit reports.


If our credit assessment team suspects there may be fraud involved with a particular loan application or determines that additional verification is needed to complete the credit decisioning process, further due diligence and verification will be conducted, such as additional phone calls to the borrower applicant and the applicant’s employer or guarantor that is identified in the application. These additional steps have led us to discover instances of inaccurate information or unstable income, which would generally lead us to reject the loan application. In addition, we review the borrower’s capability of providing an automobile of adequate value as collateral. Our credit assessment team determines the value of the collateral based on reports from third party appraisal firms. We also determine whether a guarantor of adequate means is prepared to provide a guaranty for the loan. If we determine that a guarantor has difficulty to pay off the loan and interest in the event of a default by the borrower applicant, we may decline the loan application. Generally, an applicant with higher income and more assets has a higher rate of approval once we determine there is no issue with the applicant’s credit.


Following the credit review, we will either approve the loan as is, approve the loan with one or more modified sets of loan characteristics, or decline the loan application.


The percentages of applications that were approved in each quarter of 2016 and the six months ended June 30, 2017 were as follows:


Q1 2016

52%

Q2 2016

48%

Q3 2016

45%

Q4 2016

38%

Q1 2017

35%

Q2 2017

32%


We expect these percentages to continue to decrease as the number or applicants increases as we enhance our marketing efforts and attract more borrowers.



85






Stage 4: Approval, Listing and Funding


Once the loan application is approved, we make a loan agreement available online for the prospective borrower’s review and approval. This loan agreement is between the borrower and the lenders who fund the borrower’s loan. Upon acceptance of the loan agreement, the loan is then listed on our marketplace for lenders to view. Once a loan is listed on our marketplace, lenders may then subscribe to the loan using either our automated or self-directed investing tools. Before a loan is disbursed to the borrower, it must be fully subscribed to by lenders. This liquidity management system is designed to ensure the fast and effective matching of borrowers’ loan applications and lenders’ investment demand through the use of a detailed demand forecasting model and real time monitoring. Once a loan is fully subscribed, funds are then drawn from a custody account and disbursed to the borrower.


We do not directly receive any funds from lenders in our own accounts as funds loaned through our platform are deposited into and settled by a third-party custody account managed by ChinaPnR, a reputable third party service provider. ChinaPnR receives the funds from the lenders’ accounts and transfers a portion of the funds to our account to cover our fees and the remainder to the borrower. Borrowers repay the money to ChinaPnR which in turn deposits the funds in the lenders’ accounts.


Competition


The online consumer finance marketplace industry in China is intensely competitive and we compete with other consumer finance marketplaces. According to the China IRN Report, as of December 2016, there were 2,448 online consumer finance marketplaces. In light of the low barriers to entry in the online consumer finance industry, we expect more players to enter this market and increase the level of competition. We anticipate that more established internet, technology and financial services companies that possess large, existing user bases, substantial financial resources and established distribution channels may enter the market in the future.


We also compete with other financial products and companies that attract borrowers, lenders or both. With respect to borrowers, we compete with other consumer finance marketplaces and traditional financial institutions, such as consumer finance business units in commercial banks, credit card issuers and other consumer finance companies. With respect to lenders, we primarily compete with other investment products and asset classes, such as equities, bonds, investment trust products, bank savings accounts and real estate.



86






Employees


As of December 18, 2017, we had a total of 102 employees of whom two were part-time. We had a total of 53 and 20 employees as of December 31, 2016 and 2015, respectively. The following table sets forth the breakdown of our employees as of December 18, 2017 by function:

 

 

 

Number of

 

 

Employees

% of Total

Function

 

 

 

 

Technology and Development

 

12

 

11.80%

Risk Management

 

22

 

21.60%

Operations, Sales and Marketing

 

48

 

47.10%

Product Development

 

4

 

3.90%

General and Administrative

 

16

 

15.60%

 

 

 

 

 

Total

 

102

 

100.00%


As of December 18, 2017, 89 of our employees were based in Shanghai, where our principal executive offices are located, and the remaining employees are located in garages outside of Shanghai for the purpose of administering the automobiles used as collateral for the loans we facilitate.


We added 49 employees in 2017, mostly in our sales and marketing department. These employees are paid a base salary and commissions. Accordingly, these new hires will increase our expenses in 2017 as compared to 2016.


As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds, namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. As of the date of this prospectus, we have made adequate employee benefit payments. However, if we were found by the relevant authorities that we failed to make adequate payment, we may be required to make up the contributions for these plans as well as to pay late fees and fines. See “Risk Factors—Risks Related to Doing Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.”


We enter into standard labor and confidentiality agreements with our employees. We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes.


Facilities


Our principal executive office is located on leased premise comprising 1,000 square meters in Shanghai, China. We lease our premise from an unrelated third party under an operating lease. The lease for our principal executive offices is effective until January 2018 and we expect to be able to renew such lease. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.



87






Intellectual Property


We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on trademark and trade secret law and confidentiality and invention assignment with our employees and others to protect our proprietary rights. We have made application for two trademarks, all of which are pending with the Trademark Office under the State Administration for Industry and Commerce of PRC. We have been granted three copyrights by the PRC Copyright Bureau for software essential to our service platform and related mobile applications.  Our intellectual property also includes domain names 98banks.com and dianniu98.com.


Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. Monitoring unauthorized use of our technology is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.


In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.


See “Risk Factors—Risks Related to Our Business—We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.” and “—We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.”


Insurance


We provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees. We do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider our insurance coverage to be sufficient for our business operations in China.


Legal Proceedings


We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.

 

Regulations


This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.


As an online consumer finance marketplace connecting lenders with individual borrowers, we are regulated by various government authorities, including, among others:



88






·

the Ministry of Industry and Information Technology, or the MIIT, regulating the telecommunications and telecommunications-related activities, including, but not limited to, the internet information services and other value-added telecommunication services;

·

the People’s Bank of China, or the PBOC, as the central bank of China, regulating the formation and implementation of monetary policy, issuing the currency, supervising the commercial banks and assisting the administration of the financing;

·

China Banking Regulatory Commission, or the CBRC, regulating financial institutions and promulgating the regulations related to the administration of financial institutions.


The relevant regulations promulgated by such government authorities are described below.


Regulations Relating to Foreign Investment


The Draft PRC Foreign Investment Law


In January 2015, the MOFCOM published a discussion draft of the proposed Foreign Investment Law for public review and comments. The draft law purports to change the existing “case-by-case” approval regime to a “filing or approval” procedure for foreign investments in China. The State Council will determine a list of industry categories that are subject to special administrative measures, which is referred to as a “negative list,” consisting of a list of industry categories where foreign investments are strictly prohibited, or the “prohibited list” and a list of industry categories where foreign investments are subject to certain restrictions, or the “restricted list.” Foreign investments in business sectors outside of the “negative list” will only be subject to a filing procedure, in contrast to the existing prior approval requirements, whereas foreign investments in any industry categories that are on the “restricted list” must apply for approval from the foreign investment administration authority.


The draft for the first time defines a foreign investor not only based on where it is incorporated or organized, but also by using the standard of “actual control.” The draft specifically provides that entities established in China, but “controlled” by foreign investors will be treated as FIEs. Once an entity is considered to be an FIE, it may be subject to the foreign investment restrictions in the “restricted list” or prohibitions set forth in the “prohibited list.” If an FIE proposes to conduct business in an industry subject to foreign investment restrictions in the “restricted list,” the FIE must go through a market entry clearance by the MOFCOM before being established. If an FIE proposes to conduct business in an industry subject to foreign investment prohibitions in the “prohibited list,” it must not engage in the business. However, an FIE that conducts business in an industry that is in the “restricted list,” upon market entry clearance, may apply in writing for being treated as a PRC domestic investment if it is ultimately “controlled” by PRC government authorities and its affiliates and/or PRC citizens. In this connection, “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. According to the draft, variable interest entities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties.

 

The draft emphasizes on the security review requirements, whereby all foreign investments that jeopardize or may jeopardize national security must be reviewed and approved in accordance with the security review procedure. In addition, the draft imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.



89







The draft is now open for public review and comments. It is still uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft. When the Foreign Investment Law becomes effective, the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations, will be abolished. See “Risk Factors—Risks related to Doing Business in China—Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

Industry Catalog Relating to Foreign Investment


Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalog of Industries for Foreign Investment, or the Catalog, which was promulgated and is amended from time to time by the MOFCOM and the National Development and Reform Commission. Industries listed in the Catalog are divided into three categories: encouraged, restricted and prohibited. Industries not listed in the Catalog are generally deemed as constituting a fourth “permitted” category. Establishment of wholly foreign-owned enterprises is generally allowed in encouraged and permitted industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. In addition, restricted category projects are subject to higher-level government approvals. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in the Catalog are generally open to foreign investment unless specifically restricted by other PRC regulations.


Our PRC subsidiary is mainly engaged in providing investment and financing consultations and technical services, which fall into the “encouraged” or “permitted” category under the Catalog. Our PRC subsidiary has obtained all material approvals required for its business operations. However, industries such as value-added telecommunication services (except e-commerce), including Internet information services, are restricted from foreign investment. We provide the value-added telecommunication services that are in the “restricted” category through our consolidated variable interest entities.


Foreign Investment in Value-Added Telecommunication Services


The Provisions on Administration of Foreign Invested Telecommunications Enterprises promulgated by the State Council in December 2001 and subsequently amended in September 2008 prohibit a foreign investor from owning more than 50% of the total equity interest in any value-added telecommunications service business in China and require the major foreign investor in any value-added telecommunications service business in China have a good and profitable record and operating experience in this industry. The Guidance Catalog of Industries for Foreign Investment amended in 2017 allows a foreign investor to own more than 50% of the total equity interest in an E-Commerce business.


In July 2006, the Ministry of Information Industry, the predecessor of the MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in the Operation of Value-added Telecommunications Business, pursuant to which a domestic PRC company that holds an operating license for value-added telecommunications business, which we refer to as a VATS License, is prohibited from leasing, transferring or selling the VATS License to foreign investors in any form and from providing any assistance, including resources, sites or facilities, to foreign investors that conduct a value-added telecommunications business illegally in China. Further, the domain names and registered trademarks used by an operating company providing value-added telecommunications services must be legally owned by that company or its shareholders. In addition, the VATS License holder must have the necessary facilities for its approved business operations and to maintain the facilities in the regions covered by its VATS License.



90







Regulations Relating to Peer-to-Peer Lending Business


The PRC government has not promulgated any particular rules, laws or regulations to specially regulate the online peer-to-peer, or peer-to-peer, lending services industry. However, there are certain rules, laws and regulations relevant or applicable to the online peer-to-peer lending services industry, including the PRC Contract Law, the General Principles of the Civil Law of the PRC, and related judicial interpretations promulgated by the Supreme People’s Court.


As a type of contract, the loan agreements in the peer-to-peer lending business must meet the requirements of the PRC Contract Law as well as the relevant Supreme People’s Court’s guidance regarding contract formation, validity, performance, enforcement and assignment of contracts. In addition, under the PRC Contract Law and the guidance issued by the Supreme People’s Court in August 2015 on Certain Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases, or the Private Lending Judicial Interpretation, a contractual interest rate of above 36% per annum will not be enforceable while the enforceability of interest rates between 24% to 36% depends on the facts of the case.


According to Private Lending Judicial Interpretation, when the lender and borrower formed their lending relationship via an online lending platform, but the online lending platform only provides intermediary service, the People’s Court shall dismiss the lender’s claim if it alleges such platform to assume guarantee responsibilities. The People’s Court, however, shall support the lender’s claim if the provider of the online lending platform makes express indication via webpages, advertisement or other media, or other evidence indicated that it has provided guarantee for the lending, in case that the lender alleges such platform to assume guarantee responsibilities.


A contract for intermediary services under PRC Contract Law is one where the intermediary reports to the client on contract opportunities or supplies intermediary services relating to the entering into of contracts, and the client pays remuneration to the intermediary. The intermediary shall provide the client with a strictly truthful account of all matters relating to the entering into of any contract. Where the intermediary deliberately conceals important matters relating to the entering into of contracts or supplies false information of the facts surrendering the entering into of such contracts, the intermediary is not allowed to claim remuneration and shall also indemnify the client.


In a press conference on April 21, 2014, a senior officer of the CBRC emphasized that a peer-to-peer lending services provider must operate as a platform that serves as an information intermediary between borrowers and lenders, and must not form any pool of capital, provide any guarantee, or illegally raise any funds from the general public. Furthermore, on a public forum held on September 27, 2014, another senior officer of the CBRC mentioned several requirements that the CBRC is contemplating for future regulations of the peer-to-peer lending service industry, which include, among others, that (i) a peer-to-peer lending service provider is neither a credit intermediary bearing credit risk nor a transaction platform, but an information intermediary between lenders and borrowers; (ii) a peer-to-peer lending service provider should not hold lenders’ funds or set up any capital pool; (iii) a peer-to-peer lending service provider must not provide guarantees for lenders in relation to the principal or interests, or bear any system risk or liquidity risk; (iv) the borrowers and lenders using the peer-to-peer lending service providers are required to register their real identity information; (v) a peer-to-peer lending service provider must meet some qualification requirements, such as those with respect to the registered capital, management and corporate governance; (vi) the transfer of funds between borrowers and lenders must be handled by independent third-party payment companies; (vii) peer-to-peer lending service providers must improve information disclosure; (viii) the loans and investments made through the platform should be “micro-financing” that targets individuals and small enterprises; (ix) a peer-to-peer lending service provider should not unreasonably target high-interest financing projects; and (x) a peer-to-peer lending service provider should promote the promulgation and implementation of the rules for peer-to-peer lending service industry, and strengthen the function of self-regulations.



91







On July 18, 2015, ten PRC regulatory agencies, including the PBOC, the MIIT and the CBRC, jointly issued the Guidelines on Promoting the Healthy Development of Internet Finance, or the Guidelines. The Guidelines provide that a peer-to-peer lending service provider shall function as a platform and provide the lenders and the borrowers with information exchange, deal making, credit rating and other intermediary services. A peer-to-peer lending service provider shall clarify the nature of information intermediary, provide the direct loans between the lenders and borrowers primarily with information services, and must not provide credit enhancement services and engage in illegal fundraising.


The Guidelines require a peer-to-peer lending service provider to choose qualified banking financial institutions as the fund deposit institutions for supervision and administration of customer funds to ensure that the customers’ funds and the service provider’s own funds are managed in separate custody accounts.


According to the Guidelines, a peer-to-peer lending service provider shall make full information disclosure to the customers, and disclose the information concerning its operating activities and financial standing of the borrower to the lenders in a timely manner so that the lenders can develop a full understanding of the operating status of the borrower and the peer-to-peer lending service provider can operate steadily and control the risks.


Under the Guidelines, a peer-to-peer lending service provider shall truly increase the technical security level, keep the customers’ data and transaction information safe and shall not sell or disclose the customers’ personal information in violation of the laws and take effective measures to recognize the identity of customers, monitor and report suspicious transactions proactively, and keep the customers’ data and transaction records safe.


The Guidelines only set out the basic principles for promoting and administering the online peer-to-peer lending services industry, and additional detailed rules and regulations will be adopted by the relevant regulatory bodies to implement and enforce those principles. How the requirements in the Guidelines will be interpreted and implemented remains uncertain.


On August 17, 2016, CBRC, MIIT, the Ministry of Public Security and the State Internet Information Office issued Provisional Measures for Administration of Business Activities of Internet Lending Information Intermediaries (“P2P Measures”), pursuant to which Internet lending information intermediaries shall provide information services to lenders and borrowers under the principles of integrity, voluntariness and fairness according to the law, and protect their legitimate rights and interests, and shall not provide value-added services, or directly or indirectly raise funds, absorb public deposits or jeopardize national or social public interests. P2P Measures provide that none of internet lending information intermediary may engage in or be entrusted to engage in any of the following activities: (1) financing for its own projects, or doing so in a disguised form; (2) accepting or collecting lenders’ funds, directly or indirectly; (3) offering guarantees to lenders or promise guaranteed returns, directly or disguisedly; (4) promoting, or entrusting or authorizing any third party to promote financing projects at any physical location other than electronic channels like internet, fixed phones and mobile phones; (5) granting loans, unless otherwise provided by laws and regulations; (6) dividing the term of financing projects; (7) selling its own wealth management products and other financial products to raise fund, or sell banks’ wealth management products, brokers’ assets management products, funds, insurance or trust products, or other financial products on behalf of others; (8) providing asset securitization services or transfer creditor’s rights in form of packaged assets, securitized assets, trust assets or fund shares; (9) mixing, bundling or selling as an agent in any form the investment, sales agent and brokerage services of other institutions unless permitted by laws and regulations, and regulatory rules on internet lending; (10) fabricating a financing project, exaggerate the earnings prospects of a financing project, conceal its flaws and risks, falsely advertise or promote a project with ambiguity in language or other deceptive means, make up or spread false information or incomplete information to damage the commercial reputation of others, misleading lenders or borrowers; (11) providing information intermediation services for high-risk financing projects in which loans are used in stock investments, OTC margin financing, futures contracts, structured products and other derivatives; (12) providing equity crowdfunding services; and (13) other activities



92






prohibited by laws and regulations, and regulatory rules on internet lending. Internet lending shall be dominated by small loans. P2P Measures also stipulate that an internet lending information intermediary shall, based on its risk management capability, set upper limits of loan balance of a single borrower borrowed from a single internet lending information intermediary and from all internet lending information intermediaries to avoid credit concentration risk. The loan balance upper limit for a natural person shall be not more than RMB 200,000 borrowed from a single internet lending information intermediary platform and not more than RMB 1 million in total maximum from all platforms. The maximum loan balance for a legal person or other organizations shall be not more than RMB 1 million borrowed from a single internet lending information intermediary platform and not more than RMB 5 million in total from all platforms. The P2P Measures will likely go effective in August 2017, after which borrowers may not borrow more than RMB 200,000 on a peer-to-peer lending platform.


In February 2017, the CBRC released the Guidance to regulate funds depositories for online lending intermediaries, or the Guidance. The Guidance defines depositories as commercial banks that provide online lending fund depository services, and stipulates that the depositories shall not be engaged in offering any guarantee, including: (i) offering guarantees for lending transaction activities conducted by online lending intermediaries, or undertaking any liability for breach of contract related to such activities; (ii) offering guarantees to lenders, guarantying principal and dividend payments or bearing the risks associated with fund lending operations for lenders.


Apart from the requirements set forth in the P2P Measures, the Guidance imposes certain responsibilities on online lending intermediaries, including requiring them to enter into fund depository agreements with only one commercial bank to provide fund depository services, organize independent auditing on funds depository accounts of borrowers and investors and various other services. The Guidance also provides that online lending intermediaries are permitted to develop an online lending fund depository business only after satisfying certain conditions, including: (i) completing registration, filing records and obtaining a business license from the Industry and Commerce Administration Department; (ii) filing records with the local financial regulator; and (iii) applying for a corresponding value-added telecommunications business license pursuant with the relevant telecommunication authorities. The Guidance also requires online lending intermediaries to perform various obligations, and prohibits them advertising their services with the information of their depository except for in accordance with necessary exposure requirements, the interpretation and applicability of which is unclear, as well as oversight requirements. The Guidance also raises other business standards and miscellaneous requirements for depositories and online lending intermediaries as well. Online lending intermediaries and commercial banks conducting the online depository services prior to the effectiveness of the Guidance have a six-month grace period to rectify any activities not in compliance with the Guidance.


On December 1, 2017, the Office of the Leading Group for the Special Campaign against Internet Financial Risks and the Office of the Leading Group for the Special Campaign against Peer-to-peer Lending Risks jointly issued the Notice on Standardization and Rectification of Cash Loans Business, or the Rectification Notice. The Rectification Notice further regulates that information intermediaries for online P2P lending: (i) shall not match borrowing with lending to realize direct lending on the interest rates that did not comply with relevant laws and provisions; (ii) shall not outsource core business including customers information collection , customers identifying and screening, credit assessing and opening accounts for customers etc; (iii) shall not match banking financial institutions for involving in  P2P online lending business; and (iv) shall not provide online lending services for students or borrowers who are not capable of repayment in the scope of their marketing efforts, shall not provide online lending services for property down payment loans, and shall not provide online lending services for borrowing without specified purpose. Furthermore, the Notice prohibited the small-amount lending corporations from raising money through information intermediaries for online lending.



93







On December 8, 2017, the Office of the Leading Group for the Special Campaign against Peer-to-peer Lending Risks (the “Office of the Leading Group for the Special Campaign”) released Notice on The Improvement and Acceptance of The Peer-to-Peer Online Lending Risk (Letter No.57 [2017] of the Office of the Leading Group for the Special Campaign) (the “Letter No.57”). The Letter No.57 requires local financial regulator, local CBRC, the People's Bank local branch, local public security, local communication administrative department and local AIC should jointly inspect and accept whether an internet lending information intermediary (the “P2P company”) comply with the P2P Measures. The P2P company can only be filed records (“P2P Filing”) with the local financial regulator after receiving acceptance certificate or document issued jointly by local financial regulator and local CBRC. Normally, the P2P Filing should be completed before April 2018 according to the Letter No.57, which means Shanghai Dianniu must acquire the acceptance certificate or document from local financial regulator and local CBRC before April, 2018. The Letter No.57 forbidden four credit assignment models, including: (i) providing asset securitization services or transfer creditor's rights in form of packaged assets, securitized assets, trust assets or fund shares; (ii) credit transferred from related individual party of the P2P company to the lender, the lending money normally from P2P companies or their related parties; (iii) current wealth management products and regular wealth management products related credit assignment products; and (iv) using credit right form the peer-to-peer lending platform to borrow money from other lenders in the same platform.


Our marketplace serves as an information intermediary between borrowers and lenders and we are not a party to the loans facilitated through our marketplace. We have taken measures to comply with the laws and regulations that are applicable to our business operations, including the regulatory principles raised by the CBRC, and avoid conducting any activities that may be deemed as illegal fund-raising under the current applicable laws and regulations. However, due to the lack of detailed regulations and guidance in the area of peer-to-peer lending services and the possibility that the PRC government authority may promulgate new laws and regulations regulating peer-to-peer lending services in the future, we cannot assure you that our practice would not be deemed to violate any PRC laws or regulations, especially relating to illegal fund-raising, credit enhancement services and/or information disclosure. See “Risk Factors—Risks Related to Our Business—The laws and regulations governing the peer-to-peer lending industry in China are developing and evolving and subject to changes. If our practice is deemed to violate any PRC laws or regulations, our business, financial conditions and results of operations would be materially and adversely affected.”


Regulations Relating to Value-Added Telecommunication Business Certificates


The Telecommunications Regulations promulgated by the State Council and its related implementation rules, including the Catalog of Classification of Telecommunications Business issued by the MIIT, categorize various types of telecommunications and telecommunications-related activities into basic or value-added telecommunications services, and internet information services, or ICP services, are classified as value-added telecommunications businesses. In 2009, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses, which set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses. Under these regulations, a commercial operator of value-added telecommunications services must first obtain a license for value-added telecommunications business, or VATS License, from the MIIT or its provincial level counterparts.


In September 2000, the State Council also issued the Administrative Measures on Internet Information Services, which was amended in January 2011. Pursuant to these measures, “internet information services” refer to provision of internet information to online users, and are divided into “commercial internet information services” and “non-commercial internet information services.” A commercial internet information services operator must obtain a VATS License for internet information services, or ICP License, from the relevant government authorities before engaging in any commercial internet information services operations in China. The ICP License has a term of five years and can be renewed within 90 days before expiration.



94







PRC regulations impose sanctions for engaging in Internet information services of a commercial nature without having obtained an ICP certificate or engaging in the operation of online data processing and transaction processing without having obtained an ODPTP certificate. These sanctions include corrective orders and warnings from the PRC communication administration authority, fines and confiscation of illegal gains and, in the case of significant infringements, the websites may be ordered to close. Nevertheless, the PRC regulatory authorities’ enforcement of such regulations in the context of marketplace lending platforms remains unclear.


Administration of mobile Internet application, or App, information services are strengthened through the Regulations for Administration of Mobile Internet Application Information Services, or the MIAIS Regulations, which became effective on August 1, 2016. The MIAIS Regulations were enacted to regulate App, App providers (including App owners or operators) and online App stores. Information service providers that utilize Apps are required to obtain relevant qualifications pursuant to PRC laws and regulations.


The MIAIS Regulations impose certain duties on App providers, including: (i) verifying real identities with the registered users through mobile phone numbers; (ii) establishing and improving the mechanism for user information security protection; (iii) establishing and improving the verification and management mechanism for the information content; adopting proper sanctions and measures relating to the release of illegal information content; (iv) protecting and safeguarding users’ “rights to know and rights to choose” during installation or use; (v) respecting and protecting intellectual property rights of others; and (vi) keeping records of user log information for 60 days.]


Dianniu, our PRC consolidated variable interest entity is in the process of applying for an ICP license as an internet information provider. There can be no assurance that we will be able to obtain the ICP license in the near future.  Given the ambiguity of PRC laws and regulations, we cannot predict the impact of any delay or failure on our financial conditions and results of operations. Furthermore, as we are providing mobile applications to mobile device users, it is uncertain if Dianniu will be required to obtain a separate operating license in addition to the ICP License. See also “- Regulations Relating to Intellectual Property Rights” and “Risk Factors-We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.”



95







Regulations on Loans between Individuals


The PRC Contract Law governs the formation, validity, performance, enforcement and assignment of contracts. The PRC Contract Law confirms the validity of loan agreement between individuals and provides that the loan agreement becomes effective when the individual lender provides the loan to the individual borrower. The PRC Contract Law requires that the interest rates charged under the loan agreement must not violate the applicable provisions of the PRC laws and regulations. In accordance with the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015, or the Private Lending Judicial Interpretations, which came into effect on September 1, 2015, private lending is defined as financing between individuals, legal entities and other organizations. When private loans between individuals are paid by wire transfer, through online peer-to-peer lending platforms or by other similar means, the loan contracts between individuals are deemed to be validated upon the deposit of funds to the borrower’s account. In the event that the loans are made through an online peer-to-peer lending platform and the platform only provides intermediary services, the courts shall dismiss the claims of the parties concerned against the platform demanding the repayment of loans by the platform as guarantors. However, if the online peer-to-peer lending service provider guarantees repayment of the loans as evidenced by its web page, advertisements or other media, or the court is provided with other proof, the lender’s claim alleging that the peer-to-peer lending service provider shall assume the obligations of a guarantor will be upheld by the courts. The Private Lending Judicial Interpretations also provide that agreements between the lender and borrower on loans with interest rates below 24% per annum are valid and enforceable. As to loans with interest rates per annum between 24% and 36%, if the interest on the loans has already been paid to the lender, and so long as such payment has not damaged the interest of the state, the community and any third parties, the courts will turn down the borrower’s request to demand the return of the interest payment. If the annual interest rate of a private loan is higher than 36%, the excess will not be enforced by the courts. All the loan transactions facilitated over our marketplace are between individuals currently. The APRs for the term loans on our marketplace currently range from 6% to 16%, which comprises a fixed interest rate and a transaction fee rate we charge borrowers for our services. The interest rate component, which is stipulated in the loan agreements, does not and is not expected to exceed the mandatory limit for loan interest rates.


In addition, according to the PRC Contract Law, an intermediation contract is a contract whereby an intermediary presents to its client an opportunity for entering into a contract or provides the client with other intermediary services in connection with the conclusion of a contract, and the client pays the intermediary service fees. Our business of connecting lenders with individual borrowers may constitute intermediary service, and our service agreements with borrowers and lenders may be deemed as intermediation contracts under the PRC Contract Law. Pursuant to the PRC Contract Law, an intermediary must provide true information relating to the proposed contract. If an intermediary conceals any material fact intentionally or provides false information in connection with the conclusion of the proposed contract, which results in harm to the client’s interests, the intermediary may not claim for service fees and is liable for the damages caused.



96







Regulations on Illegal Fund-Raising


Raising funds by entities or individuals from the general public must be conducted in strict compliance with applicable PRC laws and regulations to avoid administrative and criminal liabilities. The Measures for the Banning of Illegal Financial Institutions and Illegal Financial Business Operations promulgated by the State Council in July 1998, and the Notice on Relevant Issues Concerning the Penalty on Illegal Fund-Raising issued by the General Office of the State Council in July 2007, explicitly prohibit illegal public fund-raising. The main features of illegal public fund-raising include: (i) illegally soliciting and raising funds from the general public by means of issuing stocks, bonds, lotteries or other securities without obtaining the approval of relevant authorities, (ii) promising a return of interest or profits or investment returns in cash, properties or other forms within a specified period of time, and (iii) using a legitimate form to disguise the unlawful purpose.


To further clarify the criminal charges and punishments relating to illegal public fund-raising, the Supreme People’s Court promulgated the Judicial Interpretations to Issues Concerning Applications of Laws for Trial of Criminal Cases on Illegal Fund-Raising, or the Illegal Fund-Raising Judicial Interpretations, which came into force in January 2011. The Illegal Fund-Raising Judicial Interpretations provide that a public fund-raising will constitute a criminal offense related to “illegally soliciting deposits from the public” under the PRC Criminal Law, if it meets all the following four criteria: (i) the fund-raising has not been approved by the relevant authorities or is concealed under the guise of legitimate acts; (ii) the fund-raising employs general solicitation or advertising such as social media, promotion meetings, leafleting and SMS advertising; (iii) the fundraiser promises to repay, after a specified period of time, the capital and interests, or investment returns in cash, properties in kind and other forms; and (iv) the fund-raising targets at the general public as opposed to specific individuals. An illegal fund-raising activity will be fined or prosecuted in the event that it constitutes a criminal offense. Pursuant to the Illegal Fund-Raising Judicial Interpretations, an offender that is an entity will be subject to criminal liabilities, if it illegally solicits deposits from the general public or illegally solicits deposits in disguised form (i) with the amount of deposits involved exceeding RMB1,000,000 (US$157,342), (ii) with over 150 fund-raising targets involved, or (iii) with the direct economic loss caused to fund-raising targets exceeding RMB500,000 (US$78,671), or (iv) the illegal fund-raising activities have caused baneful influences to the public or have led to other severe consequences. An individual offender is also subject to criminal liabilities but with lower thresholds. In addition, an individual or an entity who has aided in illegal fund-raising from the general public and charges fees including but not limited to agent fees, rewards, rebates and commission, constitute an accomplice of the crime of illegal fund-raising. In accordance with the Opinions of the Supreme People’s Court, the Supreme People’s Procurator and the Ministry of Public Security on Several Issues concerning the Application of Law in the Illegal Fund-Raising Criminal Cases, the administrative proceeding for determining the nature of illegal fund-raising activities is not a prerequisite procedure for the initiation of criminal proceeding concerning the crime of illegal fund-raising, and the administrative departments’ failure in determining the nature of illegal fund-raising activities does not affect the investigation, prosecution and trial of cases concerning the crime of illegal fund-raising.


We have taken measures to avoid conducting any activities that are prohibited under the illegal-funding related laws and regulations. We act as a platform for borrowers and lenders and are not a party to the loans facilitated through our platform. In addition, we do not directly receive any funds from lenders in our own accounts as funds loaned through our platform are deposited into and settled by a third-party custody account managed by ChinaPnR, a reputable third party service provider.  



97







Anti-money Laundering Regulations


The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and transactions records, and reports on large transactions and suspicious transactions. According to the PRC Anti-money Laundering Law, financial institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust investment companies, stock brokerage companies, futures brokerage companies, insurance companies and other financial institutions as listed and published by the State Council, while the list of the non-financial institutions with anti-money laundering obligations will be published by the State Council. The PBOC and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions and certain non-financial institutions, such as payment institutions. However, the State Council has not promulgated the list of the non-financial institutions with anti-money laundering obligations.


The Guidelines jointly released by ten PRC regulatory agencies in July 2015, purport, among other things, to require internet finance service providers, including online peer-to-peer lending platforms, to comply with certain anti-money laundering requirements, including the establishment of a customer identification program, the monitoring and reporting of suspicious transactions, the preservation of customer information and transaction records, and the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters. The PBOC will formulate implementing rules to further specify the anti-money laundering obligations of internet finance service providers.


In cooperation with our partnering custody banks and payment companies, we have adopted various policies and procedures, such as internal controls and “know-your-customer” procedures, for anti-money laundering purposes. However, as the implementing rules of the Guidelines have not been published, there is uncertainty as to how the anti-money laundering requirements in the Guidelines will be interpreted and implemented, and whether online peer-to-peer lending service providers like us must abide by the rules and procedures set forth in the PRC Anti-money Laundering Law that are applicable to non-financial institutions with anti-money laundering obligations. We cannot assure you that our existing anti-money laundering policies and procedures will be deemed to be in full compliance with any anti-money laundering laws and regulations that may become applicable to us in the future.


Regulations on Internet Information Security


Internet information in China is also regulated and restricted from a national security standpoint. The National People’s Congress, China’s national legislative body, has enacted the Decisions on Maintaining Internet Security, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The Ministry of Public Security has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.


In addition, the Guidelines jointly released by ten PRC regulatory agencies in July 2015 purport, among other things, to require internet finance service providers, including peer-to-peer lending platforms, to improve technology security standards, and safeguard customer and transaction information. The PBOC and other relevant regulatory authorities will jointly adopt the implementing rules and technology security standards.



98







Regulations on Privacy Protection


In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in December 2011, an ICP service operator may not collect any user personal information or provide any such information to third parties without the consent of a user. An ICP service operator must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An ICP service operator is also required to properly maintain the user personal information, and in case of any leak or likely leak of the user personal information, the ICP service operator must take immediate remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority. In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the Standing Committee of the National People’s Congress in December 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes. An ICP service operator must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroying of any such information, or selling or providing such information to other parties. An ICP service operator is required to take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss. Any violation of these laws and regulations may subject the ICP service operator to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or even criminal liabilities. The Guidelines jointly released by ten PRC regulatory agencies in July 2015 also prohibit internet finance service providers, including online peer-to-peer lending platforms, from illegally selling or disclosing customers’ personal information. The PBOC and other relevant regulatory authorities will jointly adopt the implementing rules. Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress in August 2015 and becoming effective in November, 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, shall be subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtain any personal information, shall be subject to criminal penalty in severe situation.


In operating our online consumer finance marketplace, we collect certain personal information from borrowers and lenders, and also need to share the information with our business partners such as third-party online payment companies and loan collection service providers for the purpose of facilitating loan transactions between borrowers and lenders over our marketplace. We have obtained consent from the borrowers and lenders on our marketplace to collect and use their personal information, and have also established information security systems to protect the user information and privacy. However, as the implementing rules of the Guidelines have not been published, there is uncertainty as to how the requirements for protecting customers’ personal information in the Guidelines will be interpreted and implemented. We cannot assure you that our existing policies and procedures will be deemed to be in full compliance with any laws and regulations that may become applicable to us in the future.



99







Regulations Relating to Intellectual Property Rights


The PRC has adopted comprehensive legislation governing intellectual property rights, including trademarks and copyrights. The PRC is a signatory to major international conventions on intellectual property rights and is subject to the Agreement on Trade Related Aspects of Intellectual Property Rights as a result of its accession to the World Trade Organization in December 2001. The PRC Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. The Trademark Office under the State Administration of Industry and Commerce is responsible for the registration and administration of trademarks throughout the PRC, and grants a term of ten years to registered trademarks and another ten years if requested upon expiry of the initial or extended term. Trademark license agreements must be filed with the Trademark Office for record. As of the date of this prospectus, we have made application for two trademarks, all of which are pending with the Trademark Office under the State Administration for Industry and Commerce.


The National People’s Congress amended the Copyright Law in 2001 and 2010 to widen the scope of works and rights that are eligible for copyright protection. The amended, the Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center. To address copyright infringement related to content posted or transmitted over the Internet, the National Copyright Administration and former Ministry of Information Industry jointly promulgated the Administrative Measures for Copyright Protection Related to the Internet in April 2005. These measures became effective in May 2005.


On December 20, 2001, the State Council promulgated the new Regulations on Computer Software Protection, effective from January 1, 2002, and revised in 2013, which are intended to protect the rights and interests of the computer software copyright holders and encourage the development of software industry and information economy. In the PRC, software developed by PRC citizens, legal persons or other organizations is automatically protected immediately after its development, without an application or approval. Software copyrights may be registered with the designated agency and if registered, the certificate of registration issued by the software registration agency will be the primary evidence of the ownership of the copyright and other registered matters. On February 20, 2002, the National Copyright Administration of the PRC introduced the Measures on Computer Software Copyright Registration, which outline the operational procedures for registration of software copyright, as well as registration of software copyright license and transfer contracts. The Copyright Protection Center of China is mandated as the software registration agency.



100







The State Council and the National Copyright Administration have promulgated various rules and regulations and rules relating to protection of software in China, including the Regulations on Protection of Computer Software promulgated by State Council on January 30, 2013 and effective since March 1, 2013, and the Measures for Registration of Copyright of Computer Software promulgated by SARFT on February 20, 2002 and effective since the same date. According to these rules and regulations, software owners, licensees and transferees may register their rights in software with the National Copyright Administration or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are encouraged to go through the registration process and registered software rights may be entitled to better protections.


Regulations Relating to Dividend Withholding Tax


Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. In August 2015, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which became effective on November 1, 2015. Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities.


Regulations on Foreign Currency Exchange


The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China. On February 28, 2015, the SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of the SAFE, will directly examine the applications and conduct the registration.



101







In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142, provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations may result in severe monetary or other penalties.


In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated another circular in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.


In July 2014, SAFE issued SAFE Circular 36, which purports to reform the administration of settlement of the foreign exchange capitals of foreign-invested enterprises in certain designated areas on a trial basis. Under the pilot program, some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of the foreign-invested enterprises established within the designated areas and the enterprises mainly engaging in investment are allowed to use its RMB capital converted from foreign exchange capitals to make equity investment. However, our PRC subsidiary is not established within the designated areas. On March 30, 2015, the SAFE promulgated Circular 19, to expand the reform nationwide. Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign exchange capital. However, Circular 19 continues to, prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises.


Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents


SAFE issued SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. Under SAFE Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 provides that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.



102







PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. We are aware that our PRC resident beneficial owners subject to these registration requirements. Mr. Erxin Zeng and Mr. Xiaohui Liu have all fulfilled the registration under relevant SAFE regulations.


Regulations on Stock Incentive Plans


SAFE promulgated the Stock Option Rules in February 2012, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of the participants. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents.


We have adopted a share incentive plan, under which we have the discretion to grant a broad range of equity-based awards to eligible participants. See “Management—Share Incentive Plan.” After this offering, we plan to advise the recipients of awards under our 2015 share incentive plan to handle foreign exchange matters in accordance with the Stock Option Rules. However, we cannot assure you that they can successfully register with SAFE in full compliance with the Stock Option Rules. Any failure to complete their registration pursuant to the Stock Option Rules and other foreign exchange requirements may subject these PRC individuals to fines and legal sanctions, and may also limit our ability to contribute additional capital to our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us or otherwise materially adversely affect our business.


Regulations on Dividend Distribution


Under our current corporate structure, we may rely on dividend payments from WFOE, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing requirements we may have. The principal regulations governing distribution of dividends of foreign-invested enterprises include the Foreign-Invested Enterprise Law, as amended in October 2000, and its implementation rules. Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.



103







Regulations on Overseas Listings


Six PRC regulatory agencies, including the MOFCOM, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective in September 2006. The M&A Rules, among other things, require offshore SPVs formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the MOFCOM prior to publicly listing their securities on an overseas stock exchange.


In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. The M&A Rules requires a foreign investor to obtain the approval from the MOFCOM or its local counterpart only upon (i) its acquisition of a domestic enterprise’s equity interest; (ii) its subscription of the increased capital of a domestic enterprise; or (iii) establishes and operates a foreign-invested enterprise with assets acquired from a domestic enterprise and such transactions raise “national defense and security” concerns or through such transactions foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited.


See “Risk Factors—Risks Related to Doing Business in China—The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, as amended, and, if required, we cannot predict whether we will be able to obtain such approval.”


Regulations Relating to Employment


The PRC Labor Law and the Labor Contract Law require that employers must execute written employment contracts with full-time employees. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result in criminal liabilities.


Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located. Dianniu has been participating in employee benefit plans required by PRC laws and regulations and has made adequate contribution to such plans as of the date of this prospectus.  If we fail to make adequate contributions to various employee benefit plans in the future, we may be subject to fines and other administrative sanctions under PRC law.




104






MANAGEMENT


Directors and Executive Officers


The following table sets forth information regarding our executive officers and directors as of the date of this prospectus.


Directors and Executive Officers

  

Age

 

  

Position/Title

Erxin Zeng

  

41

  

  

Chief Executive Officer, Chairman of the Board

Xinxuan Hu

 

31

 

 

Chief Financial Officer

Xiaohui Liu

  

35

  

  

Director

Yanjun Cui

  

35

  

  

Independent Director

Wei Liang

  

50

  

  

Independent Director

Hui Shen

  

31

  

  

Independent Director


Biography


Erxin Zeng


Mr. Erxin Zeng founded our company and has been serving as our chairman and Chief Executive Officer since our inception.  He has over 12 years of industry and managerial experience in Internet financing, risk management, assets management and lending platform development management. Prior to founding Dianniu in November 2015, Mr. Zeng served as Chief Executive Officer of Shanghai Shangyinledian Internet Financing Information Co. Ltd., an online wealth management company, from December 2013 to November 2015. In such capacity, he managed the company’s Internet lending platform maintenance and development, brand promotion and risk management system. Prior to that, Mr. Zeng served as Chief Executive Officer and Chairman of the Board at Shanghai Daxia Internet Financial Information Co. Ltd. from December 2010 to December 2013 where he managed the company’s daily operation.  From December 2006 to December 2010, Mr. Zeng served as Chairman of Zhejiang Guantao Finance Management Co., Ltd where he managed the firm’s daily operations and established its risk management, internal control, assets safety and assets management systems.  Mr. Zeng holds a Bachelor’s degree in finance from Central University of Finance and Economics in Beijing, China.


Xinxuan Hu


Mr. Xinxuan Hu has been serving as our Chief Financial Officer since our inception. He joined Dianniu in March 2016 and has been managing Dianniu’s accounting and finance since then.  Prior to joining Dianniu, Mr. Hu served as finance manager of Shanghai Dangdian Investment Co. Ltd. from December 2014 to February 2016 where he managed all aspects of the company’s finance and accounting.  From July 2011 to December 2012, Mr. Hu served as accounting manager at the Shanghai Branch of DBS Bank Limited (SGX D05) where he managed key aspects of the bank s accounting such as monthly budget and bookkeeping. Prior to that, Mr. Hu was an accounting analyst at Philips (China) Investment Co., Ltd. from February 2007 to June 2011.  Mr. Hu holds a Bachelor s degree in finance from Shanghai Second Polytechnic University in Shanghai, China.


Xiaohui Liu


Mr. Xiaohui Liu has been serving as a director of the Company since our inception.  He joined Dianniu in November 2015 and has been serving as Supervisor of Dianniu since then. Prior to joining Dianniu, Mr. Liu served as Assistant to Chairman of the Board at Gaotong Shengrong Asset Investment Group Co., Ltd. from February 2014 to August 2015 where he managed coordination of human resources and operations among various entities within the group.  Mr. Liu served as human resources manager of Shanghai Oujiang Group Co., Ltd. from March 2012 to December 2013 and human resources manager of a branch of China Postal Logistics Co., Ltd. from August 2008 to January 2012.  Mr. Liu holds a Bachelor’s degree in management science from Wuhan Science and Technology University in Hubei, China.



105






Yanjun Cui


Mr. Yanjun Cui has been serving as a director of the Company since our inception.  Mr. Cui has been a practicing attorney in the PRC for over 10 years.  Since August 2014, he has been a partner at Beijing Yingke Law Firm where his practice focuses on private equity funds, capital markets, and general corporate matters.  Mr. Cui also founded Zhejiang Wantong Ruida Assets Management Co., Ltd. in September 2016 and has been serving as the company’s legal representative since then.  He manages Wantong’s daily operations and supervises diligence, deal negotiations and post-investment management of Wantong’s investments.  From December 2012 to July 2014, Mr. Cui served as General Counsel to Zhejiang Ruiyang Technology Co. Ltd.  where he advised on legal issues in connection with the company’s operations and managed agreement drafting and review as well as commercial negotiations.   From October 2005 to November 2012, Mr. Cui was a practicing attorney at a number of PRC law firms, including Shanxi Jinyi Law Offices, Zhejiang Tianfu Law Offices and Zhejiang Zehou Law Offices.  Mr. Cui holds a Bachelor’s of Law degree from Beifang University of Nationalities in Ninxia, China and a Master of Law from Zhejiang University in Zhejiang, China.  


Wei Liang


Mr. Wei Liang has been serving as a director of the Company since our inception.   Mr. Liang has over 20 years of corporate executive and experience.  He has been serving as General Manager and Director of Fuzhou Shijilongmai Information Technology Co., Ltd. since 2011.  From 1993 to 2010, Mr. Liang was acting as Deputy General Manager and Director of Alcatel-Lucent (Fujian) Technology Co., Limited.  He holds a Bachelor degree in Electronic Engineering from Xiamen University in Fujian, China.   


Hui Shen


Ms. Hui Shen has been serving as a director of the Company since our inception.  She has extensive experience in finance, accounting and risk management.  Since March 2017, Ms.  Shen has been serving as Senior Risk Manager at Zhengqi (Shanghai) Investment Co., Ltd.  From June 2015 to February 2017, she served as Risk Manager at Huijin Innovation Investment (Shanghai) Co., Ltd.  From September 2014 to June 2015, Ms. Shen served as Project Manager at KPMG Advisory (China) Limited.   Prior to KPMG, she was a Senior Internal Auditor at Tokio Marine & Nichido Fire Insurance Company China from April 2012 to September 2014.  Ms. Shen started her career at PricewaterhouseCoopers Zhong Tian LLP where she was an auditor from September 2009 to April 2012.   Ms. Shen has obtained a Bachelor degree in Management from Jiangxi Finance University.  She is a certified accountant in the PRC and holds an ACCA certification.  


Employment Agreements


Our operating entity Dianniu has entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period. Dianniu may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a crime, or misconduct or a failure to perform agreed duties. The executive officer may resign at any time with a three-month advance written notice.


Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to assign all right, title and interest (including but not limited to patents and trademarks) in all inventions and designs which they conceive, develop or reduce to practice during the executive officer’s employment with Dianniu and 2 years thereafter.



106






In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment. Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive officer’s termination, or in the year preceding such termination, without our express consent.


Compensation of Directors and Executive Officers


For the fiscal years ended December 31, 2016 and 2015, we paid an aggregate of approximately $51,093 and $8,516, respectively, in cash to our executive officers, and $10,571 and $1,762, respectively, to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries and consolidated variable interest entities are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. We contributed an aggregate of $134,622 and $94,802 for employee social insurance for the years ended December 31, 2016 and 2015, respectively.


The Company has also entered into two apartment units leases for Mr. Erxin Zeng and Erqin Zeng, both officers of Dianniu, pursuant to which we make monthly rental payments. The two apartment units have lease terms are expiring in May 2017 and November 2017 with monthly rental of approximately $3,500 and $1,000, respectively.


Board of Directors and Committees  


 

Our Board currently only consists of 5 directors, including Erxin Zeng, Xiaohui Liu, Yanjun Cui, Wei Liang and Hui Shen. We will also establish an audit committee and a compensation committee prior to consummation of this offering. Each of the committees of the Board shall have the composition and responsibilities described below.

 

Audit Committee

 

Hui Shen, Wei Liang and Yanjun Cui will be members of our Audit Committee, where Hui Shen shall serve as the chairman. All proposed members of our Audit Committee will satisfy the independence standards promulgated by the SEC and by Nasdaq as such standards apply specifically to members of audit committees.

 

We intend to adopt and approve a charter for the Audit Committee prior to consummation of this offering. In accordance with our Audit Committee Charter, our Audit Committee shall perform several functions, including:


·

evaluates the independence and performance of, and assesses the qualifications of, our independent auditor, and engages such independent auditor;

·

approves the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approves in advance any non-audit service to be provided by the independent auditor;

·

monitors the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law;

·

reviews the financial statements to be included in our Annual Report on Form 20-F and Current Reports on Form 6-K and reviews with management and the independent auditors the results of the annual audit and reviews of our quarterly financial statements;

·

oversees all aspects our systems of internal accounting control and corporate governance functions on behalf of the board;



107







·

reviews and approves in advance any proposed related-party transactions and report to the full Board on any approved transactions; and

·

provides oversight assistance in connection with legal, ethical and risk management compliance programs established by management and the Board, including Sarbanes-Oxley Act implementation, and makes recommendations to the Board regarding corporate governance issues and policy decisions.


It is determined that Hui Shen possesses accounting or related financial management experience that qualifies him as an "audit committee financial expert" as defined by the rules and regulations of the SEC. 

  

Compensation Committee

 

Yanjun Cui, Wei Liang and Hui Shen will be members of our Compensation Committee and Yanjun Cui shall be the chairman.  All members of our Compensation Committee will be qualified as independent under the current definition promulgated by Nasdaq. We intend to adopt a charter for the Compensation Committee prior to consummation of this offering. In accordance with the Compensation Committee’s Charter, the Compensation Committee shall be responsible for overseeing and making recommendations to the Board regarding the salaries and other compensation of our executive officers and general employees and providing assistance and recommendations with respect to our compensation policies and practices. 


Director Independence

 

Our Board reviewed the materiality of any relationship that each of our proposed directors has with us, either directly or indirectly. Based on this review, it is determined that Yanjun Cui, Wei Liang and Hui Shen will be “independent directors” as defined by Nasdaq.


Family Relationships


None of our directors and officers are related.


Duties of Directors


Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:


·

convening shareholders’ annual and extraordinary general meetings;

·

declaring dividends and distributions;

·

appointing officers and determining the term of office of the officers;

·

exercising the borrowing powers of our company and mortgaging the property of our company; and

·

approving the transfer of shares in our company, including the registration of such shares in our share register.


Our company has the right to seek damages if a duty owed by our directors is breached. A shareholder may in certain limited exceptional circumstances have the right to seek damages in our name if a duty owed by our directors is breached. You should refer to “Description of Share Capital—Differences in Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law.

 



108







Terms of Directors and Officers  


Our officers are elected by and serve at the discretion of the Board and the shareholders voting by ordinary resolution. Our directors are not subject to a set term of office and hold office until the next general meeting called for the election of directors and until their successor is duly elected or such time as they die, resign or are removed from office by a shareholders’ ordinary resolution or the unanimous written resolution of all shareholders  A director will be removed from office automatically if, among other things, the director becomes bankrupt or makes any arrangement or composition with his creditors generally or is found to be or becomes of unsound mind.


PRINCIPAL SHAREHOLDERS


The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of this prospectus by our officers, directors, and 5% or greater beneficial owners of ordinary shares. There is no other person or group of affiliated persons known by us to beneficially own more than 5% of our ordinary shares.

 

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all shares shown as beneficially owned by him, subject to applicable community property laws.





109







 

Name of Beneficial Owners (2)

 

Ordinary Shares

Beneficially Owned

Prior to This Offering

 

 

Ordinary Shares

Beneficially Owned

After This Offering

 

 

 

 

 

 

 

  

 

Number

 

 

%(1)

 

 

Number

 

 

 

 

%

Directors and Executive Officers:

 

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Erxin Zeng (3)

 

 

2,485,500

 

 

 

19.12%

 

 

 

 

 

2,485,500

 

16.57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Xinxuan Hu

 

 

--

 

 

 

--

 

 

 

 

 

--

 

--  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Xiaohui Liu(4)

 

 

6,276,700

 

 

 

48.28

%

 

 

 

 

6,276,700

 

41.84%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wei Liang  

 

 

--

 

 

 

--

 

 

 

 

 

--

 

--  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yanjun Cui

 

 

--

 

 

 

--

 

 

 

 

 

--

 

--  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hui Shen

 

 

--

 

 

 

--

 

 

 

 

 

--

 

--  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All directors and officers as a group (six individuals)

 

 

8,762,200

 

 

 

67.40

%

 

 

 

 

8,762,200

 

58.41%

  

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

5% shareholders:

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

Wise Gain Investment Industries Limited(5)

 

 

6,276,700

 

 

 

48.28

%

 

 

 

 

6,276,700

 

41.84%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver Luck International Holding Group Limited(6)

 

 

2,485,500

 

 

 

19.12

%

 

 

 

 

2,485,500

 

16.57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealthy Choice Investments Limited(7)

 

 

796,800

 

 

 

6.13

%

 

 

 

 

796,800

 

5.31%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Qian Lai Qian Wang (Shanghai) Equity Investment Fund Management Co., Ltd. (8)

 

 

2,206,000

 

 

 

16.97

%

 

 

 

 

2,206,000

 

14.71%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shaohua Chen

 

 

650,000

 

 

 

5

%

 

 

 

 

650,000

 

4.33%


 ____________________

* Less than 1%.


(1) Applicable percentage of ownership is based on 13,000,000 ordinary shares outstanding as of the date of this prospectus together with securities exercisable or convertible into ordinary shares within sixty (60) days as of the date hereof for each shareholder.

(2) Unless otherwise noted, the business address of each of the following entities or individuals is c/o 707 Zhang Yang Road, Sino Life Tower, F35, Pudong, Shanghai, China 200120.



110






(3) Erxin Zeng is deemed to beneficially own 2,485,500 of our ordinary shares through Silver Luck International Holding Group Limited.  

(4) Xiaohui Liu is deemed to beneficially own 6,276,700 of our ordinary shares through Wise Gain Investment Industries Limited.

(5) Xiaohui Liu, a director of Wise Gain Investment Industries Limited, has voting and dispositive power over the shares held by such entity.

(6) Erxin Zeng, a director of Silver Luck International Holding Group Limited, has voting and dispositive power over the shares held by such entity.

(7) Jiaran Zhang, a director of Wealthy Choice Investments Limited, has voting and dispositive power over the shares held by such entity.

(8) Qian Wang (Shanghai) Equity Investment Fund Management Co., Ltd. is deemed to beneficially own an aggregate of 2,206,000 of our ordinary shares through Star Choice Investments Limited and Ever Profit Investments Limited. Jilong Li, a director of Star Choice Investments Limited, and, Bocheng Liu, a director of Ever Profit Investments Limited, have voting and dispositive power over the shares held by these two entities, respectively. See “Related Party Transactions” for a description of the transaction pursuant to which Qian Lai Qian Wang (Shanghai) Equity Investment Fund Management Co., Ltd. acquired such shares.


RELATED PARTY TRANSACTIONS


Since our inception in November 2015, we have entered into the following related party transactions involving the Company, any of our subsidiaries or VIE entities:  


We have received capital contribution of approximately $0.2 million and approximately $0.7 million for the period from November 17, 2015 (inception) to December 31, 2015 and for the year ended December 31, 2016, respectively, from Mr. Erxin Zeng, our Chief Executive Officer and Chairman of the Board.


We have received capital contribution of approximately $0.7 million and approximately $2.0 million for the period from November 17, 2015 (inception) to December 31, 2015 and for the year ended December 31, 2016, respectively, from Mr. Xiaohui Liu, our Director.  


In May 2016, Dianniu entered into an investment agreement with Qian Lai Qian Wang (Shanghai) Equity Investment Fund Management Co., Ltd. (“Qian Lai Qian Wang”), our principal shareholder that owns 2,206,000 of our ordinary shares through Ever Profit Investments Limited and Start Choice Investments Limited. Pursuant to the investment agreement, Qian Lai Qian Wang invested RMB 30 million (approximately $4.39 million) in exchange for 18.75% equity interest of Dianniu. The transaction closed in December 2016.  



111







DESCRIPTION OF SHARE CAPITAL


We are a Cayman Islands exempted company and our affairs are governed by our memorandum and articles of association and the Companies Law (2016 Revision) of the Cayman Islands, which we refer to as the Companies Law below.


Our authorized share capital consists of 50,000,000 ordinary shares, par value $0.01 per share.  As of the date of this prospectus, 13,000,000 ordinary shares are outstanding.


Ordinary shares


Dividends.   Subject to any rights and restrictions of any other class or series of shares, our board of directors may, from time to time, declare dividends on the shares issued and authorize payment of the dividends out of our lawfully available funds. No dividends shall be declared by the board out of our company except the following: 


·

profits; or

·

“share premium account,” which represents the excess of the price paid to our company on issue of its shares over the par or “nominal” value of those shares, which is similar to the U.S. concept of additional paid in capital.


However, no dividend shall bear interest against the Company.

