Filed
pursuant to Rule 424(b)(5)
Registration
No. 333-233408
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated September 19, 2019)
HUDSON
CAPITAL INC.
Warrants
to Purchase 677,750 Ordinary Shares, par value $0.005
Hudson
Capital Inc. is offering warrants to purchase 677,750 ordinary shares to investors pursuant to this prospectus supplement, the accompanying
prospectus, a securities purchase agreement dated December 13, 2021, an amendment no. 1 to that agreement dated December 16, 2021 with
institutional investors and a partial assignment of the aforesaid documents on February 10, 2022 from such investor to another investor.
The warrants are pre-funded and the exercise price to purchase one ordinary share is $0.001 per ordinary share unless it is exercised
on a cashless basis. There is no established trading market for the warrants and we do not expect a market to develop. In addition, we
do not intend to apply for the listing of the warrants on any national securities exchange or other trading market. Without an active
trading market, the liquidity of the warrants will be limited.
No
placement agent is involved in this offering.
Our
ordinary shares are listed on the Nasdaq Capital Market under the symbol “HUSN.” On February 9, 2022, the last reported sale
price of our ordinary shares on the Nasdaq Capital Market was $2.38 per share.
As
of February 9, 2022 the aggregate market value of our outstanding ordinary shares held by non-affiliates was approximately $11,966,395
based on 7,535,897 outstanding ordinary shares, of which 2,508,000 shares are held by an affiliate, and a price of $2.38 per share, which
was the last reported trading price of our ordinary shares on The Nasdaq Capital Market on February , 2022. Pursuant to General Instruction
I.B.5 of Form F-3, in no event will we sell securities in a public primary offering with a value exceeding one-third of our public float
in any 12-month period so long as our public float remains below $75 million. Prior to this offering, we sold for an aggregate purchase
price of $2,700,000, an aggregate of 630,000 ordinary shares, par value $0.005 and a pre-funded warrant to purchase 650,000 ordinary
shares on September 28, 2021 and for aggregate purchase price of $999,502, a pre-funded warrant to purchase 499,751 (which were exercised
on December 29, 2021) on December 29, 2021. Apart from the aforesaid sales, no securities were sold pursuant to General Instruction I.B.5
of Form F-3 during the prior 12-calendar month period that ends on, and includes, the date of this prospectus supplement.
The
Chinese operations of our subsidiaries, including Hongkong Internet Financial Services Limited, will be through contractual arrangements
with Sheng Ying Xin, a variable interest entity (“PRC VIE”) based in China and this structure involves unique risks to investors.
You are not investing in Sheng Ying Xin, our PRC VIE and may never hold interests in it. Neither we nor any of our subsidiaries own shares
in Sheng Ying Xin. Instead, we control and receive the economic benefits of Sheng Ying Xin’s business operations through VIE Agreements
dated April 26, 2016 and HKSQ VIE Agreements dated September 26, 2019. The VIE Agreements and the HKSQ VIE Agreements are designed to
provide Beijing Yingxin Yijia Network Technology Co., Ltd and in turn, Hongkong Shengqi Technology Limited and Hongkong Internet Financial
Services Limited, with the power, rights and obligations equivalent in all material respects to those they would possess as the equity
holder of Sheng Ying Xin, including absolute control rights and the rights to the assets, property and revenue of Sheng Ying Xin. The
variable interest entity structure is used to replicate foreign investment in Chinese-based companies where Chinese law prohibits direct
foreign investment in the operating companies. The Chinese regulatory authorities could disallow this structure, which would likely result
in a material change in our Hong Kong and/or Chinese-based operations and/or value of our ordinary shares including that it could cause
the value of such securities to significantly decline or become worthless.
Recently,
the Chinese government announced that it would step up supervision of Chinese firms listed offshore. Under the new measures, China will
improve regulation of cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent
securities issuance, market manipulation and insider trading, China will also check sources of funding for securities investment and
control leverage ratios. The Cyberspace Administration of China (“CAC”) has also opened a cybersecurity probe into several
U.S.-listed tech giants focusing on anti-monopoly, financial technology regulation and more recently, with the passage of the Data Security
Law, how companies collect, store, process and transfer data. If we are subject to such a probe or if we are required to comply with
stepped-up supervisory requirements, valuable time from our management and money may be expended in complying and/or responding to the
probe and requirements, thus diverting valuable resources and attention away from our operations. This may, in turn, negatively impact
our operations.
Further, given the Chinese government’s
significant oversight and discretion over the conduct of our business operations in Hong Kong and China, the Chinese government may intervene
or influence our operations at any time, which could result in a material change in our operations in China and consequently, the value
of our shares. The Chinese government could also significantly limit or completely hinder our use of variable interest entities, ability
to list on an U.S. or other foreign exchange, and to offer future securities to investors and cause the value of such securities to significantly
decline or be worthless.
Investing
in our securities involves significant risks. See “Risk Factors” beginning on page S-4 of this prospectus supplement and
in the documents incorporated by reference into this prospectus supplement.
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 supplement. Any representation to the contrary is a criminal offense.
Delivery
of the ordinary shares to the investor in book-entry form through the facilities of The Depository Trust Company is expected to be made
on or about February10, 2022.
The
date of this prospectus supplement is February 10, 2022.
You
should rely only on the information incorporated by reference or provided in this prospectus supplement and the accompanying prospectus.
Neither we nor the placement agent have authorized anyone to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying prospectus do not constitute
an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus supplement and the accompanying
prospectus in any jurisdiction where it is unlawful to make such offer or solicitation. You should assume that the information contained
in this prospectus supplement or the accompanying prospectus, or any document incorporated by reference in this prospectus supplement
or the accompanying prospectus, is accurate only as of the date of those respective documents. Neither the delivery of this prospectus
supplement nor any distribution of securities pursuant to this prospectus supplement shall, under any circumstances, create any implication
that there has been no change in the information set forth or incorporated by reference into this prospectus supplement or in our affairs
since the date of this prospectus supplement. Our business, financial condition, results of operations and prospects may have changed
since that date.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering of securities.
The second part is the accompanying prospectus, which provides more general information, some of which may not apply to this offering.
The information included or incorporated by reference in this prospectus supplement also adds to, updates and changes information contained
or incorporated by reference in the accompanying prospectus. If information included or incorporated by reference in this prospectus
supplement is inconsistent with the accompanying prospectus or the information incorporated by reference therein, then this prospectus
supplement or the information incorporated by reference in this prospectus supplement will apply and will supersede the information in
the accompanying prospectus and the documents incorporated by reference therein.
This
prospectus supplement is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, using
a “shelf” registration process. Under the shelf registration process, we may from time to time offer and sell any combination
of the securities described in the accompanying prospectus up to a total dollar amount of $50,000,000, of which this offering is a part.
This
prospectus supplement, the accompanying prospectus and the information incorporated herein and therein by reference includes trademarks,
service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included or incorporated
by reference into this prospectus supplement or the accompanying prospectus are the property of their respective owners.
Except
where the context otherwise requires and for purposes of in this prospectus supplement and the accompanying prospectus, “we”,
“us”, “our company”, “Company”, “our”, “CIFS”, “Hudson Capital”,
“HUSN” refer to Hudson Capital Inc. (formerly known as China Internet Nationwide Financial Services, Inc.), its subsidiary,
Hongkong Internet Financial Services Limited (“HKIFS”), HKIFS’s subsidiary, CIFS (Xiamen) Financial Leasing Co., Ltd
, HKIFS’s variable interest entity, Hongkong Shengqi Technology Limited (“HKSQ” or “HK VIE”), HKSQ’s
wholly-owned subsidiary, Beijing Yingxin Yijia Network Technology Co., Ltd (“BYYNT”), BYYNT’s variable interest entity,
Sheng Ying Xin (Beijing) Management Consulting Co., Ltd (“Sheng Ying Xin” or “PRC VIE”) and Sheng Ying Xin’s
PRC subsidiaries - Kashgar Sheng Yingxin Enterprise Consulting Co., Ltd., Fu Hui (Shenzhen) Commercial Factoring Co., Ltd., Yingda Xincheng
(Beijing) Insurance Broker Co., Ltd., Fuhui (Xiamen) Commercial Factoring Co., Ltd., Zhizhen Investment & Research (Beijing) Information
Consulting Co., Ltd. and Hangzhou Yuchuang Investment Partnership.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights selected information about our company, this offering and information appearing elsewhere in this prospectus supplement,
in the accompanying prospectus, and in the documents we incorporate by reference. This summary is not complete and does not contain all
the information that you should consider before investing in our ordinary shares. You should read this entire prospectus supplement and
the accompanying prospectus carefully, including the “Risk Factors” contained in this prospectus supplement beginning on
page S-4, and the risk factors, financial statements and notes incorporated by reference herein, before making an investment decision.
This prospectus supplement may add to, update or change information in the accompanying prospectus.
Company
Overview
We
are in the business of providing financial advisory services to meet the financial and capital needs of our clients, which comprise largely
of small-to-medium sized enterprises (“SMEs”). Through our wholly-owned subsidiary, Hongkong Internet Financial Services
Limited (“HKIFS”), HKIFS’s variable interest entity, Hongkong Shengqi Technology Limited (“HKSQ”), HKSQ’s
wholly-owned subsidiary, Beijing Yingxin Yijia Network Technology Co., Ltd (“BYYNT”), BYYNT’s variable interest entity,
Sheng Ying Xin (Beijing) Management Consulting Co., Ltd (“Sheng Ying Xin”) and Sheng Ying Xin’s PRC subsidiary - Kashgar
Sheng Yingxin Enterprise Consulting Co., Ltd, we offer commercial payment advisory services, international corporate financing advisory
services and intermediary bank loan advisory services. Historically, we have also made direct loans to certain qualified borrowers. We
do not anticipate making any more direct loans but instead, we will be depositing our funds in trust accounts with certain bank lenders,
who will, in turn, make loans to borrowers. Be that as it may, we had made the “direct loans” to better utilize our excess
cash on hand at that time. In view of the slowing economy, we anticipate that future “entrusted loans” will be infrequent,
if at all.
We
generate revenues from service fees in connection with our (i) commercial payment advisory services, (ii) international corporate financing
advisory services, (iii) intermediary bank loan advisory services and (iv) factoring services. Additionally, we earn interest income
from our direct or entrusted lending activities. As returns from these (entrusted) loans are limited and infrequent, we do not regard
such loan activities as a separate line of business. We do not expect the balance of such loans to increase significantly in the future
and we may gradually cease the conduct of this form of investment when there are better investment options of our cash.
In
keeping with our plan to diversify our operations and rebrand ourselves, our corporate name was changed to “Hudson Capital Inc.”
on April 23, 2020 and we began to trade under our new symbol, “HUSN” on May 8, 2020. On April 9, 2020, we incorporated a
New York subsidiary, Hudson Capital USA Inc.
Our
securities were transferred to the Capital Market at the opening of business on July 16, 2020.
On
September 9, 2020, we incorporated Hudson Capital Merger Sub I Inc. in Delaware, which in turn incorporated Hudson Capital Merger Sub
II Inc. in Delaware as a wholly-owned subsidiary.
On
October 26, 2020, we filed Amended and Restated Memorandum and Articles of Association with the Registrar of Corporate Affairs of the
British Virgins Islands to effect a 5-for-1 reverse stock split (the “Reverse Split”) of our ordinary shares. As a result
of the Reverse Split, every five (5) ordinary shares were automatically combined into one (1) ordinary share. In connection with the
Reverse Split, our par value per share was increased from $0.001 to $0.005.