 

Voting Rights.   The holders of our ordinary shares are entitled to one vote per share, including the election of directors. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. On a show of hands every shareholder present in person or by proxy shall have one vote.  On a poll every shareholder entitled to vote (in person or by proxy) shall have one vote for each share for which he is the holder. A poll may be demanded by the chairman or one or more shareholders present in person or by proxy holding not less than fifteen percent of the paid up capital of the Company entitled to vote. A quorum required for a meeting of shareholders consists of shareholders who hold at least one-third of our outstanding shares entitled to vote at the meeting present in person or by proxy.

 

Any ordinary resolution to be made by the shareholders requires the affirmative vote of a simple majority of the votes of the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes of the ordinary shares cast. Under Cayman Islands law, some matters, such as amending the memorandum and articles, changing the name or resolving to be registered by way of continuation in a jurisdiction outside the Cayman Islands, require approval of shareholders by a special resolution.

 

There are no limitations on non-residents or foreign shareholders in the memorandum and articles to hold or exercise voting rights on the ordinary shares imposed by foreign law or by the charter or other constituent document of our company. However, no person will be entitled to vote at any general meeting or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting and unless all calls or other sums presently payable by the person in respect of ordinary shares in the Company have been paid.

 

Winding Up; Liquidation.   Upon the winding up of our company, after the full amount that holders of any issued shares ranking senior to the ordinary shares as to distribution on liquidation or winding up are entitled to receive has been paid or set aside for payment, the holders of our ordinary shares are entitled to receive any remaining assets of the Company available for distribution as determined by the liquidator. The assets received by the holders of our ordinary shares in a liquidation may consist in whole or in part of property, which is not required to be of the same kind for all shareholders.

 



112







Calls on Ordinary Shares and Forfeiture of Ordinary Shares.   Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. Any ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

 

Redemption of Ordinary Shares.   We may issue shares that are, or at its option or at the option of the holders are, subject to redemption on such terms and in such manner as it may, before the issue of the shares, determine. Under the Companies Law, shares of a Cayman Islands exempted company may be redeemed or repurchased out of profits of the company, out of the proceeds of a fresh issue of shares made for that purpose or out of capital, provided the memorandum and articles authorize this and it has the ability to pay its debts as they come due in the ordinary course of business.

 

No Preemptive Rights.   Holders of ordinary shares will have no preemptive or preferential right to purchase any securities of our company.

 

Variation of Rights Attaching to Shares.   If at any time the share capital is divided into different classes of shares, the rights attaching to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the memorandum and articles, be varied or abrogated with the consent in writing of the holders of three fourths of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.


Anti-Takeover Provisions. Some provisions of our current memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders.


Exempted Company. We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:


·

does not have to file an annual return of its shareholders with the Registrar of Companies;

·

is not required to open its register of members for inspection;

·

does not have to hold an annual general meeting;

·

may issue shares with no par value;

·

may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given

·

for 20 years in the first instance);

·

may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

·

may register as a limited duration company; and

·

may register as a segregated portfolio company.


“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.



113





Preferred Shares


The Board is empowered to designate and issue from time to time one or more classes or series of Preferred Shares and to fix and determine the relative rights, preferences, designations, qualifications, privileges, options, conversion rights, limitations and other special or relative rights of each such class or series so authorized. Such action could adversely affect the voting power and other rights of the holders of the Company’s ordinary shares or could have the effect of discouraging or making difficult any attempt by a person or group to obtain control of the Company.  


Warrants


There are no outstanding warrants to purchase any of our securities.


Options

 

There are no outstanding options to purchase any of our securities.


Differences in Corporate Law


The Companies Law is modeled after that of English law but does not follow many recent English law statutory enactments. In addition, the Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the State of Delaware.


Mergers and Similar Arrangements . A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be approved by the directors of each constituent company and authorization by (a) a special resolution of the shareholders and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association.


A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman Islands subsidiary if a copy of the plan of merger is given to every member of that Cayman Islands subsidiary to be merged unless that member agrees otherwise. For this purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.


The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.


Save in certain circumstances, a dissentient shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.


In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:



114







·

the statutory provisions as to the required majority vote have been met;

·

the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;

·

the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and

·

the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.


When a takeover offer is made and accepted by holders of 90.0% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.


If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.


Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoing principle, including when:


·

a company acts or proposes to act illegally or ultra vires;

·

the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and

·

those who control the company are perpetrating a “fraud on the minority.”


Indemnification of Directors and Executive Officers and Limitation of Liability . Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our current memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our current memorandum and articles of association.


Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.


Directors’ Fiduciary Duties . Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must



115






not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.


As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.


Shareholder Action by Written Consent . Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our current articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.


Shareholder Proposals . Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.


Cayman Islands law does not provide shareholders any right to put proposals before a meeting or requisition a general meeting. However, these rights may be provided in articles of association. Our current articles of association allow our shareholders holding not less than one-third of all voting power of our share capital in issue to requisition a shareholder’s meeting. Other than this right to requisition a shareholders’ meeting, our current articles of association do not provide our shareholders other right to put proposal before a meeting. As a Cayman Islands exempted company, we are not obliged by law to call shareholders’ annual general meetings.


Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our current articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.


Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our current articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.



116






Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.


Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the minority shareholders.


Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Law and our current articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.


Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our current articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the holders of three-fourths of the issued shares of that class or with the sanction of a resolution passed by not less than three-fourths of such holders of the shares of that class as may be present at a general meeting of the holders of the shares of that class.


Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands law, our current memorandum and articles of association may only be amended with a special resolution of our shareholders.


Rights of Non-resident or Foreign Shareholders . There are no limitations imposed by our post-offering amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our current memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.



117






SHARES ELIGIBLE FOR FUTURE SALE


Prior to this offering, there was no established public trading market for our ordinary shares.  We cannot assure you that a liquid trading market for our ordinary shares will develop on Nasdaq or be sustained after this offering.  Future sales of substantial amounts of ordinary shares in the public market, or the perception that such sales may occur, could adversely affect the market price of our ordinary shares.  Further, since a large number of our ordinary shares will not be available for sale shortly after this offering because of the contractual and legal restrictions on resale described below, sales of substantial amounts of our ordinary shares in the public market after these restrictions lapse, or the perception that such sales may occur, could adversely affect the prevailing market price and our ability to raise equity capital in the future.  

 

Upon completion of this offering, we will have an aggregate of 15,000,000 ordinary shares outstanding, assuming no exercise of the underwriters’ over-allotment option.   The ordinary shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act.

 

As of the date of this prospectus 13,000,000 ordinary shares held by existing shareholders are deemed “restricted securities” as that term is defined in Rule 144 and may not be resold except pursuant to an effective registration statement or an applicable exemption from registration, including Rule 144. A total of 12,415,000 or 95.5% of our currently outstanding ordinary shares will be subject to “lock-up” agreements described below on the effective date of this offering. Upon expiration of the lock-up period of twelve (12) months after the date of this prospectus, outstanding shares will become eligible for sale, subject in most cases to the limitations of Rule 144. The remaining 585,000 shares may be sold in accordance with Rule 144.


The following table summarizes the total shares potentially available for future sale.

 

Days After Date of this Prospectus

  

Shares Eligible

for Sale

  

Comment

Upon Effectiveness

  

2,000,000

  

Freely tradable shares sold in the offering.

  

  

  

  

  

90 days

  

585,000

  

shares saleable under Rule 144.

  

  

  

  

  

Twelve months

  

12,415,000

  

shares saleable after expiration of the lock-up.


Rule 144

 

In general, under Rule 144, beginning ninety days after the date of this prospectus, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any shares of our share capital that such person has held for at least six months, including the holding period of any prior owner other than one of our affiliates, without regard to volume limitations.  Sales of our share capital by any such person would be subject to the availability of current public information about us if the shares to be sold were held by such person for less than one year.


In addition, under Rule 144, a person may sell shares of our share capital acquired from us immediately upon the completion of this offering, without regard to volume limitations or the availability of public information about us, if:


·

the person is not our affiliate and has not been our affiliate at any time during the preceding three months;

·

and the person has beneficially owned the shares to be sold for at least six months, including the holding period of any prior owner other than one of our affiliates.



118







Beginning ninety days after the date of this prospectus, our affiliates who have beneficially owned shares of our share capital for at least six months, including the holding period of any prior owner other than another of our affiliates, would be entitled to sell within any three-month period those shares and any other shares they have acquired that are not restricted securities, provided that the aggregate number of shares sold does not exceed the greater of:


·

1% of the number of shares of our authorized share capital then outstanding, which will equal approximately 150,000 ordinary shares immediately after this offering assuming no exercise of the underwriters’ over-allotment option ; or

·

the average weekly trading volume in our ordinary shares on the listing exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.


Sales under Rule 144 by our affiliates are generally subject to the availability of current public information about us, as well as certain “manner of sale” and notice requirements.


Lock-up Agreements


We and each of our officers, directors and certain shareholders have agreed, subject to certain exceptions, not to, directly or indirectly, offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of, or enter into any swap or other transaction that is designed to, or could be expected to, result in the disposition of any of our ordinary shares or other securities convertible into or exchangeable or exercisable for our ordinary shares or derivatives of our ordinary shares (whether any such swap or transaction is to be settled by delivery of securities, in cash, or otherwise), owned by these persons prior to this offering or acquired in this offering or ordinary shares issuable upon exercise of options or warrants held by these persons until after 12 months following the date of this prospectus.



119







TAXATION


The following discussion of material Cayman Islands, PRC and United States federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Harney Westwood & Riegels, our Cayman Islands counsel. To the extent that the discussion relates to matters of PRC tax law, it represents the opinion of Allbright Law Offices, our PRC counsel. To the extent the discussion relates to the matters of U.S. tax law, it represents the opinion of Ellenoff Grossman & Schole LLP.


Cayman Islands Taxation


The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes levied by the Government of the Cayman Islands that are likely to be material to holders of ordinary shares or ordinary shares. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.


People’s Republic of China Taxation


Under the EIT Law, an enterprise established outside the PRC with a “de facto management body” within the PRC is considered a PRC resident enterprise for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income as well as tax reporting obligations. Under the Implementation Rules, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, SAT Circular 82 issued in April 2009 specifies that certain offshore-incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if all of the following conditions are met: (a) senior management personnel and core management departments in charge of the daily operations of the enterprises have their presence mainly in the PRC; (b) their financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) major assets, accounting books and company seals of the enterprises, and minutes and files of their board’s and shareholders’ meetings are located or kept in the PRC; and (d) half or more of the enterprises’ directors or senior management personnel with voting rights habitually reside in the PRC. Further to SAT Circular 82, the SAT issued SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration details of determination on PRC resident enterprise status and administration on post-determination matters. If the PRC tax authorities determine that Golden Bull Limited is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, Dianniu may be subject to enterprise income tax at a rate of 25% with respect to its worldwide taxable income. Also, a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares or ordinary shares and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares or ordinary shares.


It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. See “Risk Factors—Risk Factors Relating to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC resident enterprise for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC Shareholders and have a material adverse effect on our results of operations and the value of your investment”.



120







The SAT issued SAT Circular 59 together with the Ministry of Finance in April 2009 and SAT Circular 698 in December 2009. Both SAT Circular 59 and SAT Circular 698 became effective retroactively as of January 1, 2008. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-PRC resident enterprise. Under SAT Circular 698, where a non-PRC resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, and the overseas holding company is located in a tax jurisdiction that: (1) has an effective tax rate of less than 12.5% or (2) does not impose tax on foreign income of its residents, the non-PRC resident enterprise, being the transferor, must report to the relevant tax authority of the PRC resident enterprise this Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC tax at a rate of up to 10%. Although it appears that SAT Circular 698 was not intended to apply to share transfers of publicly traded companies, there is uncertainty as to the application of SAT Circular 698 and we and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Circular 698 and we may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698. See “Risk Factors—Risk Factors Relating to Doing Business in China—We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of our operating company’s equity interests. Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.”


Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a resident enterprise of the counter-party to such Tax Arrangement should meet the following conditions, among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must directly own the required percentage of equity interests and voting rights in such PRC resident enterprise; and (ii) it should directly own such percentage in the PRC resident enterprise anytime in the 12 months prior to receiving the dividends. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties (For Trial Implementation), or the Administrative Measures, which became effective in October 2009, requires that the non-resident enterprises must obtain the approval from the relevant tax authority in order to enjoy the reduced withholding tax rate under the tax treaties. There are also other conditions for enjoying such reduced withholding tax rate according to other relevant tax rules and regulations. Accordingly, Dianniu HK may be able to enjoy the 5% withholding tax rate for the dividends it receives from the WFOE, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations, and obtains the approvals as required under the Administrative Measures. However, according to Circular 81, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.



121







United States Federal Income Tax Considerations


The following is a discussion of United States federal income tax considerations relating to the acquisition, ownership, and disposition of our ordinary shares by a U.S. Holder, as defined below, that acquires our ordinary shares in this offering and holds our ordinary shares as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (such as, for example, certain financial institutions, insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations)), investors who are not U.S. Holders, investors that own (directly, indirectly, or constructively) 10% or more of our voting stock, investors that hold their ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction), or investors that have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not address any tax laws other than the United States federal income tax laws, including any state, local, alternative minimum tax or non-United States tax considerations, or the Medicare tax. Each potential investor is urged to consult its tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations of an investment in our ordinary shares.


General


For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ordinary shares that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code.


If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding our ordinary shares are urged to consult their tax advisors regarding an investment in our ordinary shares.


The discussion set forth below is addressed only to U.S. Holders that purchase ordinary shares in this offering. Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our ordinary shares.


Taxation of Dividends and Other Distributions on our Ordinary Shares


Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the ordinary shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.



122






With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the ordinary shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the ordinary shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, ordinary shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on Nasdaq. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our ordinary shares, including the effects of any change in law after the date of this prospectus.


To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.


Taxation of Dispositions of Ordinary Shares


Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the ordinary shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ordinary shares for more than one year, you may be eligible for reduced tax rates on any such capital gains. The deductibility of capital losses is subject to limitations.


Passive Foreign Investment Company


A non-U.S. corporation is considered a PFIC for any taxable year if either:


 

at least 75% of its gross income for such taxable year is passive income; or

 

at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).


Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we raise in this offering will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based on the market value of our ordinary shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets (including the cash raised in this offering) on any particular quarterly testing date for purposes of the asset test.



123






We must make a separate determination each year as to whether we are a PFIC. Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our 2017 taxable year or for any subsequent taxable year, more than 50% of our assets may be assets held for the production of passive income. We will make this determination following the end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated affiliated entities, as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. In particular, because the value of our assets for purposes of the asset test will generally be determined based on the market price of our ordinary shares and because cash is generally considered to be an asset held for the production of passive income, our PFIC status will depend in large part on the market price of our ordinary shares and the amount of cash we raise in this offering. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. We are under no obligation to take steps to reduce the risk of our being classified as a PFIC, and as stated above, the determination of the value of our assets will depend upon material facts (including the market price of our ordinary shares from time to time and the amount of cash we raise in this offering) that may not be within our control. If we are a PFIC for any year during which you hold ordinary shares, we will continue to be treated as a PFIC for all succeeding years during which you hold ordinary shares. However, if we cease to be a PFIC and you did not previously make a timely “mark-to-market” election as described below, you may avoid some of the adverse effects of the PFIC regime by making a “purging election” (as described below) with respect to the ordinary shares.


If we are a PFIC for your taxable year(s) during which you hold ordinary shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:


 

the excess distribution or gain will be allocated ratably over your holding period for the ordinary shares;

 

the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

 

the amount allocated to each of your other taxable year(s) will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.


The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as capital, even if you hold the ordinary shares as capital assets.



124






A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to hold) ordinary shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of such taxable year over your adjusted basis in such ordinary shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, such ordinary loss is allowable only to the extent of any net mark-to-market gains on the ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ordinary shares. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “— Taxation of Dividends and Other Distributions on our ordinary shares” generally would not apply.


The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including Nasdaq. If the ordinary shares are regularly traded on Nasdaq and if you are a holder of ordinary shares, the mark-to-market election would be available to you were we to be or become a PFIC.


Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold ordinary shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year and provide certain annual information regarding such ordinary shares, including regarding distributions received on the ordinary shares and any gain realized on the disposition of the ordinary shares.


If you do not make a timely “mark-to-market” election (as described above), and if we were a PFIC at any time during the period you hold our ordinary shares, then such ordinary shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless you make a “purging election” for the year we cease to be a PFIC. A “purging election” creates a deemed sale of such ordinary shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the fair market value of the ordinary shares on the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after such last day) in your ordinary shares for tax purposes.


You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our ordinary shares and the elections discussed above.



125






Information Reporting and Backup Withholding


Dividend payments with respect to our ordinary shares and proceeds from the sale, exchange or redemption of our ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.


Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.


Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to our ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold ordinary shares.




126





UNDERWRITING


We will enter into an underwriting agreement with ViewTrade Securities, Inc., or the Representative, acting as the sole book-runner and lead managing underwriter, with respect to the ordinary shares subject to this offering. Subject to the terms and conditions of the underwriting agreement, each underwriter named below has severally agreed to purchase from us, on a firm commitment basis, the number of ordinary shares set forth opposite its name below, at the public offering price, less the underwriting discount set forth on the cover page of this prospectus:


Name

 

Number of shares

ViewTrade Securities, Inc.

 

 

  

 

Total

 

 

 

 


The underwriters are offering the shares subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.


We have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an additional 300,000 ordinary shares at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The option may be exercised in whole or in part, and may be exercised more than once, during the 45-day option period. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering contemplated by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase the same percentage of the additional shares as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares listed next to the names of all underwriters in the preceding table.


The Representative has advised us that it proposes to offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $    per share. The underwriters may allow, and certain dealers may re-allow, a discount from the concession not in excess of $     per share to certain brokers and dealers. After this offering, the public offering price, concession and reallowance to dealers may be reduced by the Representative. No such reduction shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The securities are offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.




127






Commission and Expenses


The underwriting discounts and commissions are 6% of the initial public offering price.

The following table shows the price per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.


 

Total

 

Per Share

 

No Exercise

 

Full Exercise

Public offering price

$

 

$

 

$

 

 

 

 

 

 

Underwriting discounts and commissions to be paid by us:

$

 

$

 

$

 

 

 

 

 

 

Proceeds, before expenses, to us

$

 

$

 

$


We will also pay to the Representative by deduction from the net proceeds of the offering contemplated herein, a non-accountable expense allowance equal to one-half percent (0.5%) of the gross proceeds received by us from the sale of the shares.


We have agreed to reimburse the Representative up to a maximum of $150,000 for out-of-pocket accountable expenses (including the legal fees and other disbursements as disclosed below). We have paid expense deposits of $35,000 to the Representative for its anticipated out-of-pocket expenses; any expense deposits will be returned to us to the extent the Representative’s out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).


We have agreed to pay expenses relating to the offering, including but not limited to (i) all filing fees and communication expenses relating to the registration of the shares to be sold in this offering with the SEC and the filing of the offering materials with FINRA; (ii) up to $150,000 of fees, all reasonable travel and lodging expenses incurred by the Representative or its counsel in connection with visits to, and examinations of, the Company; (iii) translation costs for due diligence purpose; (iv) all fees, expenses and disbursements relating to the registration or qualification of such Shares under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of Representative’s counsel); (v) the costs of all mailing and printing of the placement documents, registration statements, prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final prospectuses as the Representative may reasonably deem necessary; (vi) the costs of preparing, printing and delivering certificates representing the shares and the fees and expenses of the transfer agent for such shares; (vii) the reasonable cost for road show meetings and preparation of a power point presentation; and (viii) the costs associated with “tombstone” advertisements, not to exceed $10,000.


We estimate that the total expenses of the offering payable by us, excluding the underwriters’ discount and commissions and non-accountable expense allowance will be approximately $    , including a maximum aggregate reimbursement of $150,000 of Representative’s accountable expenses.



128







Underwriter’s Warrant


We have also agreed to issue to the Representative a warrant to purchase that number of shares equal to an aggregate of five percent (5%) of the shares sold in the offering, including the additional shares that the underwriters may purchase at their option. Such warrant will be non-exercisable for 180 days following the effective date of the registration statement of which this prospectus forms a part, shall have an exercise price equal to 120% of the public offering price, will provide for cashless exercise in certain circumstances and shall terminate five years after the effective date of the registration statement of which this prospectus forms a part. Such warrant will not be callable by the Company. If the cashless exercise provision of the Representative’s warrants is unavailable, for the life of the Representative’s warrant, we will provide for unlimited “piggyback” registration rights with respect to the underlying shares. Such warrant will be subject to FINRA Rule 5110(g)(1) in that, except as otherwise permitted by FINRA rules, for a period of 180 days following the effective date of the registration statement of which this prospectus forms a part, the warrant shall not be (A) sold, transferred, assigned, pledged, or hypothecated, or (B) the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person except as permitted by FINRA Rule 5110(g)(2).


Indemnification; Indemnification Escrow


We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.


Concurrently with the execution and delivery of the underwriting agreement, the Company will set up an escrow account with a third-party escrow agent pursuant to which $600,000 of proceeds from the offering will be deposited by the Company at closing for a period of 24 months following the closing date of this offering, which funds will be used in the event the Company has to indemnify the underwriters pursuant to the terms of the underwriting agreement. The Company will pay the reasonable fees and expenses of the escrow agent.


Lock-Up Agreements


Our officers, directors and holders of five percent (5%) or more of our currently outstanding ordinary shares have agreed to a twelve (12) month “lock-up” period from the closing of this offering with respect to the ordinary shares that they beneficially own, including the issuance of shares upon the exercise of convertible securities and options that are currently outstanding or which may be issued. This means that, for a period of twelve (12) months following the closing of the offering, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the Representative.


The Representative has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up agreements may be waived at its discretion. In determining whether to waive the terms of the lock-up agreements, the Representative may base its decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the trading pattern of, and demand for, our securities in general.


Listing


We have applied to have our ordinary shares approved for listing on the Nasdaq under the symbol “DNJR.” We make no representation that such application will be approved or that our ordinary shares will trade on such market either now or at any time in the future; notwithstanding the foregoing, we will not close this offering unless such ordinary shares will be so listed at completion of this offering.



129







Electronic Distribution


A prospectus in electronic format may be made available on websites or through other online services maintained by Representative or by its affiliates. Other than the prospectus in electronic format, the information on the Representative’s website and any information contained in any other website maintained by it is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the Representative in its capacity as an underwriter, and should not be relied upon by investors.


Any underwriter who is a qualified market maker on Nasdaq may engage in passive market making transactions on Nasdaq in accordance with Rule 103 of Regulation M, during the business day prior to the pricing of the offering, before the commencement of offers or sales. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.


No Prior Public Market


Prior to this offering, there has been no public market for our securities and the public offering price for our ordinary shares will be determined through negotiations between us and the Representative. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the Representative believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. The offering price for our ordinary shares in this offering has been arbitrarily determined by the Company in its negotiations with the underwriters and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company.


Offers outside the United States


Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the ordinary shares offered by this prospectus in any jurisdiction where action for that purpose is required. The ordinary shares offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such Shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any ordinary shares offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.



130







Price Stabilization, Short Positions


Until the distribution of the ordinary shares offered by this prospectus is completed, rules of the SEC may limit the ability of the underwriters to bid for and to purchase our ordinary shares. As an exception to these rules, the underwriters may engage in transactions effected in accordance with Regulation M under the Exchange Act that are intended to stabilize, maintain or otherwise affect the price of our ordinary shares. The underwriters may engage in over-allotment sales, syndicate covering transactions, stabilizing transactions and penalty bids in accordance with Regulation M.


Stabilizing transactions consist of bids or purchases made by the managing underwriter for the purpose of preventing or slowing a decline in the market price of our securities while this offering is in progress.


Short sales and over-allotments occur when the managing underwriter, on behalf of the underwriting syndicate, sells more of our shares than they purchase from us in this offering. In order to cover the resulting short position, the managing underwriter may exercise the overallotment option described above and/or may engage in syndicate covering transactions. There is no contractual limit on the size of any syndicate covering transaction. The underwriters will deliver a prospectus in connection with any such short sales. Purchasers of shares sold short by the underwriters are entitled to the same remedies under the federal securities laws as any other purchaser of units covered by the registration statement.


Syndicate covering transactions are bids for or purchases of our securities on the open market by the managing underwriter on behalf of the underwriters in order to reduce a short position incurred by the managing underwriter on behalf of the underwriters.


A penalty bid is an arrangement permitting the managing underwriter to reclaim the selling concession that would otherwise accrue to an underwriter if the ordinary shares originally sold by the underwriter were later repurchased by the managing underwriter and therefore was not effectively sold to the public by such underwriter.


Stabilization, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of our ordinary shares. As a result, the price of our ordinary shares may be higher than the price that might otherwise exist in the open market.


Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the prices of our ordinary shares. These transactions may occur on the Nasdaq or on any trading market. If any of these transactions are commenced, they may be discontinued without notice at any time.


A prospectus in electronic format may be made available on a website maintained by the representatives of the underwriters and may also be made available on a website maintained by other underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives of the underwriters to underwriters that may make Internet distributions on the same basis as other allocations. In connection with the offering, the underwriters or syndicate members may distribute prospectuses electronically. No forms of prospectus other than printed prospectuses and electronically distributed prospectuses that are printable in Adobe PDF format will be used in connection with this offering.


The underwriters have informed us that they do not expect to confirm sales of our ordinary shares offered by this prospectus to accounts over which they exercise discretionary authority without obtaining the specific approval of the account holder.



131







Notice to Prospective Investors in Hong Kong


The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice. Please note that (i) our shares may not be offered or sold in Hong Kong, by means of this prospectus or any document other than to “professional investors” within the meaning of Part I of Schedule 1 of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) (SFO) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong) (CO) or which do not constitute an offer or invitation to the public for the purpose of the CO or the SFO, and (ii) no advertisement, invitation or document relating to our shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder.


Notice to Prospective Investors in the People’s Republic of China


This prospectus may not be circulated or distributed in the PRC and the Shares may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant to applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau.




132






EXPENSES RELATING TO THIS OFFERING


Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and the Nasdaq listing fee, all amounts are estimates.

 

 

 

 

 

 

  

$

  

SEC registration fee

  

1,353

  

Nasdaq listing fee

  

55,000

  

FINRA filing fee

  

3,500

  

Printing and engraving expenses

  

50,000

  

Legal fees and expenses

  

628,757

  

Accounting fees and expenses

  

195,000

  

Miscellaneous

  

150,000

  

 

  

 

  

Total

  

1,085,611

  

 

  

 

  


These expenses will be borne by us. Underwriting discounts and commissions will be borne by us in proportion to the numbers of ordinary shares sold in the offering.

 

LEGAL MATTERS


The Company is being represented by Ellenoff Grossman & Schole LLP, New York, New York, with respect to legal matters of United States federal securities law. The validity of the ordinary shares offered by this prospectus and legal matters as to Cayman Islands law will be passed upon for us by Harney Westwood & Riegels.   The Company is being represented by Allbright Law Offices with regard to PRC law. Ellenoff Grossman & Schole LLP may rely upon Allbright Law Offices with respect to matters governed by PRC law. Kaufman & Canoles, P.C. is acting as U.S. counsel for the underwriter DeHeng Law Offices and B&D Law Firm are acting as the PRC counsel for the underwriter.


EXPERTS


The consolidated financial statements as of December 31, 2015 and 2016 and for the period from November 17, 2015 (inception) to December 31, 2015 and for the year ended December 31, 2016 included in this prospectus have been so included in reliance on the report of Friedman LLP, an independent registered public accounting firm, given on the authority of said firm as an expert in accounting and auditing.


The office of Friedman LLP is located at 1700 Broadway, New York, New York 10019.



WHERE YOU CAN FIND ADDITIONAL INFORMATION


We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the ordinary shares described herein. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts,



133






agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. We anticipate making these documents publicly available, free of charge, on our website at www.dianniu98.com as soon as reasonably practicable after filing such documents with the SEC. The information on our website is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus. We have included our website address as an inactive textual reference only.

 

You can read the registration statement and our future filings with the SEC, over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document that we file with the SEC at its public reference room at 100 F Street, N.E., Washington, DC 20549.

 

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. 




134






  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm

 

F-1

 

Audited Consolidated Financial Statements

 

 

 

Consolidated Balance Sheets

 

F-2

 

Consolidated Statement of Operations and Comprehensive Loss

 

F-3

 

Consolidated Statements of Stockholders’ Equity

 

F-4

 

Consolidated Statements of Cash Flows

 

F-5

 

Notes to Consolidated Financial Statements

 

F-6

 





135





 

[GOLDENBULLF1ACONTROLDOC007.GIF]



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Shareholders

Golden Bull Limited



We have audited the accompanying consolidated balance sheets of Golden Bull Limited and Subsidiaries (collectively, the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015.  The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.



/s/ Friedman LLP


New York, New York

July 10, 2017, except for Notes 1, 2, 3, 8, 9, 11 and 12

which are dated December 22, 2017




F-1









GOLDEN BULL LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

June 30,

 

 

 

 

2016

 

2015

 

2017

 

 

 

 

 

 

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

$

7,378,920 

 

$

674,515 

 

$

5,565,815 

 

Other receivables

39,502 

 

3,093 

 

139,788 

 

Prepaid expenses

492,541 

 

87,819 

 

1,941,116 

 

Prepaid IPO Costs

 

 

2,000,000 

 

 

Total current assets

7,910,963 

 

765,427 

 

9,646,719 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

86,683 

 

21,345 

 

98,854 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

Prepaid expenses

1,041,265 

 

 

2,454,832 

 

Deferred tax assets

8,823 

 

35,082 

 

206,892 

 

Security deposits

54,359 

 

58,137 

 

614,179 

 

 

Total other assets

 

1,104,447 

 

93,219 

 

3,275,903 

 

 

 

 

 

 

 

 

 

 

 

     Total assets

$

9,102,093 

 

$

879,991 

 

$

13,021,476 

 

 

 

 

 

 

 

 

 

 

 

                       LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

$

 

$

13,900 

 

$

 

Other payables and accrued liabilities

173,810 

 

19,432 

 

510,958 

 

Deferred revenues

13,281 

 

 

22,694 

 

Deferred rent liabilities

13,046 

 

27,906 

 

6,682 

 

Taxes payable

82,156 

 

 

8,586 

 

 

Total current liabilities

282,293 

 

61,238 

 

548,920 

 

 

 

 

 

 

 

 

 

 

 

     Total liabilities

282,293 

 

61,238 

 

548,920 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Ordinary shares, $0.01 par value, 50,000,000 shares authorized,

 

 

 

 

 

 

 

26,000, 26,000 and 13,000,000 shares issued and outstanding of December 31, 2016, 2015, and June 30, 2017*

260  

 

260  

 

130,000  

 

Shares subscription receivables

(45,457)

 

(100)

 

(45,457)

 

Additional paid-in capital

8,046,392  

 

936,440  

 

11,964,505  

 

Statutory reserves

6,189 

 

 

6,189 

 

Retained earnings (accumulated deficit)

48,447 

 

(106,269)

 

(489,908)

 

Accumulated other comprehensive loss

(196,087)

 

(11,578)

 

(12,183)

 

 

Total shareholders ’ equity

7,859,744 

 

818,753 

 

11,553,146 

 

 

 

 

 

 

 

 

 

NONCONTROLLING INTEREST

960,056 

 

 

919,410 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

8,819,800 

 

818,753 

 

12,472,556 

 

 

 

 

 

 

 

 

 

 

 

     Total liabilities and shareholders ’ equity

$

9,102,093 

 

$

879,991 

 

$

13,021,476 


* Giving retroactive effect to the 260 for 1split effected on November 3, 2017.



The accompanying notes are an integral part of these consolidated financial statements.



F-2









GOLDEN BULL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

 

 

 

 

 

For the Period from

 

 

 

 

 

 

 

 

 

 

November 17, 2015

 

 

 

 

 

 

 

 

For the Year Ended

 

(Inception) to

 

For the Six Months Ended June 30,

 

 

 

 

December 31, 2016

 

December 31, 2015

 

2017

 

2016

 

 

 

 

 

 

 

 

(Unaudited)

 

(Unaudited)

OPERATING REVENUES

 

 

 

 

 

 

 

 

 

Transaction Fee

 

$

1,561,172 

 

$

 

$

1,240,720 

 

$

437,802 

 

Management Fee

 

2,264,241 

 

 

1,685,963 

 

715,735 

 

Sales taxes

 

(119,643)

 

 

(129,043)

 

(35,941)

 

 

Total operating revenues, net

 

3,705,770 

 

 

2,797,640 

 

1,117,596 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Selling

 

(1,434,662)

 

(30,091)

 

(1,715,617)

 

(715,433)

 

General and administrative

 

(1,636,353)

 

(81,659)

 

(1,680,715)

 

(670,283)

 

Research and development

 

(417,901)

 

(29,943)

 

(204,691)

 

(240,679)

 

 

Total operating expenses

 

(3,488,916)

 

(141,693)

 

(3,601,023)

 

(1,626,395)

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

216,854 

 

(141,693)

 

(803,383)

 

(508,799)

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

Interest income

 

3,324 

 

102 

 

6,140 

 

1,057 

 

Other finance expenses

 

(274)

 

(101)

 

(1,187)

 

(93)

 

Other income (expenses)

 

(155)

 

 

12,275 

 

 

 

Total other income, net

 

2,895 

 

 

17,228 

 

964 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

219,749 

 

(141,692)

 

(786,155)

 

(507,835)

 

 

 

 

 

 

 

 

 

 

 

PROVISION (BENEFIT) FOR INCOME TAXES

 

 

 

 

 

 

 

 

 

Current

 

29,859 

 

 

10,361 

 

 

Deferred

 

25,079 

 

(35,423)

 

(195,111)

 

(126,958)

 

 

Total provision (benefit) for income taxes

 

54,938 

 

(35,423)

 

(184,750)

 

(126,958)

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

164,811 

 

(106,269)

 

(601,405)

 

(380,877)

 

 

 

 

 

 

 

 

 

 

 

Less:  Net income (loss) attributable to noncontrolling interest

 

3,906 

 

 

(63,050)

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO GOLDEN BULL LIMITED

  

$

160,905 

 

$

(106,269)

 

$

(538,355)

 

$

(380,877)

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

  

$

164,811 

 

$

(106,269)

 

$

(601,405)

 

$

(380,877)

 

 

 

 

 

 

 

 

 

 

 



F-3









OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(208,333)

 

(11,578)

 

206,308 

 

(30,165)

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

(43,522)

 

(117,847)

 

(395,097)

 

(411,042)

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive loss attributable to noncontrolling interest

 

(19,918)

 

 

(40,646)

 

(1,696)

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS ATTRIBUTABLE TO GOLDEN BULL LIMITED

 

$

(23,604)

 

$

(117,847)

 

$

(354,451)

 

$

(409,346)

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

 

 

 

 

 

 

 

 

 

Basic and diluted *

 

26,000 

 

26,000 

 

527,757 

 

26,000 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS (LOSS) PER SHARE

 

 

 

 

 

 

 

 

 

Basic and diluted *

 

$

6.19  

 

$

(4.09)

 

$

(1.02)

 

$

(14.65)

      

*Giving retroactive effect to the 260 for 1 split effected on November 3, 2017.




The accompanying notes are an integral part of these consolidated financial statements.



F-4







GOLDEN BULL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Additional

 

 (accumulated deficit)

 

other

 

 

 

 

 

 

 

 

Ordinary Shares

 

Subscription

 

paid-in

 

Statutory

 

 

 

comprehensive

 

Noncontrolling

 

 

 

 

 

 

Shares *

 

Par Value

 

Receivables

 

capital

 

reserves

 

Unrestricted

 

loss

 

interest

 

Total

BALANCE, November 17, 2015 (inception)

-

 

$

-

 

$

 

$

 

$

-

 

$

 

$

 

$

 

$

     Capital contribution

26,000

 

260

 

(100)

 

936,440  

 

-

 

 

 

 

936,600 

     Net loss attributable to Golden Bull Limited

-

 

-

 

 

 

-

 

(106,269)

 

 

 

(106,269)

     Foreign currency translation

-

 

-

 

 

 

-

 

 

(11,578)

 

 

(11,578)

BALANCE, December 31, 2015

26,000

 

260

 

(100)

 

936,440  

 

-

 

(106,269)

 

(11,578)

 

 

818,753 

     Capital contribution

-

 

-

 

(45,357)

 

6,905,724 

 

-

 

 

 

 

6,860,367 

     Capital contribution from new noncontrolling interest holders

-

 

-

 

 

 

-

 

 

 

1,184,202 

 

1,184,202 

     Excess consideration received from noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          over carrying value

-

 

-

 

 

204,228 

 

-

 

 

 

(204,228)

 

     Net income attributable to Golden Bull Limited

-

 

-

 

 

 

-

 

160,905 

 

 

 

160,905 

     Net income attributable to noncontrolling interest

-

 

-

 

 

 

-

 

 

 

3,906 

 

3,906 

     Statutory reserve

-

 

-

 

 

 

6,189

 

(6,189)

 

 

 

     Foreign currency translation

-

 

-

 

 

 

-

 

 

(184,509)

 

(23,824)

 

(208,333)

BALANCE, December 31, 2016

26,000

 

260

 

(45,457)

 

8,046,392  

 

6,189

 

48,447 

 

(196,087)

 

960,056 

 

8,819,800 

     Variable interest entity acquired and contributed by shareholders

-

 

-

 

 

17,853 

 

-

 

 

 

 

17,853 

     Capital restructuring

10,942,360

 

109,424

 

 

(109,424)

 

-

 

 

 

 

     Issuance of ordinary shares to service providers

2,031,640

 

20,316

 

 

4,009,684  

 

-

 

 

 

 

4,030,000 

     Net loss attributable to Golden Bull Limited

-

 

-

 

 

 

-

 

(538,355)

 

 

 

(538,355)

     Net loss attributable to noncontrolling interest

-

 

-

 

 

 

-

 

 

 

(63,050)

 

(63,050)

     Foreign currency translation

-

 

-

 

 

 

-

 

 

183,904 

 

22,404 

 

206,308 

BALANCE, June 30, 2017 (Unaudited)

13,000,000

 

$

130,000

 

$

(45,457)

 

$

11,964,505  

 

$

6,189

 

$

(489,908)

 

$

(12,183)

 

$

919,410 

 

$

12,472,556 


*Giving retroactive effect to the 260 for 1 split effected on November 3, 2017.



The accompanying notes are an integral part of these consolidated financial statements.



F-5









GOLDEN BULL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Period from

 

 

 

 

 

 

 

 

 

 

 

 

November 17, 2015

 

 

 

 

 

 

 

 

 

 

For the Year Ended

 

(Inception) to

 

For the Six Months Ended June 30,

 

 

 

 

 

 

December 31, 2016

 

December 31, 2015

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Net income (loss)

  

$

164,811 

 

$

(106,269)

 

$

(601,405)

 

$

(380,877)

 

Adjustments to reconcile net income (loss) to net cash used in

 

 

 

 

 

 

 

 

    

operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

38,973 

 

 

24,310 

 

16,915 

 

 

 

Loss on disposal of equipment

 

 

 

141 

 

 

 

 

Deferred tax provision (benefit)

 

25,079 

 

(35,423)

 

(195,111)

 

(126,958)

 

 

Change in operating assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

Other receivables

 

(38,288)

 

(3,123)

 

(97,946)

 

(44,266)

 

 

 

Prepaid expenses

 

(1,518,243)

 

(88,671)

 

(783,704)

 

(459,689)

 

 

 

Security deposits

 

 

(58,701)

 

(550,751)

 

 

 

 

Accounts payable

 

(13,592)

 

14,035 

 

 

(13,809)

 

 

 

Other payables and accrued liabilities

 

162,770 

 

19,621 

 

328,297 

 

785,350 

 

 

 

Deferred revenues

 

13,890 

 

 

8,963 

 

 

 

 

Deferred rent liabilities

 

(13,644)

 

28,177 

 

(6,590)

 

(6,931)

 

 

 

Taxes payable

 

85,922 

 

 

(74,891)

 

25,497 

 

 

 

 

Net cash used in operating activities

 

(1,092,322)

 

(230,354)

 

(1,948,687)

 

(204,768)

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(108,757)

 

(21,552)

 

(34,368)

 

(94,023)

 

Cash acquired through variable interest entity

 

 

 

17,560 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

(108,757)

 

(21,552)

 

(16,808)

 

(94,023)

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Capital contribution

 

8,044,569 

 

936,600 

 

 

1,071,312 

 

 

 

 

Net cash provided by financing activities

 

8,044,569 

 

936,600 

 

 

1,071,312 

 

 

 

 

 

 

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE ON CASH

 

(139,085)

 

(10,179)

 

152,390 

 

(28,225)

 

 

 

 

 

 

 

 

 

 

 

 

 

INCREASE/(DECREASE) IN CASH

 

6,704,405 

 

674,515 

 

(1,813,105)

 

744,296 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH, beginning of period

 

674,515 

 

 

7,378,920 

 

674,515 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH, end of period

  

$

7,378,920 

 

$

674,515 

 

$

5,565,815 

 

$

1,418,811 


The accompanying notes are an integral part of these consolidated financial statements.



F-6










SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

Cash paid for income tax

  

$

-

 

$

-

 

$

10,361

 

$

-

 

Cash paid for interest

  

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Capital contribution on shares subscription receivables

  

$

45,357

 

$

100

 

$

-

 

$

-

 

Variable interest entity acquired and contributed by shareholders

  

$

-

 

$

-

 

$

17,853

 

$

-

 

Issuance of ordinary shares to service providers

  

$

-

 

$

-

 

$

4,030,000

 

$

-



The accompanying notes are an integral part of these consolidated financial statements.




F-7







GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 – Nature of business and organization


Golden Bull Limited (“Golden Bull Cayman” or the “Company”) is a holding company incorporated on February 17, 2017, under the laws of the Cayman Islands. The Company has no substantial operations other than holding all of the outstanding share capital of Point Cattle Holdings Limited (“Golden Bull BVI”).  Golden Bull BVI is also a holding company holding all of the outstanding share capital of Point Cattle Group Company Limited (“Golden Bull HK”).  Golden Bull HK is also a holding company holding all of the outstanding equity of Shanghai Fuyu Information and Technology Co., Ltd. (“Golden Bull WFOE”).   


The Company, through its variable interest entity (“VIEs”), Shanghai Dianniu Internet Finance Information Service Co. Ltd. (“Shanghai Dianniu”), is engaged in providing services for online marketplace connecting borrowers and lenders, and, through its VIE, Shanghai Baoxun Advertisement Design Co. Ltd. (“Shanghai Baoxun”), intends to engage in design and production of online advertisement and marketing survey services for online marketplace.  The Company’s headquarter is located in the city of Shanghai, in the People’s Republic of China (the “PRC” or “China”). All of the Company’s business activities are carried out by Shanghai Dianniu.  Shanghai Baoxun currently does not have any operations as of the date hereof.


On June 8, 2017, Golden Bull Cayman completed its reorganization of entities under the common control of three shareholders, who collectively owned a majority of the equity interests of Golden Bull Cayman prior to the reorganization. Golden Bull Cayman, Golden Bull BVI, and Golden Bull HK, were established as the holding companies of Golden Bull WFOE. Golden Bull WFOE is the primary beneficiary of Shanghai Dianniu and Shanghai Baoxun, and all of these entities included in Golden Bull Cayman are under common control, which results in the consolidation of Shanghai Dianniu and Shanghai Baoxun which have been accounted for as a reorganization of entities under common control at carrying value. The financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of Golden Bull Cayman.


Contractual Arrangements


Foreign ownership of internet-based businesses, including distribution of online information (such as an online marketplace connecting borrowers and lenders) and marketing survey services for online marketplace, is subject to restrictions under current PRC laws and regulations. For example, foreign investors are not allowed to own more than 50% of the equity interests in internet-based businesses, subject to certain exceptions, and any such foreign investor must have experience in providing internet-based businesses services overseas and maintain a good track record in accordance with the Guidance Catalog of Industries for Foreign Investment promulgated in 2007, as amended in 2011, 2015 and 2017, respectively, and other applicable laws and regulations. The Company is a Cayman Islands company and Golden Bull WFOE (its PRC subsidiary) is considered foreign invested enterprise. To comply with these regulations, the Company conducts the majority of its activities in PRC through Shanghai Dianniu and Shanghai Baoxun (its consolidated VIEs).  As such, Shanghai Dianniu and Shanghai Baoxun are controlled through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements are a series of five agreements (collectively the “Contractual Arrangements”) which significant terms are as follows:




F-8






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Contractual Agreements with Shanghai Dianniu


Technical Consultation and Services Agreement


Pursuant to the technical consultation and services agreement between Golden Bull WFOE and Shanghai Dianniu, as amended, Golden Bull WFOE is engaged as exclusive provider of management consulting services to Shanghai Dianniu.  For such services, the Shanghai Dianniu agrees to pay service fees determined based on 93.2% of its net income to Golden Bull WFOE or Golden Bull WFOE has obligation to absorb 93.2% of Shanghai Dianniu’s losses.


The technical consultation and services agreement, as amended, remains in effect for 20 years until June 7, 2037.  The agreement can be extended only if Golden Bull WFOE gives its written consent of extension of the agreement before the expiration of the agreement and Shanghai Dianniu shall agree to the extension without reserve.


Business Cooperation Agreement


Pursuant to the business cooperation agreement between Golden Bull WFOE and Shanghai Dianniu, as amended, Golden Bull WFOE has the exclusive right to provide Shanghai Dianniu with technical support, business support and related consulting services, including but not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance. In exchange, Golden Bull WFOE is entitled to a service fee that equals to 93.2% of the net income of Shanghai Dianniu determined by U.S. GAAP, The service fees may be adjusted based on the services rendered by Golden Bull WFOE in that month and the operational needs of Shanghai Dianniu.


The business cooperation agreement, as amended, remains in effect until and unless Golden Bull WFOE commits gross negligence, or a fraudulent act, against Shanghai Dianniu.  Nevertheless, Golden Bull WFOE shall have the right to terminate this agreement upon giving 30 days’ prior written notice to Shanghai Dianniu at any time.


Equity Option Agreements


Pursuant to the equity option agreements, as amended, among the shareholders who collectively owned 93.2% of Shanghai Dianniu (the “Participating Shareholders”) Shanghai Dianniu and Golden Bull WFOE, Shanghai Dianniu Participating Shareholders jointly and severally grant Golden Bull WFOE an option to purchase their equity interests in Shanghai Dianniu. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of Shanghai Dianniu, the Participating Shareholders of Shanghai Dianniu are required to immediately return any amount in excess of the registered capital to Golden Bull WFOE or its designee of Golden Bull WFOE. Golden Bull WOFE may exercise such option at any time until it has acquired all equity interests of Shanghai Dianniu, and freely transfer the option to any third party. The agreements will terminate at the date on which all of the Participating Shareholders’ equity interests of Shanghai Dianniu has been transferred to Golden Bull WFOE or its designee.




F-9






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Equity Pledge Agreements


Pursuant to the equity pledge agreements, as amended, among the Participating Shareholders of Shanghai Dianniu and Golden Bull WFOE, such Participating shareholders pledge 93.2% of the equity interests in Shanghai Dianniu to Golden Bull WFOE as collateral to secure the obligations of Shanghai Dianniu under the exclusive consulting services and operating agreement. The Participating Shareholders may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Golden Bull WFOE’s interests, without Golden Bull WFOE’s prior approval. In the event of default, Golden Bull WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of Shanghai Dianniu. The agreement will terminate at the date the Participating Shareholders have transferred all of their pledged equity interests pursuant to the equity option agreement.


Voting Rights Proxy and Financial Supporting Agreements


Pursuant to the voting rights proxy and financial supporting agreements, as amended, among the Participating Shareholders of Shanghai Dianniu and Golden Bull WFOE, Shanghai Dianniu’s Participating Shareholders have given Golden Bull WFOE an irrevocable proxy to act on their behalf on all matters pertaining to Shanghai Dianniu and to exercise all of their rights as shareholders of Shanghai Dianniu, including the right to attend shareholders meeting, to exercise voting rights and to transfer all or a part of their equity interests in Shanghai Dianniu. In consideration of such granted rights, Golden Bull WFOE agrees to provide the necessary financial support to Shanghai Dianniu whether or not Shanghai Dianniu incurs loss, and agrees not to request repayment if Shanghai Dianniu is unable to do so. The agreements shall remain in effect for 20 years until June 7, 2037.


Contractual Agreements with Shanghai Baoxun


Technical Consultation and Services Agreement


Pursuant to the technical consultation and services agreement and the business cooperation agreement between Golden Bull WFOE and Shanghai Baoxun, Golden Bull WFOE is engaged as exclusive provider of management consulting services to Shanghai Baoxun. For such services, the Shanghai Baoxun agrees to pay service fees determined based on all of its net income to Golden Bull WFOE or Golden Bull WFOE has obligation to absorb all of Shanghai Baoxun’s losses.


The technical consultation and services agreement remains in effect for 20 years until June 7, 2037.  The technical consultation and services agreement can be extended only if Golden Bull WFOE gives its written consent of extension of the agreement before the expiration of the agreement and Shanghai Baoxun shall agree to the extension without reserve.


Business Cooperation Agreement


Pursuant to the business cooperation agreement between Golden Bull WFOE and Shanghai Baoxun, Golden Bull WFOE has the exclusive right to provide Shanghai Baoxun with technical support, business support and related consulting services, including but not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance. In exchange, Golden Bull WFOE will be entitled to a service fee that equals to 100% of the net income of Shanghai Baoxun determined by U.S. GAAP, The service fees may be adjusted based on the services rendered by Golden Bull WFOE in that month and the operational needs of Shanghai Baoxun.


The business cooperation agreement remains in effect until and unless Golden Bull WFOE commits gross negligence, or a fraudulent act, against Shanghai Baoxun.  Nevertheless, Golden Bull WFOE shall have the right to terminate this agreement upon giving 30 days’ prior written notice to Shanghai Baoxun at any time.



F-10






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Equity Option Agreements


Pursuant to the equity option agreement between the shareholders of Shanghai Baoxun and Golden Bull WFOE, Shanghai Baoxun shareholders jointly and severally grant Golden Bull WFOE an option to purchase their equity interests in Shanghai Baoxun. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of Shanghai Baoxun, the shareholders of Shanghai Baoxun are required to immediately return any amount in excess of the registered capital to Golden Bull WFOE or its designee of Golden Bull WFOE. Golden Bull WOFE may exercise such option at any time until it has acquired all equity interests of Shanghai Baoxun, and freely transfer the option to any third party. The agreement will terminate at the date on which all of the shareholders’ equity interests of Shanghai Baoxun has been transferred to Golden Bull WFOE or its designee.


Equity Pledge Agreements


Pursuant to the equity pledge agreement between the shareholders of Shanghai Baoxun and Golden Bull WFOE, such shareholders pledge all of their equity interests in Shanghai Baoxun to Golden Bull WFOE as collateral to secure the obligations of Shanghai Baoxun under the exclusive consulting services and operating agreement. The shareholders may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Golden Bull WFOE’s interests, without Golden Bull WFOE’s prior approval. In the event of default, Golden Bull WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of Shanghai Baoxun. The agreement will terminate at the date the shareholders have transferred all of their pledged equity interests pursuant to the equity option agreement.


Voting Rights Proxy and Financial Supporting Agreements


Pursuant to the voting rights proxy and financial supporting agreement between the shareholders of Shanghai Baoxun and Golden Bull WFOE, Shanghai Baoxun’s shareholders have given Golden Bull WFOE an irrevocable proxy to act on their behalf on all matters pertaining to Shanghai Baoxun and to exercise all of their rights as shareholders of Shanghai Baoxun, including the right to attend shareholders meeting, to exercise voting rights and to transfer all or a part of their equity interests in Shanghai Baoxun. In consideration of such granted rights, Golden Bull WFOE agrees to provide the necessary financial support to Shanghai Baoxun whether or not Shanghai Baoxun incurs loss, and agrees not to request repayment if Shanghai Baoxun is unable to do so. The agreement shall remain in effect for 20 years until June 7, 2037.


Based on the foregoing contractual arrangements, which grant Golden Bull WFOE effective control of Shanghai Dianniu  obligate Golden Bull WFOE to absorb 93.2% of the risk of loss from their activities, and enable Golden Bull WFOE to receive 93.2% of their expected residual returns, and grant Golden Bull WFOE effective control of Shanghai Baoxun obligate Golden Bull WFOE to absorb all of the risk of loss from their activities, and enable Golden Bull WFOE to receive all of their expected residual returns, the Company accounts for Shanghai Dianniu and Shanghai Baoxun as a VIEs. Accordingly, the Company consolidates the accounts of Shanghai Dianniu for the periods presented herein and Shanghai Baoxun from February 22, 2017, the date of which Shanghai Baoxun becomes under common control, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation. 




F-11






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The accompanying consolidated financial statements reflect the activities of Golden Bull Cayman and each of the following entities:


Name

 

Background

 

Ownership

Golden Bull BVI

 

·       A British Virgin Islands company

·       Incorporated on February 27, 2017 

 

100%

Golden Bull HK

 

·       A Hong Kong company

·       Incorporated on January 24, 2017

 

100% owned by Golden Bull BVI

Golden Bull WFOE

 

·       A PRC limited liability company and deemed a wholly foreign  owned enterprise (“WFOE”)

·       Incorporated on June 8, 2017

·       Registered capital of $200,000, with registered capital of $200,000 to be funded by June 8, 2047.  

 

100% owned by Golden Bull HK

Shanghai Dianniu

 

·       A PRC limited liability company

·       Incorporated on November 17, 2015

·       Registered capital of $9,026,526 (RMB 61,156,250) with registered capital of $45,357 (RMB 315,640) to be funded by November 17, 2045.  

·       Services for online marketplace connecting borrowers and lenders.

 

VIE of Golden Bull WFOE

Shanghai Baoxun

 

·       A PRC limited liability company

·       Incorporated on January 22, 2016

·       Registered capital of $151,976 (RMB 1,000,000) with registered capital of $151,976 (RMB 1,000,000) to be funded by January 22, 2046.  

·       Design and production of online advertisement and marketing survey services for online marketplace.

 

VIE of Golden Bull WOFE


Note 2 – Summary of significant accounting policies


Basis of presentation


The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).  


Principles of consolidation


The consolidated financial statements include the accounts of the Company, its subsidiaries, and their VIEs. All intercompany transactions and balances are eliminated upon consolidation.


Use of estimates and assumptions


The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates.



F-12






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Foreign currency translation and transaction


The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

Translation adjustments were included in accumulated other comprehensive loss. The balance sheet amounts, with the exception of shareholder’s equity at December 31, 2016 and 2015 and June 30, 2017 were translated at 6.94 RMB, 6.49 RMB and 6.78 RMB to $1.00, respectively. The shareholder’s equity (deficiency) accounts were stated at their historical rate.  The average translation rates applied to statement of income accounts for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015 were 6.64 RMB and 6.43 RMB, respectively. The average translation rates applied to statement of income accounts for the three month ended June 30, 2017 and 2016 were 6.87 RMB and 6.54 RMB, respectively.  Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.


Fair value measurement


The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements.

 

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

 

 

·

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

·

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

 

·

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.


Revenue recognition


Revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.


Transaction Fee : Transaction fees are paid by borrowers to the Company for the work performed through its platform.  These fees are recognized as a component of operating revenue at the time of loan issuance. The amount of these fees is based upon the loan amount and other terms of the loan, including credit grade, maturity and other factors.  These fees are non-refundable upon the issuance of loan.



F-13






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Management Fee : Loan borrowers pay a management fee on each loan payment to compensate the Company for services provided in connection with facilitation of the loan transactions.  The Company records management fees as a component of operating revenue at the time of loan issuance.  The amount of these fees is based upon the loan amount and other terms of the loan, including credit grade, maturity and other factors.  These fees are non-refundable upon the issuance of loan.


Sales taxes : Transaction fee, management fee and license fee that are earned and received in the PRC are subject to a Chinese value-added tax (“VAT”) at a rate of 3% prior to March 2017 (6% starting in April 2017) of the gross proceed or at a rate approved by the Chinese local government Transaction fee and management fee that are earned and received in the PRC are also subject to various miscellaneous sales taxes at a rate of 7% of the VAT. VAT and miscellaneous sales taxes are presented as reduction of revenue.