On
June 23, 2020 and July 31, 2020, we closed on two registered direct offerings for the purchase and sale of 4,352,941 of our ordinary
shares, at a purchase price of $0.85 per share, for an aggregate purchase price of approximately $3.7 million and the purchase and sale
of 3,555,556 of our ordinary shares, at a purchase price of $0.45 per share, for an aggregate purchase price of approximately $1.6 million,
respectively. Chardan Capital Markets LLC acted as placement agent in both offerings. The net proceeds from the offerings, after deducting
placement agent fees and estimated offering expenses, were approximately $3.328 million and $1.39 million, respectively.
On
October 26, 2020, we filed Amended and Restated Memorandum and Articles of Association with the Registrar of Corporate Affairs of the
British Virgins Islands (the “BVI”) to effect a 5-for-1 reverse stock split (the “Reverse Split”) of the Company’s
ordinary shares. As a result of the Reverse Split, every five ordinary shares combined into one ordinary share and the par value per
share increased from $0.001 to $0.005.
On
May 12, 2021, Hudson Capital Holding Co. was incorporated as a wholly-owned subsidiary of Hudson Capital Merger Sub I Inc. and parent
of Hudson Capital Merger Sub II Inc.
On
September 16, 2021, we entered into a securities purchase agreement with ATW Opportunities Master Fund, L.P. (“ATW”) pursuant
to which we agreed to sell for an aggregate purchase price of $2,700,000, an aggregate of 630,000 ordinary shares, par value $0.005 and
a pre-funded warrant purchase 650,000 ordinary shares. The net proceeds from the securities purchase, after expenses, was approximately
$2.6 million, of which $1.5 million would be used to fund a loan to Fr8App Inc. (the “Fr8App Loan”) evidenced by a promissory
note issued by Fr8App Inc. to us dated September 16, 2021. In connection with the Fr8App Loan, Fr8App Inc. also issued to us a warrant
(the “Fr8App Warrant”) to purchase certain securities of Fr8App Inc. in an aggregate value of $2,700,000. We agreed to assign
the Fr8App Warrant to ATW and executed a Warrant Assignment Agreement on the same date. The aforesaid transaction was consummated on
September 28, 2021. The ordinary shares, the warrant and the ordinary shares underlying the warrant were issued pursuant to a prospectus
supplement dated September 28, 2021 and the prospectus included in the Company’s Registration Statement on Form F-3 (Registration
No. 333-233408), which was filed with the Securities and Exchange Commission (the “Commission”) on August 22, 2019 and was
declared effective on September 19, 2019, and a prospectus supplement that was filed with the Commission on the closing of the transactions.
On
December 13, 2021, we entered into another securities purchase agreement (the “Purchase Agreement”) with ATW pursuant to
which we agreed to sell for an aggregate purchase price of $862,000, a pre-funded warrant (the “Warrant”) to purchase 431,000
ordinary shares. On December 16, 2021, both we and ATW entered into an Amendment No. 1 to the Purchase Agreement (“Amendment No.
1”) to (i) amend Section 2.1 of the Purchase Agreement to increase the subscription amount to $2,355,000 and amend the Warrant
to purchase 1,177,500 ordinary shares instead and (ii) amend Section 5.1 of the Purchase Agreement to provide that the closing of the
Securities Purchase shall occur before the Merger. With the exception of these amendments, all other provisions of the Purchase Agreement
remain the same.
On
December 29, 2021, we, ATW and Steven Oliveira (“Oliveira”) entered into an Assignment of Securities Purchase Agreement to
assign the right to purchase 499,751 pre-funded warrants (the “Oliveira Warrant”) for a per warrant purchase price of $2.00
(for an aggregate purchase price of $999,502) and the related obligations under the Purchase Agreement from ATW to Steven Oliveira (the
“Oliveira Securities Purchase”). The assignment and the aforesaid Oliveira Securities Purchase closed on December 29, 2021.
Oliveira also notified us of his exercise to convert the Oliveira Warrant into ordinary shares on the same day.
The
net proceeds from the Oliveira Securities Purchase, after expenses, was approximately $999,502, of which $950,000 was used to fund a
loan to Freight App, Inc. evidenced by a promissory note issued by Fr8App, Inc. to us dated September 20, 2021.
The
Oliveira Warrant and the ordinary shares underlying the Oliveira Warrant were issued pursuant to the prospectus included in the Company’s
Registration Statement on Form F-3 (Registration No. 333-233408), which was filed with the Securities and Exchange Commission on August
22, 2019 and was declared effective on September 19, 2019, and a prospectus supplement that was filed with the Securities and Exchange
Commission on the closing of the Oliveira Securities Purchase.
Entry
into a Merger Agreement.
In
a bid to strategically adjust our business to diversify into new business opportunities, on December 13, 2021, we entered into a new
merger agreement between with Hudson Capital Merger Sub I, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger
Sub I”), Freight App, Inc., a Delaware corporation (fka FreightHub Inc.) and ATW Master Fund II, L.P., as the representative of
the stockholders of Freight App, Inc. (the “Stockholders’ Representative”) to acquire all the issued and outstanding
securities of Freight App and assume Freight App as its direct, wholly–owned subsidiary (the “New Merger Agreement”).
Also on December 13, 2021, the old Agreement and Plan of Merger dated October 10, 2020 (as it may be amended from time to time, the “Merger
Agreement”), with Merger Sub I, Hudson Capital Merger Sub II, Inc., a Delaware corporation and Hudson Capital Holding Co.’s
wholly-owned subsidiary, Freight App, Inc., and Stockholders’ Representative was terminated.
Pursuant
to the New Merger Agreement, a Certificate of Merger shall be filed with the Secretary of State of the State of Delaware, in accordance
with the relevant provisions of Delaware Law, whereby Merger Sub I shall be merged with and into Freight App, such time being the “Merger
Effective Time” and the merger shall hereinafter be referred to as the “Merger”. Following the Merger, the separate
corporate existence of Merger Sub I shall cease, and Freight App will continue as the surviving corporation in the Merger (the “Merger
Effective Time”). At the Merger Effective Time, the Certificate of Incorporation of Merger Sub I and by-laws then in effect, shall
cease and the organizational documents of Freight App after the Merger will be in the form as agreed by the Company and Freight App.