Incentives  


In order to incentivize lenders, the Company provides incentives to marketplace lenders, who commit a certain amount of money for a period of time.  During the relevant incentive program period, the Company set certain thresholds for the lenders to qualify for the cash incentive.  When a qualified investment is made by a lender, the incentive payment is paid to the lender as a percentage of investment amount at the time of loan issuance as part of its investment to the specified loan that he/she has invested.  The incentive expenses are recognized in our selling expenses in the accompanying consolidated statements of operations and comprehensive loss.   These expenses amounted to $503,238 and $0 for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, respectively, and amounted to $654,403 and $89,065 for the six months ended June 30, 2017 and 2016, respectively.


Servicing Expense  


Servicing expenses are paid by the Company to a third party platform provider on each deposit made by the lenders into their respective fund accounts held by the third party platform fund accounts.  The amount of these expenses is based upon the deposit amount.   The servicing expenses are recognized in our selling expenses in the accompanying consolidated statements of operations and comprehensive loss.  These expenses amounted to $105,386 and $0 for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, respectively, and amounted to $92,607 and $39,642 for the six months ended June 30, 2017 and 2016, respectively.  


Verification, credit assessment and the decision-making processes costs


Costs related to verification and credit assessment are recognized in the selling expenses in our accompanying consolidated statements of operations.  Costs related to the decision-making processes are recognized in the general and administration expenses in our accompanying consolidated statements of operations.  These expenses are immaterial to our consolidated statements of operations for the year ended December 31, 2016, for the period from November 17, 2015 (inception) to December 31, 2015, and for the six months ended June 30, 2017 and 2016.


Cash and cash equivalents


Cash and cash equivalents consist of cash on hand, demand deposits and short-term investment placed with banks or other financial institutions and have original maturities of less than six months.  Cash and cash equivalents also consist of funds earned from the Company’s operating revenues which were held at a third party platform fund accounts which are unrestricted as to immediate withdrawal and use.  


Other receivables


Other receivables represented employee advances to pay certain of its expenses in the normal course of business and rental security deposits.



F-14






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Prepaid expenses


Prepaid expenses represented advance payments made to its vendors for certain prepaid services such as marketing and promotions services, advisory serves, and rentals of an office space and two apartment units.  


Property and equipment


Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method after consideration of the estimated useful lives and estimated residual value. The estimated useful lives are as follows:


 

 

Useful Life

 

Estimated Residual Value

Office equipment and furnishing

 

3-5 years

 

5%

Leasehold improvements

 

Shorter of the remaining lease terms or estimated useful lives

 

-


The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations and comprehensive loss.  Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.


Impairment for long-lived assets


Long-lived assets, including property and equipment with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of December 31, 2016 and 2015 and June 30, 2017, no impairment of long-lived assets was recognized.


Deferred rent


The Company leases office space and two apartment units under operating lease agreements. Certain lease agreements contain scheduled rent increases, tenant improvement allowances or free rent clauses during the term of the lease which are recorded as deferred rent liabilities. Deferred rent liabilities represent the cumulative amount charged to operations under these leases in excess of the amounts paid.  Rent expense is amortized on a straight-line basis to operating expense over the applicable lease term.


Research and development


Research and development costs, which include the salary of the Company’s research and development department and benefit and website development cost, are expensed as incurred.


Advertising costs


Advertising costs are expensed as incurred and included in selling expenses.  



F-15






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Income taxes


The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

 

The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. Deferred tax liabilities are recognized for all future taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.


Deferred tax is charged or credited in the operations of statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.


An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.  PRC tax returns filed in 2016 are subject to examination by any applicable tax authorities.


Non-controlling Interest


Non-controlling interest mainly consists of an aggregate of 6.8% (amended from 10.8% on December 4, 2017 as a result of a former Shareholder of Shanghai Dianniu transferred its 4.0625% equity interest to a Shanghai Dianniu Participating Shareholder) of the equity interests of Shanghai Dianniu held by two entities. The non-controlling interests are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling interests in the results of the Company are presented on the face of the consolidated statement of operations as an allocation of the total income or loss for the year between non-controlling interest holders and the shareholders of the Company.


Commitments and Contingencies

 

In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.


Earnings (loss) per share

 

Basic earnings (loss) per share are computed by dividing income (loss) available to ordinary shareholders of the Company by the weighted average ordinary shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. As of June 30, 2017, there were no dilutive shares.



F-16






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Employee benefits


The full-time employees of the Company are entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans were $159,352 and $8,411 for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31 2015, respectively. Total expenses for the plans were $111,548 and $81,362 for the six months ended June 30, 2017 and 2016, respectively.  


Recently issued accounting pronouncements


In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes , to simplify the presentation of deferred income taxes. The update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The update applies to all entities that present a classified statement of financial position. For public business entities, the ASU is effective for consolidated financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period. The Company has elected to early adopt the ASU, and its effects are reflected in the Company’s consolidated financial statements.


In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities , to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management plans to adoption this ASU early after December 15, 2017 assuming the Company will still remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In February 2016, the FASB issued ASU 2016-02 , Amendments to the ASC 842 Leases . This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management plans to adoption this ASU early after December 15, 2017 assuming the Company will still remain an emerging growth company at that date.  Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.



F-17






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing . The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management plans to adoption this ASU early after December 15, 2018 assuming the Company will still remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.  The object is to address certain issues identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition.  The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.  Management plans to adoption this ASU early after December 15, 2018 assuming the Company will still remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. Management plans to adoption this ASU early after December 15, 2017 assuming the Company will still remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interests held through related parties that are under common control.  The amendments in this ASU require that the reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity.  The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.    Early adoption is permitted, including adoption in an interim period. Management plans to adoption this ASU early after December 15, 2017 assuming the Company will still remain an emerging growth company at that date. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.



F-18






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the definition of a business.  The amendments in this ASU is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation.  The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Management plans to adoption this ASU early after December 15, 2017 assuming the Company will still remain an emerging growth company at that date.  Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.


In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, this ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period.  Management plans to adopt this ASU after December 15, 2017 assuming the Company will still remain an emerging growth company at that date. The adoption of this ASU would not have a material effect on the Company’s consolidated financial statements.


The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.


Note 3 – Variable interest entity

 

On June 8, 2017, Golden Bull WFOE entered into Contractual Arrangements with Shanghai Dianniu and Shanghai Baoxun and its Participating Shareholders. On December 4, 2017, Shanxi Xifeng Investment Co., Ltd., a former Shareholder of Shanghai Dianniu, transferred its 4.0625% equity interest in Shanghai Dianniu to Xiaohui Liu, a Participating Shareholder. As a result, Golden Bull WFOE, Shanghai Dianniu, and Shanghai Dianniu Participating Shareholders amended the Contractual Arrangements and the equity interest of Shanghai Dianniu Participating Shareholders increased from 89.2% to 93.2% in the Contractual Arrangements. The significant terms of these Contractual Arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classifies Shanghai Dianniu and Shanghai Baoxun as VIE’s. 


A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Golden Bull WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Shanghai Dianniu because it has both of the following characteristics:


 

(1)

The power to direct activities at Shanghai Dianniu and Shanghai Baoxun that most significantly impact such entity’s economic performance, and

 

 

 

 

(2)

The obligation to absorb losses of, and the right to receive benefits from Shanghai Dianniu and Shanghai Baoxun that could potentially be significant to such entity.


Pursuant to the Contractual Arrangements, Shanghai Dianniu pays service fees equal to 93.2% of its net income to Golden Bull WFOE and Shanghai Baoxun pays service fees equal to all of its net income to Golden Bull WFOE. At the same time, Golden Bull WFOE is obligated to absorb 93.2% of Shanghai Dianniu’s losses and to absorb all of Shanghai Baoxun losses. The Contractual Arrangements are designed so that Shanghai Dianniu and Shanghai Baoxun operate for the benefit of Golden Bull WFOE and ultimately, the Company.



F-19






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Accordingly, the accounts of Shanghai Dianniu and Shanghai Baoxun are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in the Company’s financial statements.


The carrying amount of the VIEs’ consolidated assets and liabilities are as follows:

              

 

December 31, 2016

 

December 31, 2015

 

June 30, 2017

 

 

 

 

 

(Unaudited)

Current assets

$

7,910,963

 

$

765,427

 

$

6,670,052

Property and equipment, net

86,683

 

21,345

 

98,854

Other noncurrent assets

1,104,447

 

93,219

 

1,608,391

Total assets

9,102,093

 

879,991

 

8,377,297

Total liabilities

282,293

 

61,238

 

548,919

Net assets

$

8,819,800

 

$

818,753

 

$

7,828,378


 

December 31, 2016

 

December 31, 2015

 

June 30, 2017

 

 

 

 

 

(Unaudited)

Current liabilities:

 

 

 

 

 

Accounts payable

$

-

 

$

13,900

 

$

-

Other payables and accrued liabilities

173,810

 

19,432

 

510,957

Deferred revenues

13,281

 

-

 

22,694

Deferred rent liabilities

13,046

 

27,906

 

6,682

Taxes payable

82,156

 

-

 

8,586

Total liabilities

$

282,293

 

$

61,238

 

$

548,919


The summarized operating results of the VIEs are as follows: 


 

 

For the year ended December 31, 2016

 

 

For the period from November 17, 2015 (inception) to December 31, 2015

 

 

 

For the Six Months Ended June 30, 2017

 

 

 

For the Six Months Ended June 30, 2016

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

(Unaudited)

Operating revenues

 

 

$

3,705,770

 

 

 

$

 

 

 

$

2,797,640 

 

 

$

1,117,596 

Income (loss) from operations

 

 

$

216,854

 

 

 

$

(141,693)

 

 

 

$

(803,383)

 

 

$

(508,799)

Net income (loss)

 

 

$

164,811

 

 

 

$

(106,269)

 

 

 

$

(601,405)

 

 

$

(380,877)



F-20






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 4 – Other receivables


Other receivables consist of the following:


 

 

 December 31, 2016

 

 

December 31, 2015

 

 

June 30, 2017

 

 

 

 

 

 

 

 

(Unaudited)

Security deposits

 

 

$

10,552

 

 

 

$

-

 

 

$

73,370

Employee advances

 

 

28,950

 

 

 

3,093

 

 

66,418

Total

 

 

$

39,502

 

 

 

$

3,093

 

 

$

139,788


Note 5 – Prepaid expenses


Prepaid expenses consist of the following:


 

 

 December 31, 2016

 

 

December 31, 2015

 

 

June 30, 2017

 

 

 

 

 

 

 

 

(Unaudited)

Cloud services

 

 

$

7,083 

 

 

 

$

614

 

 

$

1,847 

Rental

 

 

 

 

 

87,205

 

 

12,242 

Platform

 

 

15,839 

 

 

 

-

 

 

7,375 

Advertising

 

 

1,024,000 

 

 

 

-

 

 

1,001,185 

Marketing and promotion

 

 

486,251 

 

 

 

-

 

 

1,343,092 

Professional services

 

 

 

 

 

-

 

 

2,030,000 

Others

 

 

633 

 

 

 

-

 

 

207 

     Subtotal

 

 

1,533,806 

 

 

 

87,819

 

 

4,395,948 

Less: long term prepaid expenses

 

 

(1,041,265)

 

 

 

-

 

 

(2,454,832)

Total

 

 

$

492,541 

 

 

 

$

87,819

 

 

$

1,941,116 


Note 6 – Property and equipment, net


Property and equipment consist of the following:


 

 

 December 31, 2016

 

 

December 31, 2015

 

 

June 30, 2017

 

 

 

 

 

 

 

 

(Unaudited)

Office equipment and furniture

 

 

$

77,587 

 

 

 

$

1,787

 

 

$

111,487 

Leasehold improvement

 

 

46,360 

 

 

 

19,558

 

 

50,088 

     Subtotal

 

 

123,947 

 

 

 

21,345

 

 

161,575 

Less: accumulated depreciation and amortization

 

 

(37,264)

 

 

 

-

 

 

(62,721)

Total

 

 

$

86,683 

 

 

 

$

21,345

 

 

$

98,854 


Depreciation and amortization expense for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015 amounted to $38,973 and $0, respectively. Depreciation and amortization expense for the six months ended June 30, 2017 and 2016 amounted to $24,310 and $16,915, respectively.




F-21






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7 – Taxes


Income tax

 

Cayman Islands


Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed


PRC


Under the Income Tax Laws of the PRC, companies are subject to income tax at a rate of 25%.


The following table reconciles China statutory rates to the Company’s effective tax rate:


 

For the year ended

 

For the period from November 17, 2015 (inception) to

 

For the six months ended

 

For the six months ended

 

December 31, 2016

 

December 31, 2015

 

June 30, 2017

 

June 30, 2016

 

 

 

 

 

(Unaudited)

 

(Unaudited)

China income tax rate

25.0%

 

25.0%

 

25.0%

 

25.0%

Effect of permanent difference

0.0%

 

0.0%

 

(1.5%)

 

0.0%

Effective tax rate

25.0%

 

25.0%

 

23.5%

 

25.0%


Deferred tax assets – China


According to Chinese tax regulations, net operating losses can be carried forward to offset operating income for five years. Significant components of deferred tax assets were as follows:


 

 

 

December 31, 2016

 

 

December 31, 2015

 

 

 

June 30, 2017

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net operating losses

 

 

 

$

-

 

 

 

$

35,082

 

 

 

$

192,613

Depreciation and amortization

 

 

 

5,503

 

 

 

-

 

 

 

8,605

Deferred revenues

 

 

 

3,320

 

 

 

-

 

 

 

5,673

Total

 

 

 

$

8,823

 

 

 

$

35,082

 

 

 

$

206,892


The Company incurred an operating loss of $141,692 for the year ended December 31, 2015, which could be carried forward to offset income for the next five years. The Company recorded non-current deferred tax assets of $35,082 as of December 31, 2015. 100% of the deferred tax assets from 2015 was recognized as of December 31, 2016. The Company recorded non-current deferred tax assets of $8,823 as of December 31, 2016. For the six months ended June 30, 2017, the Company incurred an operating loss and other temporary differences of $809,050 and recorded non-current deferred tax assets of $206,892.


The Company believes that a valuation allowance is not deemed necessary for the deferred assets because there will be sufficient operating income generated in future years based on the fact that the Company generated profits for the year ended December 31, 2016.  The management is expected to generate profits in the coming periods.



F-22






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Uncertain tax positions


The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of December 31, 2016 and 2015 and June 30, 2017, the Company did not have any significant unrecognized uncertain tax positions.


Taxes payable consisted of the following: 


 

 

December 31, 2016

 

 

December 31, 2015

 

 

June 30, 2017

 

 

 

 

 

 

 

 

(Unaudited)

VAT taxes payable

 

 

$

48,468

 

 

 

$

-

 

 

$

6,043

Income taxes payable

 

 

28,550

 

 

 

-

 

 

-

Other taxes payable

 

 

5,138

 

 

 

-

 

 

2,543

Totals

 

 

$

82,156

 

 

 

$

-

 

 

$

8,586


Note 8 – Concentration of Risk


Credit Risk


Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents.  As of December 31, 2016 and 2015 and June 30, 2017, $6,847,116, $674,515 and $768,940 were deposited with a bank located in the PRC, respectively.  As of December 31, 2016 and 2015 and June 30, 2017, $531,804, $0 and $4,796,875 were deposited with a third party platform fund account located in the PRC, respectively . These balances are not covered by insurance.  While management believes that these financial institutions and third party fund holder are of high credit quality, it also continually monitors their credit worthiness.


Customer concentration risk


For the year ended December 31, 2016, two borrowers paid transaction and management fees which accounted for 45.8% and 31.1% of the Company’s operating revenues, respectively. For the six months ended June 30, 2017, two borrowers paid transaction and management fees which accounted for 30.4% and 14.5% of the Company’s operating revenues. For the six months ended June 30, 2016, two borrowers paid transaction and management fees accounted for 72.6% and 27.4% of the Company’s operating revenues.


Note 9 – Equity


Capital contribution


For the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, Shanghai Dianniu received $6,860,367 and $936,600 of capital contributions, respectively, from controlling interest shareholders. For the year ended December 31, 2016, the Company received $1,184,202 of capital contributions from non-controlling interest shareholders.


Restricted net assets


The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws and regulations permit payments of dividends by Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun.



F-23






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion.  The statutory reserve funds and the discretionary funds are not distributable as cash dividends.  Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.


As of December 31, 2016 and 2015 and June 30, 2017, Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun collectively attributed $6,189, $0 and $0 of retained earnings for their statutory reserves, respectively.


As a result of the foregoing restrictions, Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun are restricted in their ability to transfer their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun from transferring funds to the Company in the form of dividends, loans and advances. As of December 31, 2016 and 2015 and June 30, 2017, amounts restricted are the net assets of Golden Bull WFOE, Shanghai Dianniu and Shanghai Baoxun, which amounted to $8,819,800, $818,753 and $7,828,378 respectively.


Ordinary shares issuances


On June 23, 2017, 10,942,360 ordinary shares of the Company were issued to the Participating Shareholders in connection with the restructuring of the Company.  


On June 23, 2017, 796,640 ordinary shares of the Company were issued for consulting services in connection with internet finance industry development, financing consultation for the period July 2017 to June 2020.  The valuation of these shares was valued at approximately $1.6 million at $1.98 per share determined by the recent cash transactions contributed in Shanghai Dianniu in December 2016 in exchange of the Company’s shares in connection with the restructuring of the Company.


On June 23, 2017, 650,000 ordinary shares of the Company were issued for consulting services in connection with private financing and road show services in relation to the Company’s initial public offering (“IPO”) for the period July 2017 until the successful completion of the Company’s IPO.  The valuation of these shares was valued at approximately $1.3 million at $1.98 per share determined by the recent cash transactions contributed in Shanghai Dianniu in December 2016 in exchange of the Company’s shares in connection with the restructuring of the Company.


On June 23, 2017, 585,000 ordinary shares of the Company were issued for consulting services in connection with financial, and accounting services in connection the Company’s IPO.  The valuation of these shares was valued at approximately $1.2 million at $1.98 per share determined by the recent cash transactions contributed in Shanghai Dianniu in December 2016 in exchange of the Company’s shares in connection with the restructuring of the Company. Approximately $1.0 million fair value of services fee with a term for the period July 2017 until the successful completion of the Company’s IPO with approximately $0.2 million fair value of service fee with a term for the period July 2017 to June 2018.




F-24






GOLDEN BULL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 10 – Commitments and contingencies


Contingencies


From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity. As of June 30, 2017, the Company was not aware of any litigations or lawsuits against them.


Lease commitment


The Company has entered into non-cancellable operating lease agreements for an office space and two apartment units for its executives. The office space has a lease term expiring in January 2018 with a monthly rental of approximately $28,000. The two apartment units have lease terms are expiring in November 2017 and May 2018 with monthly rental of approximately $1,000 and $3,500 respectively.


The Company’s commitments for minimum lease payment under these operating leases as of June 30, 2017 are as follow:


Twelve months ending June 30,

 

 Minimum lease payment

2018    

 

$

208,192

 Total minimum payments required

 

$

208,192


Rent expense for the year ended December 31, 2016 and for period from November 17, 2015 (inception) to December 31, 2015 was $359,448 and $40,618, respectively. Rent expense for the six months ended June 30, 2017 and 2016 was $188,312 and $166,344, respectively.


Note 11 – Subsequent Events


The Company evaluated all events and transactions that occurred after June 30, 2017 up through the date the Company issued these unaudited condensed consolidated financial statements on December 21, 2017.


On November 3, 2017, prior to completion of its initial public offering, the shareholders of the Company resolved to sub-divide the 50,000 issued ordinary shares of a par value of US $1.00 per share in the capital of the Company into 5,000,000 ordinary shares of a par value of US $0.01 per share and increase the authorized share capital of the Company to 50,000,000 ordinary shares from 50,000 ordinary shares.   Simultaneously, the Board of Directors of the Company adopted a consent to issue additional 8,000,000 ordinary shares to the Company’s existing shareholders proportionally with their respective existing ownership percentage immediately prior to this new issuance.  


The Company considered the above transactions as a 260 for 1 stock split of its ordinary shares and deemed the original 50,000 ordinary shares were part of the Company’s recapitalization to result in 13,000,000 ordinary shares issued and outstanding prior to completion of its initial public offering.  The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively restated to reflect the stock split.




F-25






Note 12 – Condensed financial information of the parent company


The Company performed a test on the restricted net assets of consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company.


The subsidiary did not pay any dividend to the Company for the periods presented.  For the purpose of presenting parent only financial information, the Company records its investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income (loss) of the subsidiary is presented as “share of income (loss) of subsidiary”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.


The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2016 and 2015 and June 30, 2017.


PARENT COMPANY  BALANCE SHEETS

 

 

 

 

 

 

December 31,

 

December 31,

 

June 30,

 

 

 

 

 

2016

 

2015

 

2017

 

 

 

 

 

 

 

 

 

 (Unaudited)

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Prepaid expenses

  

$

 

$

 

$

976,667 

 

Prepaid IPO costs

 

 

 

2,000,000 

 

 

Total current assets

 

 

 

2,976,667 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

Investment in subsidiary

 

7,859,744 

 

818,753 

 

7,523,146 

 

Prepaid expenses

 

 

 

1,053,333 

 

 

Total other assets

 

 

7,859,744 

 

818,753 

 

8,576,479 

 

 

 

 

 

 

 

 

 

 

         Total assets

  

$

7,859,744 

 

$

818,753 

 

$

11,553,146 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

  

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Ordinary shares, $0.01 par value, 50,000,000 shares authorized,

 

 

 

 

 

 

 

 

26,000, 26,000 and 13,000,000 share issued and outstanding as of December 31, 2016 and 2015 and June 30, 2017, respectively*

 

260 

 

260 

 

130,000  

 

Shares subscription receivables

 

(45,457)

 

(100)

 

(45,457)

 

Additional paid-in capital

 

8,046,392  

 

936,440  

 

11,964,505  

 

Statutory reserves

 

6,189 

 

 

6,189 

 

Retained earnings (accumulated deficit)

 

48,447 

 

(106,269)

 

(489,908)

 

Accumulated other comprehensive loss

 

(196,087)

 

(11,578)

 

(12,183)

 

 

Total shareholders' equity

 

7,859,744 

 

818,753 

 

11,553,146 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

7,859,744 

 

$

818,753 

 

$

11,553,146 


*Giving retroactive effect to the 260 for 1 split effected on November 3, 2017.



F-26









PARENT COMPANY STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Period from

 

 

 

 

 

 

 

 

 

November 17, 2015

 

 

 

 

 

 

 

For the Year Ended

 

(Inception) to

 

For the Six Months Ended June 30,

 

 

 

December 31, 2016

 

December 31, 2015

 

 2017

 

2016

 

 

 

 

 

 

 

 (Unaudited)

 

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

SHARE OF INCOME (LOSS) OF SUBSIDIARY

$

160,905 

 

$

(106,269)

 

$

(538,355)

 

$

(380,877)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

160,905 

 

(106,269)

 

(538,355)

 

(380,877)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

(184,509)

 

(11,578)

 

183,904 

 

(28,469)

COMPREHENSIVE LOSS

$

(23,604)

 

$

(117,847)

 

$

(354,451)

 

$

(409,346)




F-27









PARENT COMPANY STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

For the Period from

 

 

 

 

 

 

 

 

 

 

 

November 17, 2015

 

 

 

 

 

 

 

 

 

For the Year Ended

 

(Inception) to

 

For the Six Months Ended June 30,

 

 

 

 

 

December 31, 2016

 

December 31, 2015

 

 2017

 

2016

 

 

 

 

 

 

 

 

 

 (Unaudited)

 

 (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

$

160,905 

 

$

(106,269)

 

$

(538,355)

 

$

(380,877)

 

Adjustments to reconcile net income (loss) to cash used in

 

 

 

 

 

 

 

    

operating activities:

 

 

 

 

 

 

 

 

 

 

Equity (income) loss of subsidiary

(160,905)

 

106,269 

 

538,355 

 

380,877 

 

 

 

 

Net cash used in operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHANGES IN CASH

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH, beginning of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH, end of period

$

 

$

 

$

 

$









F-28






2,000,000 Ordinary Shares



[GOLDENBULLF1ACONTROLDOC008.JPG]


GOLDEN BULL LIMITED

Minimum Offering: $10,000,000

Maximum Offering: $15,000,000

 

Until           , 2017 all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.  This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 

 

 




 

The date of this prospectus is _____________

 

  

  

  

 



136





PART II


INFORMATION NOT REQUIRED IN PROSPECTUS


ITEM 6.  Indemnification of Directors and Officers


We are a Cayman Islands exempted company.  Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.  Our articles of association provide for indemnification of our officers and directors for any liability incurred in their capacities as such, except through their own willful negligence or default.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

ITEM 7.  Recent Sales of Unregistered Securities


In addition to the capital contributions discussed under “Related Party Transactions,” during the past three years, our operating entity, Dianniu, issued and sold the securities described below without registering the securities under the Securities Act. None of these transactions involved any underwriters’ underwriting discounts or commissions, or any public offering. We believe that each of the following issuances to private placement investors was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering. We believe that our issuances of incentive shares and options to our employees, directors, officers and consultants were exempt from registration under the Securities Act in reliance on Rule 701 under the Securities Act.


In May 2016, Dianniu entered into an investment agreement with Shaanxi Xifeng Investment Co., Ltd., a state owned institution (“Xifeng”), according to which Xifeng invested RMB 3 million (approximately $0.44 million) in exchange of 5% equity interest of Dianniu.  Dianniu also entered into an investment agreement with Huishi Equity Investment Fund Management (Shanghai) Co., Ltd. (“Huishi”), a state owned institution, according to which Huishi invested RMB 5 million (approximately $0.73 million) in exchange of 8.33% equity interest of Dianniu.  Each of these investors has the right to appoint one director to the board of directors of Dianniu and preemptive right in Diann’s subsequent equity issuances.  


On June 23, 2017, the Company issued 10,942,360 ordinary shares to the Participating Shareholders of Dianniu’s outstanding equity interests in connection with the restructuring of the Company.  



137







On June 23, 2017, the Company issued 796,640 ordinary shares to a consultant for services in connection with internet finance industry development and financing consultation from June 2017 to June 2019, subject to renewal, extension or termination by either party by giving thirty days’ written notice. These shares were valued at approximately $1.58 million at $1.98 per share determined by the recent cash transactions contributed in Dianniu in December 2016 in exchange of the Company’s shares in connection with the restructuring of the Company.


On June 23, 2017, the Company issued 650,000 ordinary shares for consulting services in connection with private financing and business due diligence from June 2017 to the completion of the IPO, subject to renewal, extension or termination by either party by giving thirty days’ written notice. These shares were valued at approximately $1.29 million at $1.98 per share determined by the recent cash transactions contributed in Dianniu in December 2016 in exchange of the Company’s shares in connection with the restructuring of the Company.


On June 23, 2017, the Company issued 585,000 ordinary shares to a consultant for services in connection with private financing and business due diligence consultation from July 2017 to June 2020. These shares were valued at approximately $1.2 million at $1.98 per share determined by the recent cash transactions contributed in Dianniu in December 2016 in exchange of the Company’s shares in connection with the restructuring of the Company.


On November 3, 2017, a total of 13,000,000 ordinary shares of the Company were issued to all its existing shareholders proportionally with their respective ownership prior to this issuance in connection with the restructuring of the Company.


  




138






ITEM 8.  Exhibits and Financial Statement Schedules


(a). Exhibits


The following exhibits are filed as part of this registration statement:


Exhibit No.

 

Description

1.1

 

Form of Underwriting Agreement

3.1

 

Certificate of Incorporation

3.2

 

Memorandum of Association

3.3

 

Articles of Association

3.4

 

Certificate of Incorporation on Change of Name

3.5

 

Amended and Restated Memorandum of Association*

3.6

 

Amended and Restated  Articles of Association*

4.1

 

Form of Underwriter’s Warrant

5.1

 

Opinion of Harney Westwood & Riegels as to the legality of the shares*

5.2

 

Opinion of Allbright Law Offices *

8.1

 

Opinion of Ellenoff Grossman & Schole LLP regarding certain U.S. tax matters*

10 .1

 

Business Cooperation Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.2

 

Technical Consulting and Service Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Dianniu Internet Finance Information Service Co., Ltd.

1 0.3

 

Form of Equity Pledge Agreement, by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Dianniu Internet Finance Information Service Co., Ltd. and equity holders of Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.4

 

Form of Equity Option Agreement, by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Dianniu Internet Finance Information Service Co., Ltd. and equity holders of  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.5

 

Form of Voting Rights Proxy and Finance Supporting Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Dianniu Internet Finance Information Service Co., Ltd. and equity holders of Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.6

 

Business Cooperation Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Baoxun Advertisement Design Co., Ltd.

10.7

 

Technical Consulting and Service Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Baoxun Advertisement Design Co., Ltd.

10.8

 

Form of Equity Pledge Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Baoxun Advertisement Design Co., Ltd. and equity holders of Shanghai Baoxun Advertisement Design Co., Ltd.

10.9

 

Form of Equity Option Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Baoxun Advertisement Design Co., Ltd. and equity holders of Shanghai Baoxun Advertisement Design Co., Ltd.

10.10

 

Form of Voting Rights Proxy and Finance Supporting Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Baoxun Advertisement Design Co., Ltd. and equity holders of Shanghai Baoxun Advertisement Design Co., Ltd.

10. 11

 

Supplement Account and System Custodian Agreement, dated  March 30, 2017, by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and  ChinaPnR Co., Ltd.

10.12

 

Lease Agreement, dated November 11, 2015, by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and Xinjiang Dushanzi Tianli  Technology Co. Ltd.



139






10.13

 

Form of Intermediary Service Agreement by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and Borrowers on its lending platform

10.14

 

Depository Cooperative Agreement, dated June 15, 2017, by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and Bank of Shanghai Co., Ltd.

10. 15

 

Form of Indemnification Escrow Agreement

21.1

 

List of subsidiaries of the Registrant

23.1

 

Consent of Friedman LLP

23.2

 

Consent of Harney Westwood & Riegels (included in Exhibit 5.1) *

24.1

 

Power of Attorney (included on the signature page of this Registration Statement)

 

 

_______________________

* To be filed by amendment



  

 



140





ITEM 9.  Undertakings


The undersigned registrant hereby undertakes that:

 

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by section 10(a)(3) of the Securities Act;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

 

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.


(4) To file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F (17 CFR 249.220f)” at the start of any delayed offering or throughout a continuous offering.

 

(5)(ii) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(6) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:



141






(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

 

The undersigned registrant hereby undertakes that:

 

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

  

  

 



142






SIGNATURES


Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Shanghai, China, on December 22, 2017.

 

  

GOLDEN BULL LIMITED

  

  

  

  

  

  

By:

/s/ Erxin Zeng

  

 

Name:

 Erxin Zeng

 

 

Title:

Chief Executive Officer and Chairman of the Board

 

 

 

(Principal Executive Officer)

 


POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of GOLDEN BULL LIMITED, a Cayman Islands exempted company, do hereby constitute and appoint Erxin Zeng and Xinxuan Hu, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments, exhibits thereto and other documents in connection therewith) to this Registration Statement and any subsequent registration statement filed by the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended, which relates to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.


Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

  

Date

  

  

  

  

  

/s/ Erxin Zeng

  

Chief Executive Officer and Director

(Principal Executive Officer)

  

  December 22, 2017

Erxin Zeng

  

  

  

  

  

  

  

  

Xinxuan Hu

  

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

  

  December 22, 2017

Xinxuan Hu

  

  

  

  

  

  

  

  

/s/ Xiaohui Liu

  

Director

  

  December 22, 2017

Xiaohui Liu

  

  

  

  

  

  

  

  

  

/s/ Wei Liang

  

   Director

  

  December 22, 2017

Wei Liang

  

  

  

  

  

  

  

  

/s/ Yanjun Cui

  

   Director

  

  December 22, 2017

Yanjun Cui

 

 

 

 

 

 

 

 

 

/s/ Hui Shen

 

   Director

 

December 22, 2017

Hui Shen

 

 

 

 




143






Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Golden Bull Limited has signed this registration statement on the 22 nd day of December 2017


 

Corporation Service Company

  

 

 

/s/ Paula S. Collins

 

Paula S. Collins

 

Authorized Representative





144







INDEX TO EXHIBITS

 

The following exhibits are filed as part of this registration statement:

 

Exhibit No.

 

Description

1.1

 

Form of Underwriting Agreement

3.1

 

Certificate of Incorporation

3.2

 

Memorandum of Association

3.3

 

Articles of Association

3.4

 

Certificate of Incorporation on Change of Name

3.5

 

Amended and Restated Memorandum of Association*

3.6

 

Amended and Restated  Articles of Association*

4 .1

 

Form of Underwriter’s Warrant

5.1

 

Opinion of Harney Westwood & Riegels as to the legality of the shares*

5.2

 

Opinion of Allbright Law Offices *

8.1

 

Opinion of Ellenoff Grossman & Schole LLP regarding certain U.S. tax matters*

10.1

 

Business Cooperation Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.2

 

Technical Consulting and Service Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.3

 

Form of Equity Pledge Agreement, by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Dianniu Internet Finance Information Service Co., Ltd. and equity holders of Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.4

 

Form of Equity Option Agreement, by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Dianniu Internet Finance Information Service Co., Ltd. and equity holders of  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.5

 

Form of Voting Rights Proxy and Finance Supporting Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Dianniu Internet Finance Information Service Co., Ltd. and equity holders of Shanghai Dianniu Internet Finance Information Service Co., Ltd.

10.6

 

Business Cooperation Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Baoxun Advertisement Design Co., Ltd.

10.7

 

Technical Consulting and Service Agreement, dated June 8, 2017, by and between Shanghai Fuyu Information and Technology Co., Ltd. and Shanghai Baoxun Advertisement Design Co., Ltd.

10.8

 

Form of Equity Pledge Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Baoxun Advertisement Design Co., Ltd. and equity holders of Shanghai Baoxun Advertisement Design Co., Ltd.

10.9

 

Form of Equity Option Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Baoxun Advertisement Design Co., Ltd. and equity holders of Shanghai Baoxun Advertisement Design Co., Ltd.

10.10

 

Form of Voting Rights Proxy and Finance Supporting Agreement by and among Shanghai Fuyu Information and Technology Co., Ltd., Shanghai Baoxun Advertisement Design Co., Ltd. and equity holders of Shanghai Baoxun Advertisement Design Co., Ltd.

10.11

 

Supplement Account and System Custodian Agreement, dated  March 30, 2017, by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and  ChinaPnR Co., Ltd.

10.12

 

Lease Agreement, dated November 11, 2015, by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and Xinjiang Dushanzi Tianli  Technology Co. Ltd.


 



145







10.13

 

Form of Intermediary Service Agreement by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and Borrowers on its lending platform

10.14

 

Depository Cooperative Agreement, dated June 15, 2017, by and between Shanghai Dianniu Internet Finance Information Service Co., Ltd. and Bank of Shanghai Co., Ltd.

10.15

 

Form of Indemnification Escrow Agreement

21.1

 

List of subsidiaries of the Registrant

23.1

 

Consent of Friedman LLP

23.2

 

Consent of Harney Westwood & Riegels (included in Exhibit 5.1) *

24.1

 

Power of Attorney (included on the signature page of this Registration Statement)

 

 

_______________________

* To be filed by amendment





146



Cooperation Agreement for Fund Escrow System Interface, Operation and Payment Settlement Service

Party A:

Shanghai Dianniu Internet Financial Information Service Co., Ltd.

Address:

Floor 35, Sino Life Tower, No. 707, Zhangyang Road, Pudong New Area, Shanghai

Phone:

021-61659027

Fax:

None

Postal code:

200120

Party B:

PnR Data Service Co., Ltd.

Address:

Building C5, Phase 2, Putian Industrial Park, No. 700, Yishan Road, Shanghai

Phone:

021-33323999

Fax:

021-33323830

Postal code:

200233

Whereas, Party A has expressed its intent to work with Party B's partner bank on escrow of funds of peer-to-peer lending (P2P lending), Party A and Party B have agreed as follows regarding the construction and operation of the P2P lending fund escrow interface system, as well as the payment settlement service related to the fund escrow system:

Clause 1 Descriptions of Service

1.1

Party B shall, in accordance with the requirements of its partner bank and regulatory authorities, connect Party A's P2P lending infomediary platform ("Party A's Platform") to the bank's accounting system and escrow Party A's P2P lending funds in the bank by completing the interface with the bank's system.

1.2

Party B will provide Party A with interface upgrade, operation and maintenance services after establishment of the interface with the partner bank.

1.3

Party B will provide Party A with system modules, including user information authentication, escrow account charge and cash withdrawal, transaction information query, user information management and other value-added functions.

Clause 2 System Functions

2.1

User information authentication: Party A and Party A's users (meaning natural persons, legal persons or other organizations registered as a borrower or lender on Party A's Platform) may access the bank's fund escrow system through the system interface provided by Party B, Party B's system authenticates the information of Party A's natural person users to assist them to set up bank escrow accounts. Party A shall ensure the natural person users are authentic, and the legal person or other organization users are entities that lawfully exist and are engaged in legitimate business activities. Party A shall strictly review the users' information and ensure that the information submitted through Party A's Platform is true, accurate, legal and valid. Party A and Party A's users shall abide by the account operation rules set forth by Party B's partner bank and work with Party B to complete the user information authentication.


2.2

Escrow account charge: Party A's users can use the system interface provided by Party B to use the payment service provided by Party B in P2P lending payment and settlement transactions, or payment services provided through the escrow bank, accomplishing functions such as charge and payment of fees for the escrow account (an account opened after approval by the partner bank, for which Party A or Party's users file an application through Party A, and the account is used only by Party A and Party A's users for P2P lending fund settlement during the term of the agreement) of P2P lending transactions. For escrow account charges made by Party A's users through payment services provided by the escrow bank are known as "other charges" hereunder.

2.3

Cash withdrawal from escrow account: Through the system interface provided by Party B, Party A and Party A's users can access the bank's escrow system and withdraw cash from the bank card attached to the escrow account opened at the partner bank by themselves. The time required for transfer depends on the cash withdrawal manner selected in the orders given by the bank's escrow system to Party A's system.




2.4

Quick charge for the escrow account. When a natural person user of Party A makes the first quick charge to his/her escrow account, he/she authorizes Party B to deduct an amount specified by him/her from his/her specified debit card, and Party B will verify the payment through a number of means including ID, name, bank card number and mobile phone number, and when the bank card attachment is verified, the escrow account charge transaction is completed. When another charge is made to the escrow account, after entry of the SMS verification code or confirmation of other verification methods required by Party B, the user will be deemed to have confirmed the transaction and its amount, and send an irrevocable instruction to Party B, who accordingly entrusts the bank or a third party to transfer funds from the user's bank card first attached by the user to the escrow account. After Party A' natural person user activates the quick charge function, the debit card attached will be considered as the only cash-withdrawing card for his/her escrow account, and without review and confirmation by Party B, the user shall not change, remove, or add such cash-withdrawing card or quick charge card for the escrow account.

2.4.1

Party A's natural person user shall be the legal holder of the bank debit card, the use of which shall not violate the legitimate rights and interests of any third party. Party A and Party A's natural person users shall not use the quick charge function of the escrow account to commit illegal acts such as cashing out, money laundering, gambling, fraud, and false transactions, otherwise Party B has the right to take actions in accordance with provisions of laws and regulations, and regulatory authorities.

2.4.2

Party A's natural person users shall be responsible for all the losses arising out of disclosure and misuse of sensitive information including but not limited to escrow account number or SMS verification code, and Party B shall be obliged to cooperate with Party A and Party A's users in the event of such risk event to take remedial measures.

2.4.3

When Party A's natural person users apply for removal of the attached bank card, Party A must strictly follow the removal processes issued by Party A, collect and review the natural person users' information, and ensure that the information is true, legal and valid. Party B's above operations according to the application of Party A's natural person user will be at the risk of Party A and Party A's natural person users.

2.4.4

Party A shall ensure that the instructions given to Party B are authorized by Party A's natural person user and are accurate. When Party B suffers a loss due to violation of this agreement by Party A or Party A's user, Party A or Party A's user shall take corresponding responsibility, and Party B will suspend or discontinue the quick charge function of the escrow account based on the risk.

2.5

Other functional services provided by Party B to Party A include but are not limited to transaction information query and user information management. Party B shall have the right to upgrade the system functions based on risk control and transaction regulation requirements, and Party A shall not refuse without cause. The launch of new functions to the account are subject to Party B's system display or supplementary agreements signed by the parties.

Clause 3 Rights and Obligations

3.1

Rights and Obligations of Party A

3.1.1

Party A shall provide Party B with true business qualification documents, brand information, business description and relevant legal proof, and authorize Party B to investigate and verify Party A's credit status as required for business management. Party A shall be liable for all the consequences arising from false, inaccurate, or incomplete information. When any change of Party A's business information may affect the cooperation of the parties, including but not limited to change of party, name, legal representative, or contact person with Party B, Party A shall notify Party in writing and provide relevant evidence as required by Party B.


3.1.2

Party A is responsible for the daily operation and maintenance of its own platform to ensure that the connection to Party B is established in accordance with the interface standards and data formats and other technical standards agreed by the parties. Party A shall not crack Party B's payment service system and program by reverse engineering, or copy, modify, compile, integrate and tamper with such system and program (including but not limited to source program, target program, software documentation, data running on local computer memory, client-to-server data, or server data), or modify or add the original functions of Party B's payment service system.

3.1.3

Party A shall strictly abide by the provisions of national laws, regulations and regulatory authorities, have the qualifications to engage in relevant business, obtain administrative license or filing according to the law, and ensure that its own platform business and the information released is legal, true and valid. Party A shall be solely responsible for any disputes arising from violation of the laws or regulations, false, obsolete or incomplete information on the website, and compensate Party B for the losses thus caused.

3.1.4

Party A shall ensure that all instructions given to Party B's system are timely, safe and confidential, are authorized by Party A's users and correct. Complaints by Party A's users, legal liabilities and all other consequences due to unauthorized or wrong instructions will be assumed by Party A, which will have nothing




to do with Party B.

3.1.5

Party A shall strictly review the qualification and credit of Party A's users. If there is any illegal transaction, Party A shall bear the corresponding legal liability. During the period of cooperation, Party A shall be responsible for Party B‘'s loss, including but not limited to economic loss or goodwill loss, arising out of Party A's non-compliant or illegal acts. Party A shall indemnify Party B against all losses suffered by Party B if Party A fails to perform its review obligations and Party B is held legally liable.

3.1.6

During the cooperation, Party A shall not transfer the interface technology, security protocol and certificate provided by Party B to any other third party without Party B's permission. After termination of the cooperation, Party A shall promptly destroy all the technical documents provided by Party B and shall not use or transfer them to any other third party.

3.1.7

Party A shall properly keep its administration account and password, and Party A shall bear all the losses caused by poor maintenance or use of the account and password. Party B will only provide assistance in accounting queries and password reset, and will not take responsibility for such losses. Party A shall properly retain the information and data (including but not limited to the information such as order number, customer name, ID number, date of transaction, transaction amount and other P2P lending information) from the transactions for a period of no less than five years from the completion date of completion of the transaction. The financial risk and liability due to Party A's default or other violations shall be borne by Party A.

3.1.8

Party A agrees that its business under this agreement will only be carried out using the system services provided by Party B. If Party A uses a system not provided by Party B, the relevant complaints and disputes thus caused will be resolved by Party A, and Party B has the right to terminate the cooperation without refunding any of the service costs.

3.1.9

In the event of a suspicious transaction, denial of a transaction by the cardholder or refusal to pay, suspected risk, or other circumstances where a regulatory body or other laws and regulations so require, Party A shall, at the request of Party B, provide relevant true information about Party A or Party A's users to judiciary authorities or other authorities or assist Party B in doing so.

3.1.10

Party A is responsible for dealing with customer disputes such as complaints, returns and other complaints caused by false information or content on its website, defects in quality of goods or services, and bear all legal liabilities. Party A shall indemnify Party B against all losses that occur due to the above reasons.

3.2

Rights and Obligations of Party B

3.2.1

Party B is responsible for the interface between Party A and escrow account system of the partner bank, and will provide the services agreed herein to Party A during the operation of the system, and may charge Party A in accordance with this agreement. Party B shall not be liable if Party A's qualifications fail to meet the access standards for escrow of the partner bank, and the partner bank and Party A are unable to start the cooperation or suspend/terminate the cooperation.


3.2.2 Party B shall be responsible for the safety, confidentiality, accuracy and timeliness of the information processing of its systems in accordance with the requirements of laws, regulations, regulatory authorities and cooperative banks.

3.2.3 Party B is responsible for accepting complaints related to system docking services and bears the corresponding responsibility due to fault. In addition, Party B shall not be liable for any commercial disputes between Party A and its users or between Party A and the cooperative bank.

3.2.4 Party B shall provide the payment service agreed upon in this Agreement for Party A. Party B has the right to retain the right to adjust according to the bank cooperation, but shall inform Party 3 business days in advance.

3.2.5 Party B is responsible for answering the questions related to transaction inquiries, data reconciliation and capital settlement from Party A and its users in the use of Party B’s system.

3.2.6 Party B shall have the right to update and maintain Party A’s interface on the basis of the bank custody system, and update the service system of Party B, and for the updating which may influence the running of Party A’s platform, Party B shall inform Party A 3 business days in advance, and



does not occupy Party A’s trading peak hours as far as possible to reduce the impact of Party A's business activities.

3.2.7 Party B shall accomplish corresponding operations according to the accurate orders sent by Party A, and be responsible for the safety, confidentiality and timeliness of the information processing of the system. Party B has the right at any stage through one or more ways such as real-name verification, bank card authentication, order matching and face recognition to verify whether the instructions issued by Party A was authorized by Party A, and Party B has the right to refuse the order which was not authorized by Party A or was not in accordance with the user’s actual authorization.

3.2.8 Party B may refuse to pay or claim for the amount that Party A / Party A’s users violates national laws and regulations or the relevant provisions of this agreement.

3.2.9 If Party A and its legal representative are listed in the blacklist by China Payment Clearing Association or Bank Clearing Corporation in the effective period of this agreement, Party B shall have the right to terminate the cooperation with Party A within 10 days after verification of the aforesaid circumstances and shall not bear any Breach of contract.

3.2.10 If Party A has the following circumstances, Party B has the right to refuse to provide quick withdrawal service:

(1) Party A and Party B have signed this Agreement for less than 90 days;

(2) The successive trading lasts less than 30 days in the validity of this Agreement;

3.2.11 Party B shall only provide the contents of the aforesaid service as stipulated in this Agreement, and shall not be responsible for any dispute not arising from the above-mentioned services.

3.2.12 Party B has the right to conduct on-site inspection and website inspection to Party A according to the need of risk control, including but not limited to whether the actual operation is true, whether the legal representative is true, whether the risk control management system is perfect, the situation of independent risk control department, and the matching degree of website transaction content and background data flow, Party A shall actively cooperate with Party B, and Party B has the right to take relevant measures according to the inspection results.


Clause 4 Brand management

4.1 Party B shall authorize Party A to use the brand identity of "PnR" in the validity period of this Agreement, including the standard edition and the standard combined edition of brand identity. Party A may only use Party B's logo on its free platform and related communication materials agreed upon in this Agreement. Party B shall strictly abide by the "PnR Brand User Manual" when using the brand identity and shall not modify, deform, discolor or attach other pictures, words and symbols which are not specified in VI Criterion.

4.2 Party A shall not use the “ChinaPnR” brand and the cooperative business hereunder to make false, exaggerated and misleading advertisements. Without the permission of Party B, Party A shall not authorize other third parties to use the “ChinaPnR” brand LOGO. The legal liabilities and



economic losses caused by Party A’s illegal use of Party B’s brand shall be solely borne by Party A. If the brand image of Party B is damaged due to Party A’s reason, Party B has the right to request rectification or cancellation of authorization and to hold Party A legally responsible therefor.


Clause 5 Fees

Party B shall charge Party A the service fee according to the following standards and charge the relevant fees according to the specified methods:


 

Charge

Concessionary Period

(Before June 30, 2017)

Normative linking technology service for banking system interface

RMB150,000/one-off

RMB100,000/one-off

Upgraded linkage to banking system interface and operation and maintenance service

RMB120,000/one time/year

During the term of this agreement, Party A shall pay a lump sum of RMB60,000 , and the standard cost of the following year is RMB150,000/one time/year

Related access license for payment system (including user information authentication)

RMB120,000/one time/year




Payment service item

Content

Fee

Escrow account top-up

Personal online banking top-up (only for debit card transactions)

1.5 of the top-up amount in case of Industrial and Commercial Bank of China, Agriculture Bank of China, China Construction Bank or China CITIC Bank

2.5 of the top-up amount in case of other banks

Enterprise online banking top-up

RMB10/bill

Quick top-up

1.5 of the top-up amount

Other top-up


0.5 of the top-up amount

Withdraw cash from escrow account

Quick cash withdrawal, that is, the cash payment arrives at the designated account at the withdrawal date (T day)

0.5 of withdrawal amount/day + RMB2/bill

General cash withdrawal, that is, the cash payment arrives at the designated account at T+1 working days

RMB2/bill

Note: the mark indicates the payment service function opted to open by Party A

The above expenses shall be deducted from the exclusive account for settling Party A’s handling fee, and the transaction fails when the balance of the account is insufficient.

Party B shall settle the bank account designated by Party A on a T+1 working days basis after Party A requests settlement of the exclusive account for settling the handling fee. Party A designates the following accounts as the initial settlement account:

Account Name: Shanghai Dianniu Internet Financial Information Services Co., Ltd (Subject to the compliance with the name registered in the industrial and commercial administration)

Account No.: 11014882072002

Opening Bank: Ping An Bank Co., Ltd., Shanghai Lujiazui Sub-branch







       Banks supporting personal online banking top-up:

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Construction Bank, Bank of Communications, Minsheng Bank, China Merchants Bank, Everbright Bank, Industrial Bank, Pudong Development Bank, China Postal Savings Bank, Shanghai Bank, Shanghai Rural Commercial Bank, CITIC Bank, Fudian Bank.

Banks supporting enterprise online banking top-up:

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Construction Bank, Bank of Communications, China Merchants Bank, Everbright Bank, Pudong Development Bank, Ping An Bank, Beijing Rural Commercial Bank.

Banks supporting quick top-up:

Industrial and Commercial Bank of China, Agricultural Bank of China, Shanghai Bank, Construction Bank, Bank of China, Everbright Bank, Industrial Bank, CITIC Bank, Ping An Bank, Shanghai Pudong Development Bank, China Bohai Bank, Postal Savings Bank.

       If the user of Party A uses the quick cash withdrawal at the working day immediately prior to the holiday (including weekends and legal holidays), it shall be charged at 0.5 of the withdrawal amount/day * (the number of holiday days + 1) + RMB2/bill.

       Party B shall have the right to adjust the quantity, rate as well as the limit for single bill or single day of the supporting banks based on  the risk control or bank cooperation, and Party B will inform Party A in advance of such adjustment.


Clause 6 Terms of Settlement and Payment

6.1 Party A shall promptly pay in a lump sum to Party B the relevant expenses involved in the system service items agreed in Article V hereof, and the payment shall not be later than five working days after the signing of this agreement. Party B shall issue the invoice to Party A within 15 working days after receiving the corresponding payment.

6.2 In the event Party A unilaterally terminates this agreement within the validity of this agreement, Party B will not return all the payment paid by Party A.

6.3 In case of the renewal of the agreement as provided herein, Party A shall pay to Party B the relevant payment involved in the system service items agreed in Article V hereof (other than the one-off cost) within the five working days after the commencement of automatic renewal. Party B shall issue the invoice to Party A within 15 working days after receiving the corresponding payment.

Party B: Account Name: Shanghai PnR Data Service Co., Ltd

Account No.: 98280154740016037



Opening Bank: Shanghai Pudong Development Bank, Minhang Sub-branch


Clause 7 Reconciliation

Party A may query the reconciliation information through the interface provided by Party B. The reconciliation documents downloaded by Party A include all transactions received by Party A and its users that are replied as successful online during the trading day as well as the transactions for which the bank or Party B’s account system has successfully deducted the payment and for which Party A and its users fail to receive the reply from Party B during the trading day.


Clause 8 Intellectual Property

Either party has all the ownership rights related to the content of its own network services, including but not limited to words, software, sound, pictures, videos, charts, advertisements, e-mails. All these contents are protected by the laws in relation to, among others, copyrights, trademark rights, intellectual property rights and property rights.


Clause 9 Confidentiality Obligation

The Parties shall keep confidential the business and technical secrets of each other known during the performance of this Contract. Neither Party shall disclose the business and technical secrets of the other Party known to any third party, nor shall it improperly use the same. Upon termination, change, or dissolution of this Agreement, either Party’s confidentiality obligation shall remain valid, until the business and technical secrets of the other Party are made known to the public for reasons not attributable to such Party.


Clause 10 Risk Disclosure

10.1 Party B shall provide professional system and payment services for Party A, and shall not be involved in Party A’s commercial activities. Party B assumes no legal liability for any dispute between Party A and the user over the collection of charges, breach of contract during the operation of the platform, etc.

10.2 Party B shall provide Party A with the services as specified herein, and it assumes no responsibility for operational risks or guarantee of the platform.

10.3 Party A shall ensure that Party B will not be held liable for any economic or reputation loss due to Party A’s commercial activities. Where Party A encounters difficulty in fund flow, carries out business in violation of laws or closes down its business, or is suspected of a criminal crime of illegal fund raising, etc., Party A shall independently assume all the consequences arising therefrom.


Clause 11 Force Majeure

11.1 The “Force Majeure” means an objective circumstance which occurs upon conclusion of this Agreement and cannot be foreseen, avoided or overcome by the affected Party. In the event of suspension of the services provided by Party B due to upgrading or failure of telecommunication or bank systems or other reasons not attributable to Party B’s willful misconduct or gross negligence, Party B shall not be liable for breach.

11.2 Either Party that is prevented from performing, in whole or in part, this Agreement as a result of the Force Majeure may be exempted in whole or in part from its responsibilities hereunder. Upon occurrence of the Force Majeure, the Parties must immediately negotiate and determine whether to continuously perform or terminate this Agreement.


Clause 12 Reservation of Right and Subsequent Legislation

12.1 No failure by either Party to enforce any rights granted hereunder or to take action against the other Party in the event of any breach hereunder shall be construed as a waiver of such rights or the right to hold the other Party liable for breach.

12.2 Where it is necessary to adjust the contents of cooperation due to the subsequent national legislation or changes in the legal and regulatory provisions, either Party may modify or supplement this Agreement in accordance with the subsequent national legislation or relevant legal and regulatory provisions, and the Parties shall negotiate about the subsequent cooperation and sign a supplementary agreement. Where Party B becomes unqualified to provide the services hereunder due to such changes and renders it impossible for continuously perform this Agreement, Party B may dissolve this Agreement without any liability for breach.


Clause 13 Settlement of Disputes and Governing Law

Any and all disputes arising out of or in connection with this Agreement shall be settled by the Parties through amicable negotiations. If no agreement is reached through negotiations, either Party may file a lawsuit with the competent court at Party B’s locality.

The conclusion, effectiveness, change, performance, dissolution, termination, and interpretation of this Agreement and all matters arising therefrom shall be governed by the laws and regulations of the People’s Republic of China.


Clause 14 Term and Termination

14.1 The term of this Agreement is from April 3, 2017 to April 2, 2018 .

This Agreement shall be automatically extended for another year if neither Party proposes to terminate this Agreement within one month prior to the expiration of this Agreement.

14.2 Under any of the following circumstances, the observing Party may immediately terminate this Agreement by serving a written notice to the breaching Party:

14.2.1 Either Party fails to perform relevant obligations in breach of this Agreement and fails to correct its breach upon written notification by the other Party;

14.2.2 Either Party commits a material breach of this Agreement within the term of this Agreement and renders it impossible to realize the purpose of the Agreement; or

14.2.3 Either Party incurs complaints from or disputes with users and other risk events due to breach of this Agreement within the term of this Agreement and causes other losses to the other Party including but not limited to loss of reputation and actual economic loss.

14.3 Under any of the following circumstances, Party B is entitled to send a rectification notice or risk warning letter to Party A, and take necessary restriction measures; if Party A fails to meet Party B’s rectification requirements within the time limit specified by the rectification notice, Party B is entitled to immediately terminate this Agreement by serving a written Notice of Dissolution of the Agreement to Party A, and claim compensation from Party A for its losses incurred under the following circumstances, and Party A shall have no right to request Party B to refund the paid service charges:

14.3.1 Party A’s website is suspected of violating laws and regulations (including but not limited to: committing illegal fund raising, illegal absorption of public deposits or other violations, conducting business operations in bad faith, defrauding of or stealing the users’ funds, receiving warnings from or being ordered to suspend its business by or receiving punishments from judiciary authorities and financial regulators, etc.);

14.3.2 Party B identifies any major risk in Party A’s transactions through petrol inspection on the site or on Party A’s website or through judgment by Party B’s risk control system, and Party A rejects to cooperate with Party B to take relevant measures;

14.3.3 Party A incurs any risk event during the use of the system, including but not limited to: complaints from Party A’s users that cause bad effects or fund losses to Party B, abnormal operation of the website or overdue repayment that affects Party A’s normal operation or causes reputation and fund losses to Party B, failure to withdraw cash, failure to conduct point-to-point operation based on Party A’s users, and frequent request for offline account regulation without justified reasons;

14.3.4 There is any material change in Party A’s business qualifications, resulting in noncompliance with the cooperation purpose hereunder.

14.4 During rectification, if Party B finds any risks in Party A’s relevant behaviors, Party B is entitled to start a risk security mechanism (including but not limited to notifying the bank of freezing the funds in the questionable account and restricting the account functions) while sending a written Notice of Dissolution of the Agreement in order to protect the fund security of Party A’s users.


Clause 15 Miscellaneous

15.1 In case of any conflicts or discrepancies between this Agreement and any previous similar agreements concluded between the Parties, the former shall prevail.

15.2 This Agreement is made in duplicate, one for each Party, both of which shall be equally authentic and take effect upon being signed and stamped by the Parties’ duly authorized signatories.


(The remainder of this page intentionally left blank)

(Signature Page)


Party A: dianniu98.com

Party B: Pnr Data Service Co., Ltd.

(Seal)

(Seal)

Signature of Legal Representative (or Authorized Representative): Zeng Erxin

Signature of Legal Representative (or Authorized Representative): Zhonghongbo (Seal)


Signing Date: March 30, 2017


Signing Date: March 30, 2017





Exhibit 3.1

[EXHIBIT31001.JPG]



The Companies Law

(Revised)


Company Limited by Shares


Memorandum of Association

Of


Point Cattle International Limited



1.

The name of the Company is Point Cattle International Limited .


2.

The registered office will be situate at the offices of Corporate Filing Services Ltd., P.O. Box 613, Harbour Centre, George Town, Grand Cayman KY1-1107, Cayman Islands or at such other place in the Cayman Islands as the Directors may from time to time decide.


3.

The objects for which the Company is established are unrestricted and the Company shall have full power to carry out any object not prohibited by any law as provided by Section 7 (4) of the Companies Law. (Revised).


4.

Except as prohibited or limited by the laws of the Cayman Islands, the Company shall have full power and authority to carry out any object and shall have and be capable of from time to time and at all times exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate in any part of the world whether as principal, agent, contractor or otherwise.


5.

The Company shall not be permitted to carry on any business where a licence is required under the laws of the Cayman Islands to carry on such a business until such time as the relevant licence has been obtained.


6.

If the Company is an exempted company, its operations will be carried on subject to the provisions of Section 174 of the Companies Law (Revised).


7.

The liability of each Member is limited to the amount from time to time unpaid on such Member’s share.









8.

The authorised share capital of the Company is US$50,000 consisting of 50,000 shares of US$1.00 each with the power for the Company to increase or reduce the said capital and to issue any part of its capital, original or increased, with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions; and so that, unless the condition of issue shall otherwise expressly declare, every issue of shares, whether declared to be preference or otherwise, shall be subject to the power hereinbefore contained.

The Subscriber whose name and address is subscribed herein is desirous of being formed into a Company limited by shares and in pursuance of this Memorandum of Association, the Subscriber agrees to take the shares in the capital of the Company set opposite their name.



NO OF SHARES

NAME OF

TAKEN BY

SUBSCRIBER

ADDRESS

OCCUPATION

SUBSCRIBER

______________________________________________________________


N.D. Nominees Ltd.

P.O. Box 61

Nominee Company

One

Grand Cayman

KY1-1102

Cayman Islands






___________________________________

N.D. Nominees Ltd.

By its duly authorized officer.



DATED the 17 th day of February, 2017






___________________________________

            Witness to above signature:




2




The Companies Law

(Revised)


Company Limited by Shares


Articles of Association

Of


Point Cattle International Limited


1.

The Regulations contained or incorporated in Table A of the First Schedule of the Companies Law (as defined below) shall not apply to this Company.


INTERPRETATION


2.

(a)

In these Articles the following terms shall have the meanings set opposite unless the context otherwise requires:-


Articles

these Articles of Association as from time to time amended by Special Resolution


Auditors

the Auditors for the time being of the Company, if any


Company

Point Cattle International Limited


Directors

the directors of the Company for the time being or, as the case may be, the directors assembled as a board


the Law

the Companies Law (Revised) of the Cayman Islands and any amendment or other statutory modification thereof and where in these Articles any provision of the Law is referred to, the reference is to that provision as modified by law for the time being in force


Member

a person who is registered in the Register of Members as the holder of any Share in the Company


Month

a calendar month







Ordinary

a resolution of a general meeting passed by a majority of Resolution  the Members entitled to vote thereat present at the meeting

or a written resolution signed by all Members entitled to vote.


Registered

the registered office of the Company as provided in

Office

Section 50 of the Law


Register of

the register of Members to be kept pursuant to section 40 of Members  the Law


Secretary

any person appointed by the Directors to perform any of the duties of the secretary of the Company and including any assistant secretary


Seal

the common seal of the Company or any facsimile for official seal for use outside of the Cayman Islands


Share

an ordinary voting share in the capital of the Company


Special

a resolution of a general meeting passed by a two-thirds Resolution  majority of the Members entitled to vote thereat present at

the meeting or a written resolution signed by all Members

entitled to vote and otherwise in accordance with Section 60 of the Law


(b)

Unless the context otherwise requires, expressions defined in the Law and used herein shall have the meanings so defined.


(c)

In these Articles unless the context otherwise requires:-


(i)

words importing the singular number shall include the plural number and vice-versa;


(ii)

words importing the masculine gender only shall include the feminine gender; and


(iii)

words importing persons only shall include companies or associations or bodies of persons whether incorporated or not.


(d)

The headings herein are for convenience only and shall not affect the construction of these Articles.






2







3.

(a)

Subject to the provisions, if any, in that behalf in the Memorandum of Association, and without prejudice to any special rights previously conferred on the holders of existing Shares, any Share may be issued with such preferred, deferred, or other special rights, or such restrictions, whether in regard to dividend, voting, return of Share capital or otherwise, as the Company may from time to time by Special Resolution determine, and subject to the provisions of section 37 of the Law, any Share may, with the sanction of a Special Resolution, be issued on the terms that it is, or at the option of the Company or the holder is liable, to be redeemed.


(b)

If at any time the share capital is divided into different classes of Shares, the rights attached to any class (unless otherwise provided by the terms of issue of the Shares of that class) may be varied with the consent in writing of the holders of three-fourths of the issued Shares of that class or with the sanction of a resolution passed by not less than three-fourths of such holders of the Shares of that class as may be present in person or by proxy at a separate general meeting of the holders of the Shares of that class.  To every such separate general meeting, the provisions of these Articles relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be any one or more persons holding or representing by proxy not less than one-third of the issued Shares of the class and that any holder of Shares of the class present in person or by proxy may demand a poll.


4.

(a)

Every person whose name is entered as a Member in the Register of Members shall, without payment, be entitled to a certificate under the seal of the Company specifying the Share or Shares held by him and the amount paid up thereon, provided that in respect of a Share or Shares held jointly by several persons, the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a Share to one of several joint holders shall be sufficient delivery to all.


(b)

If a Share certificate is defaced, lost or destroyed it may be renewed on payment of such fee, if any, and on such terms, if any, as to evidence and indemnity, as the Directors think fit.


5.

Except as required by law, no person shall be recognised by the Company as holding any Share upon any trust, and the Company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or actual interest in any Share (except only as by these Articles or by law otherwise provided or under an order of a court of competent jurisdiction) or any other rights in respect of any Share except an absolute right to the entirety thereof in the registered holder, but the Company may in accordance with the Law issue fractions of Shares.




3







6.

The Shares shall be at the disposal of the Directors, and they may (subject to the provisions of the Law) allot, grant options over, or otherwise dispose of them to such persons, on such terms and conditions, and at such times as they think fit, but so that no Share shall be issued at a discount, except in accordance with the provisions of the Law.

LIEN


7.

The Company shall have a first and paramount lien on every Share (not being a fully paid Share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that Share, and the Company shall also have a lien on all Shares (other than fully paid-up Shares) standing registered in the name of a single person for all moneys presently payable by him or his estate to the Company; but the Directors may at any time declare any Share to be wholly or in part exempt from the provision of this Article.  The Company's lien, if any, on a Share shall extend to all dividends payable thereon.


8.

The Company may sell, in such manner as the Directors think fit, any Shares on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the Share, or the persons entitled thereto by reason of his death or bankruptcy.


9.

For giving effect to any such sale, the Directors may authorise some person to transfer the Shares sold to the purchaser thereof.  The purchaser shall be registered as the holder of the Shares comprised in any such transfer and he shall not be bound to see to the application of the purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.


10.

The proceeds of the sale shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the Shares prior to the sale) be paid to the person entitled to the Shares at the date of the sale.


CALLS ON SHARES


11.

The Directors may from time to time make calls upon the Members in respect of any moneys unpaid on their Shares provided that no call shall be payable earlier than one month from the last call; and each Member shall (subject to receiving at least fourteen days, notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on his Shares.




4







12.

The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof.


13.

If a sum called in respect of a Share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest upon the sum at the rate of six per cent per annum from the day appointed for the payment thereof to the time of the actual payment, but the Directors shall be at liberty to waive payment of that interest wholly or in part.


14.

The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the amount of the Share, or by way of premium, as if the same had become payable by virtue of a call duly made and notified.


15.

The Directors may make arrangements on the issue of Shares for a difference between the holders in the amount of calls to be paid and in the times of payment.


16.

The Directors may, if they think fit, receive from any Member willing to advance the same all or any part of the moneys uncalled and unpaid upon any Shares held by him; and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate (not exceeding without the sanction at the Company in general meeting six per cent per annum) as may be agreed upon between the Member paying the sum in advance and the Directors.


FORFEITURE OF SHARES


17.

If a Member fails to pay any call or installment of a call on the day appointed for payment thereof, the Directors may, at any time thereafter during such time as any part of such call or installment remains unpaid, serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest which may have accrued.


18.

The notice shall name a further day (not earlier than the expiration of fourteen days from the date of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed, the Shares in respect of which the call was made will be liable to be forfeited.


19.

If the requirements of any such notice as aforesaid are not complied with, any Share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors to that effect.




5







20.

A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit, and at any time before a sale or disposition, the forfeiture may be cancelled on such terms as the Directors think fit.


21.

A person whose Shares have been forfeited shall cease to be a Member in respect of the forfeited Shares, but shall, notwithstanding, remain liable to pay to the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the Shares, but his liability shall cease if and when the Company receives payment in full of the amount due on the Shares.


22.

A statutory declaration in writing that the declarant is a Director of the Company, and that a Share in the Company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the Share.  The Company may receive the consideration, if any, given for the Share on any sale or disposition thereof and may execute a transfer of the Share in favour of the person to whom the Share is sold or disposed of and he shall thereupon be registered as the holder of the Share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the Share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the Share.


23.

The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the amount of the Share, or by way of premium, as if the same had been made payable by virtue of a call duly made and notified.


TRANSFER AND TRANSMISSION OF SHARES


24.

The instrument of transfer of any Share shall be executed by or on behalf of the transferor (but need not be executed by or on behalf of the transferee unless the Share has been issued nil paid), and the transferor shall be deemed to remain a holder of the Share until the name of the transferee is entered in the Register of Members in respect thereof.















6







25.

Shares shall be transferred in the following form, or in any usual or common form approved by the Directors:


I, _____________ of ____________ in consideration of the sum of $____ paid to me by _____________ of ______________ (hereinafter called “the Transferee”) do hereby transfer to the Transferee the __ Share (or Shares) numbered  __ in the Company called [   ], to hold the same unto the Transferee, subject to the several conditions on which I hold the same.


As witness our hands on the ______ day of __________ 20____.


______________________________

Transferor


26.

The Directors may, in their absolute discretion and without assigning any reason therefore decline to register any transfer of Shares to a person of whom they do not approve.  The Directors may also suspend the registration of transfers at such times and for such periods (not exceeding thirty days in aggregate in each year) as the Directors may from time to time determine.  The Directors may decline to recognise any instrument of transfer unless (a) a fee not exceeding one dollar is paid to the Company in respect thereof, and (b) the instrument of transfer is accompanied by the certificate of the Shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer.


If the Directors refuse to register a transfer of Shares, they shall within one month after the date on which the transfer was lodged with the Company, send to the transferee notice of the refusal.


27.

The legal personal representative of a deceased sole holder of a Share shall be the only person recognised by the Company as having any title to the Share.  In case of a Share registered in the names of two or more holders, the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the only persons recognised by the Company as having any title to the Share.


28.

Any person becoming entitled to a Share in consequence of the death or bankruptcy of a Member shall upon such evidence being produced as may from time to time be properly required by the Directors, have the right either to be registered as a Member in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt person could have made; but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by the deceased or bankrupt person before the death or bankruptcy.



29.

A person becoming entitled to a Share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the Share, except that he shall not, before being registered as a Member in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company.


CONVERSION OF SHARES INTO STOCK


30.

The Company may by ordinary Resolution convert any paid-up Shares into stock, and reconvert any stock into paid-up Shares of any denomination.


31.

The holders of stock may transfer the same, or any part thereof in the same manner and subject to the same regulations as and subject to which the Shares from which the stock arose might prior to conversion have been transferred, or as near thereto as circumstances admit; but the Directors may from time to time fix the minimum amount of stock transferable, and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal amount of the Shares from which the stock arose.


32.

The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges and advantages as regards dividends, voting at meetings of the Company and other matters as if they held the Shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profits of the Company) shall be conferred by any such aliquot part of stock as would not, if existing as Shares, have conferred that privilege or advantage.


33.

Such of the Articles of the Company as are applicable to paid-up Shares shall apply to stock, and the words "Share" and "Member" herein shall include "stock" and "stock-holder".


ALTERATION OF CAPITAL


34.

The Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into Shares of such amount, as the resolution shall prescribe.


35.

Subject to any direction to the contrary that may be given by the Company in general meeting, all new Shares shall be at the disposal of the Directors in accordance with Article 6.


36.

The new Shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture and otherwise as the Shares in the original share capital.


37.

The Company may by Ordinary Resolution:


(a)  

consolidate and divide all or any of its Share capital into Shares of larger amount than its existing Shares;


(b)  

sub-divide its existing Shares, or any of them, into Shares of smaller amount than is fixed by the Memorandum of Association, subject nevertheless to the provisions of section 13 of the Law; and


(c)  

cancel any Shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person.


38.

Subject to the provisions of the Law and the Memorandum of Association, the Company may purchase its own Shares, including any redeemable Shares, provided that the manner of purchase has first been authorised by Ordinary Resolution and may make payment therefor or for any redemption of Shares in any manner authorised by the Law, including out of capital.


STATUTORY MEETINGS


39.

If required by the Law the Directors shall hold at least one Directors’ meeting in the Cayman Islands in each calendar year.


GENERAL MEETINGS


40.

The Directors may whenever they think fit, convene a general meeting.  If at any time there are not sufficient Directors capable of acting to form a quorum, any Director or any one or more Members holding in the aggregate not less than one-third of the total issued share capital of the Company entitled to vote may convene a general meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors.  The Directors shall, upon the requisition in writing of one or more Members holding in the aggregate not less than one-tenth of such paid-up capital of the Company as at the date of the requisition carries the right of voting at general meetings, convene a general meeting.  Any such requisition shall express the object of the meeting proposed to be called, and shall be left at the Registered Office of the Company.  If the Directors do not proceed to convene a general meeting within twenty-one days from the date of such requisition being left as aforesaid, the requisitionists or any or either of them or any other Member or Members holding in the aggregate not less than one-tenth of such paid-up capital of the Company as at the date of the requisition carries the right of voting at general meetings, may convene a general meeting to be held at the Registered Office of the Company or at some convenient place within the Cayman Islands at such time, subject to the Company's Articles as to notice, as the persons convening the meeting fix.


41.

Not less than seven days notice (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which the notice is given) specifying the place, the day and the hour of meeting and, in the case of special business, the general nature of that business shall be given in manner hereinafter provided, or in such other manner (if any) as may be prescribed by the Company in general meeting, to such persons as are entitled to vote or may otherwise be entitled under the Articles of the Company to receive such notices from the Company; but with the consent of all the Members entitled to receive notice of some particular meeting, that meeting may be convened by such shorter notice or without notice and in such manner as those Members may think fit.


42.

The accidental omission to give notice of a meeting to, or the non-receipt of a notice of a meeting by, any Member entitled to receive notice shall not invalidate the proceedings at any meeting.


43.

(a)

No business shall be transacted at any general meeting unless a quorum of Members is present at the time that the meeting proceeds to business; save as herein otherwise provided, one or more Members holding in the aggregate not less than one-third of the total issued share capital of the Company present in person or by proxy and entitled to vote shall be a quorum.


(b)

An Ordinary Resolution or a Special Resolution (subject to the provisions of the Law) in writing signed by all the Members for the time being entitled to receive notice of and to attend and vote at general meetings, (or being corporations by their duly authorised representatives) including a resolution signed in counterpart by or on behalf of such Members or by way of signed telefax transmission, shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held.


44.

If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved.  In any other case it shall stand adjourned to the same day in the next week, at the same time and place, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the Members present shall be a quorum.


45.

The chairman, if any, of the Board of Directors shall preside as chairman at every general meeting of the Company.


46.

If there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairman, the Members present shall choose one of their number to be chairman.


47.

The chairman may with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.  When a meeting is adjourned for ten days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.  Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.


48.

At any general meeting a resolution put to the vote of the meeting shall be decided an a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by one or more Members present in person or by a proxy who together hold not less than fifteen per cent of the paid up capital of the Company entitled to vote, and, unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried or carried unanimously, or by a particular majority, or lost and an entry to that effect in the minutes of the proceedings of the Company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution.


49.

If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.


50.

In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote.


51.

A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith.  A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs.


VOTES OF MEMBERS


52.

On a show of hands every Member present in person or by proxy and entitled to vote shall have one vote and on a poll every Member entitled to vote shall have one vote for each Share of which he is the holder.


53.

In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.



54.

A Member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other person in the nature of a committee appointed by that court, and any such committee or other person may vote by proxy.


55.

No Member shall be entitled to vote at any general meeting, unless all calls or other sums presently payable by him in respect of Shares in the Company have been paid.


56.

On a poll votes may be given either personally or by proxy.


57.

The instrument appointing a proxy shall be in writing under the hand of the Member or, if the Member is a corporation, either under seal or under the hand of a director or officer or attorney duly authorised.  A proxy need not be a Member of the Company.


58.

The instrument appointing a proxy shall be deposited at the Registered Office of the Company or at such other place as is specified for that purpose in the notice convening the meeting no later than the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid PROVIDED THAT the chairman of the meeting may in his discretion accept an instrument of proxy sent by telex or telefax upon receipt of telex or telefax confirmation that the signed original thereof has been sent.


59.

An instrument appointing a proxy may be in the following form or any other form approved by the Directors:


[     ]


“I, __________________________, of _______________________, hereby appoint __________________________ of _______________________ as my proxy, to vote for me and on my behalf at the general meeting of the Company to be held on the ______ day of ________________, 20___.




Signed this ______ day of ________________________, 20___.


60.

The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.





CORPORATIONS ACTING BY REPRESENTATIVES AT MEETING


61.

Any corporation which is a Member of the Company may by resolution of its Directors or any committee of the Directors authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual Member of the Company.


DIRECTORS AND OFFICERS


62.

(a)

The names of the first Directors shall be determined in writing by the subscribers of the Memorandum of Association.


(b)

Notwithstanding any provision in these Articles to the contrary, a sole Director shall be entitled to exercise all of the powers and functions of the Directors which may be conferred on them by Law or by these Articles.


63.

The remuneration of the Directors shall from time to time be determined by the Company in general meeting.  The Directors shall also be entitled to be paid their travelling, hotel and other expenses properly incurred by them in going to, attending and returning from meetings of the Directors, or any committee of the Directors, or general meetings of the Company, or otherwise in connection with the business of the Company, or to receive a fixed allowance in respect thereof as may be determined by the Directors from time to time, or a combination partly of one such method and partly the other.


64.

No shareholding qualification shall be required for Directors unless otherwise required by the Company by Ordinary Resolution.


65.

Any Director may in writing appoint another person who is approved by the majority of the Directors to be his alternate to act in his place at any meeting of the Directors at which he is unable to be present.  Every such alternate shall be entitled to notice of meetings of the Directors and to attend and vote thereat as a Director when the person appointing him is not personally present, and where he is a Director, to have a separate vote on behalf of the Director he is representing in addition to his own vote. A Director may at any time, in writing, revoke the appointment of an alternate appointed by him and such appointment shall be revoked automatically if the appointor of the alternate ceases to be a Director at any time.  Every such alternate shall be an officer of the Company and shall not be deemed to be the agent of the Director appointing him.  The remuneration of such alternate shall be payable out of the remuneration of the Director appointing him and the proportion thereof shall be agreed between them.



66.

The Directors may by resolution, appoint one of their number to be President upon such terms as to duration of office, remuneration and otherwise as they may think fit.


67.

The Directors may also by resolution appoint a Secretary and such other officers as may from time to time be required upon such terms as to duration of office, remuneration and otherwise as they may think fit. Such Secretary or other officers need not be Directors and in the case of the other officers may be ascribed such titles as the Directors may decide.


POWERS AND DUTIES OF DIRECTORS


68.

The business of the Company shall be managed by the Directors, who may pay all expenses incurred in setting up and registering the Company and may exercise all such powers of the Company as are not, by the Law or these Articles, required to be exercised by the Company in general meeting, subject, nevertheless, to any clause of these Articles, to the provisions of the Law, and to such regulations, being not inconsistent with the aforesaid clauses or provisions, as may be prescribed by the Company in general meeting but no regulation made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made.


69.

The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.


70.

(a)

The Directors may from time to time and at any time by power of attorney appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and  with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him.


(b)

The Directors may delegate any of the powers exercisable by them to a Managing Director or any other person or persons acting individually or jointly as they may from time to time by resolution appoint upon such terms and conditions (including without limitation as to duration of office and remuneration) and with such restrictions as they may think fit, and may from time to time by resolution revoke, withdraw, alter or vary all or any such powers.


(c)

All cheques promissory notes, drafts, bills of exchange and other negotiable instruments, and all receipts for moneys paid to the Company shall be signed, drawn, accepted, endorsed, or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.


71.

The Directors shall cause minutes to be prepared:-


(a)

of all appointments of officers made by the Directors;


(b)

of the names of the Directors present at each meeting of the Directors and of any committee of the Directors;


(c)

of all resolutions and proceedings at all meetings of the Members of the Company and of the Directors and of committees of Directors; and the chairman of all such meetings or of any meeting confirming the minutes thereof shall sign the same.


DISQUALIFICATION AND CHANGES OF DIRECTORS


72.

The office of Director shall be vacated if the Director:-


(a)

becomes bankrupt or makes any arrangement or composition with his creditors generally; or


(b)

is found to be or becomes of unsound mind; or


(c)

resigns his office by notice in writing to the Company.


73.

The number of Directors shall be not less than one, nor unless the Company in general meeting may otherwise determine, more than ten.


74.

Any casual vacancy occurring in the Board of Directors may be filled by the Directors.


75.

The Directors shall have the power at any time, and from time to time, to appoint a person as an additional Director or persons as additional Directors.


76.

The Company may by Ordinary Resolution remove a Director before the expiration of his period of office, and may by Ordinary Resolution appoint another person in his stead.


PROCEEDINGS OF DIRECTORS


77.

The Directors may meet together (either within or without the Cayman Islands) for the dispatch of business, adjourn, and otherwise regulate their meetings and proceedings, as they think fit.  Questions arising at any meeting shall be decided by a majority of votes.  In case of an equality of votes the chairman shall have a second or casting vote.


78.

A Director or alternate Director may, and the Secretary on the requisition of a Director or alternate Director shall, at any time, summon a meeting of Directors by at least five days notice in writing to every Director and alternate Director which notice shall set forth the general nature of the business to be considered PROVIDED HOWEVER that notice may be waived by all the Directors (or their alternates) either at, before or after the meeting is held PROVIDED FURTHER that notice or waiver thereof may be given by telex or telefax.


79.

The quorum necessary for the transaction of the business of the Directors, may be fixed by the Directors and unless so fixed by the Directors, shall be two Directors  save where the subscriber of the Memorandum of Association or the Members in general meeting have appointed a sole Director when such Director acting alone shall constitute a quorum.  For the purpose of this Article, an alternate appointed by a Director shall be counted in a quorum at a meeting at which the Director appointing him is not present.


80.

The continuing Directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to the Articles of the Company as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose.


81.

Any Director or officer may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for professional services as if he were not a Director or officer PROVIDED THAT nothing herein contained shall authorise a Director or officer or his firm to act as Auditor of the Company.


82.

No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or transaction by reason of such Director or alternate Director holding office or of the fiduciary relation thereby established.  A Director (or his alternate Director in his absence) shall be at liberty to vote in  respect of any contract or transaction in which he is so interested as aforesaid PROVIDED HOWEVER that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him or the alternate Director appointed by him at or prior to its consideration and any vote thereon and a general notice that a Director or alternate Director is a shareholder of any specified firm or company and/or is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure hereunder and after such general notice it shall not be necessary to give special notice relating to any particular transaction.


83.

The Directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be chairman of the meeting.


84.

The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Directors.


85.

A committee may elect a chairman of its meetings; if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting.


86.

A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present and in case of an equality of votes the chairman shall not have a second or casting vote.


87.

All acts done by any meeting of the Directors or of a committee of Directors, or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.


88.

Upon the Directors (being in number at least a quorum) signing the minutes of a meeting of the Directors the same shall be deemed to have been duly held notwithstanding that the Directors have not actually come together or that there may have been a technical defect in the proceedings.  A resolution signed by all such Directors, including a resolution signed in counterpart by the Directors or by way of signed telefax transmission, shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and constituted. To the extent permitted by law, the Directors may also meet by telephone conference call where all Directors are capable of speaking to and hearing the other Directors at the same time.


SEALS AND DEEDS


89.

(a)

If the Directors determine that the Company shall have a common Seal, the Directors shall provide for the safe custody of the common Seal and the common Seal of the Company shall not be affixed to any instrument except by the authority of a resolution of the Directors, and in the presence of a Director and of the Secretary or, in place of the Secretary, by such other person as the Directors may appoint for the purpose; and that Director and the Secretary or other person as aforesaid shall sign every instrument to which the common Seal of the Company is so affixed in their presence.  Notwithstanding the provisions hereof, annual returns and notices filed under the Law may be executed either as a deed in accordance with the Law or by the common Seal being affixed thereto in either case without the authority of a resolution of the Directors by one Director or the Secretary.


(b)

The Company may maintain a facsimile of any common Seal in such countries or places as the Directors shall appoint and such facsimile Seal shall not be affixed to any instrument except by the authority of the Directors and in the presence of such person or persons as the Directors shall for this purpose appoint and such person or persons as aforesaid shall sign every instrument to which the facsimile Seal of the Company is so affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid  shall have the same meaning and effect as if the common Seal had been affixed in the presence of and the instrument signed by a Director and the Secretary or such other person as the Directors may appoint for the purpose.


(c)

In accordance with the Law, the Company may execute any deed or other instrument which would otherwise be required to be executed under Seal by the signature of such deed or instrument as a deed by two Directors of the Company or where there is a Sole Director of the Company, by such Sole Director, or by a Director and the Secretary of the Company or, in place of the Secretary, by such other person as the Directors may appoint or by any other person or attorney on behalf of the Company appointed by a deed or other instrument executed as a deed by two Directors of the Company, or a Sole Director or by a Director and the Secretary or such other person as aforesaid.




DIVIDENDS AND RESERVE


90.

The Company may by Ordinary Resolution declare dividends, but no dividend shall exceed the amount recommended by the Directors.


91.

The Directors may from time to time pay to the Members interim dividends.


92.

No dividend shall be paid otherwise than out of profits or out of monies otherwise available for dividend in accordance with the Law.


93.

Subject to the rights of persons, if any, entitled to Shares with special rights as to dividends, all dividends on any class of Shares not fully paid shall be declared and paid according to the amounts paid on the Shares of that class, but if and so long as nothing is paid up on any of the Shares in the Company, dividends may be declared and paid according to the number of Shares.  No amount paid on a Share in advance of calls shall, while carrying interest, be treated for the purposes of this article as paid on the Share.


94.

The Directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors, be applicable for meeting contingencies, or for equalising dividends, or for any other purpose to which the profits of the Company may be properly applied, and pending such application may, at their like discretion, either be employed in the business of the Company or be invested in such investments as the Directors may from time to time think fit.


95.

If several persons are registered as joint holders of any Share, any of them may give effectual receipts for any dividend or other monies payable on or in respect of the Share.


96.

Any dividend may be paid by cheque or warrant sent through the post to the registered address of the Member or person entitled thereto or in the case of joint holders to any one of such joint holders at his registered address or to such person at such address as the Member or person entitled or such joint holders, as the case may be, may direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to the order of such other person as the Member or person entitled or such joint holders, as the case may be, may direct.


97.

The Directors may declare that any dividend is paid wholly or partly by the distribution of specific assets and in particular of paid-up shares, debentures or debenture stock of any other company or in any one or more of such ways, and the Directors shall give effect to such resolution, and where any difficulty arises with regard to such distribution, the Directors may settle the same as they, think expedient, and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Directors.


98.

No dividend shall bear interest against the Company.


CAPITALISATION OF PROFITS


99.

The Company may upon the recommendation of the Directors by Ordinary Resolution authorise the Directors to capitalise any sum standing to the credit of any of the Company's reserve accounts (including share premium account and capital redemption reserve fund) or any sum standing to the credit of the profit and loss account or otherwise available for distribution and to appropriate such sums to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits by way of dividend and to apply such sum on their behalf in paying up in full unissued Shares for allotment and distribution credited as fully paid up to and amongst them in the proportion aforesaid.  In such event the Directors shall do all action and things required to give effect to such capitalisation, with full power to the Directors to make such provision as they think fit for the case of Shares becoming distributable in fractions (including provision whereby the benefit of fractional entitlements  accrue to the Company rather than to the Members concerned).  The Directors may authorise any person to enter on behalf of all the Members interested into an agreement with the Company providing for such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.

ACCOUNTS


100.

The books of account relating to the Company's affairs shall be kept in such manner as may be determined from time to time by the Company by Ordinary Resolution or failing such determination by the Directors of the Company.


101.

The Company may by Ordinary Resolution from time to time determine or, failing such determination, the Directors may from time to time determine that Auditors shall be appointed and that the accounts relating to the Company's affairs shall be audited in such manner as the Company by Ordinary Resolution or the Directors (as the case may be) shall determine PROVIDED THAT nothing contained in this Article shall require Auditors to be appointed or the accounts relating to the Company's affairs to be audited.


WINDING UP


102.

If the Company shall be wound up, the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Law, divide amongst the Members in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members.  The liquidator may with the like sanction, vest the whole or any part of such assets in trustees upon such  trusts for the benefit of the contributors as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any Shares or other securities upon which there is any liability. This Article is to be without prejudice to the rights of the holders of Shares issued upon special terms and conditions.



103.

If the Company shall be wound up and the assets available for distribution amongst the Members as such shall be insufficient to repay the whole of the paid up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up, on the Shares held by them respectively.  And if in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the Members in proportion to the capital paid up at the commencement of the winding up on the Shares held by them respectively.  This Article is to be without prejudice to the rights of the holders of Shares issued upon special terms and conditions.


NOTICES


104.

(a)

A notice may be given by the Company to any Member either personally or by sending it by post, telex or telefax to him to his registered address, or (if he has no registered address) to the address, if any, supplied by him to the Company for the giving of notices to him.


(b)

Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the notice (by airmail if the address is outside the Cayman Islands) and to have been effected, in the case of a notice of a meeting at the expiration of three days after the time at which the letter would be delivered in the ordinary course of post.


(c)

Where a notice is sent by telex or telefax, service of the notice shall be deemed to be effected by properly addressing and sending such notice through the appropriate transmitting medium and to have been effected on the day the same is sent.


105.

If a Member has no registered address and has not supplied to the Company an address for the giving of notice to him, a notice addressed to him and advertised in a newspaper circulating in the Cayman Islands shall be deemed to be duly given to him at noon on the day following the day on which the newspaper is circulated and the advertisement appeared therein.


106.

A notice may be given by the Company to the joint holders of a Share by giving the notice to the joint holder named first in the Register of Members in respect of the Share.


107.

A notice may be given by the Company to the person entitled to a Share in consequence of the death or bankruptcy of a Member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any supplied for the purpose by the persons claiming to be so entitled or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.


108.

Notice of every general meeting shall be given in the same manner hereinbefore authorised to:


(a)

every Member entitled to vote, except those Members entitled to vote who (having no registered address) have not supplied to the Company an address for the giving of notices to them; and


(b)

every person entitled to a Share in consequence of the death or bankruptcy of a Member, who, but for his death or bankruptcy would be entitled to receive notice of the meeting.


No other persons shall be entitled to receive notices of general meetings.


RECORD DATE


109.

The Directors may fix in advance a date as the record date for any determination of Members entitled to notice of or to vote at a meeting of the Members and, for the purpose of determining the Members entitled to receive payment of any dividend, the Directors may, at or within 90 days prior to the date of the declaration of such dividend, fix a subsequent date as the record date for such determination.


AMENDMENT OF MEMORANDUM AND ARTICLES


110.

Subject to and insofar as permitted by the provisions of the Law, the Company may from time to time by Special Resolution alter or amend its Memorandum of Association or these Articles in whole or in part provided however that no such amendment shall effect the rights attaching to any class of shares without the consent or sanction provided for in Article 3 (b).


ORGANISATION EXPENSES


111.

The preliminary and organisation expenses incurred in forming the Company shall be paid by the Company and may be amortised in such manner and over such period of time and at such rate as the Directors shall determine and the amount so paid shall in the accounts of the Company, be charged against income and/or capital.


OFFICES OF THE COMPANY


112.

Subject to the provisions of the Statute, the Company may by resolution of the Directors change the location of its Registered Office.  The Company, in addition to its Registered Office, may establish and maintain an office in the Cayman Islands or elsewhere as the Directors may from time to time determine.


INDEMNITY


113.

Every Director and officer for the time being of the Company or any trustee for the time being acting in relation to the affairs of the Company and their respective heirs, executors, administrators, personal representatives or successors or assigns shall, in the absence of wilful neglect or default, be indemnified by the Company against, and it shall be the duty of the Directors out of the funds and other assets of the Company to pay, all costs, losses, damages and expenses, including travelling expenses, which any such Director, officer or trustee may incur or become liable in respect of by reason of any contract entered into, or act or thing done by him as such Director, officer or trustee or in any way in or about the execution of his duties and the amount for which such indemnity is provided shall immediately attach as a lien on the property of the Company and have priority as between the Members over all other claims.  No such Director, officer or trustee shall be liable or answerable for the acts, receipts, neglects or defaults of any other Director, officer or trustee or for joining in any receipt or other act for conformity or for any loss or expense happening to the Company through the insufficiency or deficiency of any security in or upon which any of the monies of the Company shall be invested or for any loss of the monies of the Company which shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any monies, securities or effects shall be deposited, or for any other loss, damage or misfortune whatsoever which shall happen in or about the execution of the duties of his respective office or trust or in relation thereto unless the same happens through his own wilful neglect or default.




TRANSFER BY WAY OF CONTINUATION


114.

The Company shall, subject to the provisions of the Statute and, with the approval of a Special Resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and the Directors may cause an application to be made to the Registrar of Companies to deregister the Company.



             DESCRIPTION OF

NAME OF SUBSCRIBER

ADDRESS

SUBSCRIBER


N.D. Nominees Ltd.

P.O. Box 61

Nominee Company

Grand Cayman

KY1-1102

Cayman Islands





____________________________

N.D. Nominees Ltd.

By its duly authorized officer:



DATED the 17 th day of February, 2017





_______________________________

Witness to the above signature:





7



Exhibit 3.4



[EXHIBIT34001.JPG]



China PnR

A Financial Payment Expert

ChinaPnR Account and System Custody Agreement

   Party A : Shanghai Dianniu Internet Finance Information Services Co., Ltd


        Party B : Shanghai PnR Data Service Co., Ltd


In order to carry out the Internet financial business, Party A needs to manage the account and open the online payment and collection function. Party B, with the permission of the People’s Bank of China, is engaged in the construction and operation of the Internet payment platform. Both parties have signed this agreement through friendly negotiation in the interests of equality, mutual benefit, and common development.

Article I Definition

ChinaPnR Account System Custody ” refers to the account system developed by Party B for Party A and its user with the functions including collection, payment, sub-account as well as record of specific account details and fund balance, and the provision of the outsourcing operation services and payment settlement services for the above account system.

Article II Service Content

(I)

Party B shall provide the account system and payment service system to Party A, including the exclusive account opening, top-up and book-keeping, payment, cash withdrawal, charge, user information management, user account inquiry and other value-added functions.

(II)

The services provided by Party B to Party A meet the system safety certification standards set out by the China Information Security Certification Center. Party A, and its user, shall respectively open an exclusive account in the system that shall be operated independently by the account holder to ensure that Party A’s user funds are isolated from Party A’s funds.

(III)

Party B shall provide Party A with inter-bank payment and fund settlement services for domestic commercial banks. When Party A’s user tops up the account, withdraws cash or transfers funds, Party B shall ensure that the funds are settled accurately according to the instructions of the account holder.

(IV)

The fund payment and settlement under the account system of Party B shall be incorporated into the reserve management system of Party B, and all funds within the user’s exclusive account shall be supervised and managed by the supervisory bank and the regulatory authority.







(V)

Party B shall provide Party A with a user telephone service that is accessible 12 hours a day and seven days a week. Hours of operation: 8: 00-20:00, Customer Service Line: 400-820-2819

(VI)

Party B shall provide Party A with the technical support services in respect of sending interface documents, joint-test and upgrading for the account system, shall be online normally in correspondence to Party A’s business system, and shall provide free upgrade of the interface for Party B’s account system.

(VII)

Party B shall include the basic information of the Internet lending platform of Party A into the database, provide Party A’s user with independent website system for query and confirmation, and assist Party A in establishing and promoting its brand.

Article III Exclusive Account Function

(I)

Account Opening. Party A and its user may open the exclusive account through the account system interface provided by Party B. Party A and its user shall abide by the account operating rules and cooperate with Party B to complete the relevant verification.

(II)

Top-up. Party A and its user may top up their exclusive accounts in many ways specified in this agreement, and the account service system will automatically keep the account for such exclusive accounts.

(III)

Payment. Party A and its user may use the balance in their exclusive accounts to pay. The account service system will automatically deduct the paid amount from its corresponding exclusive account and carry out the payment transactions (including user bidding as well as freezing, unfreezing and transfer of account funds) through various functional interfaces.

(IV)

Cash Withdrawal. Party A and its user may cash out its opened exclusive accounts. The specific time to receive the fund shall be based on the cash withdrawal modes supported by Party A or selected by the user.

(V)

Charge. Party A may charge the service fee to its user through the special collection account, and Party B shall complete the operation according to the instructions of Party A. The service fee issues between Party A and its user shall be completely settled by Party A, and Party B shall not assume any responsibility thereof.

(VI)

Account Opened by Enterprise. Party A’s enterprise user may open the exclusive account as the borrower or the investor to carry out the online business on the platform of Party A.

1.

Party A shall ensure that the enterprise user is the legally existing business entity and is engaged in legitimate business activities. Party A shall strictly examine the information materials of the enterprise user as to whether it has a real loan demand and purpose and ask the enterprise user to provide full guarantee.

2.

Party B shall open the account for the enterprise user at the request of Party A. Party A shall submit to Party B the real information of the enterprise user (including but not limited to: business license, the identity card of the legal representative, organization code certificate, account opening license and tax registration certificate).

3.

Party B shall only open the exclusive account for the enterprise user according to the enterprise user data submitted by Party A, and the loss of the investor due to the fact that the user information is not true or the loan demand is fictitious shall be borne by Party A without any consequence to Party B.






4.

During the period of cooperation, Party A shall be responsible for solving the Party B’s economic, reputation and other losses due to the offense or illegal act of the enterprise user, and shall bear the corresponding liability for compensation to Party B. If Party A’s violation of the above provision causes legal responsibility borne by Party B, Party A shall unconditionally indemnify Party B against any loss.

(VII)

Quick Top-up. In the event it is the first time for the individual user of Party A to make quick top-up for its payment account, Party B is authorized to deduct the specified amount from the designated bank debit card of the user. Party B will verify the payment through the ID card, name, bank card number and phone number. The top-up will be completed after the bank card binding is verified. In the event of another top-up, the user shall be deemed to have confirmed the top-up transaction, and amount, and issue an irrevocable instruction to Party B upon confirmation of the input password of the exclusive account. Party B will entrust the bank or a third party to deduct the funds from the bank card bound by the user according to the instruction. After Party A’s user opens the quick top-up function, its binding bank debit card is regarded as the only cash withdrawal card of its own exclusive account. Without the approval of Party B, the user may not change or remove the binding or add a new cash withdrawal card or quick top-up bank card.

1.

Party A’s user shall be the legal holder of its bank debit card, and the use thereof shall not infringe upon the legitimate rights and interests of any third party. Party A and its user shall not use the quick top-up function to carry out illegal activities such as cashing, money laundering and false transaction. Failing the foregoing will entitle Party B to take measures in accordance with the relevant rules of the regulatory bank.

2.

Party A’s user shall bear all losses caused by the improper storage and use of its account number or password, and Party B is obliged to actively provide remedies to Party A and its user in case of the aforesaid risk events.

3.

Where Party A’s user applies for removal of the bound quick top-up bank card, Party A shall strictly implement the bank card unbound process issued by Party B, collect and review the relevant information of Party A’s user, and ensure the authenticity, legality and effectiveness of the information obtained. The risk of Party B’s operation according to Party A’s application above shall be borne by Party A.

4.

Party A shall ensure that the instructions given to Party B are authorized by Party A’s user and are accurate and correct. Party A or its user shall be responsible for the loss caused to Party B due to the fact that Party A or its user violates the provision of this agreement, and Party B shall have the right to deduct corresponding amount from the account of Party A or its user and to suspend or discontinue the quick top-up function based on the risk situation.

(VIII)

Sheng Li Bao ( ). Party B shall provide the Sheng Li Bao purchase and redemption channel designed for Party A s user for Party A s platform, and the user s idle funds in the account may purchase the money fund products of the fund companies in cooperation with Party B.

(IX)

Other Functional Services Provided by Party B to Party A. Party B has the right to upgrade the system function based on risk control and transaction supervision, and Party A shall not refuse to use it without reason. The new account function shall be subject to the supplementary agreement shown on Party B’s system or otherwise signed by both parties.






Article IV Rights and Obligations


(I) Party A’s Rights and Obligations

1.

Party A shall provide Party B with real enterprise qualification documents, brand introduction information, business information and relevant legal certificates, and authorize Party B to investigate and verify Party A’s credit status based on the needs of business management. Party A shall bear all the consequences caused by false, inaccurate and untrue information. Where the change of Party A’s operation information may affect the cooperation between both parties, including but not limited to change of entity, Party A’s enterprise name, legal representative as well as Party B’s business contact, Party A shall notify Party B in writing and, at the request Party B, issue relevant certificates.

2.

Party A shall be responsible for the daily operation and maintenance of its own commercial website and ensure a connection with Party B according to the technical standards such as the interface standards and data format agreed by both parties.

3.

Party A shall strictly abide by the national laws, regulations and relevant departmental rules; have the qualification and conditions for engaging in relevant business; obtain the corresponding administrative licenses or complete the filing according to laws; and ensure that the Internet lending platform and the published information are legal, true and effective. Party A shall bear sole responsibility for the user disputes and the loss to Party B arising from the Party A’s violation of national laws and regulations or false, old or inaccurate information.

4.

Party A is responsible for assisting the account opening of the exclusive account of Party A and the adjustment of the account amount between Party A’s user, and Party B shall provide the account consultation and service during the account opening and use by the user.

5.

Party A ensures that all transaction instructions (including but not limited to bidding, freezing, unfreezing, transfer, deduction and transfer of creditor’s rights) issued to Party B’s system are timely, safe and confidential, and are properly authorized by Party A’s user to be true and accurate. Party A shall be responsible for solving all consequences (including complaint of Party A’s user and relevant legal responsibilities) caused by the instructions issued by Party A without the authorization of its user or a wrong instruction—this is of no relevance to Party B.

6.

Party A shall strictly examine the qualification and credit of the investor and the borrower, and Party A shall bear the corresponding legal liability if any illegal trading behavior exists.

7.

During the period of cooperation, Party A shall not transfer the interface technology, security agreement and certificates provided by Party B to any other third party without the permission of Party B. After both parties terminate the cooperation, Party A shall timely destroy the all technical documents, which shall not be used or transferred to any other third party without authorization.

8.

Party A shall keep the administrative account and password properly, and Party A shall undertake all losses caused by improper secure or use of its own account and password, while Party B is only responsible for assisting in the accounting query and password reset, other than undertaking any responsibility herein.

9.

Party A agrees that its online credit business only uses the account system provided by Party B. If Party A violates the Agreement by using account system that is not provided by Party B, Party A shall be responsible for all the resulting relevant complaints and disputes, and Party B may have the right to terminate the cooperate and not to refund all service charges.






10.

In case of any suspicious risk transaction or suspected risk hazard, Party A shall, upon Party B's request, provide or assist Party B in providing relevant authentic materials of Party A's user to institutions such as the judiciary authorities.

1 1 . Party B shall meet with Party A's data gathering requirements and provide user’s transaction record according to the laws, regulations and the requirements of the authorities. Party B shall not provide the user’s ID card, bank card and other private information without the investigation or approval of the authorities.

(b) Rights and Obligations of Party B

1.

Party B shall be responsible for the construction, operation and maintenance of the account system, and provide the services mentioned in Article II to Party A.

2.

Party B shall be responsible for the security, confidentiality, accuracy and timeliness of the information process for its account system in comply with laws, regulations and requirements of regulatory bank.

3.

Party B shall be responsible for handling complaints involving the trust account system and bear the corresponding responsibilities caused by the fault. In addition, Party B shall not be liable for any commercial disputes that may happen between Party A and its user.

4.

In addition to the regulatory requirements, Party B shall provide to Party A domestic bank card payment service supported by Party B's account system. Party B shall have the right of adjustment according to the cooperation with the bank, but shall notify Party A 3 working days in advance.

5.

Party B shall be responsible for answering relevant questions from Party A and its users in the use of Party B's account system such as transaction query, data checking, fund settlement, etc.

6.

Party B shall have the right to conduct account services system upgrade and routine maintenance since the upgrade may affect Party A's platform operation. Party B shall notify Party A 3 working days in advance should not take up Party A's peak trading hours, and minimize the impact on Party A's business activities.

7.

Party B shall complete the payment operation in comply with accurate instructions authorized by Party A's user and issued by Party A, and shall be responsible for the security, confidentiality and timeliness in the information process of the account system. Party B has the right to validate whether instructions issued by Party A is authorized by its user in different stages through one or more ways such as real-name authentication, password authentication, bank card authentication, orders match, etc., and Party B shall have the right not to operate instructions unauthorized by Party A's user or not conducted according to actual authorization of its user.

8.

Party B shall only provide the services as agreed herein, and Party A shall be responsible for all disputes not arising from the above services.

9.

Party B shall have the right, in accordance with the demand of risk control, to conduct on-site inspection and site inspection on Party A, which includes but not limited to whether actual premises and legal representative are real, whether risk control management system is complete, the condition of independent risk control department, and the match degree between website transaction, details with the background data record, etc. Party A should cooperate with Party B's work, and Party B has the right to take corresponding measures according to the results of the inspections.

Article V. Brand Management







(I) Party B authorizes Party A to use the brand logo of "ChinaPnR" within the validity period of the Contract, including the standard version of the brand logo and the standard combination of brand logo. Party A may, only on P 2 P platform and related advertisement indicated in the Agreement, use Party B's logo. When using Party B's logo, one shall stick to "ChinaPNR Logo Using Manual," and shall not modify, change the size and color as well as add graphics, words and symbols failing to conform with VI specification.


(II) Party A shall not use "ChinaPNR" and the negotiated business under this agreement in false advertisement to mislead consumers; and without Party B's permission, one shall be forbidden to license third party to use ChinaPNR logo. The damages and losses occurred by Party A's violation of Party B’s Logo Using Manual shall be entirely assumed by Party A. In the event that Party B’s brand image is damaged, Party B shall have the right to change or revoke license and Party A shall assume the legal liabilities.







Article VI Fees

Party B shall charge fees according to the following standard:

Project

Content

Transaction Fees

Charged Object

Accountant Recharge Fee

Recharge of Individual E-bank

ICBC ABC CBC CITIC Bank: 1.5 of recharged amount

A

B

other banks: 2.5 of recharged amount

Recharge of Enterprise E-bank

10 RMB per transaction

Fast Recharge

1.5 of recharged amount 0

A

B

Withdraw fee

S 4 fast withdraw means the money you withdraw would in T day be transferred into the designated account.

0.5 of withdraw amount + 2 RMB each transaction

A

B

Common withdraw means the money you withdraw would in T +1 day be transferred into the designated account.

2 RMB per transaction

Service Fee

All account management and system maintenance fee

120,000 RMB per year

B

Note Please mark in the in front of the corresponding options. Collection way can only be chose between A or B .

Collection way A : collect from user, the transaction fee would be deducted from the exclusive account of Party A's user.

Collection way B : collect from Party A, the transaction fee would be deducted from Party A's exclusive account.










































If there is insufficient balance, the transaction would fail.

The banks which provide individual E-bank service

ICBC, ABC, BOC, CBC, Bank of Communications, CMBC, CMB, CEB, CIB, SPDB, PSBC, BOS, SRCB, CITIC Bank, Fudian Bank

The banks which provide enterprise E-bank service:

ICBC, ABC, BOC, CBC, Bank of Communications, CMB



















CEB, SPDB, Ping An Bank, BRCB

Banks which provide fast recharge service:

ICBC, ABC, BOS, CBC, BOC, CEB,

CIB, CITIC Bank, Ping An Bank, SPDB, CBHB, PSBC,

3

If Party A’s user uses fast withdraw service in the working day just before national holidays (including weekends and holidays)

the one would be charged as 0.5‰* (numbers of the holidays+1) +2 RMB per transaction.

4

Party B shall have the right, according to the risk control or cooperation with banks, to adjust the numbers, transaction fee and limit of each transaction and day limit of the banks who provide service. Party B shall inform Party A in advance.
















Article VII Transaction fee collection and payment




(I) System management fee: Party A shall transfer the money to the account designated by Party B once, which shall be no later than the fifth working day after signature of this agreement. Party B shall provide the invoice to Party A within 15 working days after receipt of money. In the event of Party A's dissatisfaction to Party B's risk control permissions, which leads to the failure of cooperation, this agreement shall be revoked since Party B has paid back Party A's money in full to the designated account and neither party shall be liable.

(II Withdraw fee: If Party A's user uses the fast withdraw service, unless party B reason which leads to the money failed to reach the designated account, Party B shall not pay back the withdraw fee.

(III In the duration of this agreement, except listed in item (I) of Article 7, if Party A unilaterally terminates this agreement, Party B would not pay back the system management fee.

(IV If this agreement shall be renewed, Party A shall pay the system management fee to Party B within 5 working days after the automatic renew of this agreement. Party B shall provide the invoice to Party A within 15 working days after receiving the money.

Party B's account name: Shanghai PnR Data Service Co., Ltd.

Account number

Bank: Shanghai Pudong Development Bank, Minhang Branch

(V

Recharging fee, withdraw fee and other account management service fee: When Party A or Party A's user submits the request for recharging or withdraw each time, Party B shall deduct the transaction service fee and then transfer the money left into the designated account of Party or Party A's user. Party B shall provide the invoice to Party A within the first 15 working days of each month according to Party A or Party A's user account management fee of last month.






Article VIII Account Checking


Party A can check the account through the port provided by Party B. The material Party A has downloaded includes all successful transactions confirmed online within transaction days and the transactions which have not been confirmed by Party B but have been successfully deducted by the bank or Party B's system.


Article IX Settlement

Party B shall settle Party A’s fund account to the bank account appointed by Party A after deducting corresponding service charge for account capital management on the workday of T+1, according to the settlement request submitted by Party A. Party A shall appoint the following account as the initial settlement account:


Account name: Shanghai Dianniu Internet Finance Information Services Co., Ltd

Account number:

Deposit bank: Shanghai Lujiazui Branch of Ping An Bank


Article X Intellectual Property


Any one party is entitled to all rights related to the content of its own network service, including but not limited to words, software, voices, pictures, videos, charts, advertisements and e-mails, which are all protected by relative laws about copyright, trademark right and its intellectual property, and property right.


Article XI Confidentiality obligation


Both parties shall have a duty of confidentiality with respect to the business and technical secrets of the other party in the performance of this Agreement, and neither party shall disclose any of the other commercial and technical secrets to any third party and shall have the improper use of such business and technical secrets. The confidentiality of any party shall cease to exist after the termination, alteration or dissolution of this Agreement until the other party’s business and technical secrets have been made public not because of its own reason.


Article XII Risk Warning


(I) Party B shall provide the professional account system service to Party A, but not intervene in Party A's business practices. Party B shall not bear any legal responsibility for the collection of charge, loan defaults and other disputes between Party A and the user.


(II) Party B shall provide the settlement service of account capital for Party A’s user, and shall not bear any responsibility for the investment risk of the platform. Party B shall not bear any guarantee responsibility for the investors, and any loss of the borrowers’ defaults.


(III) Party A shall ensure that Party B does not bear any economic or reputation loss due to Party A's business practices, and if Party A involves itself in poor cash flow, liquidation because of illegal operation, and criminal offenses that it is suspected of illegally raising funds, it shall independently bear all the risks arising from the aforesaid risks as a result of.


Article XIII Force Majeure







(I) " Force majeure " means the objective circumstances which occur after the signing of this Agreement, and cannot be foreseen, avoided and overcome by the affected party. For the suspension of Party B’s services due to the events of force majeure such as the upgrades for failures of telecommunications or banking system, or other causes not because of Party B’s intention or negligence, Party B shall not bear the liability for breach of contract.


(II) A party who is unable to perform or completely perform this Agreement because of force majeure may, in part or in whole, become exempt from its obligations. Following the event of force majeure, both parties shall immediately negotiate the status of this Agreement.


Article XIV Retention of Rights and Subsequent Legislation


(I)  Either party who has not exercised its rights or taken any action on the breach of the other party shall not be deemed to be a waiver of such rights.


(II) Any party may revise or supplement this Agreement in accordance with the provisions of the State’s subsequent legislation or laws, and both parties shall negotiate the follow-up cooperation and sign the supplementary agreement for confirmation, if the content of cooperation needs to be adjusted correspondingly because of the State’s subsequent legislation, and the change of the regulatory provisions. If any of the above changes leads to the failure of Party B to provide the services agreed upon in this Agreement, and this Agreement cannot continue to be fulfilled, either party may immediately terminate this Agreement without assuming liability for breach of contract and both parties shall negotiate separately for the termination of this Agreement and the refund of the system service charge, and sign the termination agreement.


Article XV Dispute Resolution and Legal Application


Both parties shall resolve the dispute arising from the performance of this Agreement by way of friendly negotiation. If the dispute cannot be resolved through negotiation, the court where Party B is located shall have the jurisdiction.

The laws and regulations of the People’s Republic of China are applicable to all matters arising from the conclusion, validation, change, performance, termination, dissolution, and interpretation of this Agreement.


Article XVI Term and Termination


(I) This Agreement is valid from December 3, 2015 to January 2, 2017. If neither party has terminated this Agreement within one month prior to the expiry of this Agreement, this Agreement shall be automatically renewed for one year.


(II) The non-defaulting party shall terminate this Agreement immediately after having notified defaulting party in any of the following circumstances:


1. If a party fails to comply with the agreement and has not corrected it after receiving the written notice from the other party.

2. A party seriously breaches the provisions of this Agreement during the term of the agreement, which resultsin the aim of this Agreement not being achieved.