Freight
App, Inc. is a transportation logistics platform company, focusing on truckload freight for domestic and cross-border markets in Mexico,
the US and Canada. As an innovative digital freight marketplace, broker, transportation management system (TMS) and public API, Freight
App, Inc. its proprietary technology platform to connect carriers and shippers that significantly improves matching and operation efficiency
via innovative technologies such as live pricing and real-time tracking.
For
more information on the Merger, please refer to our Current Report on Form 6-K filed with the Securities and Exchange Commission on December
14, 2021.
Further
details concerning our business, including information with respect to our assets, operations and development history, are provided in
our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 5, 2021 and the other documents incorporated
by reference into this prospectus supplement. See “Documents Incorporated by Reference.” You are encouraged to thoroughly
review the documents incorporated by reference into this prospectus supplement as they contain important information concerning our business
and our prospects.
THE
OFFERING
|
Securities
we are offering
|
|
Pre-funded
warrants to purchase 677,750 ordinary shares at an exercise price of $0.001 per share. Each
warrant will be exercisable immediately and may be exercised on a cashless basis.
No
fractional shares or scrip representing fractional shares shall be issued upon the exercise of this warrant. We shall, at our election,
either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise or
round up to the next whole share.
The
warrants also provide that in the event of a fundamental transaction we are required to cause any successor entity to assume our
obligations under the warrants. In addition, the holder of the warrant will be entitled to receive upon exercise of the warrant the
kind and amount of securities, cash or property that the holder would have received had the holder exercised the warrant immediately
prior to such fundamental transaction. This prospectus supplement also relates to the offering of the ordinary shares issuable upon
exercise of the warrants.
A
holder shall not have the right to exercise any portion of the warrants to the extent that after giving effect to such issuance after
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 9.99% of our issued and outstanding ordinary shares immediately
after giving effect to the issuance of ordinary shares issuable upon exercise of the warrants.
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Investors
|
|
FEA
FR8 LLC
Yuri
Kokush
Ignacio
Mounetou
Grays
West Ventures LLC
Winston
J. Churchill
M&M
Energy Investors LLC
Michael
Richter
Sharbaugh
Trust
The
Ezrah Charitable Trust
|
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Ordinary
shares outstanding before this offering
|
|
7,535,897
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Ordinary
shares to be outstanding after this offering
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|
7,535,897
|
|
|
|
|
|
Ordinary
shares to be outstanding after this offering assuming full exercise of the warrants
|
|
8,213,647
|
|
|
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Offering
price for the securities
|
|
$1,356,178
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|
Use
of proceeds
|
|
We
estimate the net proceeds to us from this offering will be approximately $1,356,178 after deducting offering expenses payable by
us.
We
intend to use the net proceeds from the sale of the securities offered by this prospectus supplement to fund a loan to Freight App,
Inc. (the “Fr8App Loan”) evidenced by a promissory note issued by Fr8App to Hudson Capital dated February 10, 2022 (the
“Promissory Note”).
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Dividend
policy
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|
We
do not anticipate paying any cash dividends on our ordinary shares for the foreseeable future.
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Nasdaq
Capital Market symbol
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|
Our
ordinary shares are listed on the Nasdaq Capital Market under the symbol “HUSN.”
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Risk
factors
|
|
Investing
in our securities involves significant risks. See “Risk Factors” beginning on page S-4 of this prospectus supplement
and on page 5 of the accompanying prospectus and the documents incorporated by reference herein.
|
Unless
we indicate otherwise, all information in this prospectus is based on 7,535,897 ordinary shares outstanding as of February 10, 2022.
RISK
FACTORS
Investing
in our securities involves risks. Before investing in any securities offered pursuant to this prospectus, you should carefully consider
the risk factors and uncertainties set forth under the heading “Item 3.D. Risk Factors” in our Annual Report on Form 20-F
for the year ended December 31, 2020, which is incorporated in this prospectus supplement by reference, as updated by our subsequent
filings under the Exchange Act in addition to the following offering risk factors.
Risks
Related to This Offering
You
will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
You
will incur immediate and substantial dilution as a result of this offering. After giving effect to the sale by us of a warrant to purchase
677,750 ordinary shares offered in this offering at the offering price of $1,356,178, and after deducting estimated offering expenses
payable by us, the investor in this offering can expect an immediate dilution of $0.63 per share. See “Dilution.”
Because
we will have broad discretion and flexibility in how we use the net proceeds from this offering, we may use the net proceeds in ways
in which you disagree.
All
of the net proceeds will initially be used to make a loan to Freight App, Inc.. See “Use of Proceeds.” When such loan is
repaid, our management will have significant discretion and flexibility in applying the net proceeds of this offering. You will be relying
on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your
investment decision, to assess whether the net proceeds are being used appropriately. The failure of our management to use such funds
effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.
Additional
shares offerings in the future may dilute then existing shareholders’ percentage ownership of our Company.
Given
our plans and expectations that we may need additional capital, we may need to issue additional ordinary shares or securities convertible
or exercisable for ordinary shares, including convertible preferred shares, convertible notes, stock options or warrants. The issuance
of additional securities in the future will dilute the percentage ownership of then existing shareholders.
We
have not paid dividends in the past and do not expect to pay dividends in the future on our ordinary shares..
We
have never paid cash dividends on our ordinary shares and do not anticipate paying cash dividends in the foreseeable future. The payment
of dividends on our ordinary shares will depend on earnings, financial condition, debt covenants in place, and other business and economic
factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our ordinary shares may
be less valuable because a return on a shareholder’s investment will only occur if our share price appreciates.