3. A party has caused losses including but not limited including reputation loss, and actual economic losses to the other party because of risk events such as user’s complaints, and disputes arising from the breach of this Agreement.

(III) In the following circumstances, Party B shall have the right to send Party A a notice of rectification or a warning letter and take the necessarily restrictive measures, and if Party A fails to meet the rectification requirements of Party B within the period of rectification notice, Party B shall have the right to terminate this Agreement immediately after sending Party A a written Notice of the Termination of the Contract claiming the compensation for its loss due to following circumstance, and Party A shall not require Party B to refund the paid service charge:

1. Party A’s website is suspected for illegal activities (including but not limited to: illegal fund-raising, illegal absorption of public deposits and other illegal acts, dishonest operation, fraud, theft of user’s funds, warning or suspending of business or punishment of the judiciary, or the financial regulatory authorities);

2. A significant risk was found in Party A’s transaction through site or website inspection, or the judgment of Party B’s risk control system and Party A failed to comply with Party B;

3. In the course of the use of the account, the risk event appears to Party A, including but not limited to: Party B’s adverse effects or financial losses because of Party A’s user complaints, abnormal circumstances in the running of the website, overdue repayment which impacts Party A’s normal operation or causes Party B’s losses of reputation or funds, unable withdrawal, running point to point not in accordance with Party A’s user, a large number of offline account regulation without reasonable reasons;

4. Party A's business qualification has been changed significantly and the purpose of this Agreement has not been abided by.

(IV) In order to protect the fund security of Party A’s user, Party B shall have the right to start a risk relief mechanism (including but not limited to freezing the funds of problem account, limiting the account function or transferring the user’s funds directly to the user’s binding bank card) at the same time as sending the written notice of termination of the contract should Party B find a risk for Party A’s related behaviors in the course of rectification.

(V) If the contract is terminated or canceled, one party shall send a Notice of Termination of Contract to the other, and both parties shall negotiate the termination terms such as the closing time of the account system. Both parties shall carry out the liquidation of the account funds, and Party A shall inform its user to accomplish the withdrawal in the liquidation time confirmed by both parties. If Party A's user fails to withdraw within the liquidation time, Party A shall inform its user to log in Party B’s official website (www.chinapnr.com) for the withdrawal of surplus funds.

(VI) If the terms and the period of validity of this Agreement are in conflict with or covered by any similar agreement previously signed by Party A and Party B, this Agreement shall prevail.

This Agreement shall be conducted in duplicate, each of which shall be held by each party, with the same legal effect, and shall become effective upon signature by both parties.

(No text below)







Party A: Shanghai Dianniu Internet Finance Information Services Co., Ltd

Party B: Shanghai PnR Data Service Co., Ltd.  

(Seal)

(Seal)

Signature of legal representative (or authorized representative):


/s/ Zeng Erxin (Signature )

Signature of legal representative (or authorized representative):


/s/ Zhong Hongbo (Seal)

Zeng Erxin


Signing date: Dec. 3, 2015



Signing date: Dec. 3, 2015










Entity

Jurisdiction

Point Cattle Holdings Limited

British Virgin Islands

Point Cattle Group Company Limited

Hong Kong

Shanghai Fuyu Information and Technology Co., Ltd.

People’s Republic of China

Shanghai Dianniu Internet Finance Information Service Co., Ltd.

People’s Republic of China

Shanghai Baoxun Advertisement Design Co., Ltd

People’s Republic of China




1



Form of Intermediary Service Agreement by and between Dianniu and Borrower

                                     No.:               


Borrower (hereinafter referred to as Party A):

Certification Document No.:

 

Intermediator (hereinafter referred to as Party B): Shanghai Dianniu Internet Finance Information Service Co.Ltd.

Address: Floor 35, Sino Life Tower, No. 707, Zhangyang Road, Pudong New Area, Shanghai


Whereas,

1. The Intermediator is a limited liability company legally established and validly existing in Shanghai, China, which has the right of operation of the website www.dianniu98.com (hereinafter referred to as “the website” or “the platform” or “the DN platform”) as well as is able to obtain massive borrowing and lending information and supply such intermediate services as matching and management between borrowers and lenders, in an effective way.

2. The Borrower has done registration at the website and agrees on the DN Financial P2P Lending Service Agreement of the website.

3. Due to the demand for borrowing, the Borrower has signed the Borrowing Agreement numbered        , with an investor (the Lender) matched via the platform of Party B, and this Agreement contains the specific detailed arrangements for the Borrowing Agreement in the aspect of intermediary management and service.

4. The Borrower has promised to furnish the Intermediator with authentic, accurate, complete and valid information and the Intermediator shall have the right to review the authenticity/validity of the information furnished by the Borrower.

As the Borrower intends to seek for financial support due to its capital turnover demand, it hereby entrusts the Intermediator to release the borrowing information via the website and provide intermediary services for its borrowing demand and the two parties hereto reach and shall be bound by the following agreement:

Article I Specific Items and Requirements: Party B shall assist Party A in negotiating with a Lender registered at the platform about the borrowing-related issues (the amount to be borrowed: RMB                        , in words                    ) and help Party A to sign with the Lender an online service agreement relating to borrowing.


Article II Term of Service:          days . The actual start date shall be the date as of which the funds for the amount to be borrowed by the Borrower under this borrowing project have been raised



1




completely within the specified period while the expiration date shall be the date upon which Party A finishes the relevant repayment.


Article III Intermediary Management Fee, Intermediary Service Fee and Relevant Payment Methods:

1. Party B shall facilitate the conclusion of the borrowing guarantee contract between Party A and the Lender from the DN platform; the Lender shall allocate the relevant fund from its capital account at the deposit bank or the third-party payment organization, Shanghai ChinaPnR Data Service Co., Ltd., which cooperates with Party B, directly to Party A’s capital account at such a deposit bank or third-party payment organization; in the meanwhile, Party A shall instruct the deposit bank or third-party payment organization ChinaPnR to deduct on behalf of Party A the intermediary service and management fees payable to Party B from the relevant fund as well as entrust the deposit bank or third-party payment organization to deposit these fees into Party B’s capital account at the deposit bank or third-party payment organization.

2. The intermediary service fee shall be calculated at the rate of     % of the amount to be borrowed while the intermediary management fee shall be computed at the rate of     % of the amount to be borrowed, and Party B shall collect them both at a time and issue an invoice with the amount equal to that of these fees.

3. If the third-party payment organization or deposit bank fails to directly deduct the intermediary service and management fees, Party A shall pay them to Party B within 24 hours upon receipt of the fund borrowed by Party A.


Article IV. Both Parties’ Rights and Obligations

1. Party A shall present its legal qualification certificate like ID Card or Business License and other necessary materials to Party B and Party B shall have the right to or entrust a third party to verify the authenticity of the materials provided by Party A. When any of the materials furnished by Party A is deemed to be false, Party A shall undertake all the relevant consequences and legal responsibilities.

2. During the performance of this Agreement, Party B may disclose its identity as the Intermediator between Party A and the Lender from the platform, to any other third party, and introduce the information concerning the borrowing project of Party A to such a third party.

3. Party A understands that the information about Party A and the purpose of the fund borrowed shall be publicized on the website of Party B so as to facilitate Party A in acquiring the fund it borrows. Such information shall be disclosed after Party A operates and confirms it on the website and such operation of Party A shall be deemed as Party A’s agreement on and recognition of the disclosure of such information, so Party B shall not assume any legal consequence due to the disclosure of such information.

4. Party A shall truthfully furnish the Lender and Party B with its personal information (including, without limitation, name, ID card No., education background, contact way, mailing address, occupational information, and contact person) as required by Party B from time to time as well as the involved information such as the purpose of the fund borrowed. Party A shall promise that all the information furnished by it to the Lender and Party B shall be true, complete and valid.

5. During the process of the intermediary service by Party B, when any loss is caused due to Party A, Party B shall have the right to ask Party A to bear the responsibility for compensation. In case that



2




Party A provides any false material or intentionally conceals a material fact, Party A shall pay the penal sum equal to 18% of the total amount borrowed respectively to the Lender and Party B.

6. Party A shall pay Party B the corresponding intermediation fees as required by this Agreement.

7. When the issues relating to borrowing cannot be completed due to Party A’s refusal to sign a borrowing guarantee contract with the Lender, where Party B serves as the Intermediator, under the conditions agreed upon, during the performance of the Agreement, or within the scope of borrowing, or any other reason attributable to Party A, Party A shall pay the intermediation fees in full as specified under Article III of this Agreement.

8. For the relevant borrowing project, Party A shall not have any act pertinent to repeated financing, which is given in the Interim Measures for Management over Operational Activities of Intermediary Organs of P2P Borrowing & Lending Information , or otherwise Party A shall assume all of the adverse consequences and legal responsibilities, including but not limited to elimination of adverse consequences, compensation for loss, and payment for penal sum.

9. After the fund borrowed becomes due and payable, Party A shall fulfill each obligation for the Lender as per the arrangements in the borrowing guarantee contract, including, without limitation, payment of the interest generated after the expiration of the term of borrowing and the principal to the Lender.


Article V Dispute Resolution

Any dispute arising from or in connection with this Agreement during the fulfillment of the Agreement shall be resolved by the two parties hereto through negotiation. In case of failure to do so, a lawsuit shall be legally filed at the People’s Court of Pudong New Area, Shanghai and the law of Mainland China shall apply.


Article VI Miscellaneous

1. Because of the particularity of Internet Finance, the Borrower, the Lender, the Guarantor, or any other related party shall accept the way of signing of the borrowing guarantee contract (including but not limited to online click for confirmation, electronic signature, or electronic seal) and the content of such a contract and shall not hereby justify its refusal to perform its obligations under the contract.

2. For the content to be disclosed as required by the Interim Measures for Management over Operational Activities of Intermediary Organs of P2P Borrowing & Lending Information , which is not under confidentiality, Party A shall allow Party B to make disclosure in accordance with the Interim Measures .

3. Matters not covered herein shall be subject to related laws and regulations. Where no specific provisions are provided under laws or regulations, Party A and Party B may reach a supplemental agreement in writing. The attachments to this Agreement and the supplemental agreements involved shall be deemed to be an integral part of this Agreement, with equal legal force to this Agreement.

4. This Agreement shall come into effect upon the signatures and the seals of both Party A and Party B.

5. This Agreement shall be made in duplicate and each of Party A and Party B shall hold one, which shall have the same legal effect.



3




6. Both parties shall be obliged to keep confidential the content of this Agreement and shall not arbitrarily reveal the content to the outside.

(The remainder of this page is intentionally left blank)



Borrower (Signature & Seal):

Authorized Representative:


Intermediator (Signature & Seal):   Shanghai Dianniu Internet Finance Information Service Co.Ltd.


Authorized Representative:  


Signed on:         

Signed at: Pudong New Area, Shanghai


                    




4



UNDERWRITING AGREEMENT

 

[ ], 2018

ViewTrade Securities, Inc.

7280 W. Palmetto Park Road

Suite 105

Boca Raton, Florida 33433

 

As Representative of the Underwriters named on  Annex A  hereto

 

Ladies and Gentlemen:

 

The undersigned, Golden Bull Limited, a company limited by shares organized under the laws of the Cayman Islands (the “ Company ”), hereby confirms its agreement (this “ Agreement ”) with the several underwriters (such underwriters, for whom ViewTrade Securities, Inc. is acting as representative (in such capacity, the “ Representative ,” if there are no underwriters other than the Representative, reference to multiple underwriters shall be disregarded and the term Representative as used herein shall have the same meaning as underwriter, the “ Underwriters ” and each an “ Underwriter ”) to issue and sell to the Underwriters an aggregate of 2,000,000 ordinary shares, $0.01 par value per share (“ Ordinary shares ”), of the Company (the “ Firm Shares ”). The Company has also granted to the several Underwriters an option to purchase up to 300,000 additional Ordinary shares, on the terms and for the purposes set forth in Section 1(b) hereof (the “ Option Shares ”). The Firm Shares and any Option Shares purchased pursuant to this Agreement are herein collectively called the “Securities.” The offering and sale of securities contemplated by this Agreement is referred to herein as the “ Offering .”

 

(1)

Purchase of Securities/Consideration.

 

(a)

Firm Shares . On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Underwriters, severally and not jointly, an aggregate of 2,000,000 Firm Shares at a purchase price (net of discount and commissions) of $ [ ] per share. The Underwriters, severally and not jointly, agree to purchase from the Company the Firm Shares set forth opposite their respective names on  Annex A  attached hereto and made a part hereof.

 

(b)

Option Shares . On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants to the several Underwriters an option to purchase, severally and not jointly, all or any portion of the Option Shares at the same purchase price as the Firm Shares. The option granted hereunder may be exercised in whole or in part at any time (but not more than once) within 45 days after the date of the Prospectus upon notice (confirmed in writing) by the Representative to the Company setting forth the aggregate number of Option Shares as to which the Underwriters are exercising the option and the date and time, as determined by the Representative, when the Option Shares are to be delivered, but in no event earlier than the First Closing Date nor earlier than the second Business Day or later than the tenth Business Day after the date on which the option shall have been exercised. The number of Option Shares to be purchased by each Underwriter shall be the same percentage of the total number of Option Shares to be purchased by the Underwriters as the number of Firm Shares to be purchased by such Underwriter is of the total number of Firm Shares to be purchased by the Underwriters, as adjusted by the Representative in such manner as the Representative deems advisable to avoid fractional shares. No Option Shares shall be sold and delivered unless the Firm Shares previously have been, or simultaneously are, sold and delivered.

 

(c)

Commission and Expenses . In consideration of the services to be provided for hereunder, the Company shall pay to the Underwriters or their respective designees their pro rata portion (based on the Securities purchased) of (i) an underwriting discount equal to six percent (6%) of the aggregate gross proceeds raised in the Offering (the “ Underwriting Fee ”), and (ii) a non-




accountable expense allowance of one-half percent (0.5%) of the gross proceeds of the Offering. In addition, the Company shall reimburse the Representative for certain out-of-pocket accountable expenses, as set forth in Section 4(i), which reimbursement shall be reduced by any Advances previously paid to the Representative. To the extent that the Underwriters’ incurred expenses are less than the Advances previously paid, the Underwriters will return to the Company that portion of the Advances not offset by out-of-pocket accountable expenses.


(d)

Representative’s Warrant . The Company hereby agrees to issue to the Representative (and/or its designees) on the applicable Closing Date and/or Option Closing Date, as the case may be, Warrants to purchase such number of Shares equal to five percent (5%) of the Shares issued at the Closing (for the avoidance of doubt, including the Additional Shares) (the “Representative’s Warrant”). The Representative’s Warrant shall be exercisable, in whole or in part, commencing 180 days from the Effective Date and expiring on the three (3) year six (6) month anniversary of the Effective Date at an initial exercise price of $[ ] per Share, which is equal to one hundred twenty percent (120%) of the initial public offering price of a Firm Share. The Representative s Warrant and the Shares issuable upon exercise of the Representative s Warrant are hereinafter referred to collectively as the “Representative’s Securities.”

 

The Firm Shares, the Option Shares and the Representative’s Securities are hereinafter referred to collectively as the “Securities.”

 

(2)

Delivery and Payment.

 

(a)

Delivery of and Payment for Securities . Delivery of and payment for the Firm Shares shall be made at 10:00 A.M., Eastern time, on                       , 2018 or at such other time as shall be agreed upon by the Representative and the Company, and, with respect to the Option Shares, 10:00 A.M., Eastern time, on the date specified by the Representative in the written notice given by the Representative of the Underwriters’ election to purchase such Option Shares, or at such other time as shall be agreed upon by the Representative and the Company. The hour and date of delivery of and payment for the Firm Shares is called the “ First Closing Date ,” and the time and date for delivery of the Option Shares, if not the First Closing Date, is called a “ Second Closing Date ,” and each such closing of the payment of the purchase price for, and delivery of certificates representing, Securities is referred to herein as a “ Closing .” Each Closing shall be at the offices of the Representative or at such other place as shall be agreed upon by the Representative and the Company. Payment for the Securities shall be made on the applicable Closing Date by wire transfer in Federal (same day) funds upon delivery to the Representative of certificates (in form and substance reasonably satisfactory to the Representative) representing the Securities (or if uncertificated through the full fast transfer facilities of the Depository Trust Company (the “ DTC ”)) for the account of the Underwriters. The Securities shall be registered in such names and in such denominations as the Representative may request in writing at least two Business Days prior to the applicable Closing Date. If certificated, the Company will permit the Representative to examine and package the Securities for delivery at least one full Business Day prior to the applicable Closing Date. The Company shall not be obligated to sell or deliver the Securities to be purchased on such Closing Date except upon tender of payment by the Representative for all such Securities.

 

(b)

Escrow Agreement . Concurrently with the execution and delivery of this Agreement, the Company, the Representative and Pearlman Law Group LLP, as escrow agent (the “ Escrow Agent ”), shall enter into an escrow agreement (the “ Escrow Agreement ”), pursuant to which $600,000 in proceeds from the Offering shall be deposited by the Company at Closing in a non-interest bearing escrow account (the “ Escrow Account ”). All remaining funds in the Escrow Account that are not subject to an indemnification claim as of the second anniversary of Closing will be returned to the Company in accordance with the terms of the Escrow Agreement. The Company shall pay the reasonable fees and expenses of the Escrow Agent.

 




(3)

Representations and Warranties of the Company.  The Company represents and warrants to, and agrees with, each of the Underwriters that, as of the date hereof and as of the First Closing Date and the Second Closing Date (as if made at such Closing Date):

 

(a)

Filing of Registration Statement . The Company has filed with the Commission a registration statement, and an amendment or amendments thereto, on Form F-1 (File No. 333-                    ), including any related prospectus or prospectuses, for the registration of the Securities under the Securities Act, which registration statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Securities Act. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act (the “ Rule 430A Information ”), is referred to herein as the “ Registration Statement .” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.

 

Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “ Preliminary Prospectus . The Preliminary Prospectus, subject to completion and filed with the Commission on [ ], 2018, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the Pricing Prospectus . The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “ Prospectus .” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.

 

For purposes of this Agreement:

 

Applicable Time means [ ] p.m., Eastern Time, on [ ], 2018.

 

Business Day means any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

 

Commission means the U.S. Securities and Exchange Commission.

 

Effective Date ” means each date and time that the Registration Statement, any post-effective amendment or amendments thereto became or becomes effective.

 

Execution Time ” means the date and time that this Agreement is executed and delivered by the parties to this Agreement.

 

Issuer Free Writing Prospectus ” means any “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act (“ Rule 433 ”), including any “free writing prospectus” (as defined in Rule 405 under the Securities Act) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

 

Marketing Materials ” means written roadshow materials prepared by or on behalf of the Company and used or referred to by the Company or with the Company’s express consent.

 




Offering ” means the offering and sale of the Securities.

 

Pricing Disclosure Package ” means the Pricing Prospectus, any Permitted Free Writing Prospectuses set forth on  Schedule II  and the information included on  Schedule I  hereto, all considered together.

 

Registration Statement ” means the registration statement referred to in Section 3(a) hereof including exhibits and financial statements and any prospectus supplement relating to the Securities that is filed with the Commission pursuant to Rule 424(b) and deemed part of such registration statement pursuant to Rule 430A, as amended, on each Effective Date and, in the event any post-effective amendment thereto becomes effective prior to the First Closing Date, shall also mean such registration statement as so amended.

 

Rule 158 ,” “ Rule 163 ,” “ Rule 164 ,” “ Rule 172 ,” “ Rule 405 ,” “ Rule 415 ,” “ Rule 424 ,” “ Rule 430A ,” “ Rule 430B ” and “ Rule 433 ” refer to such rules under the Securities Act.

 

SEC Filings ” means any filings made by the Company with the Commission.

 

Trading Day ” means any day on which the Exchange is open for trading.

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

(b)

Disclosures in Registration Statement.

 

(i)

Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (“ EDGAR ), except to the extent permitted by Regulation S-T ;

 

(ii)

Neither the Registration Statement nor any amendment thereto, at the time each part thereto became effective pursuant to the Securities Act, as of the date of this Agreement, at the First Closing Date or at the Second Closing Date, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided however that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of the Underwriters consists solely of (i) the name of the Underwriters contained on the cover page of the Pricing Prospectus and Prospectus and (ii) the sub-sections titled “Commissions and Expenses”, “Underwriter’s Warrant”, “Indemnification; Indemnification Escrow”, “Electronic Distribution , and Price Stabilization, Short Positions , in each case under the caption Underwriting in the Prospectus (the Underwriter Information ) ;

 

(iii)

The Pricing Disclosure Package, as of the Applicable Time, as of the date of this Agreement, and at the First Closing Date and the Second Closing Date, did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading ; provided, however, that this representation and warranty shall not apply to the Underwriter Information. Each Issuer Free Writing Prospectus does not conflict with the information contained in the Registration Statement, the




Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading ; provided, however, that this representation and warranty shall not apply to the Underwriter Information ; and

 

(iv)

Neither the Prospectus nor any amendment or supplement thereto, as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), or at the First Closing Date or the Second Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading ; provided, however, that this representation and warranty shall not apply to the Underwriter Information.

 

(c)

Disclosure of Agreements . The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which any of the Company or its Subsidiaries (as defined below) is a party or by which any of them is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package or the Prospectus, or (ii) that is material to the business of the Company and its Subsidiaries, has been duly authorized and validly executed by the Company or a Subsidiary, as applicable, is in full force and effect in all material respects and is enforceable against the Company or such Subsidiary, as applicable, and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by any of the Company or its Subsidiaries, and neither the Company or such Subsidiary, as applicable, nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. To the best of the Company’s knowledge, performance by the Company or a Subsidiary, as applicable, of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental authority, agency or court, domestic or foreign, having jurisdiction over the Company or its Subsidiaries or any of their respective assets or businesses, including those relating to environmental laws and regulations, except to the extent that the violation would not result in a Material Adverse Change.

 

(d)

Good Standing . The Company has been duly incorporated, is validly existing as a company limited by shares in good standing under the laws of the Cayman Islands, has the corporate power and authority to own its property and to conduct its business as described in the Pricing Disclosure Package and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not result in a Material Adverse Change.

 

(e)

Subsidiaries . Each of the Company’s direct and indirect subsidiaries (each a “ Subsidiary ” and collectively, the “ Subsidiaries ”) has been identified on  Schedule III  hereto. Each of the Subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Pricing Disclosure Package; all of the outstanding equity interests of each Subsidiary have been duly and validly authorized and issued, are owned directly or indirectly by the Company, are fully paid and non-assessable and, except as




described in the Pricing Disclosure Package, are free and clear of all liens, encumbrances, equities or claims. None of the outstanding share capital or equity interest in any Subsidiary was issued in violation of preemptive or similar rights of any security holder of such Subsidiary. All of the constitutive or organizational documents of each of the Subsidiaries comply with the requirements of applicable laws of its jurisdiction of incorporation or organization and are in full force and effect. Apart from the Subsidiaries, the Company has no direct or indirect subsidiaries or any other company over which it has direct or indirect effective control.  

 

(f)

Prior Securities Transactions . No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Pricing Disclosure Package and the Preliminary Prospectus.

 

(g)

Regulations.

 

(i)

The disclosures in the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulation on the Offering and the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed pursuant to the Securities Act in the Registration Statement, the Pricing Disclosure Package or the Prospectus which are not so disclosed.

 

(ii)

Except as described in the Pricing Disclosure Package and the Prospectus, each of the Company and its Subsidiaries has complied, and has taken all steps to ensure compliance by each of its shareholders, directors and officers that is, or is directly or indirectly owned or controlled by, a PRC resident or citizen with any applicable rules and regulations of the relevant PRC government agencies in effect on the applicable Closing Date (including but not limited to the Ministry of Commerce, the National Development and Reform Commission, the China Securities Regulatory Commission (“ CSRC ”) and the State Administration of Foreign Exchange) (the “ SAFE ”) relating to overseas investment by PRC residents and citizens (the “ PRC Overseas Investment and Listing Regulations ”), including, requesting each such person that is, or is directly or indirectly owned or controlled by, a PRC resident or citizen to complete any registration and other procedures required under applicable PRC Overseas Investment and Listing Regulations (including any applicable rules and regulations of the SAFE).

 

(iii)

The Company is aware of and has been advised as to the content of the Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors and any official clarifications, guidance, interpretations or implementation rules in connection with or related thereto in effect on the applicable Closing Date (the “ PRC Mergers and Acquisitions Rules ”) jointly promulgated by the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Tax Administration, the State Administration of Industry and Commerce, the CSRC and the State Administration of Foreign Exchange on August 8, 2006, including the provisions thereof which purport to require offshore special purpose entities formed for listing purposes and controlled directly or indirectly by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of their securities on an overseas stock exchange. The Company has received legal advice specifically with respect to the PRC Mergers and Acquisitions Rules from its PRC counsel, and the Company understands such legal advice. In addition, the Company has communicated such legal advice in full to each of its directors that signed the Registration Statement and each such director has confirmed that he or she understands such legal advice. The issuance and sale of the Securities, the listing and trading of the Securities on the Exchange (as defined below) and the consummation of the transactions contemplated by this Agreement and the Escrow Agreement (A) are not and will not be, as of the date hereof or at the applicable Closing Date, as the case may be, adversely affected by the PRC Mergers and Acquisitions Rules and (B) do not require the prior approval of the CSRC.

 

 (h)

Absence of Certain Events.  Except as contemplated in the Pricing Disclosure Package and in the Prospectus, subsequent to the respective dates as of which information is given in the Pricing Disclosure Package, none of the Company or its Subsidiaries has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, or declared or




paid any dividends or made any distribution of any kind with respect to its capital stock; and there has not been any change in the capital stock (other than a change in the number of outstanding Ordinary shares of the Company due to the issuance of shares upon the exercise of outstanding options or warrants or conversion of convertible securities), or any material change in the short-term or long-term debt (other than as a result of the conversion of convertible securities of the Company), or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock of the Company or any of its Subsidiaries, or any material adverse change in the general affairs, condition (financial or otherwise), business, prospects, management, properties, operations or results of operations of the Company and its Subsidiaries, taken as a whole (“ Material Adverse Change ”), or any development which could reasonably be expected to result in any Material Adverse Change.

 

(i)

Independent Accountants.  Friedman LLP (the “ Auditor ”), which has expressed its opinion with respect to the financial statements and schedules filed as a part of the Registration Statement and included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, is (i) an independent public accounting firm within the meaning of the Securities Act, (ii) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”)) and (iii) not in violation of the auditor independence requirements of the Sarbanes-Oxley Act.

 

(j)

Financial Statements, etc.  The financial statements, including the notes thereto and supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, comply in all material respects with the requirements of the Securities Act and fairly present the financial position and the results of operations of the Company and its Subsidiaries at the dates and for the periods to which they apply ; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles ( GAAP ), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP) ; and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Item 10 of Regulation S-K of the Securities Act. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company and its Subsidiaries with unconsolidated entities or other persons that may have a material current or future effect on the financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses of the Company and its Subsidiaries.

 

(k)

Capitalization; the Securities; Registration Rights . All of the issued and outstanding shares of capital stock of the Company, including the outstanding Ordinary shares, are duly authorized and validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state and foreign securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities that have not been waived in writing (a copy of which has been delivered to counsel to the Underwriters), and the holders thereof are not subject to personal liability by reason of being such holders; the Securities which may be sold hereunder by the Company have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement, will have been validly issued and will be fully paid and nonassessable, and the holders thereof will not be subject to personal liability by reason of being such holders; and the capital stock of the Company, including the Ordinary shares, conforms to the description thereof in the Registration Statement, in the Pricing Disclosure Package and in the Prospectus. Except as otherwise stated in the Registration Statement, in the Pricing Disclosure Package and in the Prospectus, (i) there are no preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, any Ordinary shares pursuant to the Company’s charter, by-




laws (or other organizational documents) or any agreement or other instrument to which the Company is a party or by which the Company is bound, (ii) neither the filing of the Registration Statement nor the offering or sale of the Securities as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Ordinary shares or other securities of the Company (collectively “ Registration Rights ”) and (iii) any person to whom the Company has granted Registration Rights has agreed not to exercise such rights until after the date that is 180 days after the date of the Prospectus. The Company has an authorized and outstanding capitalization as set forth in the Registration Statement, in the Pricing Disclosure Package and in the Prospectus under the caption “Capitalization.” The Ordinary shares (including the Securities) conform in all material respects to the description thereof contained in the Pricing Disclosure Package and the Prospectus.

 

(l)

Stock Options .  Except as described in the Registration Statement, in the Pricing Disclosure Package and in the Prospectus, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company any shares of the capital stock of the Company. The description of the Company’s stock option, stock bonus and other stock plans or arrangements (the “ Company Stock Plans ”), and the options (the “ Options ”) or other rights granted thereunder, set forth in the Pricing Disclosure Package and the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. Each grant of an Option (i) was duly authorized no later than the date on which the grant of such Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required shareholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto and (ii) was made in accordance with the terms of the applicable Company Stock Plan, and all applicable laws and regulatory rules or requirements, including all applicable federal securities laws.

 

(m)

Validity and Binding Effect of Agreements . Each of this Agreement and the Escrow Agreement has been duly and validly authorized by the Company, and, when executed and delivered, will constitute, a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally ; except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

(n)

No Conflicts, etc . The execution, delivery and performance by the Company of this Agreement and the Escrow Agreement, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of any of the Company and the Subsidiaries pursuant to the terms of any agreement or instrument to which any of the Company or the Subsidiaries, as applicable, is a party ; (ii) result in any violation of the provisions of the Company s Memorandum and Articles of Association (as the same may be amended or restated from time to time, the Organizational Documents ) ; or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any governmental authority as of the date hereof, except in the case of (i) or (iii), such as would not result in a Material Adverse Change.

 

(o)

No Defaults ; Violations . No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default, in the due performance and observance of any term, covenant or condition of any license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money,




or any other agreement or instrument to which any of the Company or its Subsidiaries is a party or by which any of the Company or its Subsidiaries may be bound or to which any of their respective properties or assets is subject. None of the Company or its Subsidiaries is (i) in violation of any term or provision of its constitutive or organizational documents, or (ii) in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any governmental authority, except such as would not result in a Material Adverse Change.

 

(p)

Corporate Power ; Licenses ; Consents .

 

(i)

Conduct of Business . Each of the Company and its Subsidiaries has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to conduct its business as described in the Pricing Disclosure Package and the Prospectus.

 

(ii)

Transactions Contemplated Herein . The Company has all corporate power and authority to enter into this Agreement and the Escrow Agreement and to carry out the provisions and conditions hereof and thereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Escrow Agreement and as contemplated by the Pricing Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“ FINRA ”).

 

(q)

D&O Information . All information concerning the Company’s directors, officers and principal shareholders described in the Pricing Disclosure Package and the Prospectus, is true and correct in all material respects and the Company has not become aware of any information which would cause such information to become materially inaccurate or incorrect.

 

(r)

Litigation ; Governmental Proceedings . Except as set forth in the Pricing Disclosure Package and in the Prospectus, there is not pending or, to the knowledge of the Company, threatened or contemplated, any action, suit or proceeding (i) to which the Company or any Subsidiary is a party or (ii) which has as the subject thereof any officer or director of, any employee benefit plan sponsored or any property or assets owned or leased by, the Company or any Subsidiary before or by any court or governmental authority, or any arbitrator, which, individually or in the aggregate, might result in any Material Adverse Change, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement or the Escrow Agreement or which are otherwise material in the context of the sale of the Securities. There are no current or, to the knowledge of the Company, pending, legal, governmental or regulatory actions, suits or proceedings (x) to which the Company or any Subsidiary is subject or (y) which has as the subject thereof any officer or director of, any employee plan sponsored by or any property or assets owned or leased by, the Company or any Subsidiary, that are required to be described in the Registration Statement, Pricing Disclosure Package and Prospectus and that have not been so described.

 

(s)

Insurance . Except as disclosed in the Pricing Disclosure Package and the Prospectus, each of the Company and its Subsidiaries carries, or is covered by, insurance from reputable insurers in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries; all policies of insurance and any fidelity or surety bonds insuring any of the Company or its Subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; each of the Company and its Subsidiaries is in compliance with the terms of such policies and instruments in all material respects; there are no claims by any of the Company or its Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; none of the Company or its Subsidiaries has been refused any insurance coverage sought or applied for; and none of the Company or its Subsidiaries has reason to believe that it will not be able to renew its existing insurance coverage as and when such




coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not result in a Material Adverse Change.

 

(t)

Transactions Affecting Disclosure to FINRA .

 

(i)

Finder’s Fees . Except as described in the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, broker’s, agent’s, consulting or origination fee by the Company or any Subsidiary with respect to the sale of the Securities hereunder or any other arrangements, agreements or understandings of the Company or any Subsidiary or, to the Company’s knowledge, any of its shareholders that may affect the Underwriters’ compensation, as determined by FINRA.

 

(ii)

Payments Within Twelve Months . Except as described in the Pricing Disclosure Package and the Prospectus, none of the Company or its Subsidiaries has made any direct or indirect payments (in cash, securities or otherwise) to: (A) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company ; (B) any FINRA member ; or (C) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder in connection with the Offering.

 

(iii)

Use of Proceeds . None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.

 

(iv)

FINRA Affiliation . There are no affiliations or associations between (A) any member of the FINRA and (B) the Company or any of its Subsidiaries or any of their respective officers, directors or, to the knowledge of the Company, 5% or greater security holders or, to the knowledge of the Company, any beneficial owner of the Company’s unregistered equity securities that were acquired at any time on or after the 180th day immediately preceding the date that the Registration Statement was initially filed with the Commission.

 

(v)

Information . All information provided by the Company in its FINRA questionnaire to the Underwriters’ counsel specifically for use by the Underwriters’ counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.

 

(u)

Foreign Corrupt Practices Act . Neither the Company nor any of its Subsidiaries or their respective affiliates, nor any director or officer, nor, to the Company’s knowledge, any employee, agent or representative of the Company or of any of its Subsidiaries or their respective affiliates, has (A) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (B) taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to influence official action or secure an improper advantage; or (C) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit; and the Company and its Subsidiaries and their respective affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintain and will continue to maintain policies and procedures designed to promote and achieve compliance with such laws and with the representation and warranty contained herein.

 

(v)

Compliance with OFAC .

 




(i)

None of the Company or its Subsidiaries, nor any director, officer or employee thereof, nor, to the Company’s knowledge, any agent, affiliate or representative of any of the Company or its Subsidiaries, is an individual or entity that is, or is owned or controlled by an individual or entity that is:

 

(A)

the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “ Sanctions ”), nor

 

(B)

located, organized or resident in a country or territory that is the subject of Sanctions (including, Burma/Myanmar, Iran, Libya, North Korea, Sudan and Syria).

 

(ii)

The Company will not, directly or indirectly, use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other individual or entity:

 

(C)

to fund or facilitate any activities or business of or with any individual or entity or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or

 

(D)

in any other manner that will result in a violation of Sanctions by any individual or entity (including any individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise).

 

(iii)

For the past five years, none of the Company or its Subsidiaries has knowingly engaged in, and is now knowingly engaged in, any dealings or transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.

 

(w)

Money Laundering Laws . None of the Company or its Subsidiaries, their respective affiliates nor any of their respective officers, directors, supervisors, managers, agents, or employees, has violated, the Company’s participation in the Offering will not violate, and the Company and its Subsidiaries have instituted and maintain policies and procedures designed to ensure continued compliance with, each of the following laws: (A) anti-bribery laws, including but not limited to, any applicable law, rule, or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed December 17, 1997, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act 2010, or any other law, rule or regulation of similar purposes and scope or (B) anti-money laundering laws, including but not limited to, applicable federal, state, international, foreign or other laws, regulations or government guidance regarding anti-money laundering, including, Title 18 US. Code section 1956 and 1957, the Patriot Act, the Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended, and any Executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder.

 

(x)

Lock-Up Agreements Schedule IV  hereto contains a complete and accurate list of the Company’s officers, directors and each beneficial owner of the Company’s outstanding Ordinary shares (or securities convertible or exercisable into Ordinary shares) (collectively, the “ Lock-Up Parties ”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit A (the “ Lock-Up Agreement ”), prior to the execution of this Agreement. The Company will enforce the terms of each Lock-Up Agreement and issue stop-transfer instructions to its transfer agent and registrar for the Ordinary shares with respect to any transaction or contemplated transaction that would constitute a breach of or default under the applicable Lock-Up Agreement. If the Representative, in its sole discretion, agrees to release or waive the restrictions of any Lock-Up Agreement between an officer or director of the Company and the Representative and provides the Company with notice of the impending release or




waiver at least three Business Days before the effective date of such release or waiver, the Company agrees to announce the impending release or waiver by means of a press release substantially in the form of Exhibit B hereto, issued through a major news service, at least two Business Days before the effective date of the release or waiver.

 

(y)

Related Party Transactions . There are no business relationships or related party transactions involving the Company or any of its Subsidiaries or any other person required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus that have not been described as required.

 

(z)      Sarbanes-Oxley Compliance .

 

(i)

Disclosure Controls . The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “ Exchange Act ”) and such controls and procedures are effective in ensuring that material information relating to the Company is made known to the principal executive officer and the principal financial officer. The Company has utilized such controls and procedures in preparing and evaluating the disclosures in the Registration Statement, in the Pricing Disclosure Package and in the Prospectus.

 

(ii)

Compliance . The Company is in compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure its future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the provisions of the Sarbanes-Oxley Act.

 

(iii)

Accounting Controls . The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in the United States and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, in the Pricing Disclosure Package and in the Prospectus, the Company’s internal control over financial reporting is effective and none of the Company, its board of directors and audit committee is aware of any “significant deficiencies” or “material weaknesses” (each as defined by the Public Company Accounting Oversight Board) in its internal control over financial reporting, or any fraud, whether or not material, that involves management or other employees of the Company who have a significant role in the Company’s internal controls; and since the end of the latest audited fiscal year, there has been no change in the Company’s internal control over financial reporting (whether or not remediated) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s board of directors has, subject to the exceptions, cure periods and the phase-in periods specified in the applicable rules of the Exchange (“ Exchange Rules ”), validly appointed an audit committee to oversee internal accounting controls whose composition satisfies the applicable requirements of the Exchange Rules and the Company’s board of directors and/or the audit committee has adopted a charter that satisfies the requirements of the Exchange Rules.

 

(aa)

Investment Company Act . None of the Company or its Subsidiaries is or, after giving effect to the Offering and the application of the proceeds thereof as described in the Pricing Disclosure Package and the Prospectus, will be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.

 

(bb)

No Labor Disputes.  No labor problem or dispute with the employees of any of the Company or its Subsidiaries exists or is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or its Subsidiaries’ principal suppliers, contractors or customers, that could result in a Material Adverse Change.




 

(cc)

Intellectual Property Rights.  Each of the Company and its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“ Intellectual Property Rights ”) necessary for the conduct of its business as currently carried on and as described in the Pricing Disclosure Package and the Prospectus. No action or use by any of the Company or its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Pricing Disclosure Package and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. None of the Company or its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not result, individually or in the aggregate, in a Material Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by any of the Company or its Subsidiaries ; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of any of the Company or its Subsidiaries in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims in this Section 3(dd), reasonably be expected to result in a Material Adverse Change ; (C) the Intellectual Property Rights owned by each of the Company or its Subsidiaries and, to the knowledge of the Company, the Intellectual Property Rights licensed to any of the Company or its Subsidiaries have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 3(dd), reasonably be expected to result in a Material Adverse Change ; (D) there is no pending or, to the Company s knowledge, threatened action, suit, proceeding or claim by others that any of the Company or its Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 3(dd), reasonably be expected to result in a Material Adverse Change ; and (E) to the Company s knowledge, no employee of the Company or its Subsidiaries is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or its Subsidiaries, or actions undertaken by the employee while employed with any of the Company or its Subsidiaries. To the Company’s knowledge, all material technical information developed by and belonging to any of the Company or its Subsidiaries which has not been patented has been kept confidential. None of the Company or its Subsidiaries is a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Pricing Disclosure Package and the Prospectus and are not described therein. The Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by any of the Company or its Subsidiaries has been obtained or is being used by any of them in violation of any contractual obligation binding on any of the Company or its Subsidiaries or, to the Company’s knowledge, any of their respective officers, directors or employees, or otherwise in violation of the rights of any persons.

 

(dd)

Taxes.  Each of the Company and its Subsidiaries has filed all returns (as defined below) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Each of the Company and its Subsidiaries has paid all taxes (as defined below) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against it. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not




disputed, and for all periods to and including the dates of such consolidated financial statements. No issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from any of the Company or its Subsidiaries and no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from any of the Company or its Subsidiaries. The term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.

 

(ee)

ERISA and Employee Benefits Matters . None of the Company or its Subsidiaries maintains any “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, including any stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, under which (i) any current or former employee, director or independent contractor has any present or future right to benefits and which are contributed to, sponsored by or maintained by any of the Company or its Subsidiaries or (ii) any of the Company or its Subsidiaries has had or has any present or future obligation or liability.

 

(ff)

Compliance with Laws.  Each of the Company and its Subsidiaries holds, and is operating in compliance in all material respects with, all franchises, grants, authorizations, licenses, permits, easements, consents, certificates and orders of any governmental authority or self-regulatory body required for the conduct of its business and all such franchises, grants, authorizations, licenses, permits, easements, consents, certifications and orders are valid and in full force and effect; and none of the Company or its Subsidiaries has received notice of any revocation or modification of any such franchise, grant, authorization, license, permit, easement, consent, certification or order or has reason to believe that any such franchise, grant, authorization, license, permit, easement, consent, certification or order will not be renewed in the ordinary course; and each of the Company and its Subsidiaries is in compliance in all material respects with all applicable federal, state, local and foreign laws, regulations, orders and decrees.

 

(gg)

Ownership of Assets . Each of the Company and its Subsidiaries has good and marketable title (valid land use rights and building ownership certificates in the case of real property located in the PRC) to all property (whether real or personal) described in the Pricing Disclosure Package and the Prospectus as being owned by it, in each case free and clear of all liens, claims, security interests, other encumbrances or defects except such as are described in the Pricing Disclosure Package and the Prospectus. The property held under lease by any of the Company or its Subsidiaries is held by it under valid, subsisting and enforceable leases with only such exceptions with respect to any particular lease as do not interfere in any material respect with the conduct of the business of the Company or its Subsidiaries, as applicable.

 

(hh)

Compliance with Environmental Laws . Except as disclosed in the Pricing Disclosure Package and the Prospectus, none of the Company or its Subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental authority or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “ Environmental Laws ”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would, individually or in the aggregate, result in a Material Adverse Change; and none of the Company or its Subsidiaries is aware of any pending investigation which might lead to such a claim. None of the Company or its Subsidiaries anticipates incurring any material capital expenditures relating to compliance with Environmental Laws.




 

 (ii)

Compliance with Occupational Laws . Each of the Company and its Subsidiaries (i) is in compliance, in all material respects, with any and all applicable foreign, federal, state and local laws, rules, regulations, treaties, statutes and codes promulgated by any and all governmental authorities (including pursuant to the Occupational Health and Safety Act) relating to the protection of human health and safety in the workplace (“ Occupational Laws ”); (ii) has received all material permits, licenses or other approvals required of it under applicable Occupational Laws to conduct its business as currently conducted; and (iii) is in compliance, in all material respects, with all terms and conditions of such permit, license or approval. No action, proceeding, revocation proceeding, writ, injunction or claim is pending or, to the Company’s knowledge, threatened against any of the Company or its Subsidiaries relating to Occupational Laws, and the Company does not have knowledge of any facts, circumstances or developments relating to its operations or cost accounting practices that could reasonably be expected to form the basis for or give rise to such actions, suits, investigations or proceedings.

 

(jj)

Ineligible Issuer.  At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act) of any of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

 

(kk)

Business Arrangements . Except as disclosed in the Pricing Disclosure Package and the Prospectus, none of the Company or its Subsidiaries has granted rights to develop, manufacture, produce, assemble, distribute, license, market or sell its products to any other person or is bound by any agreement that affects the exclusive right of any of the Company or its Subsidiaries to develop, manufacture, produce, assemble, distribute, license, market or sell its products.

 

(ll)

Industry Data.  The statistical and market-related data included in each of the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources. The Company has obtained all consents required for the inclusion of such statistical and market-related data in each of the Pricing Disclosure Package and the Prospectus.

 

(mm)

Forward-looking Statements . No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

(nn)

Emerging Growth Company.  From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication (as defined below)) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “ Emerging Growth Company ”). “ Testing-the-Waters Communication ” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.

 

(oo)

Testing-the-Waters Communications.  The Company (i) has not alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the prior consent of the Representative with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Underwriters to engage in Testing-the-Waters Communications. The Company reconfirms that the Underwriters has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The




Company has not distributed any Written Testing-the-Waters Communications (as defined below) other than those listed on  Schedule V  hereto. “ Written Testing-the-Waters Communication ” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act. Any individual Written Testing-the-Waters Communication does not conflict with the information contained in the Registration Statement or the Pricing Disclosure Package, complied in all material respects with the Securities Act, and when taken together with the Pricing Disclosure Package as of the Applicable Time, did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(pp)

No Other Offering Materials . The Company has not distributed and will not distribute any prospectus or other offering material in connection with the Offering other than any Pricing Prospectus, the Pricing Disclosure Package or the Prospectus or other materials permitted by the Securities Act to be distributed by the Company;  provided, however,  that, except as set forth on  Schedule II , the Company has not made and will not make any offer relating to the Securities that would constitute a free writing prospectus, except in accordance with the provisions of Section 4(m) of this Agreement and, except as set forth on  Schedule II , the Company has not made and will not make any communication relating to the Securities that would constitute a Testing-the-Waters Communication, except in accordance with the provisions of Section 4(m) of this Agreement.

 

(qq)

Payments of Dividends; Payments in Foreign Currency . Except as described in the Pricing Disclosure Package, (i) none of the Company or its Subsidiaries is prohibited, directly or indirectly, from (A) paying any dividends or making any other distributions on its share capital, (B) making or repaying any loan or advance to the Company or any other Subsidiary or (C) transferring any of its properties or assets to the Company or any other Subsidiary; and (ii) all dividends and other distributions declared and payable upon the share capital of the Company or any of its Subsidiaries (A) may be converted into foreign currency that may be freely transferred out of such person’s jurisdiction of incorporation, without the consent, approval, authorization or order of, or qualification with, any court or governmental agency or body in such person’s jurisdiction of incorporation or tax residence, and (B) are not and will not be subject to withholding, value added or other taxes under the currently effective laws and regulations of such person’s jurisdiction of incorporation, without the necessity of obtaining any consents, approvals, authorizations, orders, registrations, clearances or qualifications of or with any court or governmental agency or body having jurisdiction over such person.

 

(rr)

PFIC Status . Based on the Company’s current income and assets and projections as to the value of its assets and the market value of its Shares, including the current and anticipated valuation of its assets, the Company does not believe it was a Passive Foreign Investment Company (“ PFIC ”) within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended, for its most recent taxable year, and does not expect to become a PFIC for its current taxable year or in the foreseeable future. 

 

(ss)

Foreign Private Issuer . From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is a “foreign private issuer” within the meaning of Rule 405 under the Securities Act.  

 

(tt)

Margin Securities . The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Ordinary shares to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.

 




(uu)

Stock Exchange Listing . The Securities have been approved for listing on the Exchange upon official notice of issuance and, on the date the Registration Statement became effective, the Company’s Registration Statement on Form 8-A or other applicable form under the Exchange Act, became effective.

 

(vv)

No Stop Orders, etc.  Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.

 

(ww)

No Immunity . None of the Company or its Subsidiaries or any of their respective properties, assets or revenues has any right of immunity, under the laws of the Cayman Islands, the PRC or the State of New York, from any legal action, suit or proceeding, the giving of any relief in any such legal action, suit or proceeding, set-off or counterclaim, the jurisdiction of any Cayman Islands, PRC, New York or United States federal court, service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment, or execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement or the Escrow Agreement; and, to the extent that the Company or any of its Subsidiaries or any of their respective properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, each of the Company and its Subsidiaries waives or will waive such right to the extent permitted by law and has consented to such relief and enforcement as provided in this Agreement and the Escrow Agreement.

 

(xx)

Validity of Choice of Law . The choice of the laws of the State of New York as the governing law of this Agreement and the Escrow Agreement is a valid choice of law under the laws of the Cayman Islands and the PRC and will be honored by courts in the Cayman Islands and the PRC. The Company has the power to submit, and pursuant to this Agreement and the Escrow Agreement, has legally, validly, effectively and irrevocably submitted, to the personal jurisdiction of each New York State and United States Federal court sitting in The City of New York (each, a “ New York Court ”) and has validly and irrevocably waived any objection to the laying of venue of any suit, action or proceeding brought in any such court; and the Company has the power to designate, appoint and empower, and pursuant to this Agreement and the Escrow Agreement, has legally, validly, effectively and irrevocably designated, appointed and empowered, an authorized agent for service of process in any action arising out of or relating to this Agreement, the Escrow Agreement, any preliminary prospectus, the Pricing Disclosure Package, the Prospectus, the Registration Statement, or the offering of the Securities in any New York Court, and service of process effected on such authorized agent will be effective to confer valid personal jurisdiction over the Company as provided in this Agreement and the Escrow Agreement.

 

(yy)

Enforceability of Judgment . Any final judgment for a fixed or readily calculable sum of money rendered by a New York Court having jurisdiction under its own domestic laws in respect of any suit, action or proceeding against the Company based upon this Agreement or the Escrow Agreement and any instruments or agreements entered into for the consummation of the transactions contemplated herein and therein would be declared enforceable against the Company, without re-examination or review of the merits of the cause of action in respect of which the original judgment was given or re-litigation of the matters adjudicated upon, by the courts of the Cayman Islands and PRC, provided that with respect to courts of the PRC, (A) adequate service of process has been effected and the defendant has had a reasonable opportunity to be heard, (B) such judgments or the enforcement thereof are not contrary to the law, public policy, security or sovereignty of the PRC, (C) such judgments were not obtained by fraudulent means and do not conflict with any other valid judgment in the same matter between the same parties and (D) an action between the same parties in the same matter is not pending in any PRC court at the time the lawsuit is instituted in a foreign court. The Company is not aware of any reason why the enforcement in the Cayman Islands or the PRC of




such a New York Court judgment would be, as of the date hereof, contrary to public policy of the Cayman Islands or PRC.

 

(zz)

Officer’s Certificate . Any certificate signed by any duly authorized officer of the Company and delivered to you or to the Underwriters’ counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.

 

(4)

Certain Agreements of the Company . The Company agrees with the Underwriters as follows:

 

(a)

Required Filings.  The Company will prepare and file a Prospectus with the Commission containing the Rule 430A Information omitted from the Preliminary Prospectus within the time period required by, and otherwise in accordance with the provisions of, Rules 424(b) and 430A of the Securities Act. If the Company has elected to rely upon Rule 462(b) of the Securities Act to increase the size of the offering registered under the Securities Act and the Rule 462(b) Registration Statement has not yet been filed and become effective, the Company will prepare and file the Rule 462 Registration Statement with the Commission within the time period required by, and otherwise in accordance with the provisions of, Rule 462(b) and the Securities Act. The Company will prepare and file with the Commission, promptly upon the Representative’s request, any amendments or supplements to the Registration Statement or Prospectus that, in the Representative’s opinion, may be necessary or advisable in connection with the distribution of the Securities by the Underwriters; and the Company will furnish the Representative and its counsel a copy of any proposed amendment or supplement to the Registration Statement or Prospectus and will not file any amendment or supplement to the Registration Statement or Prospectus to which the Representative shall reasonably object by notice to the Company after having been furnished a copy a reasonable time prior to the filing.

 

(b)

Notification of Certain Commission Actions.  The Company will advise the Representative, promptly after it shall receive notice or obtain knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, or any post-effective amendment thereto or preventing or suspending the use of any Preliminary Prospectus, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose; and the Company will promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.

 

 (c)

Continued Compliance with Securities Laws .

 

 

(i)

Within the time during which a prospectus (assuming the absence of Rule 172) relating to the Securities is required to be delivered under the Securities Act by the Underwriters or any dealer, the Company will comply with all requirements imposed upon it by the Securities Act, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof, the Pricing Disclosure Package and the Prospectus. If during such period any event occurs as a result of which the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the Pricing Disclosure Package) would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available to prospective investors, the Pricing Disclosure Package) to comply with the Securities Act, the Company promptly will (x) notify the Underwriters of such untrue statement or omission, (y) amend the Registration Statement or supplement the Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Pricing Disclosure Package) (at the expense of the Company) so as to correct such statement or omission or effect such compliance and (z) notify the Underwriters when any amendment to the Registration Statement is filed or becomes effective or when any supplement to the Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Pricing Disclosure Package) is filed.

 




 

(ii)

If at any time following issuance of an Issuer Free Writing Prospectus or Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus or Written Testing-the-Waters Communication conflicted or would conflict with the information contained in the Registration Statement, any Preliminary Prospectus or the Prospectus relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company (x) has promptly notified or promptly will notify the Underwriters of such conflict, untrue statement or omission, (y) has promptly amended or will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus or Written Testing-the-Waters Communication to eliminate or correct such conflict, untrue statement or omission and (z) has notified or promptly will notify the Underwriters when such amendment or supplement was or is filed with the Commission to the extent required to be filed by the Securities Act.

 

(d)

Rule 158 The Company will make generally available to its security holders as soon as practicable, but in no event later than 16 months after the end of the Company’s current fiscal quarter, an earnings statement (which need not be audited) covering a 12-month period beginning after the effective date of the Registration Statement (which, for purposes of this paragraph, will be deemed to be the effective date of the Rule 462(b) Registration Statement, if applicable) that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

(e)

Furnishing of Prospectuses.  The Company will furnish to the Underwriters copies of the Registration Statement, including all exhibits, any Statutory Prospectus relating to the Securities, the Final Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Underwriters reasonably requests. The Company will pay the expenses of printing and distributing to the Underwriters all such documents.

 

(f)

Blue Sky Qualifications The Company shall take or cause to be taken all necessary action to qualify the Securities for sale under the securities laws of such domestic United States or foreign jurisdictions as the Underwriters may reasonably designate and to continue such qualifications in effect so long as required for the distribution of the Securities, except that the Company shall not be required in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process in any state.

 

(g)

Provision of Documents . The Company will furnish, at its own expense, to the Underwriters and their counsel copies of the Registration Statement (one of which will be signed and will include all consents and exhibits filed therewith), and to the Underwriters and any dealer each Preliminary Prospectus, the Pricing Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Underwriters may from time to time reasonably request.

 

(h)

Reporting Requirements The Company will file on a timely basis with the Commission such periodic and special reports as required by the Exchange Act.

 

(i)

Payment of Expenses The Company shall be responsible for and shall pay all expenses relating to the Offering, including but not limited to: (i) all filing fees and communication expenses relating to the registration of the shares to be sold in this offering with the SEC and the filing of the offering materials with FINRA; (ii) up to $150,000 of fees, all reasonable travel and lodging expenses incurred by the Representative or its counsel in connection with visits to, and examinations of, the Company; (iii) translation costs for due diligence purpose; (iv) all fees, expenses and disbursements relating to the registration or qualification of such Shares under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of Representative’s counsel); (v) the costs of all mailing and printing of the placement documents, registration statements, prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final prospectuses as the Representative may reasonably deem necessary; (vi) the costs of preparing, printing and delivering certificates representing the shares and the fees and




expenses of the transfer agent for such shares; (vii) the reasonable cost for road show meetings and preparation of a power point presentation; and (viii) the costs associated with “tombstone” advertisements, not to exceed $10,000. In the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 7 hereof.

 

(j)

Use of Proceeds The Company will apply the net proceeds from the sale of the Securities to be sold by it hereunder for the purposes set forth in the Pricing Disclosure Package and in the Prospectus and will file such reports with the Commission with respect to the sale of the Securities and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Securities Act.

 

(k)

Absence of Manipulation The Company has not taken and will not take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, or which has constituted, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities, and has not effected any sales of Ordinary shares which are required to be disclosed in response to Item 701 of Regulation S-K under the Securities Act which have not been so disclosed in the Registration Statement.

 

(l)

Emerging Growth Company . The Company will promptly notify the Underwriters if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of Securities within the meaning of the Securities Act and (B) completion of the 180-day restricted period referenced to in Section 4(l) hereof.

 

(m)

Free Writing Prospectuses . The Company represents and agrees that, unless it obtains the prior written consent of the Underwriters, and the Underwriters represents and agrees that, unless it obtains the prior written consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a free writing prospectus required to be filed with the Commission; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the free writing prospectuses included in  Schedule II . Any such free writing prospectus consented to by the Company or the Underwriters is hereinafter referred to as a “ Permitted Free Writing Prospectus .” The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, and has complied and will comply with the requirements of Rules 164 and 433 under the Securities Act applicable to any Permitted Free Writing Prospectus. The Company represents that it has satisfied and agrees that it will satisfy the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic road show. Each Underwriter represents and agrees that, (A) unless it obtains the prior written consent of the Company, it has not distributed, and will not distribute any Written Testing-the-Waters Communication other than those listed on  Schedule V , and (B) any Testing-the-Waters Communication undertaken by it was with entities that are qualified institutional buyers with the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act.

 

 (n)

Company Lock Up . The Company will not, without the prior written consent of the Representative, from the date of execution of this Agreement and continuing to and including the date 180 days after the date of the Prospectus (the “ Lock-Up Period ”), (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any Ordinary shares or any securities convertible into or exercisable or exchangeable for Ordinary shares or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Ordinary shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Ordinary shares or such other securities, in cash or otherwise, except to the Underwriters pursuant to this Agreement. The Company agrees not to accelerate the vesting of any option or warrant or the lapse of any repurchase right prior to the expiration of the Lock-Up Period.

 




(o)

Transfer Agent . The Company shall maintain, at its expense, a registrar and transfer agent for the Company’s Ordinary shares reasonably acceptable to the Underwriters, and shall retain such transfer agent for a period of not less than one year from the First Closing Date.

 

(p)

Press Releases . The Company shall not issue any press release without the Representative’s prior written consent, commencing on the date of this Agreement and continuing for a period of 40 days from Closing of the Offering, other than normal and customary releases issued in the ordinary course of the Company’s business, each of which the Underwriters shall have a reasonable right to review in advance of publication.

 

(q)

PRC Compliance The Company shall comply with the PRC Overseas Investment and Listing Regulations, and use its reasonable efforts to cause holders of its ordinary shares that are, or that are directly or indirectly owned or controlled by, Chinese residents or Chinese citizens, to comply with the PRC Overseas Investment and Listing Regulations applicable to them, including requesting each such shareholder to complete any registration and other procedures required under applicable PRC Overseas Investment and Listing Regulations (including any applicable rules and regulations of the SAFE).

 

(5)

Conditions of the Obligations of the Underwriters . The obligations of the Underwriters hereunder are subject to the accuracy, as of the date hereof and as of the First Closing Date and the Second Closing Date (as if made at such Closing Date), of and compliance with all representations, warranties and agreements of the Company contained herein, to the performance by the Company of its obligations hereunder and to the following additional conditions:

 

(a)

Filing of Prospectuses All filings required by Rules 424, 430A and 433 of the Securities Act shall have been timely made (without reliance on Rule 424(b)(8) or Rule 164(b)); no stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof, nor suspending or preventing the use of the Pricing Disclosure Package, the Prospectus or any issuer free writing prospectus shall have been issued; no proceedings for the issuance of such an order shall have been initiated or threatened; and any request of the Commission for additional information (to be included in the Registration Statement, the Pricing Disclosure Package, the Prospectus, any issuer free writing prospectus or otherwise) shall have been complied with to the Underwriters’ satisfaction.

 

(b)

Continued Compliance with Securities Laws.  The Underwriters shall not have advised the Company that (i) the Registration Statement or any amendment thereof or supplement thereto contains an untrue statement of a material fact which, in the Underwriters’ opinion, is material or omits to state a material fact which, in the Underwriters’ opinion, is required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Pricing Disclosure Package or the Prospectus, or any amendment thereof or supplement thereto, or any Issuer Free Writing Prospectus contains an untrue statement of fact which, in the Underwriters’ opinion, is material, or omits to state a fact which, in the Underwriters’ opinion, is material and is required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.

 

(c)

Absence of Certain Events . Except as contemplated in the Pricing Disclosure Package and in the Prospectus, subsequent to the respective dates as of which information is given in the Pricing Disclosure Package and the Prospectus, none of the Company or its Subsidiaries has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, or declared or paid any dividends or made any distribution of any kind with respect to its capital stock; and there shall not have been any change in the capital stock (other than a change in the number of outstanding Ordinary shares of the Company due to the issuance of shares upon the exercise of outstanding options or warrants or conversion of convertible securities), or any material change in the short-term or long-term debt of any of the Company (other than as a result of the conversion of convertible securities of the Company), or its Subsidiaries, or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock of any of the Company or its




Subsidiaries, or any Material Adverse Change or any development involving a prospective Material Adverse Change (whether or not arising in the ordinary course of business), that, in the Underwriters’ judgment, makes it impractical or inadvisable to offer or deliver the Securities on the terms and in the manner contemplated in the Pricing Disclosure Package and in the Prospectus.

 

 (d)

Officer’s Certificate The Underwriters shall have received on and as of each Closing Date a certificate, addressed to the Underwriters, signed by the chief executive officer and the chief financial officer of the Company to the effect that:

 

 

(i)

The representations and warranties of the Company in this Agreement are true and correct as if made at and as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date; and

 

 

(ii)

No stop order or other order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof or the qualification of the Securities for offering or sale, nor suspending or preventing the use of the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, has been issued, and no proceeding for that purpose has been instituted or, to the best of their knowledge, is contemplated by the Commission or any state or regulatory body.

 

(e)

Chief Financial Officer s Certificate . At each Closing Date, the Underwriters shall have received a certificate of the Company signed by the chief financial officer of the Company, dated such Closing Date, certifying: (i) that the Articles and Memorandum of Association are true and complete, have not been modified and are in full force and effect ; (ii) that the resolutions of the Company s Board of Directors relating to the public offering contemplated by this Agreement are in full force and effect and have not been modified ; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission ; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate

 

(f)

Opinions of Counsel for the Company At each Closing Date, the Underwriters shall have received the written opinion and negative assurance letter of Ellenoff Grossman & Schole LLP, U.S. counsel for the Company, dated such Closing Date and addressed to the Underwriters, in form and substance reasonably satisfactory to the Underwriters.

 

(g)

Opinion of PRC Counsel for the Company . At each Closing Date, the Underwriters shall have received the written opinion of Allbright Law Offices, PRC counsel for the Company, dated such Closing Date and addressed to the Underwriters, in form and substance reasonably satisfactory to the Underwriters.

 

(h)

Opinion of Cayman Islands Counsel for the Company.  At each Closing Date, the Underwriters shall have received the written opinion of Harney Westwood & Riegels, dated such Closing Date and addressed to the Underwriters, in form and substance reasonably satisfactory to the Underwriters.

 

(i)

Opinion of Counsel for the Underwriters At each Closing Date, the Underwriters shall have received on and as of such Closing Date an opinion of Kaufman & Canoles, P.C., counsel for the Underwriters, with respect to such matters as the Underwriters may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

 

(j)

No Legal Impediment to Issuance No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of such Closing Date, prevent the issuance or sale of the Securities ; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of such Closing Date, prevent the issuance or sale of the Securities.

 




(k)

Good Standing . At each Closing Date, the Underwriters shall have received on and as of such Closing Date satisfactory evidence of the good standing of the Company and its Subsidiaries, excluding each Subsidiary set forth on  Schedule VI  hereto, in their respective jurisdictions of organization and their good standing as foreign entities in such other jurisdictions as the Underwriters may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions or, for any such jurisdiction in which evidence of good standing may not be obtained from appropriate governmental authorities, in the form of an opinion of counsel licensed in the applicable jurisdiction.

 

 (l)

Lock-up Agreements . The Underwriters shall have received all of the Lock-Up Agreements from the Lock-Up Parties, and the Lock-Up Agreements shall be in full force and effect.

 

(m)

Escrow Agreement.  The Company shall have entered into the Escrow Agreement with the Representative and the Escrow Agent, and such agreement shall be in full force and effect.

 

(n)

FINRA Matters.  FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.

 

(o)

Comfort Letters The Company shall have requested and caused the Auditor to have furnished to the Underwriters, at the Execution Time and at each Closing Date and any settlement date, letters (which may refer to letters previously delivered to the Underwriters), dated respectively as of the Execution Time and as of such Closing Date and any settlement date, in form and substance satisfactory to the Underwriters.

 

(p)

Exchange Listing The Securities to be delivered on each Closing Date shall have been approved for listing on the NASDAQ Capital Market or New York Stock Exchange (the “ Exchange ”), subject to official notice of issuance and shall be DTC eligible.

 

(q)

Additional Documents On or prior to each Closing Date, the Company shall have furnished to the Underwriters such further certificates and documents as the Underwriters may reasonably request.

 

All opinions, letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters. The Company will furnish the Underwriters with such conformed copies of such opinions, certificates, letters and other documents as it shall reasonably request.

 

(6)

Indemnification and Contribution .

 

(a)

The Company agrees to indemnify, defend and hold harmless the Underwriters, their respective affiliates, directors and officers and employees, and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “ Indemnified Party ”), from and against any losses, claims, damages or liabilities (including in settlement of any litigation if such settlement is effected with the prior written consent of the Company) arising out of (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act Regulations, or arise out of or are based upon the omission from the Registration Statement, or alleged omission to state therein, a material fact required to be stated therein or necessary to make the statements therein not misleading ; (ii) an untrue statement or alleged untrue statement of a material fact contained in the Pricing Disclosure Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any Marketing Materials, or any Written Testing-the-Waters Communications or in any other materials used in connection with the offering of the Securities, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein,




in light of the circumstances under which they were made, not misleading, and will reimburse such Indemnified Party for any legal or other expenses reasonably incurred by it in connection with evaluating, investigating or defending against such loss, claim, damage, liability or action ; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any Marketing Materials or any Written Testing-the-Waters Communications or, in reliance upon and in conformity with the Underwriter Information.

 

(b)

Each Underwriter, severally and not jointly, will indemnify, defend and hold harmless the Company, its affiliates, directors, officers and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “ Underwriter Indemnified Party ”), from and against any losses, claims, damages or liabilities to which such Underwriter Indemnified Party may become subject, under the Securities Act or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Representative), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any Marketing Materials, or any Written Testing-the-Waters Communications, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any Marketing Materials or any Written Testing-the-Waters Communications in reliance upon and in conformity with the Underwriter Information, and will reimburse such Underwriter Indemnified Party for any legal or other expenses reasonably incurred by it in connection with defending against any such loss, claim, damage, liability or action.

 

(c)

Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof ; but the failure to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party except to the extent such indemnifying party has been materially prejudiced by such failure. In case any such action shall be brought against any indemnified party, and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of the indemnifying party s election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof ; provided, however, that if (i) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (ii) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party), or (iii) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, the indemnified party shall have the right to employ a single counsel to represent it in any claim in respect of which indemnity may be sought under subsection (a) or (b) of this Section 6, in which event the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party or parties and reimbursed to the indemnified party as incurred.




 

(d)

The indemnifying party under this Section 6 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is a party or could be named and indemnity was or would be sought hereunder by such indemnified party, unless such settlement, compromise or consent (i) includes an unconditional release of such indemnified party from all liability for claims that are the subject matter of such action, suit or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Notwithstanding the foregoing, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel pursuant to Section 6(c), such indemnifying party agrees that it shall be liable for any settlement effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

 

(e)

 If the indemnification provided for in this Section 6 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then the indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering and sale of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Company bear to the total Underwriting Fee received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relevant intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (e) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the first sentence of this subsection (e). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim that is the subject of this subsection (e). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

(f)

Notwithstanding the provisions of this Section 6, no Underwriter shall be required to pay pursuant to this Section 6, either as indemnification or contribution or both, any amount in excess of the amount of the Underwriting Fee actually received by it pursuant to this Agreement.

 

(g)

For purposes of this Agreement, the Underwriters confirm, and the Company acknowledges, that there is no information concerning the Underwriters furnished in writing to the Company by the Representative specifically for preparation of or inclusion in the Registration




Statement, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, other than the Underwriter Information.

 

(7)

Term and Termination of Agreement . The term of this Agreement will commence upon the execution of this Agreement and will terminate at the final Closing of the Offering; provided the Underwriters shall have the right to terminate this Agreement by giving notice to the Company at any time at or prior to the First Closing Date, and the option referred to in Section 1(b), if exercised, may be cancelled at any time prior to the Second Closing Date, if (i) the Company shall have failed, refused or been unable, at or prior to such Closing Date, to perform any agreement on its part to be performed hereunder, (ii) any other condition of the Underwriters’ obligations hereunder is not fulfilled, (iii) trading on the Exchange shall have been wholly suspended, (iv) minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the Exchange, by such Exchange or by order of the Commission or any other governmental authority, (v) a banking moratorium shall have been declared by federal or state authorities, or (vi) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the Representative’s judgment, is material and adverse and makes it impractical or inadvisable to proceed with the completion of the sale of and payment for the Securities. Any such termination shall be without liability on the part of any party to any other party, except that those portions of this Agreement specified in Section 9 shall at all times be effective and shall survive such termination. Notwithstanding anything to the contrary in this Agreement, in the event that this Agreement shall not be carried out for any reason whatsoever, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein, less any advances previously paid which as of the date hereof is $[_______________] (the “ Advances ”), then due and payable and upon demand the Company shall pay the full amount thereof to the Underwriters. To the extent that the Underwriters’ out-of-pocket expenses are less than the Advances, the Underwriters will return to the Company that portion of the Advances not offset by actual expenses. Notwithstanding anything to the contrary contained herein, any provision in this Agreement concerning or relating to confidentiality, indemnification, contribution, advancement, the Company’s representations and warranties and the Company’s obligations to pay fees and reimburse expenses will survive any expiration or termination of this Agreement.

 

(8)

Underwriter Default.

 

(a)

 If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares, and if the Firm Shares with respect to which such default relates (the “ Default Securities ”) do not (after giving effect to arrangements, if any, made by the Representative pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares, each non-defaulting Underwriter, acting severally and not jointly, agrees to purchase from the Company that number of Default Securities that bears the same proportion to the total number of Default Securities then being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on  Annex A hereto bears to the aggregate number of Firm Shares set forth opposite the names of the non-defaulting Underwriters; subject, however, to such adjustments to eliminate fractional shares as the Representative in its sole discretion shall make.

 

(b)

In the event that the aggregate number of Default Securities exceeds 10% of the number of Firm Shares, the Representative may in its discretion arrange for itself or for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase the Default Securities on the terms contained herein. In the event that within five (5) calendar days after such a default the Representative does not arrange for the purchase of the Default Securities as provided in this Section 8, this Agreement shall thereupon terminate, without liability on the part of the Company with respect thereto (except in each case as provided in Sections 4(i), 6, 7, 8 and 9) or the Underwriters, but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Company for damages occasioned by its or their default hereunder.

 




(c)

In the event that any Default Securities are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the First Closing Date for a period, not exceeding five (5) Business Days, in order to effect whatever changes may thereby be necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the reasonable opinion of Underwriters’ counsel, may be necessary or advisable. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 8 with like effect as if it had originally been a party to this Agreement with respect to such Securities.

 

(9)

Survival of Indemnities, Representations, Warranties, Etc.  The respective indemnities, covenants, agreements, representations, warranties and other statements of the Company and the Underwriters, as set forth in this Agreement or made by them respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of the Underwriters, the Company, the Purchasers or any person controlling any of them and shall survive delivery of and payment for the Securities. Notwithstanding any termination of this Agreement, including any termination pursuant to Section 7, the payment, reimbursement, indemnity and contribution agreements contained in Sections 4(i), 6, 7, 8 and 9, and the Company’s covenants, representations, and warranties set forth in this Agreement shall not terminate and shall remain in full force and effect at all times. The indemnity and contribution provisions contained in Section 6 and the covenants, warranties and representations of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Underwriters, any person who controls the Underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or any affiliate of the Underwriters, or by or on behalf of the Company, the Company’s directors or officers or any person who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and delivery of the Securities. The Company and the Underwriters agree to notify each other of the commencement of any proceeding against either of them promptly, and, in the case of the Company, against any of the Company’s officers or directors in connection with the issuance and sale of the Securities, or in connection with the Registration Statement and the Prospectus.

 

(10)

Notices . All communications hereunder shall be in writing and shall be mailed, hand delivered or faxed and confirmed to the parties hereto as follows:

 

If to the Company, to: 

 

Golden Bull Limited

707 Zhang Yang Road, Sino Life Tower, F35,

Pudong, Shanghai, China 200120

 

with a copy to (which shall not constitute notice):

 

Ellenoff Grossman & Schole LLP

Attention: Ari Edelman, Esq.

1345 Avenue of the Americas, 11th Floor

New York, New York 10105

 

If to the Underwriter, to:

 

ViewTrade Securities, Inc.

Attention: Doug K. Aguililla

7280 West Palmetto Park Road, Suite 310

Boca Raton, FL 33433

 

with a copy to (which shall not constitute notice):

 




Kaufman & Canoles, P.C.

Attention: Anthony W. Basch, Esq.

Two James Center, 14th Floor

1021 E. Cary St.

Richmond, VA 23219

 

(11)

Successors . This Agreement will inure to the benefit of and be binding upon parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder.

 

(12)

Headings . The headings of the various sections of this Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.

 

(13)

Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission, electronic delivery, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile, electronic copy, or “.pdf” signature page were an original thereof.

 

(14)

Absence of Fiduciary Relationship . The Company acknowledges and agrees that:

 

(d)

No Other Relationship . The Underwriters have been retained solely as independent contractors to act as underwriters in connection with the sale of Securities and that no fiduciary, advisory or agency relationship between the Company and any Underwriter has been created in respect of any of the transactions contemplated by this Agreement or the Final Prospectus, irrespective of whether any such Underwriter has advised or is advising the Company on other matters ;

 

(e)

Arm s-Length Negotiations . The price of the Securities set forth in this Agreement was established by the Company following discussions and arm s-length negotiations with the Underwriters and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement ;

 

(f)

Absence of Obligation to Disclose . The Company has been advised that the Underwriters and their respective affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company, and that the Underwriters have no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship ; and

 

(g)

Waiver . The Company waives, to the fullest extent permitted by law, any claims it may have against the Underwriters for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Underwriters shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including shareholders, employees or creditors of the Company.

 

(15)

Amendment . In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior and all contemporaneous agreements (whether written or oral), understandings and negotiations with respect to the subject matter hereof. This Agreement may only be amended or modified in writing, signed by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.

 




(16)

Confidentiality In the event of the consummation or public announcement of the Offering, the Underwriters shall have the right to disclose their participation in the Offering, including through, at the Underwriters’ cost, the use of “tombstone” advertisements in financial and other newspapers and journals. The Underwriters agrees not to use any confidential information concerning the Company provided to the Underwriters by the Company for any purposes other than those contemplated under this Agreement.

 

(17)

Applicable Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

(18)

Submission to Jurisdiction; Appointment of Agent for Service . The Company hereby irrevocably submits to the non-exclusive jurisdiction of the U.S. federal and state courts in the Borough of Manhattan in The City of New York (each, a “ New York Court ”) in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company and each of the Company’s Subsidiaries irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in the New York Courts, and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum. The Company irrevocably appoints Corporation Service Company as its authorized agent (the “ Authorized Agent ”) in the Borough of Manhattan in The City of New York upon which process may be served in any such suit or proceeding, and agree that service of process in any manner permitted by applicable law upon such agent shall be deemed in every respect effective service of process in any manner permitted by applicable law upon the Company in any such suit or proceeding. The Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of two years from the date of this Agreement.

 

(19)

Judgment Currency . If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder into any currency other than United States dollars, the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Underwriters could purchase United States dollars with such other currency in The City of New York on the Business Day preceding that on which final judgment is given. The obligation of the Company pursuant to this Agreement with respect to any sum due from it to the Underwriters or any person controlling the Underwriters shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first Business Day following receipt by the Underwriters or controlling person of any sum in such other currency, and only to the extent that the Underwriters or controlling person may in accordance with normal banking procedures purchase United States dollars with such other currency. If the United States dollars so purchased are less than the sum originally due to the Underwriters or controlling person hereunder, the Company agrees as a separate obligation and notwithstanding any such judgment, to indemnify the Underwriters or controlling person against such loss. If the United States dollars so purchased are greater than the sum originally due to the Underwriters or controlling person hereunder, the Underwriters or controlling person agrees to pay to the Company an amount equal to the excess of the dollars so purchased over the sum originally due to the Underwriters or controlling person hereunder.

 

(20)

Time of Essence . Time shall be of the essence of this Agreement.

 

[The remainder of this page is intentionally left blank]

 





Please sign and return to the Company the enclosed duplicates of this Agreement whereupon this Agreement will become a binding agreement between the Company and the Underwriters in accordance with its terms.

 

 

Very truly yours,

 

 

 

Golden Bull Limited

 

 

 

 

By: 

 

 

 

Name: Erxin Zeng

 

 

Title: Chief Executive Officer

 

Accepted by the Representative, acting for itself and as

 

Representative of the Underwriters named on  Annex A  hereto,

 

as of the date first written above:

 

ViewTrade Securities, Inc.

 

 

 

 

By:

 

 

 

Name: Douglas Aguililla

 

 

Title: Director

 

 





Annex A

 

Name of Underwriter

 

Number of Securities Being Purchased  (1)

 

ViewTrade Securities, Inc.

 

 

 

 

Total

 

 

2,000,000

 

 

(1) The Underwriters may purchase an additional 300,000 Option Shares, to the extent the option described in Section 1(b) of this Agreement is exercised in the manner described in this Agreement.

 

 





SCHEDULE I

 

Pricing Information

 

Initial public offering price per share for the Securities: $[ ]

Number of Firm Shares offered: 2,000,000

Number of Option Shares: 300,000

 

 





SCHEDULE II

 

Certain Permitted Free Writing Prospectuses

 

 





SCHEDULE III

 

Subsidiaries

 

 





SCHEDULE IV

 

Lock-Up Parties

 

 





SCHEDULE V

 

Testing the Waters Communications

 

 





SCHEDULE VI

 

Good Standing

 

 

 





EXHIBIT A 

 

Form of Lock-Up Agreement

 

 

, 2018

 

ViewTrade Securities, Inc.

7280 W. Palmetto Park Road Suite 105

Boca Raton, Florida 33433

 

As Representative of the Underwriters

named on  Annex A  to the Underwriting Agreement

 

Dear Sirs:

 

As an inducement to the underwriters, for which ViewTrade Securities, Inc. is acting as representative (the “ Representative ”), to execute an underwriting agreement (the “ Underwriting Agreement ”) providing for a public offering (the “ Offering ”) of ordinary shares (the “ Ordinary shares ”), of Golden Bull Limited and any successor (by merger or otherwise) thereto (the “ Company ”), the undersigned hereby agrees that without, in each case, the prior written consent of the Representative during the period specified in the second succeeding paragraph (the “ Lock-Up Period ”), the undersigned will not: (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any Ordinary shares or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Ordinary shares (including Ordinary shares which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant) whether now owned or hereafter acquired (the “ Undersigned’s Securities ”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Undersigned’s Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Ordinary shares or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Ordinary shares or any security convertible into or exercisable or exchangeable for Ordinary shares; or (4) publicly disclose the intention to do any of the foregoing.

 

The undersigned agrees that the foregoing restrictions preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Securities even if such Securities would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to any of the Undersigned’s Securities or with respect to any security that includes, relates to, or derives any significant part of its value from such Securities.

 

The Lock-Up Period will commence on the date of this Agreement and continue and include the date 180 days after the date of the final prospectus used to sell Ordinary shares in the Offering pursuant to the Underwriting Agreement.

 

If the undersigned is an officer or director of the Company, (i) the Representative agrees that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Ordinary shares, the Representative will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by issuing a press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two business days after the




publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.

 

Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Securities (i) as a bona fide gift or gifts, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (iii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (1) transfers to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned or (2) distributions of Ordinary shares or any security convertible into or exercisable for Ordinary shares to limited partners, limited liability company members or stockholders of the undersigned, (iv) if the undersigned is a trust, transfers to the beneficiary of such trust, (v) by testate succession or intestate succession or (vi) pursuant to the Underwriting Agreement; provided, in the case of clauses (i)-(v), that (x) such transfer shall not involve a disposition for value, (y) the transferee agrees in writing with the Representative to be bound by the terms of this Lock-Up Agreement, and (z) no filing by any party under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), shall be required or shall be made voluntarily in connection with such transfer. Furthermore, notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Securities in a transaction not involving a public offering or public resale; provided that (x) the transferee agrees in writing with the Representative to be bound by the terms of this Lock-Up Agreement, and (y) no filing by any party under Section 16(a) of the Exchange Act shall be required or shall be made voluntarily in connection with such transfer. For purposes of this Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, nor more remote than first cousin.

 

In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Ordinary shares if such transfer would constitute a violation or breach of this Agreement.

 

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that upon request, the undersigned will execute and additional documents necessary to ensure the validity or enforcement of this Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned.

 

The undersigned understands that the undersigned shall be released from all obligations under this Agreement if (i) the Company notifies the Representative that it does not intend to proceed with the Offering, (ii) the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Ordinary shares to be sold thereunder, or (iii) the Offering is not completed by May 11, 2018.

 

The undersigned understands that the underwriters named in the Underwriting Agreement are entering into the Underwriting Agreement and proceeding with the Offering in reliance upon this Agreement.

 

[signature page follows]

 

 





This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

 

Very truly yours,  

 

 

 

 

 

 

 

Printed Name of Holder

 

 

 

 

By:

      

 

 

Signature

 

 

 

 

 

 

 

 

Printed Name of Person Signing

 

 

(and indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity)

 





Exhibit B

 

Form of Company Press Release for Waivers or Releases

of Officer/Director Lock-Up Agreements

 

Golden Bull Limited

[ADDRESS] 

 

[Date]

 

Golden Bull Limited (the “Company”) announced today that ViewTrade Securities, Inc., the sole Underwriter, is  [waiving] [releasing] [a]  lock-up restriction [s]  with respect to an aggregate of  **[# of ordinary shares]  held by certain  [officers] [directors]  of the Company. These  [officers] [directors]  entered into lock-up agreements with ViewTrade in connection with the Company’s initial public offering.

 

This  [waiver] [release]  will take effect on  **[date that is at least 2 business days following date of this press release].

 

This  press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.



THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF SUCH SECURITIES BY ANY PERSON FOR A PERIOD OF ONE HUNDRED AND EIGHTY (180) DAYS IMMEDIATELY FOLLOWING THE DATE OF EFFECTIVENESS OF THE PUBLIC OFFERING OF THE COMPANY S SECURITIES PURSUANT TO REGISTRATION STATEMENT NO.: 333-[ ] AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT IN ACCORDANCE WITH FINRA RULE 5110(G)(2).

 

REPRESENTATIVE S WARRANT

 

GOLDEN BULL LIMITED

 

Warrant Shares: [ ]

Issuance Date: [ ] [ ], 2018

 

THIS  REPRESENTATIVE S WARRANT  (the Warrant ) certifies that, for value received, ViewTrade Securities, Inc. or its assigns (the Holder ) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date that is 180 days from the effective date of the Registration Statement (the “ Initial Exercise Date ”) and on or prior to the close of business on the three (3) year six (6) month anniversary of the effective date of the Registration Statement (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from Golden Bull Limited, a Cayman Islands company (the “ Company ”), up to [ ] Ordinary Shares (as subject to adjustment hereunder, the Warrant Shares ). The purchase price of one Warrant Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1 .            Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Underwriting Agreement (the Agreement ), dated [ ] [ ], 2018, between the Company and ViewTrade Securities, Inc., as representative of the several Underwriters named in Schedule A thereto.

 

Section 2 .            Exercise .

 

(a)         Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise form annexed hereto. Within three (3) trading days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is available and specified in the applicable Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) trading days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases; provided that the records of the Company, absent manifest error, will be conclusive with respect to the number of Warrant Shares purchasable from time to time hereunder. The Company shall deliver any objection to any Notice of Exercise form within one (1) business day of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount




stated on the face hereof.  For purposes of this agreement, “business day” means any day other than a Saturday, Sunday or any other day on which commercial banks are required or authorized to close in the City of New York, State of New York.

 

 (b)          Exercise Price . The exercise price per share of the Ordinary Shares under this Warrant shall be  $ [ [120% of the public offering price] , subject to adjustment hereunder (the “ Exercise Price ”). Except as where otherwise permitted in accordance with Section 2(c), this Warrant may only be exercised by means of payment by wire transfer or cashier’s check drawn on a United States bank.

 

(c)          Cashless Exercise . This Warrant may, at the option of the Holder, be exercised, in whole or in part, at such times by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” which shall be set forth in the applicable Notice of Exercise;

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder, at the time of exercise; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed or quoted on The New York Stock Exchange, the NYSE MKT or any tier of The NASDAQ Stock Market (each, a “ Trading Market ”), the daily volume weighted average price of the Ordinary Shares for such date (or the nearest preceding date) on the Trading Market on which the Ordinary Shares are then listed or quoted as reported by Bloomberg L.P. (“ Bloomberg ”) (based on a trading day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the Ordinary Shares are listed or quoted on the OTCQB or OTCQX (each as operated by OTC Markets Group, Inc., or any successor market), the volume weighted average price of the Ordinary Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Ordinary Shares are not then listed or quoted for trading on the OTCQB or OTCQX Markets and if prices for the Ordinary Shares are then reported in the OTC Pink Market published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Ordinary Shares so reported, or (d) in all other cases, the fair market value of an Ordinary Share as determined by an independent appraiser selected in good faith by the Board of Directors of the Company and reasonably acceptable to the Holder, the fees and expenses of which shall be paid by the Company. 

 

(d)            Mechanics of Exercise .

 

(i)            Delivery of Warrant Shares Upon Exercise . The Company shall use its reasonable best efforts to cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“ DWAC ”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is two (2) trading days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required) and (C) receipt by the Company of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted) (such date, the “ Warrant Share Delivery Date ”). The Warrant Shares shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised and payment to the Company




of the aggregate Exercise Price (or by cashless exercise, if permitted) has been received by the Company and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares have been paid.

 

(ii)           Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

 (iii)           Rescission Rights . If the Company fails to cause its transfer agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

(iv)          Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise . In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, Ordinary Shares to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Ordinary Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of Ordinary Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Ordinary Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrant Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Ordinary Shares upon exercise of the Warrant as required pursuant to the terms hereof.  

 

(v)           No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

(vi)          Charges, Taxes and Expenses . Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;  provided however , that, in the event Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.

 

(vii)          Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.




 

 (e)           Holder’s Exercise Limitations . The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of Ordinary Shares beneficially owned by the Holder and its Affiliates shall include the number of Ordinary Shares which are issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Ordinary Shares which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any other securities of the Company which by their terms are convertible into or exercisable for Ordinary Shares (“ Ordinary Share Equivalents ”) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the 1934 Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether, and representation and certification to the Company that, this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding Ordinary Shares, a Holder may rely on the number of outstanding Ordinary Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of Ordinary Shares outstanding.  Upon the written or oral request of a Holder, the Company shall within two (2) trading days confirm orally and in writing to the Holder the number of Ordinary Shares then outstanding.  In any case, the number of outstanding Ordinary Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding Ordinary Shares was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of Ordinary Shares outstanding immediately after giving effect to the issuance of Warrant Shares issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any such increase or decrease will not be effective until the 61 st  day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. 

 

Section 3 .            Certain Adjustments .

 

(a)           Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions pro rata to the




record holders of its Ordinary Shares of its Ordinary Shares or any other equity or equity equivalent securities payable in Ordinary Shares (which, for avoidance of doubt, shall not include any Ordinary Shares issued by the Company upon exercise of this Warrant), (ii) subdivides its outstanding Ordinary Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) its outstanding Ordinary Shares into a smaller number of shares, or (iv) issues by reclassification of the Ordinary Shares any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

 (b)            Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 3(a) above, if at any time during which this Warrant is outstanding the Company grants, issues or sells any Ordinary Share Equivalents or other rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). The provisions of this Section 3(b) will not apply to any grant, issuance or sale of Ordinary Share Equivalents or other rights to purchase stock, warrants, securities or other property of the Company which is not made pro rata to the record holders of any class of Ordinary Shares. 

 

(c)            Extraordinary Distributions . If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Ordinary Shares , by way of return of capital or otherwise (including, without limitation, any distribution of stock or other securities, property or options (but specifically excluding cash dividends) by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction), except to the extent an adjustment was already made pursuant to Section 3(a) or 3(b) and other than regular quarterly or other periodic dividends that may be initiated in the future (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, then the Exercise Price shall be decreased, effective immediately after the effective date of such Distribution, by the amount of cash and/or the fair market value (as determined by the Company’s Board of Directors, in good faith) of any securities or other assets paid on each Ordinary Share in respect of such Distribution in order that subsequent thereto upon exercise of this Warrant the Holder may obtain the equivalent benefit of such Distribution.

 

(d)            Fundamental Transaction . If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Ordinary Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Ordinary Shares , (iv) the Company, directly or




indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares are effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons (other than (but except in the case of a “Rule 13e-3 transaction” transaction as defined in Rule 13e-3 promulgated under the 1934 Act involving), whereby such other Person or group acquires more than 50% of the outstanding Ordinary Shares (not including any Ordinary Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of common equity of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of Ordinary Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant), without duplication of the Successor Entity securities deliverable under Section 3(e) below. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one Ordinary Share in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Ordinary Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or (3) a Fundamental Transaction involving a person or entity not traded on a Trading Market the Company or any Successor Entity (as defined below) shall, at the option of the Holder or the Company or any Successor Entity, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the exercise of the option. “ Black Scholes Value ” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the trading day immediately following the public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is consummated, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) and for which stockholders of the Company received any equity securities of the Successor Entity to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(e), and to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the Ordinary Shares acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Ordinary Shares pursuant to such Fundamental Transaction and the value of such




shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. 

 

(f)            Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest whole share, as the case may be. For purposes of this Section 3, the number of Ordinary Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Ordinary Shares (excluding treasury shares, if any) issued and outstanding.

 

(g)            Notice to Holder .

 

(i)            Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

(ii)            Notice to Allow Exercise by Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Ordinary Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Ordinary Shares , (C) the Company shall authorize the granting to all holders of the Ordinary Shares rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Ordinary Shares , any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Ordinary Shares are converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 10 business days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Ordinary Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Ordinary Shares of record shall be entitled to exchange their Ordinary Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 4 .            Transfer of Warrant .

 

(a)           Transferability . This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if




required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. Neither this Warrant nor any Warrant Shares issued upon exercise of this Warrant shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of the offering pursuant to which this Warrant is being issued, except the transfer of any security:

 

(i)           by operation of law or by reason of reorganization of the Company;

 

(ii)          to any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period; or

 

(iii)         the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period.

 

(b)           New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

 (c)           Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5 .            Registration Rights . To the extent the Company does not maintain an effective registration statement for the Warrant Shares and cashless exercise is unavailable to any Holder under Section 2(c) hereof pursuant to which all of the Warrant Shares issuable upon exercise of the Warrants under Section 2(c) would be tradable upon exercise of this Warrant upon issuance, and in the further event that the Company files a registration statement with the Securities and Exchange Commission to register its Ordinary Shares (other than a registration statement on Form S-4 or S-8, or on another form, or in another context, in which such “piggyback” registration would be inappropriate), then, for the term of the Warrants, the Company shall give written notice of such proposed filing to the Holder as soon as practicable but in no event less than thirty (30) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and offer to the Holder in such notice the opportunity to register the sale of such number of shares of Warrant Shares as such Holder may request in writing within five (5) days following receipt of such notice (a “ Piggyback Registration ”). The Company shall cause such Warrant Shares to be included in such registration and shall use its reasonable best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Warrant Shares requested to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Warrant Shares in accordance with the intended method(s) of distribution thereof. All Holders proposing to distribute their securities through a Piggyback Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggyback Registration.




 

  Section 6 .            Miscellaneous .

 

(a)           No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividend rights or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

(b)           Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

(c)            Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a business day, then, such action may be taken or such right may be exercised on the next succeeding business day.

 

(d)            Authorized Shares .

 

(i)          The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Ordinary Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such commercially reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Ordinary Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

(ii)          Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

(iii)          Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 




(e)            Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the laws of the State of New York, without regard to conflict of laws principles, and federal or state courts sitting in the State of New York shall have exclusive jurisdiction over matters arising out of this Warrant.

 

(f)            Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

(g)            Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 

 

(h)            Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Agreement.

 

(i)            Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Ordinary Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

(j)            Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

(k)            Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of this Warrant.

 

(l)            Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

(m)           Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

(n)            Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 





 

IN WITNESS WHEREOF, the Company has caused this Representative’s Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

GOLDEN BULL LIMITED 

 

 

 

 

 

By: 

 

 

 

Name: 

 

 

Title: 

 

 

 





NOTICE OF EXERCISE

 

TO:        GOLDEN BULL LIMITED

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, dated _______, 2018, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

in lawful money of the United States by wire transfer or cashier s check drawn on a United States bank; or

 

if permitted by the terms of the Warrant, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

 

 

 

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:

 

 

Signature of Authorized Signatory of Investing Entity:

 

 

Name of Authorized Signatory:

 

 

Title of Authorized Signatory:

 

 

Date:

 

 

 





ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is _______________________________________________________________.  

 

Date: ______________

 

 

Holder’s Signature:

 

 

 

 

 

Holder’s Address:

 

 

 

 

 

 

 

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.





Business Cooperation Agreement


2017 6 8

This Business Cooperation Agreement (this Agreement ) is made and entered into by and between the following parties on June 8, 2017 in Shanghai, the People s Republic of China ( China or the PRC ).


  

   耀 251

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:

Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


 

38 1 1 102-34

Party B:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

Address:  Room 102-34, Floor 1, Building 1, No 38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China.


Each of Party A and Party B shall be hereinafter referred to as a Party respectively, and as the Parties collectively.


Whereas,


1.

Party A is a wholly-foreign-owned enterprise established in China, and has the necessary resources to provide technical and consulting services;


2.

( )



1


Business Cooperation Agreement





Party B is a company with exclusively domestic capital registered in China and engages in internet financial information service and other businesses (the Principal Business ).


3.

Party A is willing to provide Party B with technical support, consulting services and other commercial services on exclusive basis in relation to the Principal Business during the term of this Agreement, utilizing its advantages in technology, human resources, and information, and Party B is willing to accept such services provided by Party A or Party A's designee(s), each on the terms set forth herein.


Now, therefore, through mutual discussion, the Parties have reached the following agreements:


1.

Services Provided by Party A


1.1

Party B hereby appoints Party A as Party B's exclusive services provider to provide Party B with complete technical support, business support and related consulting services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, which may include all necessary services within the scope of the Principal Business as may be determined from time to time by Party A, such as but not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance.


1.2

/



2


Business Cooperation Agreement





1.3 /

Party B agrees to accept all the consultations and services provided by Party A. Party B further agrees that unless with Party A's prior written consent, during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar consultations and/or services provided by any third party and shall not establish similar corporation relationship with any third party regarding the matters contemplated by this Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the consultations and/or services under this Agreement.

 

1.3

Service Providing Methodology


1.3.1

Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further technical service agreements or consulting service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the specific technical services and consulting services.


1.3.2

使

To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into equipment or property leases with Party A or any other party designated by Party A which shall permit Party B to use Party A's or its designee s relevant equipment or property based on the needs of the business of Party B.


2.

The Calculation and Payment of the Service Fees




3


Business Cooperation Agreement





(89.16667%) (a) (b) 89.16667% 90 (a) (b)

Both Parties agree that, in consideration of the services provided by Party A, Party B shall pay to Party A the fees (the “ Service Fees ”) equal to 89.16667% of the after-tax income determined by U.S. GAAP of Party B, provided that upon mutual discussion between the Parties and the prior written consent by Party A, the rate of Service Fees may be adjusted based on the services rendered by Party A in that quarter and the operational needs of Party B. All out-of-pocket expenses (including without limitation the travelling expenses, accommodation, transportation, printing and postage fees etc) that Party A may incur as a result of the provision of the Services hereunder shall be solely borne by Party B.   The Service Fees shall be due and payable on a quarterly basis; within 15 working days after the beginning of each quarter, Party B shall (a) deliver to Party A the management accounts and operating statistics of Party B for such quarter, including the after-tax income of Party B during such quarter (the “Quarterly Income”), and (b) pay 89.16667% of such Quarterly Income, or other amount agreed by Party A, to Party A (each such payment, a “Quarterly Payment”).  Within ninety (90) days after the end of each fiscal year, Party B shall (a) deliver to Party A audited financial statements of Party B for such fiscal year, which shall be audited and certified by an independent certified public accountant approved by Party A, and (b) pay an amount to Party A equal to the shortfall, if any, of the net income of Party B for such fiscal year, as shown in such audited financial statements, as compared to the aggregate amount of the Quarterly Payments paid by Party B to Party A in such fiscal year.  Unless the Parties agree otherwise or the law provides otherwise, the Service Fees payable by Party B hereunder shall not be subject to any deduction or set-off (e.g. bank handling fees etc).  The management report, operation data and financial statements provided by Party B shall be true, valid, accurate and complete.  If Party A suffers any losses as



4


Business Cooperation Agreement





a result of any defect of the aforesaid documents, Party B shall be fully responsible for such losses.  In the event that Party B’s payment obligation hereunder is reduced or released because of the provision by Party B of any fraudulent materials to Party A, Party B hereby irrevocably undertakes to compensate Party A accordingly for the amount so reduced or released.


If Party B is operating at losses determined by U.S. GAAP when Party B is obligated to pay the Services fees to Party A , Party A needs to absorb Party B s losses and be responsible and required to reimbursement Party B for those losses.


3.

Intellectual Property Rights and Confidentiality Clauses


3.1

/ /

To the extent permitted under the PRC laws, Party A shall have exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A in its sole discretion for the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the protections for any such intellectual property rights in Party A.


3.2

(a)



5


Business Cooperation Agreement





(b) (c)

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.


3.3

The Parties agree that this Section shall survive changes to, and rescission or termination of, this Agreement.


4.

Representations and Warranties


4.1

Party A hereby represents and warrants as follows:


4.1.1

Party A is a wholly owned foreign enterprise legally registered and validly existing in accordance with the laws of China.




6


Business Cooperation Agreement





4.1.2

Party A has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement.  Party A’s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party A.


4.1.3

This Agreement constitutes Party A's legal, valid and binding obligations, enforceable in accordance with its terms.


4.2

Party B hereby represents and warrants as follows:


4.2.1

Party B is a company legally registered and validly existing in accordance with the laws of China and has obtained the relevant permit and license for engaging in the Principal Business in a timely manner.  It has independent legal person status, and has full and independent civil and legal capacity to execute, deliver and perform this Agreement.  It can sue and be sued as a separate entity;


4.2.2

Party B has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement.  Party B s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party B.


4.2.3



7


Business Cooperation Agreement





This Agreement constitutes Party B's legal, valid and binding obligations, and shall be enforceable against it.


5.

Effectiveness and Term


6.1

This Agreement is executed on the date first above written and shall take effect as of such date. This Agreement shall maintain effective unless terminated in accordance with Article 6.1 or was compelled to terminate under applicable PRC laws and regulations.


6.

Termination


6.1

30

During the term of this Agreement, unless Party A commits gross negligence, or a fraudulent act, against Party B, Party B shall not terminate this Agreement prior to its expiration date. Nevertheless, Party A shall have the right to terminate this Agreement upon giving 30 days' prior written notice to Party B at any time.


6.2

3 7 8

The rights and obligations of the Parties under Articles 3, 7 and 8 shall survive the termination of this Agreement.


7.

Governing Law and Resolution of Disputes


7.1

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.



8


Business Cooperation Agreement






7.2

30 使

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.


7.3

使

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.


8.

Event of Breach

8.1

( ) ( ) 30 1 2

The Parties agree and confirm that, if either Party (the Defaulting Party ) is in breach of any provisions herein or fails to perform its obligations hereunder, such breach or failure shall constitute a default under this Agreement (the Default ), which shall entitle the



9


Business Cooperation Agreement





non-defaulting Party to request the Defaulting Party to rectify or remedy such Default with a reasonable period of time.  If the Defaulting Party fails to rectify or remedy such Default within the reasonable period of time or within 30 days of non-defaulting Party s written notice requesting for such rectification or remedy, then the non-defaulting Party shall be entitled to elect any one of the following remedial actions: (a) to terminate this Agreement and request the Defaulting Party to fully compensate its losses and damages; (b) to request the specific performance by the Defaulting Party of its  obligations hereunder and request the Defaulting Party to fully compensate non-defaulting Party s losses and damages.


8.2

使 使 使 使

No waiver of rights in respect of any Default hereunder shall be valid unless it was made in writing.  Any failure to exercise or delay in exercising any rights or remedy by any Party under this Agreement shall not be deemed as a waiver of such Party.  Any partial exercise of any right or remedy shall not affect the exercise of any other rights and remedies.

     

8.3

8.1

Notwithstanding Clause 8.1 above, the Parties agree and confirm that in no circumstance shall Party B early terminate this Agreement unless the applicable law or this Agreement provides otherwise.

 

8.4

Notwithstanding any other provisions under this Agreement, the validity of this Clause shall not be affected by the suspension or termination of this Agreement.


9.

Notices


9.1



10


Business Cooperation Agreement





All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:


9.1.1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of delivery or refusal at the address specified for notices.


9.2

For the purpose of notices, the addresses of the Parties are as follows:


 

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

   耀 251

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn  

Phone

  15988179261


Party B:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

38 1 1 102-34

Address:  Room 102-34, Floor 1, Building 1, No 38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China.

Attn.

Phone

 15988179261


9.3



11


Business Cooperation Agreement





If any Party change its address for notices or its contact person, a notice shall be delivered to the other Party in accordance with the terms hereof.


10.

Assignment


10.1

Without Party A's prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.


10.2

Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party upon a prior written notice to Party B but without the consent of Party B.


11.

Severability


In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.


12.

Amendments and Supplements



12


Business Cooperation Agreement






Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and that relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.


13.

Language and Counterparts


This Agreement is written in both Chinese and English language in two copies, each Party having one copy with equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

[The remainder of this page is intentionally left blank.]



13


Business Cooperation Agreement





[THE SIGNATURE PAGE]

使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Business Cooperation Agreement as of the date first above written.



  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.


By:

 /s/ ZENG Erxin

Name:

ZENG Erxin

Title:  

Legal Representative



Party B:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.


By:

  /s/ ZENG Erxin

Name:

ZENG Erxin

Title:

Legal Representative







14


Business Cooperation Agreement




Technical Consultation and Service Agreement


2017 6 8

This Technical Consulting and Services Agreement (the "Agreement") is entered into as of June 8, 2017 in Shanghai between the following two parties:


  

   耀 251

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:

Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


 

38 1 1 102-34

Party B:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

Address:  

Room 102-34, Floor 1, Building 1, No 38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China.

Whereas,

1.

Party A is a wholly-foreign-owned enterprise established in China, and has the necessary resources to provide consulting services;

2.

Party B is a company with exclusively domestic capital registered in China and needs Party A s support and services during its business.

NOW THEREFORE, through friendly consultation, Party A and Party B hereby agree to enter into and perform this Agreement.

MANAGEMENT CONSULTING AND SERVICES

1.

Party A hereby agrees to provide consultation and services to Party B in the area of fund, human, technology and intellectual properties, and Party B hereby agrees to accept such management consultation and services in accordance with the terms and conditions under this Agreement. The management consultation and services provided by Party A include:

(1)

be responsible for providing training and technical support to the staff of Party B;

(2)

be responsible for providing consultation services regarding the marketing of Party B;

(3)

be responsible for providing general advice and assistance relating to the management and operation of Party B s business;

(4)

be responsible for providing other consultation and services which are necessary for Party B s businesses.

2.   

     Party B shall provide appropriate assistance to Party A for its work, including but not limited to providing the relevant data, engineering requirement and technical directions.

3.

     The term of this Agreement is twenty (20) years. The Parties agree that, this Agreement can be extended only if Party A gives its written consent of the extension of this Agreement before the expiration of this Agreement and Party B shall agree with this extension without reserve. If Party B’s operation term is required to extended, Party B shall use its best efforts to renew its business license and extend its operation term until and unless otherwise instructed in Party A’s prior written notice.

4.

/

     Party A is the exclusive consultation and services provider of Party B; Party B shall not utilize third party to provide services which are same as or similar with Party A’s services and shall not establish similar corporation relationship with any third party regarding the matters contemplated by this Agreement without the prior written consent of Party A. Party A may appoint other parties to provide Party B with the consultations and/or services under this Agreement.

        SERVICES FEES

1 1

The Parties agree that, Party B shall pay relevant services fees to Party A which shall be determined according to the Appendix of this Agreement. This Appendix can be amended by the Parties in considering the circumstances.

       INTELLECTUAL PROPERTY AND CONFIDENTIALITY

1.

/ /

     Unless otherwise stipulated in writing by the Parties, Party A shall be the sole and exclusive owner of all rights and interests to any and all intellectual property rights arising from the performance of this Agreement, including, but not limited to, any copyrights, patent, know-how and otherwise, whether developed by Party A or Party B. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A in its sole discretion for the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the protections for any such intellectual property rights in Party A. The Parties agree that this Section shall survive changes to, and rescission or termination of, this Agreement.

2.     使

       For the purpose of this Agreement, Confidential Information includes, but not limited to, (i) technical information, materials, program, drawing, data, parameter , standard, software, computer program, web design in connection with the development, design, research, produce and maintenance of technology disclosed by one Party to the other Party; (ii) any contracts, agreement, memo, annexes, draft or record (including this Agreement) entered into by the Parties for the purpose of this Agreement; and (iii) any information designated to be proprietary or confidential when it is disclosed by one Party to the other Party. Upon termination or expiration of this Agreement, Party B shall, return all and any documents, materials or software contained any of such Confidential Information to Party A or destroy it, delete all of such Confidential Information from memory devices, and cease to use them.

3.  

        Any Party shall not disclose any Confidential Information to any third party in any way without the other Party s prior written consent.

4.

        The Parties may disclose Confidential Information solely to its employees, agents or consultant who must know such information, subject to such employees, agents or consultant being bound by confidentiality obligations at least as restrictive as this Section 3.

5.

   

      Notwithstanding the foregoing, Confidential Information shall not be deemed to include the following information:

(1)

    is or will be in the public domain (other than through the receiving Party s unauthorized disclosure); or

(2)

    is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities, in which case the receiving Party will promptly notify the disclosing Party, and will take reasonable and lawful steps to minimize the extent of the disclosure.

6.     

        Any Party breaching confidentiality obligations under this Section shall indemnity all losses of the other Party.

       REPRESENTATIONS AND WARRANTIES

1.

Party A hereby represents and warrants as follows:

(1)

Party A is a wholly owned foreign enterprise legally registered and validly existing in accordance with the laws of China.

(2)

Party A has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement. Party A’s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party A.

(3)

This Agreement constitutes Party A's legal, valid and binding obligations, enforceable in accordance with its terms.

2.

Party B hereby represents and warrants as follows:

(1)

Party B is a company legally registered and validly existing in accordance with the laws of China and has obtained the relevant permit and license for engaging in its business in a timely manner. It has independent legal person status, and has full and independent civil and legal capacity to execute, deliver and perform this Agreement.  It can sue and be sued as a separate entity;

(2)

Party B has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement.  Party B s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party B.

(3)

This Agreement constitutes Party B's legal, valid and binding obligations, enforceable in accordance with its terms.

        LIABILITY FOR BREACH OF AGREEMENT

1.      30 : 1 2

        The Parties agree and confirm that, if either Party is in breach of any provisions herein or fails to perform its obligations hereunder, such breach or failure shall constitute a default under this Agreement, which shall entitle the non-defaulting Party to request the defaulting Party to rectify or remedy such default with a reasonable period of time.  If the defaulting Party fails to rectify or remedy such default within the reasonable period of time or within 30 days of non-defaulting Party’s written notice requesting for such rectification or remedy, then the non-defaulting Party shall be entitled to elect any one of the following remedial actions: (a) to terminate this Agreement and request the defaulting Party to fully compensate its losses and damages; (b) to request the specific performance by the defaulting Party of its obligations hereunder and request the defaulting Party to fully compensate all losses and damages of the non-defaulting Party.

2.

使 使 使 使

No waiver of rights in respect of any default hereunder shall be valid unless it was made in writing.  Any failure to exercise or delay in exercising any rights or remedy by any Party under this Agreement shall not be deemed as a waiver of such Party.  Any partial exercise of any right or remedy shall not affect the exercise of any other rights and remedies.

3.

5.1

        Notwithstanding Clause 5.1 above, the Parties agree and confirm that in no circumstance shall Party B early terminate this Agreement unless the applicable law provides otherwise or it has obtained the prior written consent of Party A.

4.

   

        The validity of this Section shall not be affect by the suspension or termination of this Agreement.

        FORCE MAJEURE

1.    

In this Agreement, Force Majeure will mean war, earthquake and other events which are unforeseen, inevitable and beyond the control of the Party.

2.  

       If the Force Majeure causes any one party to the Agreement the impossibility to further perform this Agreement, the Parties agree that the suffering party will waive any liability to the other party for any loss that result from any such Force Majeure, provided that the suffering party shall continue to perform this Agreement after the Force Majeure.

        AMENDMENT AND TERMINATION

1.

        Any amendment of this Agreement shall come into force only after a written agreement is signed by both Parties.

2.  

30

During the term of this Agreement, unless Party A commits gross negligence, or a fraudulent act, against Party B, Party B shall not terminate this Agreement prior to its expiration date. Nevertheless, Party A shall have the right to terminate this Agreement upon giving 30 days prior written notice to Party B at any time.

3.

       During the term of this Agreement, if any Party is going into liquidation (either voluntary or compulsory), or is prohibited to conduct business by the governmental authority, the other Party shall be entitled to terminate this Agreement. The termination notice shall come into force upon the notice is sent.

4.

        The amendment and termination of this Agreement shall not affect the exercise of any other remedies under this Agreement. Except when it may be exempted from liability according to law, the Party that is held responsible shall compensate the other Party for all losses and damages thus caused by such amendment or termination.

        GOVERNING LAW AND DISPUTE RESOLUTION

1.    

       The execution, effectiveness, interpretation, performance, amendment, termination and dispute resolution shall be governed by the law of the People s Republic of China.

2.   

       In the event of any dispute with respect to this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai Commission of China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

3.     使

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

           NOTICES

1.    

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices.

2.    

For the purpose of notices, the addresses of the Parties are as follows:

  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

    耀 251

Address:   Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn  

Phone

15988179261


  

Party A: Shanghai Dianniu Internet Finance Information Service Co., Ltd.

    38 1 1 102-34

Address:   Room 102-34, Floor 1, Building 1, No 38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn   

Phone

 15988179261


3.     

If any Party change its address for notices or its contact person, a notice shall be delivered to the other Party in accordance with the terms hereof.

           ASSIGNMENT

1.    

Without Party A's prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.

2.    

Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party upon a prior written notice to Party B but without the consent of Party B.

           MISCELLANEOUS

1.     

        This Agreement shall become effective upon and from the date on which it is signed by the authorized representative and seal of each Party.

2.

Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and that relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

3.

        The clauses in connection with confidentiality obligations, disputes resolution and default responsibilities shall survive rescission or termination of this Agreement.

4.

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

5.  

This Agreement shall be signed in Chinese and English language bearing the same legal effect. In the event of any inconsistency between the Chinese and English language, the Chinese version of this Agreement shall prevail. This Agreement shall have two counterparts, with each party holding one original. All counterparts shall be given the same legal effect.

[ ]

[THE SIGNATURE PAGE]





使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Technical Consultation and Service Agreement as of the date first above written.


  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.


By:

  /s/ Zeng Erxin

 

Name:

 ZENG Erxin

 

Title:  

 Legal Representative




Party B:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.


By:

   /s/ Zeng Erxin

 

Name:

 ZENG Erxin

 

Title:

Legal Representative



{00534821.DOC.1}

1



Technical Consultation and Service Agreement





 

Exhibit Provisions on the payment standard and method of technology service fee

1.

1 1

Both Parties agreed that Party B should pay service fee relating to Article 1, paragraph 1 to Party A based on the following terms:

(1)

     Annual Fee

(89.16667%), 15

Party B should pay 89.16667% of net profit after tax of Party B accepted by US GAAP to Party A as the annual fee (the Annual Fee ) of technology support and service herein. The Annual fee should be paid to the designed bank account of Party A within 15 working days after the first day of each quarter of the year.