Risks
Related to Hudson Capital Inc.’s Business and Industry
We
are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable
laws and obligations could have a material and adverse effect on our business, financial condition and results of operations.
We
are subject relating various risks and costs associated with to the collection, use, sharing, retention, security, and transfer of confidential
and private information, such as personal information and other data. This data is wide ranging and relates to our investors, employees,
contractors and other counterparties and third parties. The relevant PRC laws apply not only to third-party transactions, but also to
transfers of information between us, HKIFS, HKSQ, BYYNT, Sheng Ying Xin and Sheng Ying Xin, and among us, HKIFS, HKSQ, BYYNT, Sheng Ying
Xin and Sheng Ying Xin’s subsidiaries, and other parties with which we have commercial relations.
The
PRC regulatory and enforcement regime with regard to privacy and data security is evolving. The PRC Cybersecurity Law which was promulgated
on November 7, 2016 and became effective on June 1, 2017 provides that personal information and important data collected and generated
by operators of critical information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the
law imposes heightened regulation and additional security obligations on operators of critical information infrastructure. According
to the Cybersecurity Review Measures promulgated by the Cyberspace Administration of China and certain other PRC regulatory authorities
in April 2020, which became effective in June 2020, operators of critical information infrastructure must pass a cybersecurity review
when purchasing network products and services which do or may affect national security. If we provide or are deemed to provide such network
products and services to critical information infrastructure operators, or we are deemed to be a critical information infrastructure
operator, we would be required to follow cybersecurity review procedures. There can be no assurance that we would be able to complete
the applicable cybersecurity review procedures in a timely manner, or at all, if we are required to follow such procedures. Any failure
or delay in the completion of the cybersecurity review procedures may prevent us from using or providing certain network products and
services, and may result in fines of up to ten times the purchase price of such network products and services being imposed upon us,
if we are to be deemed a critical information infrastructure operator using network products or services without having completed the
required cybersecurity review procedures. The PRC government is increasingly focused on data security, recently launching cybersecurity
review against a number of mobile apps operated by several US-listed Chinese companies and prohibiting these apps from registering new
users during the review period.
On
June 10, 2021, the Standing Committee of the National People’s Congress of China promulgated the Data Security Law which shall
take effect in September 1, 2021. The Data Security Law provides for data security and privacy obligations of entities and individuals
carrying out data activities, prohibits entities and individuals in China from providing any foreign judicial or law enforcement authority
with any data stored in China without approval from the competent PRC authority, and sets forth the legal liabilities of entities and
individuals found to be in violation of their data protection obligations, including rectification order, warning, fines of up to RMB10
million, suspension of relevant business, and revocation of business permits or licenses.
On
August 20, 2021, the Standing Committee of the National People’s Congress adopted the Personal Information Protection Law, which
shall come into force as of November 1, 2021. The Personal Information Protection Law includes the basic rules for personal information
processing, the rules for cross-border provision of personal information, the rights of individuals in personal information processing
activities, the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and
use of personal information.
In
addition, on July 10, 2021, the Cyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments)
for public comments, which proposes to authorize the relevant government authorities to conduct cybersecurity review on a range of activities
that affect or may affect national security, including listings in foreign countries by companies that possess personal data of more
than one million users. The PRC National Security Law covers various types of national security, including technology security and information
security.
We
currently have fewer than 500 registered users on our digital platform. We only require and obtain user information after users register
with us. Although we believe we currently are not required to obtain clearance from the Cyberspace Administration of China for our Re-domestication
and Merger under the Measures for Cybersecurity Review (Revision Draft for Comments) or the Opinions on Strictly Cracking Down on Illegal
Securities Activities, we face uncertainties as to the interpretation or implementation of such regulations or rules, and if required,
whether such clearance can be timely obtained, or at all.
Compliance
with the PRC Cybersecurity Law, the PRC National Security Law, the Data Security Law, the Personal Information Protection Law, the Cybersecurity
Review Measures, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, including data security
and personal information protection laws, may result in additional expenses to us and subject us to negative publicity, which could harm
our reputation among users and negatively affect the trading price of our ordinary shares in the future. There are also uncertainties
with respect to how the PRC Cybersecurity Law, the PRC National Security Law and the Data Security Law will be implemented and interpreted
in practice. PRC regulators, including the Ministry of Public Security, the MIIT, the SAMR and the Cyberspace Administration of China,
have been increasingly focused on regulation in the areas of data security and data protection, including for mobile apps, and are enhancing
the protection of privacy and data security by rule-making and enforcement actions at central and local levels. We expect that these
areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our
compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to
manage these risks, we could become subject to penalties, including fines, suspension of business, prohibition against new user registration
(even for a short period of time) and revocation of required licenses, and our reputation and results of operations could be materially
and adversely affected.
Risks
Related to Hudson Capital Inc.’s Corporate Structure
If
the PRC government deems that the contractual arrangements in relation to our variable interest entity do not comply with PRC governmental
restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, we could
be subject to penalties or be forced to relinquish our interests in those operations. Further, our shares may decline in value or become
worthless if we are unable to assert our contractual control rights over the assets of Sheng Ying Xin and its subsidiaries that conduct
our operations.
Foreign
ownership of certain types of internet businesses, such as internet information services, is subject to restrictions under applicable
PRC laws, rules and regulations. For example, foreign investors are generally not permitted to own more than 50% of the equity interests
in a value-added telecommunication service provider. Any such foreign investor must also have experience and a good track record in providing
value-added telecommunications services overseas. Accordingly, under current and applicable PRC laws, it is possible that we acquire
up to 50% equity interests in Sheng Ying Xin. However, if we were to acquire more than 50% of the equity interests in Sheng Ying Xin,
Sheng Ying Xin will lose its ICP License. Under current PRC laws, any foreign-invested entity providing value-added telecommunication
services is required to demonstrate to the relevant branch of the Ministry of Industry and Information Technology (the “MIIT”),
namely in our case, the Beijing Communication Administration, that its foreign investors have a positive track of, and operation experience
in operating value-added telecommunication services outside the PRC. In practice, the Beijing Communication Administration makes a determination
after sixty (60) days after receiving the complete set of application documents. We believe that we presently do not have the necessary
experience and track record in providing value- added telecommunications services overseas and intend to take steps to build a track
record and accumulate the requisite experience in anticipation that we may acquire the equity interests in Sheng Ying Xin when the restrictions
on percentage of foreign ownership are eased or lifted. There is however no guarantee that we will be successful in this endeavor and
if we are unsuccessful, we will not be able to acquire the equity interests in Sheng Ying Xin.