(2)

     Floating Charge

(1)

Besides the Annual Fee, Party B should pay Floating Charge (the Floating Charge ), the amount of which should not be exceed total net profit accepted by the US GAAP deducting the Annual Fee of Party B, to Party A in each quarter of the year according to the technology support and service provided by Party A. The amount of the Floating Charge should be determined by both Parties based on the following factors:

A

The number and qualification of the employees provided by Party A for the technology support and service in a certain quarter;

B

The service time costed for the technology support and service in a certain quarter;

C

The investment made for the technology support and service in a certain quarter;

D

The service and the value of the service provided for the technology support and service in a certain quarter;

E

The operation revenue of Party B.

1.

15 30

Within 15 days of the end of each quarter, Party A should provide all the required financial information to be used to calculate (the Financial Information ) the Floating Charge on the certain quarter with Party B and should pay the Floating Charge within 30 days of the end each quarter. Both Parties can engage independent accountants with good reputation to audit on the Financial Information, if any Party has a doubt on it. The audit would be conducted during the business hour and should not be affect the normal business of Party B.

2.

1

Party B should negotiate with Party B within 7 working days after receiving the written notice regarding the adjustment of the Annual Fee or the Floating Charge from Party A.

3.

If Party B is in a status of loss accepted by the US GAAP, Party A is obliged to absorb all the loss of Party B and to pay the amount of loss to Party B.



{00534821.DOC.1}

2



Technical Consultation and Service Agreement






Form of Equity Pledge Agreement


( ) 2017 __ __

This Equity Pledge Agreement (this "Agreement") has been executed by and among the following parties on ____, 2017 in Shanghai, the People s Republic of China ( China or the PRC ):


 

  耀 251

Party A: Shanghai Fuyu Information and Technology Co., Ltd. (hereinafter " Pledgee ")

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


________ (

_____________________

Party B:  ________________ (hereinafter " Pledgor ")

ID No.:   _____________________


 

38 1 1 102-34

Party C:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

Address:  

Room 102-34, Floor 1, Building 1,No.38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China



1

Equity Pledge Agreement








In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties."


Whereas:

1.

__%

Pledgor is a citizen of China, and holds ___% of the equity interest in Party C in fact. Party C is a limited liability company registered in Shanghai, China. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;     

2.

Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee, Pledgor and Party C owned by Pledgor have executed a Technical Consultation and Service Agreement and other control agreements (the Control Agreements );

3.

To ensure that Pledgor and Party C fully perform their obligations under the Control Agreements, and pay the consulting and service fees thereunder to the Pledgee when the sum becomes due, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as security for payment of the consulting and service fees by Party C under the Control Agreements.



2

Equity Pledge Agreement







To perform the provisions of the Control Agreements, the Parties have mutually agreed to execute this Agreement upon the following terms.

1.

Definitions

Unless otherwise provided herein, the terms below shall have the following meanings:

1.1

2

Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Section 2 of this Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.

1.2

Equity Interest: shall refer to all of the equity interest lawfully now held and hereafter acquired by Pledgor in Party C.

1.3

3

Term of Pledge: shall refer to the term set forth in Section 3 of this Agreement.

1.4

2017 6 8

Control Agreements: shall refer to Technical Consultation and Service Agreements, Business Cooperation Agreement and other relevant control agreements executed by and among Pledgor, Party C and Pledgee on_____, 2017.

1.5

7

Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.



3

Equity Pledge Agreement







1.6

Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.

2.

The Pledge

As collateral security for the performance of the Control Agreements and the timely and complete payment when due (whether at stated maturity, by acceleration or otherwise) of any or all of the payments due by Party C and/or Pledgor, including without limitation the consulting and services fees payable to the Pledgee under the Control Agreements, Pledgor hereby pledges to Pledgee a first security interest in all of Pledgor's right, title and interest, whether now owned or hereafter acquired by Pledgor, in the Equity Interest of Party C.

3.

Term of Pledge

3.1

Upon signing this Agreement, the Parties should complete the pledge of the Equity Interest contemplated registered with relevant administration for industry and commerce (the “AIC”) as soon as possible. The Pledge shall be continuously valid until the Pledgor is no longer a shareholder of Party C or the satisfaction of all its obligations by the Party C under the Control Agreements. The Pledgors shall be responsible for recording of this Agreement in the Company’s Register of Shareholders.  

3.2



4

Equity Pledge Agreement







During the Term of Pledge, in the event Party C fails to pay the exclusive consulting or service fees in accordance with the Control Agreements, Pledgee shall have the right, but not the obligation, to dispose of the Pledge in accordance with the provisions of this Agreement.

4.

Custody of Records for Equity Interest subject to Pledge

4.1

During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have custody of such items during the entire Term of Pledge set forth in this Agreement.

4.2

Pledgee shall have the right to collect dividends generated by the Equity Interest during the Term of Pledge.

5.

Representations and Warranties of Pledgor

5.1

Pledgor is the owner of the Equity Interest in record of register of shareholder.

5.2

Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

5.3

Except for the Pledge, Pledgor has not placed any security interest or other



5

Equity Pledge Agreement







encumbrance on the Equity Interest.

6.

Covenants and Further Agreements of Pledgor

6.1

Pledgor hereby covenants to the Pledgee, that during the term of this Agreement, Pledgor shall:

6.1.1

not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest, without the prior written consent of Pledgee, except for the performance of the Share Disposal Agreement (the Share Disposal Agreement ) executed by Pledgor, the Pledgee and Party C on the execution date of this Agreement;

6.1.2

comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 working days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request or upon consent of Pledgee;

6.1.3



6

Equity Pledge Agreement







promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any guarantees and other obligations of Pledgor arising out of this Agreement.

6.2

Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.

6.3

使 / 使 使 便 ( / )

To protect or perfect the security interest granted by this Agreement for payment of the consulting and service fees under the Control Agreements, Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by Pledgee.  Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).  Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by Pledgee.

6.4



7

Equity Pledge Agreement







Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall indemnify Pledgee for all losses resulting therefrom.

6.5

The Pledgors shall process the registration procedures with the Administration for Industry and Commerce concerning the Pledge as soon as practical after the execution of this Agreement.

6.6

Without notifying Pledgee in advance and obtaining Pledgee’s prior written consent, Pledgor shall not transfer the Equity Interest and any action for the proposed transfer of the Equity Interest of Pledgor shall be invalid. Any payment received by Pledgor for transfer of the Equity Interest shall be firstly used to repay the secured obligations to Pledgee or be placed in escrow with a third party as agreed with Pledgee.

7.

Event of Breach

7.1

The following circumstances shall be deemed Event of Default:

7.1.1

Party C fails to fully and timely fulfill any liabilities under the Control Agreements, including without limitation failure to pay in full any of the consulting and service fees payable under the Control



8

Equity Pledge Agreement







Agreements or breaches any other obligations of Party C thereunder;

7.1.2

Pledgor or Party C has committed a material breach of any provisions of this Agreement;

7.1.3

Except for the performance of the Share Disposal Agreement, Pledgor transfers or purports to transfer or abandons the Equity Interest pledged or assigns the Equity Interest pledged without the written consent of Pledgee; and

7.1.4

The successor or custodian of Party C is capable of only partially performing or refusing to perform the payment obligations under the Control Agreements.

7.1.5

使

The occurrence of any adverse change to the assets or property of the Pledgor, which in Pledgee s determination, may impact the ability of the Pledgor to perform its obligations hereunder.

7.1.6

使

The occurrence of any other circumstances under which the Pledgee is not or may not able to exercise its rights hereunder in accordance with the applicable law.

7.2

7.1

Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, Pledgor shall immediately notify Pledgee in writing accordingly.



9

Equity Pledge Agreement







7.3

7.1 20 8 使

Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the Pledgee delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default to Pledgor in writing at any time thereafter, demanding to immediately dispose of the Pledge in accordance with the provisions of Section 8 of this Agreement.

8.

使

Exercise of Pledge

8.1

Prior to the full payment of the consulting and service fees described in the Control Agreements, without the Pledgee's written consent, Pledgor shall not assign the Equity Interest in Party C.

8.2

使

Pledgee may issue a written notice to Pledgor when exercising the Pledge.

8.3

7.3 7.3 使 使

Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 7.3. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.

8.4



10

Equity Pledge Agreement







In the event of default, Pledgee is entitled to dispose of the Equity Interest in accordance with applicable PRC laws. Only to the extent permitted under applicable PRC laws, Pledgee has no obligation to account to Pledgor for proceeds of disposition of the Equity Interest, and Pledgor hereby waives any rights it may have to demand any such accounting from Pledgee.

8.5

使

When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable Pledgee to enforce the Pledge in accordance with this Agreement.

9.

Assignment

9.1

Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.

9.2

This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its successors and assigns.

9.3

/ /

At any time, Pledgee may assign any and all of its rights and obligations under the Control Agreements to its designee(s) (natural/legal persons), in which case the assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Control Agreements, upon Pledgee's request, Pledgor shall execute relevant



11

Equity Pledge Agreement







agreements or other documents relating to such assignment.

9.4

In the event of a change in Pledgee due to an assignment, Pledgor shall, at the request of Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.

9.5

/ 使

Pledgor shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Share Disposal Agreement and the Power of Attorney granted to Pledgee, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.

10.

Termination

Upon the full payment of the consulting and service fees under the Control Agreements and upon termination of Party C's obligations under the Control Agreements, this Agreement shall be terminated, and Pledgee shall then terminate the equity pledge under this Agreement as soon as reasonably practicable.

11.



12

Equity Pledge Agreement







Handling Fees and Other Expenses

All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.

12.

Confidentiality

(a) (b) (c)

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This



13

Equity Pledge Agreement







Section shall survive the termination of this Agreement for any reason.

13.

Governing Law and Resolution of Disputes

13.1

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

13.2

30 使

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

13.3

使

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

14.



14

Equity Pledge Agreement







Notices

14.1

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service to the address of such party set forth below. A confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

14.1.1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices.

14.2

For the purpose of notices, the addresses of the Parties are as follows:

   

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

   耀 251

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn.

Phone

 15988179261


Party B:  



15

Equity Pledge Agreement







  

Address:

Phone


  

Party C:   Shanghai Dianniu Internet Finance Information Service Co., Ltd.

38 1 1 102-34

Address:   Room 102-34, Floor 1, Building 1,No.38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn.

Phone

15988179261


14.3

If any Party change its address for notices or its contact person, a notice shall be delivered to the other Parties in accordance with the terms hereof.

15.

Severability

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or



16

Equity Pledge Agreement







regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

16.

Attachments

The attachments set forth herein shall be an integral part of this Agreement.

17.

Effectiveness

17.1

This Agreement shall become effective when the Parties have duly executed this Agreement.

17.2

Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective after the affixation of the signatures or seals of the Parties.

17.3

This Agreement is written in Chinese and English in three copies. Pledgor, Pledgee and Party C shall hold one copy respectively.  Each copy of this Agreement shall have equal validity.  In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.




17

Equity Pledge Agreement







The Remainder of this page is intentionally left blank




18

Equity Pledge Agreement







使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Agreement as of the date first above written.

 

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

 ___________

By:

 ___________

Name:

 ZENG Erxin

 

Title:  

 Legal Representative


 

Party B: ________________

By:

________________


Party C: Shanghai Dianniu Internet Finance Information Service Co., Ltd.

_______________

By:

 ______________

 

Name:

ZENG Erxin

Title:

Legal Representative


19

Equity Pledge Agreement







Attachments:


1.

 

Shareholders' register of Shanghai Dianniu Internet Finance Information Service Co., Ltd.;


2.

 

The Capital Contribution Certificate for Shanghai Dianniu Internet Finance Information Service Co., Ltd.;


3.

Technical Consultation and Service Agreement


4.

Business Cooperation Agreement




20

Equity Pledge Agreement




Form of Equity Option Agreement


2017 _ _

This Equity Option Agreement (this "Agreement") is executed by and among the following Parties as of ____ , 2017 in Shanghai, the People s Republic of China ( China or the PRC ):


 

  耀 251

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


     

Party B:     

Chinese Identification Card No.:


 

38 1 1 102-34

Party C:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

Address:  

Room 102-34, Floor 1, Building 1,No.38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".



1

Equity Option Agreement





____%

Whereas: Party B holds ____% of the equity interest in Party C. Party A and Party C have executed a Technical Consultation and Service Agreement, Business Cooperation Agreement and other control agreements (the Control Agreements ).


Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:


1.

Sale and Purchase of Equity Interest

1.1

Option Granted

1 使 1.3 使 ( ) ( )

In consideration of the payment of RMB 1 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby irrevocably agrees that, on the condition that it is permitted by the PRC laws, Party A has the right to require Party B to fulfill and complete all approval and registration procedures required under PRC laws for Party A to purchase, or designate one or more persons (each, a "Designee") to purchase, Party B’s equity interests in Party C, once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion and at the price described in Section 1.3 herein (such right being the "Equity Interest Purchase Option"). Party A’s Equity Interest Purchase Option shall be exclusive. Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term



2

Equity Option Agreement





"person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

1.2

  使

Steps for Exercise of Equity Interest Purchase Option

使 使 ( ) (a) 使 (b) ( ) (c) /

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's decision to exercise the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased from Party B (the "Optioned Interests"); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.

1.3

Equity Interest Purchase Price

The purchase price of the Optioned Interests (the "Base Price") shall be shall be the lowest price allowed by the laws of China.  If appraisal is required by the laws of China at the time when Party A exercises the Equity Interest Purchase Option, the Parties shall negotiate in good faith and based on the appraisal result make necessary adjustment to the Equity Interest Purchase Price so that it complies with any and all then applicable laws of China (collectively, the "Equity Interest Purchase Price"). When the price is higher than the registered capital of Party C, calculated pro rata for purchase of less than all of the Equity Interest, the excessive part of the price shall be returned to Party A or its designee in a manner as instructed by Party A.

1.4

Transfer of Optioned Interests

使



3

Equity Option Agreement





For each exercise of the Equity Interest Purchase Option:


1.4.1

/

Party B shall cause Party C to promptly convene a shareholders meeting, at which a resolution shall be adopted approving Party B's transfer of the Optioned Interests to Party A and/or the Designee(s);

1.4.2

/

Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the equity interest to Party A and/or the Designee(s) and waiving any right of first refusal related thereto.

1.4.3

/ ( )

Party B shall execute a share transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

1.4.4

/ 使 /

The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages,



4

Equity Option Agreement





third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement and Party B's Equity Pledge Agreement. "Party B's Equity Pledge Agreement" as used in this Section and this Agreement shall refer to the Equity Pledge Agreement ("Party B's Equity Pledge Agreement") executed by and among Party A, Party B and Party C as of the date hereof, whereby Party B pledges all of its equity interests in Party C to Party A, in order to guarantee Party C's performance of its obligations under the Control Agreements executed by and between Party C and Party A.

2.

Covenants

2.1

Covenants regarding Party C

Party B (as the shareholders of Party C) and Party C hereby covenant as follows:

2.1.1

Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

2.1.2

They shall maintain Party C's corporate existence in accordance with good financial and business standards and practices by prudently and effectively operating its business and handling its affairs;

2.1.3

Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party C or legal or beneficial interest in



5

Equity Option Agreement





the business or revenues of Party C, or allow the encumbrance thereon of any security interest;

2.1.4

(i) (ii)

Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained;

2.1.5

/

They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may affect Party C's operating status and asset value;

2.1.6

( 100,000 )

Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB 100,000 shall be deemed a major contract);

2.1.7

Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

2.1.8

They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;

2.1.9

If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;



6

Equity Option Agreement





2.1.10

Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

2.1.11

They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C's assets, business or revenue;

2.1.12

To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

2.1.13

Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its shareholders; and

2.1.14

At the request of Party A, they shall appoint any persons designated by Party A as directors of Party C; without the prior written consent of Party A, they shall not replace the directors of Party C.

2.2

Covenants of Party B

Party B hereby covenants as follows:



7

Equity Option Agreement





2.2.1

Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the pledge placed on these equity interests in accordance with Party B's Equity Pledge Agreement;

2.2.2

使 /

Party B shall cause the shareholders' meeting and/or the board of directors of Party C not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, without the prior written consent of Party A, except for the pledge placed on these equity interests in accordance with Party B's Equity Pledge Agreement;

2.2.3

Party B shall cause the shareholders' meeting or the board of directors of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person, without the prior written consent of Party A;

2.2.4

Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

2.2.5

使

Party B shall cause the shareholders' meeting or the board of directors of Party C to vote their approval of the transfer of the



8

Equity Option Agreement





Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

2.2.6

To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

2.2.7

/

Party B shall appoint any designee of Party A as director and/or executive director of Party C, at the request of Party A; without the prior written consent of Party A, they shall not replace the directors of Party C;

2.2.8

/ / 使

Party B shall issue such power of attorney as Party A may request from time to time, to authorize Party A and/or the individual designated by Party A to exercise Party B s voting rights as a shareholder in Party C.

2.2.9

At the request of Party A at any time, Party B shall promptly and unconditionally transfer its equity interests in Party C to Party A's Designee(s) in accordance with the Equity Interest Purchase Option under this Agreement, and Party B hereby waives its right of first refusal to the respective share transfer by the other existing shareholder of Party C (if any); and

2.2.10

/ / 使

Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B,



9

Equity Option Agreement





Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof.  If Party B retains any additional rights other than those rights provided for under this Agreement, Party B's Equity Pledge Agreement and the powers of attorney issued to Party A and/or the individual designated by Party A, Party B shall not exercise such rights without Party A’s written direction.

3.

Representations and Warranties

Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement that:

3.1

( ) 使

They have the authority to execute and deliver this Agreement and any share transfer contracts to which they are parties concerning the Optioned Interests to be transferred thereunder (each, a "Transfer Contract"), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

3.2

(i) (ii) (iii) (iv) ( ) (v)

The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or



10

Equity Option Agreement





instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

3.3

Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Pledge Agreement, Party B has not placed any security interest on such equity interests;

3.4

Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;

3.5

(i) (ii)

Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained.

3.6

Party C has complied with all laws and regulations of China applicable to equity or asset acquisitions; and

3.7

There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

4.

Effective Date

/

This Agreement shall become effective upon the date hereof, and remain effective until all the equity interest owned by Party B in Party C has been legally transferred to Party A or the Designee(s) in accordance with this Agreement.



11

Equity Option Agreement





5.

Governing Law and Resolution of Disputes

5.1

Governing law

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws of China shall be governed by international legal principles and practices.

5.2

Methods of Resolution of Disputes

30 使

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

6.

Taxes and Fees



12

Equity Option Agreement





Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

7.

Notices

7.1

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

7.1.1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices.

7.2

For the purpose of notices, the addresses of the Parties are as follows:

  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

   耀 251

Address:   Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

   

Attn:

      ZENG Erxin

Phone 15988179261    




13

Equity Option Agreement





Party B:  

Address:

Phone


  

Party C:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

    38 1 1 102-34

Address:   Room 102-34, Floor 1, Building 1, No.38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

  

Attn:

     ZENG Erxin

Phone 15988179261    


7.3

If any Party change its address for notices or its contact person, a notice shall be delivered to the other Party in accordance with the terms hereof.

8.

Confidentiality

(a) (b) (c)



14

Equity Option Agreement





The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

9.

Further Warranties

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

10.

Miscellaneous

10.1

Amendment, change and supplement

Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.



15

Equity Option Agreement





10.2

Entire agreement

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

10.3

Headings

便

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

10.4

Language

This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.  

10.5

Severability



16

Equity Option Agreement





In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

10.6

Successors

This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such Parties.

10.7

Waivers

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

10.8

Survival

10.8.1

Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.



17

Equity Option Agreement





10.8.2

5 7 8 10.8

The provisions of Sections 5, 7, 8 and this Section 10.8 shall survive the termination of this Agreement.

10.9

Indemnification

10.9.1

  10 1 2 3

The Parties agree and confirm that, if any Party (the Defaulting Party ) is in material breach of any provisions herein or fails to perform any obligations hereunder in any material respect, such breach or failure shall constitute a default under this Agreement (the Default ), which shall entitle non-defaulting Party to request Defaulting Party to rectify or remedy such Default with a reasonable period of time.  If the Defaulting Party fails to rectify or remedy such Default within the reasonable period of time or within 10 days of non-defaulting Party s written notice requesting for such rectification or remedy, the non-defaulting Party shall be entitled to elect any one of the following remedial actions: (a) to terminate this Agreement and request the Defaulting Party to fully compensate its losses and damages; (b) to request the specific performance by the Defaulting Party of its obligations hereunder and request the Defaulting Party to fully compensate non-defaulting Party s losses and damages; or (c) to enforce the pledge under the Party B s Equity Pledge Agreement by selling, auctioning or exchanging the pledged equity thereunder and receive payment in priority from the proceeds derived therefrom, and in the meantime, request the Defaulting Party to fully compensate non-defaulting Party for any losses as a result thereof.

10.9.2



18

Equity Option Agreement





The rights and remedies provided for in this Agreement shall be accumulative and shall not affect any other rights and remedies stipulated at law.


[ ]

[THE SIGNATURE PAGE]


1

Equity Option Agreement





使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Option Agreement as of the date first above written.


  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

_____________

By:

   

Name:

ZENG Erxin

Title:  

 Legal Representative



Party B:  


_________________

By:

________________


Party C:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.


_______________

By:

   

Name:

ZENG Erxin

Title:

Legal Representative



{00535409.DOC.1}

20

Equity Option Agreement




Form of Voting Rights Proxy and Financial Supporting Agreement

( ) 2017 _ _

This Voting Rights Proxy and Financial Supporting Agreement (the Agreement ) is made in Shanghai on ____ , 2017 among the following parties:


___________

___________________

Party A: __________ (hereinafter " Entrusting Party ")

ID No.:  ______________________


  耀 251

Party B:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


 

38 1 1 102-34

Party C:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.

Address:  

Room 102-34, Floor 1, Building 1,No.38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


 ( )

(In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".)

Whereas:

1.

____%

The Entrusting Party, the shareholders of Party C, collectively own ___% of the equity interest in Party C in record.

2.

使

The Entrusting Party is willing to unconditionally entrust Party B or Party B s designee to vote on his or her behalf at the shareholders meeting of Party C, and Party B is willing to accept such proxy on behalf of Entrusting Party.

Therefore, the Parties hereby agree as follows:

Proxy of Voting Rights

1.1

( ) ( ) 使 ( )

    Entrusting Party hereby irrevocably covenants that, he/she shall execute the Power of Attorney (“POA”) set forth in Exhibit A upon signing this Agreement and entrust Party B or Party B’s designee (“Designee”) to exercise all his or her rights as the shareholders of Party C under the Articles of Association of Party C, including without limitation to:

(1)

       propose to hold a shareholders' meeting in accordance with the Articles of Association of Party C and attend shareholders' meetings of Party C as the agent and attorney of Entrusting Party;

(2)

使

       exercise all shareholder's voting rights with respect to all matters to be discussed and voted in the shareholders meeting of Party C, including but not limited to designate and appoint the director, the chief executive officer and other senior management members of Party C;

(3)

       exercise other voting rights the shareholders are entitled to under the laws of China promulgated from time to time; and

(4)

exercise other voting rights the shareholders are entitled to under the Articles of Association of Party C amended from time to time;

1.1 使 1.1

Party B hereby agrees to accept such proxy as set forth in Clause 1.1. Upon receipt of the written notice of change of Designee from Party B, the Entrusting Party shall immediately entrust such person to exercise the rights set forth in Clause 1.1. Except the aforesaid situation, the proxy shall be irrevocable and continuously valid.

1.2 使

The Entrusting Party hereby acknowledges and ratify all the actions associated with the proxy conducted by the Designee.

1.3

使

   The Parties hereby confirm that, Designee is entitled to exercise all proxy rights without the consent of Entrusting Party.

Rights to Information

2.1

使

For the purpose of this Agreement, the Designee is entitled to request relevant information of Party C and inspect the materials of Party C. Party C shall provide appropriate assistance to the Designee for his/her work.

2.2

The Entrusting Party and Party C shall immediately inform Party B once the proxy matter happens.

使

       Performance of Proxy Rights

3.1

使

    The Entrusting Party shall provide appropriate assistance to the Designee for the performance of proxy rights provided in this Agreement, including signing and executing the shareholders resolution and other relevant legal documents (if applicable) which have been confirmed by the Designee.

3.2

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.


Financial Supporting

In consideration of the foregoing grant of voting rights by the Entrusting Party, Party B agrees to arrange for funds to be provided as necessary to Party C in connection with the business (the “Financial Support”). Party B further agrees that should the business fails in the ordinary course of business, and as a result Party C is unable to repay the Financial Support, the Party C shall have no repayment obligation.

       Representations and Warranties

5.1

    The Entrusting Party hereby represents and warrants to Party B as follows:

5.1.1

The Entrusting Party has full power and legal right to enter into this Agreement and perform his or her obligations under this Agreement and in executing the POA; This Agreement and the POA constitute legal, valid, binding and enforceable obligation of each Entrusting Party.

5.1.2

Each Entrusting Party has necessary authorization for the execution and delivery of this Agreement, and the execution, delivery and performance of this Agreement will not conflict with or violate any and all constitutional documents of Party C.

5.1.3

使

Each Entrusting Party is the lawfully registered and beneficial owner of the shares of Party C, and none of the shares held by the Entrusting Party is subject to any encumbrance or other restrictions, except as otherwise provided under the Equity Interest Pledge Agreement and Share Disposal and Exclusive Option Agreement entered into by and between Party B, Party C and the Entrusting Party. According to this Agreement, the Designee has full power and legal rights to exercise the proxy rights according to the Articles of Association of Party C.

5.2

Party C hereby represents and warrants as follows:

5.2.1

Party C is a company legally registered and validly existing in accordance with the laws of China and has independent legal person status, and has full and independent civil and legal capacity to execute, deliver and perform this Agreement.  It can sue and be sued as a separate entity;

5.2.2

Party C has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement.  Party C s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party C.

5.2.3

使

Each Entrusting Party is the lawfully registered and beneficial owner of the shares of Party C, and none of the shares held by the Entrusting Party is subject to any encumbrance or other restrictions, except as otherwise provided under the Equity Interest Pledge Agreement and Share Disposal and Exclusive Option Agreement entered into by and between Party B, Party C and the Entrusting Party. According to this Agreement, the Designee has full power and legal rights to exercise the proxy rights according to the Articles of Association of Party C.

       Term of this Agreement

6.1

(20)

This Agreement shall become effective upon the date hereof with a term of twenty (20) years. The Parties agree that, this Agreement can be extended only if Party B gives its written consent of the extension of this Agreement before the expiration of this Agreement and the other Parties shall agree with this extension without reserve.

6.2

    If the Entrusting Party has transferred all his or her equity interests in Party C subject to the prior consent of Party B, the obligations and warranties under this Agreement of the Entrusting Party shall be undertaken by the assignee.

       Notices

7.1

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered in written.

7.2

    Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices. Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

8.1

(a) (b) (c)

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

Liability for Breach of Agreement

9.1

( ) ( ) ( ) (10)

The Parties agree and confirm that, if either Party is in breach of any provisions herein or fails to perform its obligations hereunder, such breach or failure shall constitute a default under this Agreement, which shall entitle the non-defaulting Party to request the defaulting Party to rectify or remedy such default with a reasonable period of time.  If the defaulting Party fails to rectify or remedy such default within the reasonable period of time or within 10 days of non-defaulting Party s written notice requesting for such rectification or remedy, then the non-defaulting Party shall be entitled to elect the following remedial actions:

9.1.1

           If the defaulting Party is any Entrusting Party or Party C, then Party B has the right to terminate this Agreement and request the defaulting Party to fully compensate its losses and damages;

9.1.2

       If the defaulting Party is Party B, then the non-defaulting Party has the right to request the defaulting Party to fully compensate its losses and damages, but in no circumstance shall the non-defaulting Party early terminate this Agreement unless the applicable law provides otherwise.

9.2

Notwithstanding otherwise provided under this Agreement, the validity of this Section shall not be affect by the suspension or termination of this Agreement.

Miscellaneous

10.1

(3) (1)

This Agreement shall be signed in Chinese and English language bearing the same legal effect. In the event of any inconsistency between the Chinese and English language, the Chinese version of this Agreement shall prevail. This Agreement shall have three counterparts, with each party holding one original. All counterparts shall be given the same legal effect.

10.2

The execution, effectiveness, interpretation, performance, amendment, termination and dispute resolution shall be governed by the law of the People s Republic of China.

10.3

In the event of any dispute with respect to this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai. The arbitration award shall be final and binding on all Parties.

10.4

The rights and remedies provided for in this Agreement shall be accumulative and shall not affect any other rights and remedies stipulated at law.

10.5

    Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

10.6

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

10.7

Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.

10.8

/ /

Without Party B's prior written consent, other Parties shall not assign its rights and obligations under this Agreement to any third party. Entrusting Party and Party C agrees that Party B may assign its obligations and rights under this Agreement to any third party upon a prior written notice to Entrusting Party and Party C.

10.9

This Agreement shall be binding on the legal successors of the Parties.

[ ]

[THE SIGNATURE PAGE]



1







IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Agreement as of the date first above written.


 

Party A:  

 _________________

By:

________________


 

Party B:  Shanghai Fuyu Information and Technology Co., Ltd.

___________________

By:

                     

Name:

 Zeng Erxin

 

Title:  

 Legal Representative


Party C:  Shanghai Dianniu Internet Finance Information Service Co., Ltd.


_________________

By:

   

  

Name:    ZENG Erxin

  

Title:

Legal Representative




Exhibit A


Power of Attorney


_______ ____________ ____ % ( ) 使

I, ____________, a Chinese citizen with Chinese Identification Card No.: ____________ , and a holder of ____ % of the entire registered capital in Shanghai Dianniu Internet Finance Information Service Co., Ltd. ("My Shareholding"), hereby irrevocably authorize Shanghai Fuyu Information and Technology Co., Ltd. ( Designee ) to exercise the following rights relating to My Shareholding during the term of this Power of Attorney:


使 1 2 使 3

The Designee is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders' meetings of Shanghai Dianniu Internet Finance Information Service Co., Ltd.; 2) exercise all the shareholder's rights and shareholder's voting rights I am entitled to under the laws of China and Articles of Association of Shanghai Dianniu Internet Finance Information Service Co., Ltd., including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative (chairperson), the director, the supervisor, the chief executive officer and other senior management members of Shanghai Dianniu Internet Finance Information Service Co., Ltd..


使

Without limiting the generality of the powers granted hereunder, the Designee shall have the power and authority under this Power of Attorney to execute the Transfer Contracts stipulated in Share Disposal Agreement, to which I am required to be a party, on behalf of myself, and to effect the terms of the Share Interests Pledge Agreement and Share Disposal Agreement, both dated the date hereof, to which I am a party.


All the actions associated with My Shareholding conducted by the Designee shall be deemed as my own actions, and all the documents related to My Shareholding executed by the Designee shall be deemed to be executed by me.  I hereby acknowledge and ratify those actions and/or documents by the Designee.  


Unless Shanghai Fuyu Information and Technology Co., Ltd. issues an instruction to me to change the Designee, this Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of Shanghai Dianniu Internet Finance Information Service Co., Ltd..


使

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the Designee through this Power of Attorney, and shall not exercise such rights by myself.


This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.




_______________



By: ______________


2017 _ _

_____ , 2017


Witness: _________________


Name:


2017 _ _

_____ , 2017






2





Technical Consultation and Service Agreement


2017 6 8

This Technical Consulting and Services Agreement (the "Agreement") is entered into as of June 8, 2017 in Shanghai between the following two parties:


  

   耀 251

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:

Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


 

广

8 1442

Party B:  Shanghai Baoxun Advertisement Design Co., Ltd.

Address:  

Room 1442, No.8 Nanhong Road, Fengxian District, Shanghai, China.

Whereas,

1.

Party A is a wholly-foreign-owned enterprise established in China, and has the necessary resources to provide consulting services;

2.

Party B is a company with exclusively domestic capital registered in China and needs Party A s support and services during its business.

NOW THEREFORE, through friendly consultation, Party A and Party B hereby agree to enter into and perform this Agreement.

MANAGEMENT CONSULTING AND SERVICES

1.

Party A hereby agrees to provide consultation and services to Party B in the area of fund, human, technology and intellectual properties, and Party B hereby agrees to accept such management consultation and services in accordance with the terms and conditions under this Agreement. The management consultation and services provided by Party A include:

(1)

be responsible for providing training and technical support to the staff of Party B;

(2)

be responsible for providing consultation services regarding the marketing of Party B;

(3)

be responsible for roviding general advice and assistance relating to the management and operation of Party B s business;

(4)

be responsible for providing other consultation and services which are necessary for Party B s businesses.

2.   

     Party B shall provide appropriate assistance to Party A for its work, including but not limited to providing the relevant data, engineering requirement and technical directions.

3.

     The term of this Agreement is twenty (20) years. The Parties agree that, this Agreement can be extended only if Party A gives its written consent of the extension of this Agreement before the expiration of this Agreement and Party B shall agree with this extension without reserve. If Party B’s operation term is required to extended, Party B shall use its best efforts to renew its business license and extend its operation term until and unless otherwise instructed in Party A’s prior written notice.

4.

/

     Party A is the exclusive consultation and services provider of Party B; Party B shall not utilize third party to provide services which are same as or similar with Party A’s services and shall not establish similar corporation relationship with any third party regarding the matters contemplated by this Agreement without the prior written consent of Party A. Party A may appoint other parties to provide Party B with the consultations and/or services under this Agreement.

        SERVICES FEES

1 1

The Parties agree that, Party B shall pay relevant services fees to Party A which shall be determined according to the Appendix of this Agreement. This Appendix can be amended by the Parties in considering the circumstances.

       INTELLECTUAL PROPERTY AND CONFIDENTIALITY

1.

/ /

     Unless otherwise stipulated in writing by the Parties, Party A shall be the sole and exclusive owner of all rights and interests to any and all intellectual property rights arising from the performance of this Agreement, including, but not limited to, any copyrights, patent, know-how and otherwise, whether developed by Party A or Party B. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A in its sole discretion for the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the protections for any such intellectual property rights in Party A. The Parties agree that this Section shall survive changes to, and rescission or termination of, this Agreement.

2.     使

       For the purpose of this Agreement, Confidential Information includes, but not limited to, (i) technical information, materials, program, drawing, data, parameter , standard, software, computer program, web design in connection with the development, design, research, produce and maintenance of technology disclosed by one Party to the other Party; (ii) any contracts, agreement, memo, annexes, draft or record (including this Agreement) entered into by the Parties for the purpose of this Agreement; and (iii) any information designated to be proprietary or confidential when it is disclosed by one Party to the other Party. Upon termination or expiration of this Agreement, Party B shall, return all and any documents, materials or software contained any of such Confidential Information to Party A or destroy it, delete all of such Confidential Information from memory devices, and cease to use them.

3.  

        Any Party shall not disclose any Confidential Information to any third party in any way without the other Party s prior written consent.

4.

        The Parties may disclose Confidential Information solely to its employees, agents or consultant who must know such information, subject to such employees, agents or consultant being bound by confidentiality obligations at least as restrictive as this Section 3.

5.

   

      Notwithstanding the foregoing, Confidential Information shall not be deemed to include the following information:

(1)

    is or will be in the public domain (other than through the receiving Party s unauthorized disclosure); or

(2)

    is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities, in which case the receiving Party will promptly notify the disclosing Party, and will take reasonable and lawful steps to minimize the extent of the disclosure.

6.     

        Any Party breaching confidentiality obligations under this Section shall indemnity all losses of the other Party.

       REPRESENTATIONS AND WARRANTIES

1.

Party A hereby represents and warrants as follows:

(1)

Party A is a wholly owned foreign enterprise legally registered and validly existing in accordance with the laws of China.

(2)

Party A has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement. Party A’s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party A.

(3)

This Agreement constitutes Party A's legal, valid and binding obligations, enforceable in accordance with its terms.

2.

Party B hereby represents and warrants as follows:

(1)

Party B is a company legally registered and validly existing in accordance with the laws of China and has obtained the relevant permit and license for engaging in its business in a timely manner. It has independent legal person status, and has full and independent civil and legal capacity to execute, deliver and perform this Agreement.  It can sue and be sued as a separate entity;

(2)

Party B has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement.  Party B s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party B.

(3)

This Agreement constitutes Party B's legal, valid and binding obligations, enforceable in accordance with its terms.

        LIABILITY FOR BREACH OF AGREEMENT

1.      30 : 1 2

        The Parties agree and confirm that, if either Party is in breach of any provisions herein or fails to perform its obligations hereunder, such breach or failure shall constitute a default under this Agreement, which shall entitle the non-defaulting Party to request the defaulting Party to rectify or remedy such default with a reasonable period of time.  If the defaulting Party fails to rectify or remedy such default within the reasonable period of time or within 30 days of non-defaulting Party’s written notice requesting for such rectification or remedy, then the non-defaulting Party shall be entitled to elect any one of the following remedial actions: (a) to terminate this Agreement and request the defaulting Party to fully compensate its losses and damages; (b) to request the specific performance by the defaulting Party of its obligations hereunder and request the defaulting Party to fully compensate all losses and damages of the non-defaulting Party.

2.

使 使 使 使

No waiver of rights in respect of any default hereunder shall be valid unless it was made in writing.  Any failure to exercise or delay in exercising any rights or remedy by any Party under this Agreement shall not be deemed as a waiver of such Party.  Any partial exercise of any right or remedy shall not affect the exercise of any other rights and remedies.

3.

5.1

        Notwithstanding Clause 5.1 above, the Parties agree and confirm that in no circumstance shall Party B early terminate this Agreement unless the applicable law provides otherwise or it has obtained the prior written consent of Party A.

4.

   

        The validity of this Section shall not be affect by the suspension or termination of this Agreement.

        FORCE MAJEURE

1.    

In this Agreement, Force Majeure will mean war, earthquake and other events which are unforeseen, inevitable and beyond the control of the Party.

2.  

       If the Force Majeure causes any one party to the Agreement the impossibility to further perform this Agreement, the Parties agree that the suffering party will waive any liability to the other party for any loss that result from any such Force Majeure, provided that the suffering party shall continue to perform this Agreement after the Force Majeure.

        AMENDMENT AND TERMINATION

1.

        Any amendment of this Agreement shall come into force only after a written agreement is signed by both Parties.

2.  

30

During the term of this Agreement, unless Party A commits gross negligence, or a fraudulent act, against Party B, Party B shall not terminate this Agreement prior to its expiration date. Nevertheless, Party A shall have the right to terminate this Agreement upon giving 30 days prior written notice to Party B at any time.

3.

       During the term of this Agreement, if any Party is going into liquidation (either voluntary or compulsory), or is prohibited to conduct business by the governmental authority, the other Party shall be entitled to terminate this Agreement. The termination notice shall come into force upon the notice is sent.

4.

        The amendment and termination of this Agreement shall not affect the exercise of any other remedies under this Agreement. Except when it may be exempted from liability according to law, the Party that is held responsible shall compensate the other Party for all losses and damages thus caused by such amendment or termination.

        GOVERNING LAW AND DISPUTE RESOLUTION

1.    

       The execution, effectiveness, interpretation, performance, amendment, termination and dispute resolution shall be governed by the law of the People s Republic of China.

2.   

       In the event of any dispute with respect to this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai Commission of China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

3.     使

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

           NOTICES

1.    

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices.

2.    

For the purpose of notices, the addresses of the Parties are as follows:

  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

    耀 251

Address:   Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn  

Phone

15988179261

   广

Party A: Shanghai Baoxun Advertisement Design Co., Ltd.

    8 1442

Address:  Room 1442, No.8 Nanhong Road, Fengxian District, Shanghai, China

Attn   

Phone

 15988179261

3.     

If any Party change its address for notices or its contact person, a notice shall be delivered to the other Party in accordance with the terms hereof.

           ASSIGNMENT

1.    

Without Party A's prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.

2.    

Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party upon a prior written notice to Party B but without the consent of Party B.

           MISCELLANEOUS

1.     

        This Agreement shall become effective upon and from the date on which it is signed by the authorized representative and seal of each Party.

2.

Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and that relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

3.

        The clauses in connection with confidentiality obligations, disputes resolution and default responsibilities shall survive rescission or termination of this Agreement.

4.

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

5.  

This Agreement shall be signed in Chinese and English language bearing the same legal effect. In the event of any inconsistency between the Chinese and English language, the Chinese version of this Agreement shall prevail. This Agreement shall have two counterparts, with each party holding one original. All counterparts shall be given the same legal effect.

[ ]

[THE SIGNATURE PAGE]










使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Technical Consultation and Service Agreement as of the date first above written.


  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.


By:

  /s/ ZENG Erxin

 

Name:

 ZENG Erxin

 

Title:  

 Legal Representative




广

Party B:  Shanghai Baoxun Advertisement Design Co., Ltd.


By:

   /s/ ZENG Erxin

 

Name:

 ZENG Erxin

 

Title:

Legal Representative



{00534825.DOC.1}

1



Technical Consultation and Service Agreement





 

Exhibit Provisions on the payment standard and method of technology service fee

1.

1 1

Both Parties agreed that Party B should pay service fee relating to Article 1, paragraph 1 to Party A based on the following terms:

(1)

     Annual Fee

(100%), 15

Party B should pay 100% of net profit after tax of Party B accepted by US GAAP to Party A as the annual fee (the Annual Fee ) of technology support and service herein. The Annual fee should be paid to the designed bank account of Party A within 15 working days after the first day of each quarter of the year.

(2)

     Floating Charge

(1)

Besides the Annual Fee, Party B should pay Floating Charge (the Floating Charge ), the amount of which should not be exceed total net profit accepted by the US GAAP deducting the Annual Fee of Party B, to Party A in each quarter of the year according to the technology support and service provided by Party A. The amount of the Floating Charge should be determined by both Parties based on the following factors:

A

The number and qualification of the employees provided by Party A for the technology support and service in a certain quarter;

B

The service time costed for the technology support and service in a certain quarter;

C

The investment made for the technology support and service in a certain quarter;

D

The service and the value of the service provided for the technology support and service in a certain quarter;

E

The operation revenue of Party B.

1.

15 30

Within 15 days of the end of each quarter, Party A should provide all the required financial information to be used to calculate (the Financial Information ) the Floating Charge on the certain quarter with Party B and should pay the Floating Charge within 30 days of the end each quarter. Both Parties can engage independent accountants with good reputation to audit on the Financial Information, if any Party has a doubt on it. The audit would be conducted during the business hour and should not be affect the normal business of Party B.

2.

1

Party B should negotiate with Party B within 7 working days after receiving the written notice regarding the adjustment of the Annual Fee or the Floating Charge from Party A.

3.

If Party B is in a status of loss accepted by the US GAAP, Party A is obliged to absorb all the loss of Party B and to pay the amount of loss to Party B.




{00534825.DOC.1}

2



Technical Consultation and Service Agreement






Form of Equity Pledge Agreement


( ) 2017 __ __

This Equity Pledge Agreement (this "Agreement") has been executed by and among the following parties on ____, 2017 in Shanghai, the People s Republic of China ( China or the PRC ):


 

  耀 251

Party A: Shanghai Fuyu Information and Technology Co., Ltd. (hereinafter " Pledgee ")

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


________

____________________

Party B:  ______________________ (hereinafter " Pledgor ")

ID No.:   _____________________


 

广

8 1442

Party C:  Shanghai Baoxun Advertisement Design Co., Ltd.

Address:  

Room 1442, No.8 Nanhong Road, Fengxian District, Shanghai, China



1

Equity Pledge Agreement








In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".


Whereas:

1.

__%

Pledgor is a citizen of China, and holds __% of the equity interest in Party C in record. Party C is a limited liability company registered in Shanghai, China. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;     

2.

Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee, Pledgor and Party C owned by Pledgor have executed an Technical Consultation and Service Agreement and other control agreements (the Control Agreements );

3.

To ensure that Pledgor and Party C fully perform their obligations under the Control Agreements, and pay the consulting and service fees thereunder to the Pledgee when the sum becomes due, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as security for payment of the consulting and service fees by Party C under the Control Agreements.



2

Equity Pledge Agreement







To perform the provisions of the Control Agreements, the Parties have mutually agreed to execute this Agreement upon the following terms.

1.

Definitions

Unless otherwise provided herein, the terms below shall have the following meanings:

1.1

2

Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Section 2 of this Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.

1.2

Equity Interest: shall refer to all of the equity interest lawfully now held and hereafter acquired by Pledgor in Party C.

1.3

3

Term of Pledge: shall refer to the term set forth in Section 3 of this Agreement.

1.4

2017 6 8

Control Agreements: shall refer to Technical Consultation and Service Agreements, Business Cooperation Agreement and other relevant control agreements executed by and among Pledgor, Party C and Pledgee on June 8, 2017.

1.5

7

Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.



3

Equity Pledge Agreement







1.6

Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.

2.

The Pledge

As collateral security for the performance of the Control Agreements and the timely and complete payment when due (whether at stated maturity, by acceleration or otherwise) of any or all of the payments due by Party C and/or Pledgor, including without limitation the consulting and services fees payable to the Pledgee under the Control Agreements, Pledgor hereby pledges to Pledgee a first security interest in all of Pledgor's right, title and interest, whether now owned or hereafter acquired by Pledgor, in the Equity Interest of Party C.

3.

Term of Pledge

3.1

The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until the Pledgor is no longer a shareholder of Party C or the satisfaction of all its obligations by the Party C under the Control Agreements. The Pledgors shall be responsible for recording of this Agreement in the Company’s Register of Shareholders.  

3.2



4

Equity Pledge Agreement







During the Term of Pledge, in the event Party C fails to pay the exclusive consulting or service fees in accordance with the Control Agreements, Pledgee shall have the right, but not the obligation, to dispose of the Pledge in accordance with the provisions of this Agreement.

4.

Custody of Records for Equity Interest subject to Pledge

4.1

During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have custody of such items during the entire Term of Pledge set forth in this Agreement.

4.2

Pledgee shall have the right to collect dividends generated by the Equity Interest during the Term of Pledge.

5.

Representations and Warranties of Pledgor

5.1

Pledgor is the owner of the Equity Interest in record of register of shareholder.

5.2

Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

5.3

Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.



5

Equity Pledge Agreement







6.

Covenants and Further Agreements of Pledgor

6.1

Pledgor hereby covenants to the Pledgee, that during the term of this Agreement, Pledgor shall:

6.1.1

not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest, without the prior written consent of Pledgee, except for the performance of the Share Disposal Agreement (the Share Disposal Agreement ) executed by Pledgor, the Pledgee and Party C on the execution date of this Agreement;

6.1.2

comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 working days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request or upon consent of Pledgee;

6.1.3



6

Equity Pledge Agreement







promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any guarantees and other obligations of Pledgor arising out of this Agreement.

6.2

Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.

6.3

使 / 使 使 便 ( / )

To protect or perfect the security interest granted by this Agreement for payment of the consulting and service fees under the Control Agreements, Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by Pledgee.  Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).  Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by Pledgee.

6.4



7

Equity Pledge Agreement







Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall indemnify Pledgee for all losses resulting therefrom.

6.5

The Pledgors shall process the registration procedures with the Administration for Industry and Commerce concerning the Pledge as soon as practical after the execution of this Agreement.

6.6

Without notifying Pledgee in advance and obtaining Pledgee’s prior written consent, Pledgor shall not transfer the Equity Interest and any action for the proposed transfer of the Equity Interest of Pledgor shall be invalid. Any payment received by Pledgor for transfer of the Equity Interest shall be firstly used to repay the secured obligations to Pledgee or be placed in escrow with a third party as agreed with Pledgee.

7.

Event of Breach

7.1

The following circumstances shall be deemed Event of Default:

7.1.1

Party C fails to fully and timely fulfill any liabilities under the Control Agreements, including without limitation failure to pay in full any of the consulting and service fees payable under the Control Agreements or breaches any other obligations of Party C thereunder;

7.1.2



8

Equity Pledge Agreement







Pledgor or Party C has committed a material breach of any provisions of this Agreement;

7.1.3

Except for the performance of the Share Disposal Agreement, Pledgor transfers or purports to transfer or abandons the Equity Interest pledged or assigns the Equity Interest pledged without the written consent of Pledgee; and

7.1.4

The successor or custodian of Party C is capable of only partially performing or refusing to perform the payment obligations under the Control Agreements.

7.1.5

使

The occurrence of any adverse change to the assets or property of the Pledgor, which in Pledgee s determination, may impact the ability of the Pledgor to perform its obligations hereunder.

7.1.6

使

The occurrence of any other circumstances under which the Pledgee is not or may not able to exercise its rights hereunder in accordance with the applicable law.

7.2

7.1

Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, Pledgor shall immediately notify Pledgee in writing accordingly.

7.3

7.1 20



9

Equity Pledge Agreement







8 使

Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the Pledgee delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default to Pledgor in writing at any time thereafter, demanding to immediately dispose of the Pledge in accordance with the provisions of Section 8 of this Agreement.

8.

使

Exercise of Pledge

8.1

Prior to the full payment of the consulting and service fees described in the Control Agreements, without the Pledgee's written consent, Pledgor shall not assign the Equity Interest in Party C.

8.2

使

Pledgee may issue a written notice to Pledgor when exercising the Pledge.

8.3

7.3 7.3 使 使

Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 7.3. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.

8.4

In the event of default, Pledgee is entitled to dispose of the Equity Interest in accordance with applicable PRC laws. Only to the extent permitted under applicable PRC laws, Pledgee has no obligation to account to Pledgor for



10

Equity Pledge Agreement







proceeds of disposition of the Equity Interest, and Pledgor hereby waives any rights it may have to demand any such accounting from Pledgee.

8.5

使

When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable Pledgee to enforce the Pledge in accordance with this Agreement.

9.

Assignment

9.1

Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.

9.2

This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its successors and assigns.

9.3

/ /

At any time, Pledgee may assign any and all of its rights and obligations under the Control Agreements to its designee(s) (natural/legal persons), in which case the assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Control Agreements, upon Pledgee's request, Pledgor shall execute relevant agreements or other documents relating to such assignment.

9.4



11

Equity Pledge Agreement







In the event of a change in Pledgee due to an assignment, Pledgor shall, at the request of Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.

9.5

/ 使

Pledgor shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Share Disposal Agreement and the Power of Attorney granted to Pledgee, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.

10.

Termination

Upon the full payment of the consulting and service fees under the Control Agreements and upon termination of Party C's obligations under the Control Agreements, this Agreement shall be terminated, and Pledgee shall then terminate the equity pledge under this Agreement as soon as reasonably practicable.

11.

Handling Fees and Other Expenses



12

Equity Pledge Agreement







All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.

12.

Confidentiality

(a) (b) (c)

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

13.



13

Equity Pledge Agreement







Governing Law and Resolution of Disputes

13.1

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

13.2

30 使

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

13.3

使

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

14.

Notices

14.1



14

Equity Pledge Agreement







All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service to the address of such party set forth below. A confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

14.1.1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices.

14.2

For the purpose of notices, the addresses of the Parties are as follows:

   

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

   耀 251

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

Attn:

ZENG Erxin

Phone

 15988179261


Party B:  

  



15

Equity Pledge Agreement







Address:

Phone

 


   广

Party C:   Shanghai Baoxun Advertisement Design Co., Ltd.

    8 1442

Address:   Room 1442, No.8 Nanhong Road, Fengxian District, Shanghai, China

  

Attn.:    ZENG Erxin

Phone 15988179261


14.3

If any Party change its address for notices or its contact person, a notice shall be delivered to the other Parties in accordance with the terms hereof.

15.

Severability

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties



16

Equity Pledge Agreement







shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

16.

Attachments

The attachments set forth herein shall be an integral part of this Agreement.

17.

Effectiveness

17.1

This Agreement shall become effective when the Parties have duly executed this Agreement.

17.2

Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective after the affixation of the signatures or seals of the Parties.

17.3

This Agreement is written in Chinese and English in three copies. Pledgor, Pledgee and Party C shall hold one copy respectively.  Each copy of this Agreement shall have equal validity.  In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.


The Remainder of this page is intentionally left blank



17

Equity Pledge Agreement










18

Equity Pledge Agreement







使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Agreement as of the date first above written.


 

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.


By:

________________

Name:

ZENG Erxin

 

Title:  

 Legal Representative


  

Party B: ________________

By:

________________


广

Party C:

Shanghai Baoxun Advertisement Design Co., Ltd.


By:

________________

Name:

ZENG Erxin

Title:

Legal Representative


19

Equity Pledge Agreement







Attachments:


1.

  广

Shareholders' register of Shanghai Baoxun Advertisement Design Co., Ltd.;


2.

Technical Consultation and Service Agreement


3.

Business Cooperation Agreement




20

Equity Pledge Agreement




Form of Equity Option Agreement


2017 __ __

This Equity Option Agreement (this "Agreement") is executed by and among the following Parties as of   _____, 2017 in Shanghai, the People s Republic of China ( China or the PRC ):


 

  耀 251

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


     

Party B:     

Chinese Identification Card No.:


 

广

8 1442

Party C:  Shanghai Baoxun Advertisement Design Co., Ltd.

Address:  

Room 1442, No.8 Nanhong Road, Fengxian District, Shanghai, China


In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".



1

Equity Option Agreement





___ %

Whereas: Party B holds ___ % of the equity interest in Party C. Party A and Party C have executed an Technical Consultation and Service Agreement, Business Cooperation Agreement and other control agreements (the Control Agreements ).


Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:


1.

Sale and Purchase of Equity Interest

1.1

Option Granted

1 使 1.3 使 ( ) ( )

In consideration of the payment of RMB 1 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby irrevocably agrees that, on the condition that it is permitted by the PRC laws, Party A has the right to require Party B to fulfill and complete all approval and registration procedures required under PRC laws for Party A to purchase, or designate one or more persons (each, a "Designee") to purchase, Party B’s equity interests in Party C, once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion and at the price described in Section 1.3 herein (such right being the "Equity Interest Purchase Option"). Party A’s Equity Interest Purchase Option shall be exclusive. Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term



2

Equity Option Agreement





"person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

1.2

  使

Steps for Exercise of Equity Interest Purchase Option

使 使 ( ) (a) 使 (b) ( ) (c) /

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's decision to exercise the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased from Party B (the "Optioned Interests"); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.

1.3

Equity Interest Purchase Price

The purchase price of the Optioned Interests (the "Base Price") shall be shall be the lowest price allowed by the laws of China.  If appraisal is required by the laws of China at the time when Party A exercises the Equity Interest Purchase Option, the Parties shall negotiate in good faith and based on the appraisal result make necessary adjustment to the Equity Interest Purchase Price so that it complies with any and all then applicable laws of China (collectively, the "Equity Interest Purchase Price"). When the price is higher than the registered capital of Party C, calculated pro rata for purchase of less than all of the Equity Interest, the excessive part of the price shall be returned to Party A or its designee in a manner as instructed by Party A.

1.4

Transfer of Optioned Interests

使



3

Equity Option Agreement





For each exercise of the Equity Interest Purchase Option:


1.4.1

/

Party B shall cause Party C to promptly convene a shareholders meeting, at which a resolution shall be adopted approving Party B's transfer of the Optioned Interests to Party A and/or the Designee(s);

1.4.2

/

Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the equity interest to Party A and/or the Designee(s) and waiving any right of first refusal related thereto.

1.4.3

/ ( )

Party B shall execute a share transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

1.4.4

/ 使 /

The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages,



4

Equity Option Agreement





third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement and Party B's Equity Pledge Agreement. "Party B's Equity Pledge Agreement" as used in this Section and this Agreement shall refer to the Equity Pledge Agreement ("Party B's Equity Pledge Agreement") executed by and among Party A, Party B and Party C as of the date hereof, whereby Party B pledges all of its equity interests in Party C to Party A, in order to guarantee Party C's performance of its obligations under the Control Agreements executed by and between Party C and Party A.

2.

Covenants

2.1

Covenants regarding Party C

Party B (as the shareholders of Party C) and Party C hereby covenant as follows:

2.1.1

Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

2.1.2

They shall maintain Party C's corporate existence in accordance with good financial and business standards and practices by prudently and effectively operating its business and handling its affairs;

2.1.3

Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party C or legal or beneficial interest in



5

Equity Option Agreement





the business or revenues of Party C, or allow the encumbrance thereon of any security interest;

2.1.4

(i) (ii)

Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained;

2.1.5

/

They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may affect Party C's operating status and asset value;

2.1.6

( 100,000 )

Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB 100,000 shall be deemed a major contract);

2.1.7

Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

2.1.8

They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;

2.1.9

If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;



6

Equity Option Agreement





2.1.10

Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

2.1.11

They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C's assets, business or revenue;

2.1.12

To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

2.1.13

Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its shareholders; and

2.1.14

At the request of Party A, they shall appoint any persons designated by Party A as directors of Party C; without the prior written consent of Party A, they shall not replace the directors of Party C.