All
our revenue is mainly generated by contractually controlled and managed entity, Sheng Ying Xin and its wholly-owned subsidiaries, Kashgar
SYX and Fu Hui (Shenzhen) Commercial Factoring Co., Ltd., and Fu Hui (Xiamen) Commercial Factoring Co., Ltd. Sheng Ying Xin is 99% directly
owned by our former Chief Executive Officer, Mr. Jianxin Lin and 1% indirectly owned by Mr. Lin through his nominee, Mr. Shaoyong Huang.
On December 30, 2018, Sheng Ying Xin disposed of one of its wholly-owned subsidiaries, Beijing Anytrust Science & Technology Co.,
Ltd to reduce operating losses.
The
contractual arrangements give us effective control over Sheng Ying Xin and enable us to obtain substantially all of the economic benefits
arising from it as well as consolidate the financial results of it in our results of operations. Although the structure we have adopted
is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, the PRC government may not
agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with
requirements or policies that may be adopted in the future.
In
the opinion of Sino-Integrity Law firm, our PRC counsel, the ownership structures of our BYYNT and Sheng Ying Xin in China, do not and
will not violate any applicable PRC law, regulation or rule currently in effect based on the current interpretation of those law, regulation
or rule; and the contractual arrangements between our BYYNT , Sheng Ying Xin and its respective equity holders governed by PRC law are
valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect and will not
violate any applicable PRC law, rule or regulation currently in effect based on the current interpretation of those law, regulation or
rule. We also do not require the approval of the People’s Republic of China government to be listed on the Nasdaq Capital Market.
However,
Sino-Integrity Law Firm has also advised us that there are substantial uncertainties regarding the interpretation and application of
current PRC laws, rules and regulations. Accordingly, the PRC regulatory authorities and PRC courts may in the future take a view that
is contrary to the opinion of our PRC legal counsel and this could significantly affect our financial performance and the enforceability
of the contractual arrangements.
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. If we or Sheng Ying Xin is/are found to be in violation of any existing or future PRC laws, rules or regulations,
or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion
to take action in dealing with such violations or failures, including revoking the business and operating licenses of Sheng Ying Xin
or its subsidiaries, requiring us to discontinue or restrict our operations, restricting our right to collect revenue, blocking one or
more of our websites, requiring us to restructure our operations or taking other regulatory or enforcement actions against us. The imposition
of any of these measures could result in a material adverse effect on our ability to conduct all or any portion of our business operations.
In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results
of our variable interest entity in our consolidated financial statements, if the PRC government authorities were to find our legal structure
and contractual arrangements to be in violation of PRC laws, rules and regulations. If the imposition of any of these government actions
causes us to lose our right to direct the activities of Sheng Ying Xin or otherwise separate from them and if we are not able to restructure
our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of our
variable interest entity in our consolidated financial statements. Any of these events would have a material adverse effect on our business,
financial condition and results of operations. Further, our shares may also decline in value or become worthless if we are unable to
assert our contractual control rights over the assets of Sheng Ying Xin and HKSQ and their subsidiaries that conduct our operations.
Substantial
uncertainties exist with respect to the interpretation of the PRC Foreign Investment Law (“FIL”) and how it may impact the
viability of our current corporate structure, corporate governance and business operations.
The
Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015, or the 2015 FIL Draft, which
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 2015 FIL Draft, variable interest entities that are controlled via
contractual arrangement would also be deemed as foreign invested enterprises, if they are ultimately “controlled” by foreign
investors.
On
March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the PRC, or the FIL, which came into effect
on January 1, 2020, repealing simultaneously the Law of the PRC on Sino-foreign Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned
Enterprises and the Law of the PRC on Sino-foreign Cooperative Joint Ventures, together with their implementation rules and ancillary
regulations. Pursuant to the FIL, foreign investment refers to any investment activity directly or indirectly carried out by foreign
natural persons, enterprises, or other organizations, including investment in new construction project, establishment of foreign funded
enterprise or increase of investment, merger and acquisition, and investment in any other way stipulated under laws, administrative regulations,
or provisions of the State Council. Although the FIL has deleted the particular reference to the concept of “actual control”
and contractual arrangements compared to the 2015 FIL Draft, there is still uncertainty regarding whether Sheng Ying Xin would be identified
as a FIE in the future.
On
December 26, 2019, the Supreme People’s Court issued the Interpretations on Certain Issues Regarding the Applicable of Foreign
Investment Law, or the FIL Interpretations, which came into effect on January 1, 2020. In accordance with the FIL Interpretations, any
claim to invalidate an investment agreement will be supported by courts if such agreement is found to be entered into for purposes of
making investments in the “prohibited industries” under the Negative List or for purposes of investing in “restricted
industries” while failing to satisfy the conditions set out in the Negative List.
The
“variable interest entity” 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.
If
our control over Sheng Ying Xin through PRC VIE Agreements is deemed as foreign investment in the future, and any business of Sheng Ying
Xinis “restricted” or “prohibited” from foreign investment under the Negative List effective at the time, we
may be deemed to be in violation of the FIL, the PRC VIE Agreements that allow us to have control over Sheng Ying Xin may be deemed as
invalid and illegal, and we may be required to unwind such contractual arrangements and/or restructure our business operations, any of
which may have a material adverse effect on our business operations. Presently, Sheng Ying Xin’s operation of our electronic platform
to provide financial advisory services in China fall within the category of “Commercial Internet Information Services”, which
are value-added telecommunication services that are “restricted” under the Special Management (Negative List) for the Access
of Foreign Investment (2020 Version) (“Negative List”). On December 18, 2015, Sheng Ying Xin received an Internet Content
Provider (“ICP”) license to provide such value-added internet information services.
If
future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual
arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure
to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely
affect our current corporate structure and business operations.
In
addition, our corporate governance practice may be materially impacted and our compliance costs could increase if we were not considered
as ultimately controlled by PRC domestic investors under the enacted version of the Foreign Investment Law. For instance, the draft Foreign
Investment Law as proposed purports to impose 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 would be required for each investment
and alteration of investment specifics, a prospectus would be mandatory, and large foreign investors meeting certain criteria would be
required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations could potentially
be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible could be subject to criminal
liabilities.
Our
contractual arrangements may not be as effective in providing control over the variable interest entities as direct ownership.
We
rely on contractual arrangements with our variable interest entity, namely HKSQ and BYYNT’s variable interest entity, Sheng Ying
Xin, to operate our electronic platform in China and other businesses in which foreign investment is restricted or prohibited. These
contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entity.
If
we had direct ownership of these variable interest entities, we would be able to exercise our rights as an equity holder directly to
effect changes in the boards of directors of the entity, which could effect changes at the management and operational level. Under our
contractual arrangements, we may not be able to directly change the members of the board of directors of HKSQ (and in the case of BYYNT,
the members of the board of director of Sheng Ying Xin) and would have to rely on the respective variable interest entities and the variable
interest entities’ equity holders to perform their obligations in order to exercise HKIFS’s control over HKSQ and HKSQ /BYYNT’s
control over Sheng Ying Xin. The variable interest entities equity holders may have conflicts of interest with us or our shareholders
and with HKSQ /BYYNT and its shareholders as the case may be, and they may not act in the best interests of our Company or may not perform
their obligations under these contracts. For example, Sheng Ying Xin and its equity holders could breach its contractual arrangements
with BYYNT by, among other things, failing to conduct their operations, including maintaining our website and using our domain names
and trademarks which Sheng Ying Xin has exclusive rights to use, in an acceptable manner or taking other actions that are detrimental
to our interests. Pursuant to the call option, BYYNT may replace the equity holders of Sheng Ying Xin at any time pursuant to the contractual
arrangements. However, if any equity holder is uncooperative and any dispute relating to these contracts or the replacement of the equity
holders remains unresolved, BYYNT will have to enforce its rights under the contractual arrangements through the operations of PRC law
and arbitral or judicial agencies, which may be costly and time-consuming and will be subject to uncertainties in the PRC legal system.
The same can be said for HKIFS and HKSQ. See “Any failure by our variable interest entities or their equity holders to perform
their obligations under the contractual arrangements would have a material adverse effect on our business, financial condition and results
of operations.” Consequently, the contractual arrangements may not be as effective in ensuring our control over the relevant
portion of our business operations as direct ownership.
Any
failure by our variable interest entities or their equity holders to perform their obligations under the contractual arrangements would
have a material adverse effect on our business, financial condition and results of operations.
If
our variable interest entities, namely HKSQ and Sheng Ying Xin or their respective equity holders 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.
Although
HKIFS and BYYNT have entered into exclusive option agreements in relation to their respective variable interest entities, HKSQ and Sheng
Ying Xin, respectively which provide that HKIFS /BYYNT may exercise an option to acquire, or nominate a person to acquire, ownership
of the equity in HKSQ/Sheng Ying Xin or, in some cases, its assets, to the extent permitted by applicable PRC laws, rules and regulations,
the exercise of the call option is subject to the review and approval of the relevant PRC governmental authorities. HKIFS and BYYNT have
also entered into share pledge agreements with respect to HKSQ and Sheng Ying Xin, respectively to secure certain obligations of HKSQ
and Sheng Ying Xin, respectively or its equity holders to HKIFS and BYYNT, respectively under the contractual arrangements. However,
the enforcement of such agreement through arbitral or judicial agencies may be costly and time-consuming and will be subject to uncertainties
in the PRC legal system. Moreover, HKIFS’s and HKSQ /BYYNT’s remedies under their respective share pledge agreements are
primarily intended to help HKIFS/BYYNT collect debts owed to HKIFS/BYYNT by HKSQ / Sheng Ying Xin equity holders under the contractual
arrangements and may not help us in acquiring the assets or equity of HKSQ and/or Sheng Ying Xin.
In
addition, although the terms of the contractual arrangements provide that they will be binding on the successors of the variable interest
entity equity holders, as those successors are not a party to the agreements, it is uncertain whether the successors in case of the death,
bankruptcy or divorce of a variable interest entity equity holder will be subject to or will be willing to honor the obligations of such
variable interest entity equity holder under the contractual arrangements. If the relevant variable interest entity or its equity holder
(or its successor), as applicable, fails to transfer the shares of the variable interest entity according to the relevant exclusive option
agreement or share pledge agreement, we would need to enforce our rights under the exclusive option agreement or share pledge agreement,
which may be costly and time-consuming and may not be successful.
The
contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration or court proceedings
in China. Accordingly, these contracts would be interpreted in accordance with PRC law 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.
Moreover, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest
entity should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel or court
would view such contractual arrangements. As a result, uncertainties in the PRC legal system could limit our ability to enforce the contractual
arrangements. Under PRC law, if the losing parties fail to carry out the arbitration awards or court judgments within a prescribed time
limit, the prevailing parties may only enforce the arbitration awards or court judgments in PRC courts, which would require additional
expense and delay. In the event we are unable to enforce the contractual arrangements, we may not be able to exert effective control
over the variable interest entities, and our ability to conduct our business, as well as our financial condition and results of operations,
may be materially and adversely affected.