2.2

Covenants of Party B

Party B hereby covenants as follows:



7

Equity Option Agreement





2.2.1

Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the pledge placed on these equity interests in accordance with Party B's Equity Pledge Agreement;

2.2.2

使 /

Party B shall cause the shareholders' meeting and/or the board of directors of Party C not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, without the prior written consent of Party A, except for the pledge placed on these equity interests in accordance with Party B's Equity Pledge Agreement;

2.2.3

Party B shall cause the shareholders' meeting or the board of directors of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person, without the prior written consent of Party A;

2.2.4

Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

2.2.5

使

Party B shall cause the shareholders' meeting or the board of directors of Party C to vote their approval of the transfer of the



8

Equity Option Agreement





Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

2.2.6

To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

2.2.7

/

Party B shall appoint any designee of Party A as director and/or executive director of Party C, at the request of Party A; without the prior written consent of Party A, they shall not replace the directors of Party C;

2.2.8

/ / 使

Party B shall issue such power of attorney as Party A may request from time to time, to authorize Party A and/or the individual designated by Party A to exercise Party B s voting rights as a shareholder in Party C.

2.2.9

At the request of Party A at any time, Party B shall promptly and unconditionally transfer its equity interests in Party C to Party A's Designee(s) in accordance with the Equity Interest Purchase Option under this Agreement, and Party B hereby waives its right of first refusal to the respective share transfer by the other existing shareholder of Party C (if any); and

2.2.10

/ / 使

Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B,



9

Equity Option Agreement





Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof.  If Party B retains any additional rights other than those rights provided for under this Agreement, Party B's Equity Pledge Agreement and the powers of attorney issued to Party A and/or the individual designated by Party A, Party B shall not exercise such rights without Party A’s written direction.

3.

Representations and Warranties

Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement that:

3.1

( ) 使

They have the authority to execute and deliver this Agreement and any share transfer contracts to which they are parties concerning the Optioned Interests to be transferred thereunder (each, a "Transfer Contract"), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

3.2

(i) (ii) (iii) (iv) ( ) (v)

The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or



10

Equity Option Agreement





instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

3.3

Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Pledge Agreement, Party B has not placed any security interest on such equity interests;

3.4

Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;

3.5

(i) (ii)

Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained.

3.6

Party C has complied with all laws and regulations of China applicable to equity or asset acquisitions; and

3.7

There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

4.

Effective Date

/

This Agreement shall become effective upon the date hereof, and remain effective until all the equity interest owned by Party B in Party C has been legally transferred to Party A or the Designee(s) in accordance with this Agreement.



11

Equity Option Agreement





5.

Governing Law and Resolution of Disputes

5.1

Governing law

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws of China shall be governed by international legal principles and practices.

5.2

Methods of Resolution of Disputes

30 使

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

6.

Taxes and Fees



12

Equity Option Agreement





Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

7.

Notices

7.1

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

7.1.1

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices.

7.2

For the purpose of notices, the addresses of the Parties are as follows:

  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

   耀 251

Address:   Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

   

Attn:

      ZENG Erxin

Phone 15988179261   





13

Equity Option Agreement





Party B:  

Address:

 

Phone

 


   广

Party C:  Shanghai Baoxun Advertisement Design Co., Ltd.

    8 1442

Address:   Room 102-34, Floor 1, Building 1, No.38 Debao Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China

  

Attn:

     ZENG Erxin

Phone 15988179261    


7.3

If any Party change its address for notices or its contact person, a notice shall be delivered to the other Party in accordance with the terms hereof.

8.

Confidentiality

(a) (b) (c)



14

Equity Option Agreement





The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

9.

Further Warranties

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

10.

Miscellaneous

10.1

Amendment, change and supplement

Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.



15

Equity Option Agreement





10.2

Entire agreement

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

10.3

Headings

便

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

10.4

Language

This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.  

10.5

Severability



16

Equity Option Agreement





In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

10.6

Successors

This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such Parties.

10.7

Waivers

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

10.8

Survival

10.8.1

Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.



17

Equity Option Agreement





10.8.2

5 7 8 10.8

The provisions of Sections 5, 7, 8 and this Section 10.8 shall survive the termination of this Agreement.

10.9

Indemnification

10.9.1

  10 1 2 3

The Parties agree and confirm that, if any Party (the Defaulting Party ) is in material breach of any provisions herein or fails to perform any obligations hereunder in any material respect, such breach or failure shall constitute a default under this Agreement (the Default ), which shall entitle non-defaulting Party to request Defaulting Party to rectify or remedy such Default with a reasonable period of time.  If the Defaulting Party fails to rectify or remedy such Default within the reasonable period of time or within 10 days of non-defaulting Party s written notice requesting for such rectification or remedy, the non-defaulting Party shall be entitled to elect any one of the following remedial actions: (a) to terminate this Agreement and request the Defaulting Party to fully compensate its losses and damages; (b) to request the specific performance by the Defaulting Party of its obligations hereunder and request the Defaulting Party to fully compensate non-defaulting Party s losses and damages; or (c) to enforce the pledge under the Party B s Equity Pledge Agreement by selling, auctioning or exchanging the pledged equity thereunder and receive payment in priority from the proceeds derived therefrom, and in the meantime, request the Defaulting Party to fully compensate non-defaulting Party for any losses as a result thereof.

10.9.2



18

Equity Option Agreement





The rights and remedies provided for in this Agreement shall be accumulative and shall not affect any other rights and remedies stipulated at law.


[ ]

[THE SIGNATURE PAGE]


1

Equity Option Agreement





使

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Option Agreement as of the date first above written.


  

Party A:  Shanghai Fuyu Information and Technology Co., Ltd.

________________

By:

________________

Name:

ZENG Erxin

Title:  

 Legal Representative



Party B:  


_______________

By:

________________


广

Party C:  Shanghai Baoxun Advertisement Design Co., Ltd.


By:

   /s/ ZENG Erxin

Name:

ZENG Erxin

Title:

Legal Representative



20


[F231002.GIF]



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We consent to the inclusion in this Registration Statement of Golden Bull Limited on Form F-1 (Amendment No. 3) of our report dated July 10, 2017, except for Notes 1, 2, 3, 8, 9, 11 and 12, which are dated December 22, 2017, with respect to our audits of Golden Bull Limited and Subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, cash flows and shareholders’ equity for the year ended December 31, 2016 and for the period from November 17, 2015 (inception) to December 31, 2015, which report appears in the Prospectus, which is part of this Registration Statement.  





/s/ Friedman LLP



New York, New York

December 22, 2017























[F231004.GIF]





Form of Voting Rights Proxy and Financial Supporting Agreement

( ) 2017 _ _

This Voting Rights Proxy and Financial Supporting Agreement (the Agreement ) is made in Shanghai on ____ , 2017 among the following parties:


________

___________________

Party A:  _________________ (hereinafter " Entrusting Party ")

ID No.:  _____________________  


  耀 251

Party B:  Shanghai Fuyu Information and Technology Co., Ltd.

Address:  Floor 1, Building 1, No.251, Yaohua Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, China


 

广

8 1442

Party C:  Shanghai Baoxun Advertisement Design Co., Ltd.

Address:  

Room 1442, No.8 Nanhong Road, Fengxian District, Shanghai, China


 ( )

(In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".)

Whereas:

1.

__ %

The Entrusting Party, the shareholders of Party C, collectively own __ % of the equity interest in Party C in record.

2.

使

The Entrusting Party is willing to unconditionally entrust Party B or Party B s designee to vote on his or her behalf at the shareholders meeting of Party C, and Party B is willing to accept such proxy on behalf of Entrusting Party.

Therefore, the Parties hereby agree as follows:

Proxy of Voting Rights

1.1

( ) ( ) 使 ( )

    Entrusting Party hereby irrevocably covenants that, he/she shall execute the Power of Attorney ( POA ) set forth in Exhibit A upon signing this Agreement and entrust Party B or Party B s designee ( Designee ) to exercise all his or her rights as the shareholders of Party C under the Articles of Association of Party C, including without limitation to:

(1)

       propose to hold a shareholders' meeting in accordance with the Articles of Association of Party C and attend shareholders' meetings of Party C as the agent and attorney of Entrusting Party;

(2)

使

       exercise all shareholder's voting rights with respect to all matters to be discussed and voted in the shareholders meeting of Party C, including but not limited to designate and appoint the director, the chief executive officer and other senior management members of Party C;

(3)

       exercise other voting rights the shareholders are entitled to under the laws of China promulgated from time to time; and

(4)

exercise other voting rights the shareholders are entitled to under the Articles of Association of Party C amended from time to time;

1.1 使 1.1

Party B hereby agrees to accept such proxy as set forth in Clause 1.1. Upon receipt of the written notice of change of Designee from Party B, the Entrusting Party shall immediately entrust such person to exercise the rights set forth in Clause 1.1. Except the aforesaid situation, the proxy shall be irrevocable and continuously valid.

1.2 使

The Entrusting Party hereby acknowledges and ratify all the actions associated with the proxy conducted by the Designee.

1.3

使

   The Parties hereby confirm that, Designee is entitled to exercise all proxy rights without the consent of Entrusting Party.

Rights to Information

2.1

使

For the purpose of this Agreement, the Designee is entitled to request relevant information of Party C and inspect the materials of Party C. Party C shall provide appropriate assistance to the Designee for his/her work.

2.2

The Entrusting Party and Party C shall immediately inform Party B once the proxy matter happens.

使

       Performance of Proxy Rights

3.1

使

    The Entrusting Party shall provide appropriate assistance to the Designee for the performance of proxy rights provided in this Agreement, including signing and executing the shareholders resolution and other relevant legal documents (if applicable) which have been confirmed by the Designee.

3.2

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.


Financial Supporting

In consideration of the foregoing grant of voting rights by the Entrusting Party, Party B agrees to arrange for funds to be provided as necessary to Party C in connection with the business (the “Financial Support”). Party B further agrees that should the business fails in the ordinary course of business, and as a result Party C is unable to repay the Financial Support, the Party C shall have no repayment obligation.

       Representations and Warranties

5.1

    The Entrusting Party hereby represents and warrants to Party B as follows:

5.1.1

The Entrusting Party has full power and legal right to enter into this Agreement and perform his or her obligations under this Agreement and in executing the POA; This Agreement and the POA constitute legal, valid, binding and enforceable obligation of each Entrusting Party.

5.1.2

Each Entrusting Party has necessary authorization for the execution and delivery of this Agreement, and the execution, delivery and performance of this Agreement will not conflict with or violate any and all constitutional documents of Party C.

5.1.3

使

Each Entrusting Party is the lawfully registered and beneficial owner of the shares of Party C, and none of the shares held by the Entrusting Party is subject to any encumbrance or other restrictions, except as otherwise provided under the Equity Interest Pledge Agreement and Share Disposal and Exclusive Option Agreement entered into by and between Party B, Party C and the Entrusting Party. According to this Agreement, the Designee has full power and legal rights to exercise the proxy rights according to the Articles of Association of Party C.

5.2

Party C hereby represents and warrants as follows:

5.2.1

Party C is a company legally registered and validly existing in accordance with the laws of China and has independent legal person status, and has full and independent civil and legal capacity to execute, deliver and perform this Agreement.  It can sue and be sued as a separate entity;

5.2.2

Party C has taken all necessary corporate actions, obtained all necessary authorization and the consent and approval from third parties and government agencies (if any) for the execution and performance of this Agreement.  Party C s execution and performance of this Agreement do not violate any explicit requirements under any law or regulation binding on Party C.

5.2.3

使

Each Entrusting Party is the lawfully registered and beneficial owner of the shares of Party C, and none of the shares held by the Entrusting Party is subject to any encumbrance or other restrictions, except as otherwise provided under the Equity Interest Pledge Agreement and Share Disposal and Exclusive Option Agreement entered into by and between Party B, Party C and the Entrusting Party. According to this Agreement, the Designee has full power and legal rights to exercise the proxy rights according to the Articles of Association of Party C.

       Term of this Agreement

6.1

(20)

This Agreement shall become effective upon the date hereof with a term of twenty (20) years. The Parties agree that, this Agreement can be extended only if Party B gives its written consent of the extension of this Agreement before the expiration of this Agreement and the other Parties shall agree with this extension without reserve.

6.2

    If the Entrusting Party has transferred all his or her equity interests in Party C subject to the prior consent of Party B, the obligations and warranties under this Agreement of the Entrusting Party shall be undertaken by the assignee.

       Notices

7.1

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered in written.

7.2

    Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of acceptance or refusal at the address specified for notices. Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

8.1

(a) (b) (c)

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

Liability for Breach of Agreement

9.1

( ) ( ) ( ) (10)

The Parties agree and confirm that, if either Party is in breach of any provisions herein or fails to perform its obligations hereunder, such breach or failure shall constitute a default under this Agreement, which shall entitle the non-defaulting Party to request the defaulting Party to rectify or remedy such default with a reasonable period of time.  If the defaulting Party fails to rectify or remedy such default within the reasonable period of time or within 10 days of non-defaulting Party s written notice requesting for such rectification or remedy, then the non-defaulting Party shall be entitled to elect the following remedial actions:

9.1.1

           If the defaulting Party is any Entrusting Party or Party C, then Party B has the right to terminate this Agreement and request the defaulting Party to fully compensate its losses and damages;

9.1.2

       If the defaulting Party is Party B, then the non-defaulting Party has the right to request the defaulting Party to fully compensate its losses and damages, but in no circumstance shall the non-defaulting Party early terminate this Agreement unless the applicable law provides otherwise.

9.2

Notwithstanding otherwise provided under this Agreement, the validity of this Section shall not be affect by the suspension or termination of this Agreement.

Miscellaneous

10.1

(3) (1)

This Agreement shall be signed in Chinese and English language bearing the same legal effect. In the event of any inconsistency between the Chinese and English language, the Chinese version of this Agreement shall prevail. This Agreement shall have three counterparts, with each party holding one original. All counterparts shall be given the same legal effect.

10.2

The execution, effectiveness, interpretation, performance, amendment, termination and dispute resolution shall be governed by the law of the People s Republic of China.

10.3

In the event of any dispute with respect to this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission Shanghai Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Shanghai. The arbitration award shall be final and binding on all Parties.

10.4

The rights and remedies provided for in this Agreement shall be accumulative and shall not affect any other rights and remedies stipulated at law.

10.5

    Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

10.6

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

10.7

Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.

10.8

/ /

Without Party B's prior written consent, other Parties shall not assign its rights and obligations under this Agreement to any third party. Entrusting Party and Party C agrees that Party B may assign its obligations and rights under this Agreement to any third party upon a prior written notice to Entrusting Party and Party C.

10.9

This Agreement shall be binding on the legal successors of the Parties.

[ ]

[THE SIGNATURE PAGE]



1







IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Agreement as of the date first above written.


  

Party A:  

________________

By:

________________


 

Party B:  Shanghai Fuyu Information and Technology Co., Ltd.

By:

                     

Name:

 ZENG Erxin

 

Title:  

 Legal Representative


广

Party C:  Shanghai Baoxun Advertisement Design Co., Ltd.


By:

   

  

Name:    ZENG Erxin

  

Title:

Legal Representative




Exhibit A


Power of Attorney


______ ___________ 广 ___% ( ) 使

I, ____________, a Chinese citizen with Chinese Identification Card No.: ______________ , and a holder of ___% of the entire registered capital in Shanghai Baoxun Advertisement Design Co., Ltd. ("My Shareholding"), hereby irrevocably authorize Shanghai Fuyu Information and Technology Co., Ltd. ( Designee ) to exercise the following rights relating to My Shareholding during the term of this Power of Attorney:


使 1 广 2 使 广 3 广

The Designee is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders' meetings of Shanghai Baoxun Advertisement Design Co., Ltd.; 2) exercise all the shareholder's rights and shareholder's voting rights I am entitled to under the laws of China and Articles of Association of Shanghai Baoxun Advertisement Design Co., Ltd., including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative (chairperson), the director, the supervisor, the chief executive officer and other senior management members of Shanghai Baoxun Advertisement Design Co., Ltd..


使

Without limiting the generality of the powers granted hereunder, the Designee shall have the power and authority under this Power of Attorney to execute the Transfer Contracts stipulated in Share Disposal Agreement, to which I am required to be a party, on behalf of myself, and to effect the terms of the Share Interests Pledge Agreement and Share Disposal Agreement, both dated the date hereof, to which I am a party.


All the actions associated with My Shareholding conducted by the Designee shall be deemed as my own actions, and all the documents related to My Shareholding executed by the Designee shall be deemed to be executed by me.  I hereby acknowledge and ratify those actions and/or documents by the Designee.  


广

Unless Shanghai Fuyu Information and Technology Co., Ltd. issues an instruction to me to change the Designee, this Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of Shanghai Baoxun Advertisement Design Co., Ltd..


使

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the Designee through this Power of Attorney, and shall not exercise such rights by myself.


This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

[The remainder of this page is intentionally left blank.]





[Signature Page]




By: ______________


2017 __ __

____ , 2017


Witness: _________________


Name:


2017 _ __

______ , 2017






2



Exhibit 10.14

[F1014001.JPG]




[F1014002.JPG]




[F1014003.JPG]




[F1014004.JPG]




[F1014005.JPG]




[F1014006.JPG]




[F1014007.JPG]




[F1014008.JPG]




[F1014009.JPG]




[F1014010.JPG]




[F1014011.JPG]




[F1014012.JPG]




[F1014013.JPG]



">


















Shanghai Municipal Contract of Property Lease















(Contract number: 20151205001)  







1




Parties of this Contract:


Lessor (Party A): Xinjiang Dushanzi Tianli Technology Co., Ltd.

Lessee (Party B): Shanghai DianNiu Internet Financial Information Service Co., Ltd.


This Contract is executed by, and as agreed, negotiations between both parties in accordance with the provisions of the Contract Law of the People's Republic of China and Shanghai Municipal Ordinance on Property Lease (hereafter referred to as “ Ordinance ”) on the basis of being equal, voluntary, fair and honest with respect to Party B’s lease of Party A’s legally leasable property.


I. Details of Property for Lease


1.1 Party A’s property for lease to Party B is located on the entire 35 th floor of the Sino Life Tower, No.707 Zhangyang Road, Pudong New District, and Shanghai (hereafter referred to as “the Property”). The construction floorage of the Property measures at 1,034.28m 2 , (to be specifically based on the ownership certificate); the Property is for office space, located in an office building, and the structure is steel bar reinforced concrete. Party A has displayed to Party B four certificates of real estate ownership in total including certificates HFD(P)Z (2005) No.113654, HFD(P)Z (2005) No.113655, HFD(P)Z (2005) No.113091 and HFD(P)Z (2005) No.113092.


1.2 Party A, as the owner of the Property, agrees to lease the Property to Party B. Before this Contract is executed, Party A has informed Party B that the Property had been mortgaged.


II. Purpose of Lease


2.1 Party B promises to Party A that the Property will be leased for office use in compliance with applicable national and municipal provisions on property use and property management.


2.2 Party B guarantees that within the term of the lease, without prior written consent from Party A or prior approval from the competent authority, the aforesaid agreed upon purpose of use will not be changed.


III. Delivery Date and Lease Period


3.1 Both parties agree that the Property be delivered by Party A to Party B on or before December 18, 2015; the lease term for the Property is two years, from January 18, 2016 to January 17, 2018; and that the designated rent-free period is from December 18, 2015 to January 17, 2017.


3.2 When the lease period expires, Party A shall be entitled to take back the Property while Party B shall return on time. If Party B needs to renew lease of the Property, it shall submit a written request of renewal to Party A 6 months before such expiration date and after such request is agreed by Party A, another lease contract shall be executed. If both parties fail to execute another contract within 6 months of such expiry, Party B will be deemed to have given up its renewal request and preemptive right of lease under the same conditions, in which case, it shall return the Property to Party A when the lease period expires.


IV. Rent, Payment Terms and Deadline


4.1 Both parties agree that the rent for the Property is RMB 6.0 Yuan per square meter of construction floorage per day; the monthly rent is rated at RMB 188,756.00 Yuan (hundred eighty-eight thousand seven hundred fifty-six Yuan flat) (invoice should be provided); and within the rent-free period, Party B does not have to pay rent to Party A.




2




4.2 The first installment of rent is payable by Party B in 3-month installments beginning on January 18, 2016 to April 17, 2016 for 566,268.00 Yuan (five hundred sixty-six thousand two hundred sixty-eight Yuan flat); from the second installment on, each rent is payable quarterly, the same rule applies; and the rent shall not be increased within the 2-year term.


4.3 The rent shall be paid by Party B in the following terms: see supplementary articles.


V. Deposit and Other Expenses


5.1 Both parties agree that Party B shall pay deposit to Party A when it delivers the Property, in the amount of two months’ rent, RMB 377,512.00 Yuan (three hundred seventy-seven thousand five hundred twelve Yuan flat); the deposit shall not be used as rent payment.


  

Upon receipt of deposit, Party A shall issue a voucher of payment receipt to Party B.


      

When the lease is terminated, the deposit received by Party A, barring any deduction of the expense contracted as borne by Party B, shall be refunded to Party B without interests.


5.2 During the term of the lease and the rent-free period, the expenses incurred from the Property such as charges for water, electricity, telecommunication, equipment or property management, parking fee, etc. shall be borne by Party B. Any other relevant expenses shall also be borne by Party B.


VI. Requirements for Use of Property and Repair Liability


6.1 During the term of the lease, upon identification of any damage to or malfunction of the Property or its accessory facilities, Party B shall timely notify Party A to repair, while Party A shall repair within 3 days from the date it is notified by Party B. If it fails to repair within such period, Party B may repair on behalf of and at the expense borne by Party A.


6.2 During the term of the lease, Party B shall reasonably use and protect the Property and its accessory facilities. When any damage or malfunction occurs to the Property or its accessory facilities due to Party B’s improper or unreasonable use, it shall be responsible for repair; if Party B refuses to repair, Party A may repair on behalf of and at the expense borne by Party B.


6.3 During the term of the lease, Party A shall guarantee that the Property and its accessory facilities are safe and can be used for office space. For inspection on and maintenance to the Property, Party A shall notify Party B 3 days in advance. During inspection and maintenance, Party B shall cooperate, and Party A shall reduce the influence on Party B’s use of the Property.


6.4 Where Party B needs to make additional renovations or facilitate additional accessory facilities and equipment, it shall obtain the prior consent in writing from Party A; where an approval by the competent authority is required, Party B shall apply with the competent authority for prior approval.


VII. Property Conditions upon Return


7.1 Unless Party A agrees Party B’s lease renewal, Party B shall return the Property within the same day when the contracted lease period expires; if return of the Property is delayed without prior consent from Party A, Party B shall pay Party A an occupancy fee for the Property twice of the current rent each day of delay.


7.2 The Property returned by Party B shall be normally usable. When returned, the Property shall be inspected by Party A as acceptable; and expenses respectively payable shall be settled mutually.




3






VIII. Sublease, Assignment and Exchange


8.1 Within the term of the lease, Party B shall not assign, under lease or sublease, the Property or any of its right to any third person.


8.2 Within the term of the lease, Party B shall not assign its rights or obligations under this Contract to others, nor exchange the Property with another property leased to others.


8.3 Within the term of the lease, if any change occurs to the ownership of the Property, Party A shall ensure that the transferee of the Property performs this Contract; however, Party A is not obligated to compensate Party B.


IX. Conditions for Termination of Lease  


9.1 Both parties agree that within the term of the lease, this Contract is terminated on occurrence of any of the following without liabilities borne by either party to the other party.

(I) The right of use for the land occupied by the Property is legally recovered in advance;

(II) The Property is legally requisitioned for the interest of social public;

(III) The Property is legally listed as property to be demolished demanded for urban construction;

(IV) The Property is damaged, lost or assessed as being dangerous;

(V) The Property is now disposed due to its pre-lease mortgage as disclosed by Party A to Party B.


9.2 Both parties agree that on occurrence of any of the following, either party may cancel this Contract by notifying the other party in writing. The contract defaulting party shall pay the other party a default penalty in the amount of six times of the monthly rent; if a loss is incurred by the defaulting party to the other party and the paid default penalty becomes insufficient for compensation of such loss, the balance shall also be compensated if

(I) Party A fails to deliver the Property on time and further fails even within 30 days from when it is urged by Party B;

(II) The Property delivered by Party A is incompliant with this Contract and consequently fails realization of the lease purpose; or such property is defective and endangering Party A’s safety;

(III) The Property is damaged due to Party B’s change of property use without  prior consent from Party A;

(IV) The main structure of the Property is damaged due to Party B’s fault;

(V) Party B presumptuously subleases, assigns the right of lease for, or mutually exchanges the Property with the Property leased to others;

(VI) Party B delays the payment for rent by over one month cumulatively.


X. Default Liability


10.1 If the Property is defective at the time of delivery, Party A shall repair within 30 days from the day of delivery; and if it fails to repair as deadline, it agrees to reduce rent and change relevant rent articles.




4




10.2 During the term of the lease, if Party A fails to perform the contracted repair, maintenance liabilities, causes any damage to the Property, and causes Party B’s property loss or bodily injury, the indemnity liability shall be borne by Party A.


10.3 During the term of the lease, in the absence of any contracted circumstance, if Party A requires to cancel this Contract and take back the Property in advance, it shall notify Party B in writing by 6 months in advance; in addition to refund of the deposit for this lease paid by Party B and subtracted of the expenses payable by Party B (if any) to Party B, it shall also pay Party B an amount of three months’ rent as a default penalty. If Party A’s aforesaid prior written notice for cancellation of contract is given less than 6 months in advance, in addition to the aforesaid default penalty, Party A shall also pay Party B an amount equal to the Property rent for the period whereby such advancement is less than 6 months, as a default penalty.


10.4 If Party B decorates the Property or adds accessory facilities without  prior written consent from Party A or beyond the scope or requirement agreed by Party A in writing, Party A may require Party B to restitute the Property to original conditions and indemnify loss.


10.5 During the term of the lease, in the absence of any contracted circumstance, if Party B requires to cancel this Contract and terminate lease in advance, it shall notify Party A in writing by 6 months in advance; in addition to no refund of the deposit paid by Party B, it shall also pay Party A an amount of 3 months’ rent as a default penalty.


XI. Other Provisions


11.1 For other matters related to this Contract, the parties can enter into supplementary provisions. Supplementary provisions of and annexes to this Contract shall be integrate part of this Contract. All characters, handwritten or typed, shall have the same legal effect.  


11.2 When signing this Contract, both parties are fully aware of their respective rights, obligations and responsibilities thereunder and agree to comply with provisions thereof.  If one Party breaches this Contract, the other Party are entitled to damages pursuant to this Contract.


11.3 Both parties shall resolve any disputes resulting from performance of this Contract through negotiation.  If negotiation did not resolve such dispute, both parties agree to submit the dispute to the Shanghai Arbitration Commission for arbitration.


11.4 This Contract is executed in four copies with equal legal effects and each Party shall hold two copies.



5






Supplementary Articles


      These supplementary articles supplement the Shanghai Municipal Contract of Property Lease executed by both parties thereof for lease of the Property to Party B (hereafter referred to as “ Main Text of this Contract ”) and are collectively referred to as “ this Contract ” with Main Text of this Contract, all schedules and appendixes. If Main Text of this Contract disagrees with these supplementary articles, schedules or appendixes, these supplementary articles and schedules shall prevail.


12.1 Article 1.1 of this Contract is supplemented as follows:


(1)

The Property leased by Party B from Party A under this Contract is located on the entire 35th floor, No.707 Zhangyang Road, Pudong New District, Shanghai (hereafter referred to as “the Building”).


Before this Contract is executed, Party A has displayed to Party B the four certificates of real estate ownership that are necessary for leasing the Property. The respectively number of these certificates is: HFD(P)Z (2005) No.113654, HFD(P)Z (2005) No.113655, HFD(P)Z (2005) No.113091, and HFD(P)Z (2005) No.113092.


12.2 Article 1.2 of this Contract is supplemented as follows:


      

Before this Contract is executed, Party A has fully advised Party B that the Property has been mortgaged; Party B has admitted its awareness of such fact, and expressed that it will not claim any type of indemnification by Party A or have any other right based on such fact. At any time within the term of the lease, Party A shall be entitled to mortgage the Property, if necessary, without prior consent of Party B who shall actively cooperate with Party A in undertaking corresponding formalities.


12.3 Supplementation of Property Condition under this Contract:


Party B states that it has visited the Property before this Contract is executed, is adequately acquainted with  the conditions of existing property decorations and facilities, and it agrees with the existing property delivery standard for Party A’s property delivery.


12.4 Articles 4.3 and 5.2 of this Contract are supplemented as follows:


(1) Within the term of the lease and the rent-free period, Party B shall pay Party A or the property management company the rent for the Property, the property management fee, electricity bill, parking fee and other relevant expenses on time and in full. Party B agrees that within the term of the lease and the rent-free period, if Party A or the property management company uniformly increases the property management fee or other expenses for all properties in the Building and notify Party B one month in advance, such increase shall be payable by Party B upon expiry of such one month notice period.


(2) If Party B delays the payment for any amount under this Contract to Party A, including but not limited to rent, property management fee, electricity bill and other expenses; per each day of delay, it shall pay Party A a default penalty at 50% of the accumulated overdue amount. If the payment for rent is delayed by over 10 days, Party A shall be entitled to cancel this Contract.


12.5 Articles 6.1 and 6.3 of this Contract are supplemented as follows:




6




(1) Party A’s liability for repairing the Property is limited within the structure of the Property, but such liability excludes any damage due to Party B’s fault.


(2) When Party A repairs, it shall notify Party B in writing by a reasonable period in advance, while Party B shall actively cooperate. Any consequence incurred from Party B’s hindrance of Party A’s repair shall be borne by Party B.


(3) In the event of an emergency (including but not limited to fire, flood, robbery, causality, etc.), Party A or its authorized representative may enter the Property without prior notice. If such emergency is not caused by Party A, it shall not be liable to compensate the damage caused by such entry for the purpose to eliminate dangers and within the reasonable scope, provided that Party A shall explain in writing to Party B in detail after the event.


12.6 Article 6.4 of this Contract is supplemented as follows:


(1) As approved by the competent government authority and consented in writing by Party A or property management company, Party B may decorate or add or reconstruct the Property and/or the facilities, equipment provided by Party A.


With prior written consent from Party A and filing required, Party B may engage a qualified construction contractor to be responsible for decoration, addition or reconstruction engineering. Party B and the construction contractor engaged shall abide by the applicable provisions, standards and related amendments from time to time promulgated by Party A and the property management company. Party B agrees that, during the decoration, addition or reconstruction engineering, all of the liabilities caused by either Party B or such construction contractor shall be borne by Party B.


(2) All expenses incurred from clause (1), including but not limited to decoration, addition or reconstruction expenses, equipment and material expenses, the taxes and government fees incurred accordingly shall be borne by Party B. Party B shall be responsible for repairing and maintaining the facilities, equipment decorated, added or reconstructed as stipulated under clause (1), while such responsibility does not rest on Party A.


12.7 Both parties agree specifically on the insurance for the Property within the term of the lease as follows: Party B shall not act in any way nullifying the insurance for the Building or any part thereof against fire or others; and Party B shall not act or allow others to act in any way that may increase the premium for such insurance. If such premium is increased due to Party B’s fault, Party A shall be entitled to recover the insurance premiums increased accordingly from Party B without prejudicing its own entitlement to a right or remedy.


     

 If the water or power supply to or the air-conditioning service for the Property is stopped at any time due to any reason not attributable to Party A or any public facility in the Building is stopped of operation, Party A does not have to bear the corresponding indemnity liability to Party B or reduce or exempt Party B’s rent, property management fee or other expenses.


12.8

Both parties agree that:


(1)  Party A is not responsible for security, nor the custody of belongings in the Property;


(2) The provision of security enforcement personnel, management personnel, mechanical or electronic theft proof system of any nature by Party A to the Building or the Property does not obligate Party A to be responsible for security, custody of the Property or belongings therein. Party B shall be solely responsible at any time for the Property or belongings therein; and


(3) Party B shall not reduce or stop the payment for rent or other expenses contracted as payable on



7




account of any issue relevant to security enforcement.


12.9 Rights and Obligations of Party A


(1) Party A’s request or receipt of a default penalty from Party B as contracted does not prejudice or affect Party A’s exercise of any other right or remedy vested under this Contract, including but not limited to the right of taking the Property back.


(2) Party A’s acceptance of Party B’s rent, property management fee and other expenses shall not be deemed as Party A’s waiver of its right to prosecute Party B of the liabilities borne by it due to its default of any provision under this Contract.


(3) Party A’s forbearance for one or several times of Party B’s any default under this Contract does not constitute as a basis for Party A to waive prosecution of Party B’s any continuous, future defaults or impair or affect in any way Party A’s right or remedy to prosecute Party B’s any continuous, future defaults, unless Party A clearly expresses in writing its waiver of prosecuting Party B.


(4) Upon a reasonable prior notice, Party A shall be entitled to bring any future lessee of the Property or relevant personnel to visit the Property at any time reasonable within three months before the lease period is ended or terminated.


(5) Within the term of the lease, Party A shall keep the public areas and facilities in the Building (including roof, main structure, wall, main water pipeline tunnel, main cable, wiring, elevator, escalator, fireproof, security enforcement equipment, air-conditioning equipment) in good use.


12.10 Rights and Obligations of Party B


(1) Party B shall strictly follow all of the regulations and management rules for the Building.


(2) Within the term of the lease, Party B shall not authorize others to use of occupy the Property or any part therein.


(3) Party B shall cause its employee, contractor, agent (hereafter referred to as “such Personnel”) to abide by and perform all of the articles under this Contract to be abided or performed by Party B. If any loss is incurred by Party A or any third person from any default by such Personnel of this Contract, Party B shall be indemnify.


(4) Before engagement or operation of its business in the Property, Party B shall obtain all licenses, approvals or permits (if required) necessary for opening and operating business from the competent government authorities. Party B shall ensure that such licenses, approvals or permits are fully effective within the term of the lease and compliant with the requirements for such licenses, approvals or permits in every aspect. Furthermore, Party B shall ensure that the business operation activity in the Property is free of violation of applicable laws and regulations; otherwise, all of the liabilities and consequences incurred from its unlawful business operations shall be solely borne by it.


(5) Within the term of the lease, Party B shall not offset or refuse, due to any reason, the payment for the rent, property management fee or other expenses under this Contract payable by it to Party A.


(6) With prior approval from Party A or the property management company, Party B shall be entitled to display its name at the direction signage (if any) in the Building by the fonts and in the way uniformed by Party A. Such fonts will be uniformed through negotiations; Party A has the full right to arrange manufacture and placement at relevant expense borne by Party B.



8





(7) Party B shall be entitled to arrange at its own cost in the format approved by Party A or the property management company at the entrance to the Property or on the door; any signage not approved by Party A or the property management company shall not be arranged.


(8) Party B shall not peddle or solicit in any way at any place outside the Property but in the Building.


(9) If goods need to be loaded or unloaded, Party B shall use the goods’ loading or unloading area, entrance or exit and goods’ elevator designated by Party A or the property management company, and such goods shall be loaded or unloaded only within the hours specified by Party A and the property management company. In no event shall Party B move goods with a passenger elevator or escalator.


12.11 The execution, effectiveness, interpretation, performance of and the resolution of disputes over this Contract shall be governed by the laws of the People's Republic of China.


12.12 The content listed in a schedule of or appendix to this Contract is intended by both parties to supplement and revise the content of relevant articles of this Contract; if any other article of this Contract is inconsistent with relevant contents of schedule or appendix, the provisions of such schedule or appendix shall prevail.


12.13 Article 11.4 of this Contract is supplemented as follows:


This Contract, including supplementary articles, all appendixes and schedules, are made in four copies, two of which shall be kept respectively by each party with equal legal effects.



9







Schedule 1


Part I.

Delivery day: December 18, 2015

Rent Due Date: January 17, 2016

Lease Term: from January 18, 2016 to January 17, 2018

Rent-Free Period: from December 18, 2015 to January 17, 2016


Part II.

Leased floorage: The construction floorage of the Property measures about 1,034.28m 2 .



10





Schedule 2


Part I.

Rent: within the term of the lease, Party B shall pay Party A the rent for the Property in every three months as an installment; the rent for the first installment shall be paid together with the deposit for lease to Party A within 7 working days from the execution date of this Contract. Thereafter,

the rent for each installment shall be paid  at least 10 days before each payment period begins.

The rent for the Property is RMB 6.0 Yuan per square meter of construction floorage per day.  The monthly rent is RMB 188,756.00 Yuan (or one hundred eighty-eight thousand seven hundred fifty-six Yuan flat).


The rent for the first installment is payable quarterly from January 18, 2016 to April 17, 2016 at 566,268.00 Yuan (in words: five hundred sixty-six thousand two hundred sixty-eight Yuan flat).


For all subsequent payments, rent is payable for every 3 months and the same rule applies. The rent shall not be increased for two years.


Part II.

Property management fee: the current property management fee for the Property is rated at monthly RMB 25.0 Yuan per square meter of construction floorage and totaled at monthly RMB 25,857.00 Yuan (or twenty-five thousand eight hundred fifty-seven Yuan flat).


Part III.

Deposit for lease: the Property rent for two months (RMB 377,512.00 Yuan or  three hundred seventy-seven thousand five hundred twelve Yuan flat).


Part IV.

Payment terms: All amounts payable by Party B to Party A under this Contract shall be paid in RMB to Party A’s bank account as follows, or in any other way separately notified by Party A in writing. Any bank fee incurred by Party B shall be borne by Party B.


Account name: Xinjiang Dushanzi Tianli Technology Co., Ltd.

Account bank: Dushanzi Subbranch of Xinjiang Kelamayi Oil Branch of Industrial and Commercial Bank of China

Account number at account bank:

Bank number of account bank:



11






Schedule 3


Detailed Information of Both Parties


Party A: Xinjiang Dushanzi Tianli High/new-tech Joint Stock Co., Ltd.

Registered address: No.2 East Daqing Road, Dushanzi District, Xinjiang

Mailing address: No.2 East Daqing Road, Dushanzi District, Xinjiang


Legal representative: Chen Junhao

Tel.: 0992-3658058

Fax: 0992-3659999


Party B: Shanghai DianNiu Internet Finance Information Service Co., Ltd.

Registered address: Rooms 102-34, Floor 1, Building 1, No.38 Debao Road, Shanghai Free Trade Zone

Mailing address: No.1980 Luoxiu Road, Minhang District, Shanghai

Legal representative: Zeng Erxin

Tel.: 15988179261

Fax:



12







Lessor (Party A): Xinjiang Dushanzi Tianli  Technology Co., Ltd.


Nationality: Chinese


Legal representative: Chen Junhao


Registration certification /number of identity card:


(Seal)

Lessee (Party B): Shanghai DianNiu Internet Finance Information Service Co., Ltd.


Nationality: Chinese


Legal representative: Zeng Erxin


Registration certification /number of identity card:


(Seal)


Address: No.2 East Daqing Road, Dushanzi District, Xinjiang


Postcode: 833699


Tel.: 0992-3658058


Signed on: December 11, 2015


Signed in: Shanghai


Address: No.1980 Luoxiu Road, Minhang District, Shanghai


Postcode: 201100


Tel.: 15988179261


Signed on: December 11, 2015


Signed in: Shanghai


  Name of brokerage provider: Shanghai Shengbang House Property Brokerage Co., Ltd.

  Name of broker: Yuan Zhigang



13



INDEMNIFICATION ESCROW AGREEMENT

 

This INDEMNIFICATION ESCROW AGREEMENT (this Agreement ) dated as of [ ], 2018 is entered into by and among Golden Bull Limited (the Company ), ViewTrade Securities, Inc. (the Underwriter ), and Pearlman Law Group LLP (the “ Escrow Agent ”).

 

WITNESSETH:

 

WHEREAS, the Company is offering (the “ Offering ”) on a firm commitment basis up to 2,300,000 ordinary shares of the Company, par value $0.01 (including up to 300,000 ordinary shares that the underwriters in the offering have the option to purchase) (the “ Shares ), at an offering price of $[ ] per share;

 

WHEREAS, the Company and Underwriter expect that the Offering will close on or before the close of business on [ ], 2018 (the Closing Date );

 

WHEREAS, upon the closing of the Offering, the Company has agreed to deposit an aggregate amount of Five Hundred Thousand Dollars ($600,000)(the “ Escrowed Funds ”) from the proceeds of the Offering to be received by the Company with the Escrow Agent in a non-interest bearing escrow account, to be held, invested and disbursed by the Escrow Agent pursuant to the terms and conditions of this Agreement;

 

WHEREAS, the Escrow Agent is willing to hold the Escrowed Funds and Investment Gain Funds (as such term is defined below) in escrow pursuant to and subject to the terms and conditions of this Agreement; and

 

NOW, THEREFORE, in consideration of the mutual promises herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

1.

Appointment of Escrow Agent . The Company and the Underwriter hereby appoint the Escrow Agent as escrow agent in accordance with the terms and subject to the conditions set forth herein and the Escrow Agent hereby accepts such appointment.


2.

Delivery of the Escrowed Funds . Upon the closing of the Offering, the Escrowed Funds shall be delivered on behalf of the Company to the Escrow Agent, as escrow agent, into a non-interest bearing escrow account maintained by the Escrow Agent (the “ Escrow Account ”) by wire transfer in accordance with the wire transfer instructions set forth on  Schedule A  hereto. In no event shall the aggregate amount of Escrowed Funds delivered to the Escrow Account be less than Five Hundred Thousand Dollars ($600,000).

 

3.

Escrow Agent to Hold and Disburse the Escrowed Funds and Investment Gain Funds . The Escrow Agent will retain the Escrowed Funds and Investment Gain Funds in an escrow account and disburse the Escrowed Funds and Investment Gain Funds pursuant to the terms of this Agreement, as follows:

 

a.

The Escrowed Funds shall be held by the Escrow Agent for the purpose of satisfying the initial $600,000 of the indemnification obligations of the Company, with respect to the Escrowed Funds, pursuant to Section 2 of the Underwriting Agreement dated [ ], 2018 by and between the Company and the Underwriter, for a period of two (2) years from the closing of the Offering. Disbursement of such Escrowed Funds and Investment Gain Funds shall be determined by an independent third-party trustee, to be chosen by mutual consent of the Company and the Underwriter.

 

b.

Notwithstanding the last sentence of the prior paragraph, in the event that any litigation or proceeding arising out of any matter in connection with the Offering in connection to the Underwriter acting in its capacity as underwriter within two (2) years following the Closing Date and in which the Company, the Underwriter, the Escrow Agent or the Escrowed Funds becomes the subject of such litigation or proceeding, the Underwriter and the Company hereby




authorize the Escrow Agent, at the Underwriter’s sole instruction upon Underwriter’s written notice to the Escrow Agent if not otherwise so required, to release and deposit the Escrowed Funds with the clerk of the court in which the litigation is pending for the purpose of indemnifying and defending the Underwriter such litigation and proceeding, and thereupon the Escrow Agent shall be relieved and discharged of any further responsibility with regard thereto to the extent determined by any such court. The Company and the Underwriter further hereby authorize the Escrow Agent, if it receives conflicting claims to any of the Escrowed Funds, is threatened with litigation in its capacity as escrow agent under this Agreement, or if the Escrow Agent determines it is necessary to do so for any other reason relating to this Agreement or the Offering, to interplead all interested parties in any court of competent jurisdiction and to deposit the Escrowed Funds with the clerk of that court and thereupon the Escrow Agent shall be relieved and discharged of any further responsibility hereunder to the parties from which they were received to the extent determined by such court.

 

c.

Upon written instruction of the Company, with a copy to the Underwriter the Escrow Agent may invest the Escrowed Funds during the term of the Agreement as follows:

 

i.

The Escrowed Funds may be invested in issuers listed on U.S. national securities exchanges; provided that (1) no investments may be made in the Company’s securities; (2) no more than 20% of the Escrowed Funds may be invested in one issuer; (3) no more than 50% of the Escrowed Funds may be invested in issuers that have; (A) a market capitalization of less than $1.0 billion; (B) been public for less than two years; and (C) less than $1.0 million in average daily volume for last 30 days.


ii.

In the event the aggregate value of the Escrowed Funds plus the Investment Gain Funds in the Escrow Account decreases to less than 81% of the original amount ($600,000) of Escrowed Funds (“ Minimum Equity ”) for more than 20 consecutive trading days the Company shall promptly (but no later than 10 calendar days following the 20 consecutive trading days following the decrease of less than 81%) add funds to the Escrow Account to maintain the Minimum Equity.

 

iii.

Upon the account reaching Minimum Equity, the Company may not open any additional positions until the account is above the Minimum Equity.

 

iv.

As soon as possible after the Closing, the Escrow Agent shall establish a brokerage account in the Company’s name with a FINRA registered broker-dealer chosen by the Company and reasonably satisfactory to the Underwriter (the “ Escrow Broker ”). All proposed transactions will be submitted by the Company in writing to the Underwriter with a confirmation by the Company that such transaction(s) meet the criteria set forth in Sections 3(c)(i)-(iii). The Underwriter will have two business days after receipt to review the submission. Unless the Underwriter disagrees in writing that the transaction(s) meet the criteria set forth in Section 3(c)(i)-(iii) prior to the end of the second business day after receipt of the written submission by the Company, the Company may submit the transaction request to the Escrow Agent for submission to the Escrow Broker with a copy to the Underwriter. The Escrow Agent shall instruct the Escrow Broker to submit confirmations of all transactions to the Escrow Agent, the Company and the Underwriter.

 

v.

All income derived from the investments pursuant to this Section 3(c) in excess of the Escrowed Funds (“ Investment Gain Funds ”) shall be disbursed to the Company provided in the manner of Section 3(a) of this Agreement, provided that to the extent Investment Gain Funds exceed $50,000 in excess of the Minimum Equity, the Company shall be permitted to request a disbursement of such excess funds in an amount of no less than $50,000 on March 31, June 30, September 30 or December 31 of any year during the term of this Agreement prior to the two year period set forth in Section 3(a).

 




4.

Exculpation and Indemnification of Escrow Agent.

 

a.

The Escrow Agent shall have no duties or responsibilities other than those expressly set forth herein. The Escrow Agent shall have no duty to enforce any obligation of any person to make any payment or delivery, or to direct or cause any payment or delivery to be made other than as set forth herein, or to enforce any obligation of any person to perform any other act. The Escrow Agent shall be under no liability to the other parties hereto or anyone else, by reason of any failure, on the part of any party hereto or any maker, guarantor, endorser or other signatory of a document or any other person, to perform such person’s obligations under any such document. Except for amendments to this Agreement referenced below, and except for written instructions given to the Escrow Agent by the Company and the Underwriter relating to the Escrowed Funds, the Escrow Agent shall not be obligated to recognize any agreement between or among any of the Company and the Underwriter, notwithstanding that references thereto may be made herein and the Escrow Agent has knowledge thereof.

 

b.

The Escrow Agent shall not be liable to the Company, the Underwriter, or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report, or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained), which is reasonably believed by the Escrow Agent to be genuine and to be signed or presented by the proper party or parties hereunder. The Escrow Agent shall not be bound by any of the terms thereof, unless evidenced by written notice delivered to the Escrow Agent signed by the proper party or parties hereunder and, if the duties or rights of the Escrow Agent are affected, unless it shall give its prior written consent thereto.

 

c.

The Escrow Agent shall not be responsible for the sufficiency or accuracy of the form, or of the execution, validity, value or genuineness of, any document or property received, held or delivered to it hereunder, or of any signature or endorsement thereon, or for any lack of endorsement thereon, or for any description therein; nor shall the Escrow Agent be responsible or liable to the Company, the Underwriter, or to anyone else in any respect on account of the identity, authority or rights, of the person executing or delivering or purporting to execute or deliver any document or property or this Agreement. Except as otherwise set forth herein, the Escrow Agent shall have no responsibility with respect to the use or application of the Escrowed Funds pursuant to the provisions hereof.

 

d.

The Escrow Agent shall have the right to assume, in the absence of written notice to the contrary from the proper party or parties hereunder, that a fact or an event, by reason of which an action would or might be taken by the Escrow Agent, does not exist or has not occurred, without incurring liability to the Company, the Underwriter, or to anyone else for any action taken or omitted to be taken or omitted, in good faith and in the exercise of its own best judgment, in reliance upon such assumption.

 

e.

To the extent that the Escrow Agent becomes liable for the payment of taxes, including withholding taxes, in respect of the Investment Gain Funds, or any payment made hereunder, the Escrow Agent may pay such taxes from the Escrowed Funds; and the Escrow Agent may withhold from any payment of the Escrowed Funds and Investment Gain Funds such amount as the Escrow Agent estimates to be sufficient to provide for the payment of such taxes not yet paid, and may use the sum withheld for that purpose. The Escrow Agent shall be indemnified and held harmless against any liability for taxes and for any penalties in respect of taxes, on such investment income or payments in the manner provided in Section 4(f).

 

f.

The Escrow Agent will be indemnified and held harmless by the Company and Underwriter from and against all expenses, including all counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or proceeding involving any




claim, or in connection with any claim or demand, which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, except for claims relating to gross negligence or reckless misconduct by the Escrow Agent or breach of this Agreement by the Escrow Agent, or the monies or other property held by it hereunder. Promptly, but no later than ten (10) business days, after the receipt by the Escrow Agent of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent shall, if a claim in respect thereof is to be made by the Escrow Agent against the Company, notify the Company in writing, but the failure by the Escrow Agent to give such notice shall not relieve the Company from any liability which the Company may have to the Escrow Agent hereunder, unless the failure of the Escrow Agent to give such notice prejudices or otherwise impairs the Company’s ability to defend any demand, claim, action suit or proceeding. Notwithstanding any obligation to make payments and deliveries hereunder, the Escrow Agent may retain and hold for such time as it deems necessary such amount of monies or property as it shall, from time to time, reasonably deem sufficient to indemnify itself for any such loss or expense.

 

g.

For purposes hereof, the term “expense or loss” shall include all amounts paid or payable to satisfy any claim, demand or liability, or in settlement of any claim, demand, action, suit or proceeding settled with the express written consent of the Escrow Agent, and all costs and expenses, including, but not limited to, counsel fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit or proceeding.

 

5.

Indemnification by the Company . The indemnification provisions subject to this Agreement are set forth in Section 6 of the Underwriting Agreement dated [ ], 2018 by and between the Company and the Underwriter, which Section 6 shall be deemed to be a part of this Agreement.

 

6. 

Termination of Agreement and Resignation of Escrow Agent.

 

a.

This Agreement shall terminate upon disbursement of all of the Escrowed Funds and Investment Gain Funds provided that the rights of the Escrow Agent and the obligations of the Company and the Underwriter under Section 4 shall survive the termination hereof.

 

b.

The Escrow Agent may resign at any time and be discharged from its duties as Escrow Agent hereunder by giving the Company and the Underwriter at least fifteen (15) business days’ written notice thereof (the “ Notice Period ”). As soon as practicable after its resignation, the Escrow Agent shall, if it receives notice from the Company and the Underwriter within the Notice Period, turn over to a successor escrow agent appointed by the Company and the Underwriter all Escrowed Funds and Investment Gain Funds (less such amount as the Escrow Agent is entitled to continue to retain and hold in escrow pursuant to Section 4(f) and to retain pursuant to Section 7) upon presentation of the document appointing the new escrow agent and its acceptance thereof. If no new agent is so appointed within the Notice Period, the Escrow Agent shall return the Escrowed Funds and Investment Gain Funds to the Company without interest or deduction.

 

7.

Form of Payments by Escrow Agent .

 

a.

Any payments of the Escrowed Funds by the Escrow Agent pursuant to the terms of this Agreement shall be made by wire transfer unless directed to be made by check by the Underwriter and/or Company.

 

b.

All amounts referred to herein are expressed in United States Dollars and all payments by the Escrow Agent shall be made in such dollars.

 

8.

Compensation . Escrow Agent shall be entitled to $12,500 as compensation for its services rendered under this Agreement, which amount shall be delivered by the Company to an account designated by the Escrow Agent on the same date when the Escrowed Funds are delivered into the Escrow Account.

 




9.

Notices . All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, on the business day of such delivery (as evidenced by the signed certified mail card), (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), (iv) if delivered by facsimile transmission, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day (as evidenced by the printed confirmation of delivery generated by the sending party’s telecopier machine), or (v) if delivered by email on the business day of such delivery (as evidenced by delivery confirmation). If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 9), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to addresses or facsimile numbers as applicable set forth hereunder.

 

If to the Company, to: 

 

Golden Bull Limited

707 Zhang Yang Road, Sino Life Tower, F35,

Pudong, Shanghai, China 200120

 

with a copy to (which shall not constitute notice):

 

Ellenoff Grossman & Schole LLP

Attention: Ari Edelman, Esq.

1345 Avenue of the Americas, 11th Floor

New York, New York 10105

 

If to the Underwriter, to:

 

ViewTrade Securities, Inc.

Attention: Doug K. Aguililla

7280 West Palmetto Park Road, Suite 310

Boca Raton, FL 33433

 

with a copy to (which shall not constitute notice):

 

Kaufman & Canoles, P.C.

Attention: Anthony W. Basch, Esq.

Two James Center, 14th Floor

1021 E. Cary St.

Richmond, VA 23219

 

If to the Escrow Agent, to: 

 

Pearlman Law Group LLP

200 South Andrews Avenue, Suite 901

Fort Lauderdale, FL 33301

Attn: Charles Pearlman

 

10.

Further Assurances . From time to time on and after the date hereof, the Company and the Underwriter shall deliver or cause to be delivered to the Escrow Agent such further documents and




instruments and shall do and cause to be done such further acts as the Escrow Agent shall reasonably request (it being understood that the Escrow Agent shall have no obligation to make any such request) to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself that it is protected in acting hereunder.

 

11.

Consent to Service of Process . The Company, the Underwriter and the Escrow Agent hereby irrevocably consent to the jurisdiction of the courts of the State of Florida and of any Federal court located in such state in connection with any action, suit or proceedings arising out of or relating to this Agreement or any action taken or omitted hereunder, and waives personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to it at the address listed hereto.

  

12.

Miscellaneous.

 

a.

This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing such instrument to be drafted. The terms “hereby,” “hereof,” “hereunder,” and any similar terms, as used in this Agreement, refer to the Escrow Agreement in its entirety and not only to the particular portion of this Agreement where the term is used. The word “person” shall mean any natural person, partnership, corporation, government and any other form of business of legal entity. All words or terms used in this Agreement, regardless of the number or gender in which they were used, shall be deemed to include any other number and any other gender as the context may require. This Agreement shall not be admissible in evidence to construe the provisions of any prior agreement.

 

b.

This Agreement and the rights and obligations hereunder of the Company and the Underwriter may not be assigned without the consent of the Escrow Agent, other than by laws of descent or operation of law. This Agreement and the rights and obligations hereunder of the Escrow Agent may be assigned by the Escrow Agent, with the prior consent of the Company. This Agreement shall be binding upon and inure to the benefit of each party’s respective successors, heirs and permitted assigns. No other person shall acquire or have any rights under or by virtue of this Agreement. This Agreement may not be changed orally or modified, amended or supplemented without an express written agreement executed by the Escrow Agent, the Company and the Underwriter, which consent shall not be unreasonably withheld. This Agreement is intended to be for the sole benefit of the parties hereto and their respective successors, heirs and permitted assigns, and none of the provisions of this Agreement are intended to be, nor shall they be construed to be, for the benefit of any third person.

 

c.

This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Florida. The representations and warranties contained in this Agreement shall survive the execution and delivery hereof and any investigations made by any party. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect any of the terms thereof.

  

13.

Execution of Counterparts . This Agreement may be executed in any number of counterparts, by facsimile or other form of electronic transmission, each of which shall be deemed to be an original as of those whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more of the counterparts hereof, individually or taken together, are signed by all parties hereto.

 

[THE REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK]

 





 

 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year first above written.

  

ESCROW AGENT: 

 

 

 

 

PEARLMAN LAW GROUP LLP

 

 

 

 

By:

 

 

Name: 

 

 

Title:

            

 

  

COMPANY:

 

GOLDEN BULL LIMITED

  

By: 

 

 

Name: 

Erxin Zeng

 

Title: 

Chief Executive Officer

 

 

UNDERWRITER:

 

VIEWTRADE SECURITIES, INC.

  

By: 

 

 

Name: 

Douglas K. Aguililla

 

Title: 

Director, Investment Banking

 

 

Indemnification Escrow Agreement

 





Schedule A

   

ACCOUNT NAME:                                            TRUST ACCOUNT

ACCOUNT NO.:

ABA ROUTING NO.:

SWIFT CODE: 

BANK:

REFERENCE: ATTN:

 

TO BE WIRED IN U.S. DOLLARS