We
may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by Sheng Ying Xin, which could severely
disrupt our business, render us unable to conduct some or all of our business operations and constrain our growth.
Sheng
Ying Xin holds licenses and approvals and assets that are necessary for our business operations, to which foreign investments are typically
restricted under applicable PRC law. We, our subsidiaries, HKSQ, BYYNT, Sheng Ying Xin and its subsidiaries are not required to obtain
any permission or approval from the PRC authorities including China Securities Regulatory Commission or The Cyberspace Administration
of China for the Sheng Ying Xin’s operation other than what is already in our possession, nor have we, our subsidiaries, HKSQ,
BYYNT, or Sheng Ying Xin and its subsidiaries received any denial for the Sheng Ying Xin’s operation .
The
PRC VIE Agreements contain terms that specifically obligate Sheng Ying Xin equity holders to ensure the valid existence of Sheng Ying
Xin and restrict the disposal of material assets of Sheng Ying Xin. However, in the event Sheng Ying Xin equity holders breach the terms
of these contractual arrangements and voluntarily liquidate Sheng Ying Xin or Sheng Ying Xin declares bankruptcy and all or part of its
assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable
to conduct some or all of our business operations or otherwise benefit from the assets held by Sheng Ying Xin, which could have a material
adverse effect on our business, financial condition and results of operations. Furthermore, if Sheng Ying Xin undergoes a voluntary or
involuntary liquidation proceeding, its equity holders or unrelated third-party creditors may claim rights to some or all of the assets
of Sheng Ying Xin, thereby hindering our ability to operate our business as well as constrain our growth.
The
equity holders, directors and executive officers of our variable interest entities, as well as our employees who execute other strategic
initiatives may have potential conflicts of interest with our Company.
PRC
laws provide that a director and an executive officer owes a fiduciary duty to the company he or she directs or manages. The directors
and executive officers of the variable interest entity must act in good faith and in the best interests of the variable interest entity
and must not use their respective positions for personal gain. On the other hand, such officers and directors who may be directors/employees
of our Company, also have a duty of care and loyalty to act in the best interests of our Company, which in the ordinary course will include
acting in the best interests of our shareholders as a whole under British Virgin Islands law. We control our variable interest entities
through contractual arrangements and the business and operations of our variable interest entities are closely integrated with the business
and operations of our subsidiaries. Nonetheless, conflicts of interests for these individuals may arise due to dual roles both as directors
and executive officers of the variable interest entities and as directors or employees of our Company, and may also arise due to dual
roles both as variable interest entities’ equity holders and as directors or employees of our Company.
We
cannot assure you that these individuals will always act in the best interests of our Company should any conflicts of interest arise,
or that any conflicts of interest will always be resolved in our favor. We also cannot assure you that these individuals will ensure
that the variable interest entities will not breach the existing contractual arrangements. If we cannot resolve any such conflicts of
interest or any related disputes, we would have to rely on legal proceedings to resolve these disputes and/or take enforcement action
under the contractual arrangements. There is substantial uncertainty as to the outcome of any such legal proceedings. See “Any
failure by our variable interest entities or their equity holders to perform their obligations under the contractual arrangements would
have a material and adverse effect on our business, financial condition and results of operations.”
The
contractual arrangements with our variable interest entities may be subject to scrutiny by the PRC tax authorities. Any adjustment of
related party transaction pricing could lead to additional taxes, and therefore substantially reduce our consolidated net income and
the value of your investment.
The
tax regime in China is rapidly evolving and there is significant uncertainty for taxpayers in China as PRC tax laws may be interpreted
in significantly different ways. The PRC tax authorities may assert that we or our subsidiaries or the variable interest entities, namely
HKSQ and Sheng Ying Xin, or their equity holders owe and/or are required to pay additional taxes on previous or future revenue or income.
In particular, under applicable PRC laws, rules and regulations, arrangements and transactions among related parties, such as the contractual
arrangements with our variable interest entities, may be subject to audit or challenge by the PRC tax authorities. If the PRC tax authorities
determine that any contractual arrangements were not entered into on an arm’s length basis and therefore constitute a favorable
transfer pricing, the PRC tax liabilities of the relevant subsidiaries and/or variable interest entities and/or variable interest entities
equity holders could be increased, which could increase our overall tax liabilities. In addition, the PRC tax authorities may impose
late payment interest. Our net income may be materially reduced if our tax liabilities increase.
Risks
Related to Doing Business in the People’s Republic of China
There
are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations, which can change quickly with little
advance notice.
Most
of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries are subject to
laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes.
Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
In
1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general.
The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of
foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations
may not sufficiently cover all aspects of economic activities in China or may be subject to significant degree of interpretation by PRC
regulatory agencies and courts. In particular, because these laws, rules and regulations are relatively new, and because of the limited
number of published decisions and the non-precedential nature of such decisions, and because the laws, rules and regulations often give
the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations
involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government policies
and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result,
we may not be aware of our violation of these policies and rules until after the occurrence of the violation.
Any
administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
attention. 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. Further, enforcement of laws and that rules and regulations in China can change quickly
with little advance notice. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially
and adversely affect our business, financial condition and results of operations.
We
rely to a significant extent on dividends and other distributions on equity paid by Sheng Ying Xin to fund offshore cash and financing
requirements.
We
are a holding company and rely to a significant extent on dividends and other distributions on equity paid by Sheng Ying Xin and on remittances
from Sheng Ying Xin, for our offshore cash and financing requirements, including the funds necessary to pay dividends and other cash
distributions to our shareholders, fund inter-company loans, service any debt we may incur outside of China and pay our expenses. When
Sheng Ying Xin incurs additional debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions
or remittances to us. Furthermore, the laws, rules and regulations applicable to Sheng Ying Xin and certain other of its subsidiaries
permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicable accounting standards
and regulations.
Under
PRC laws, rules and regulations, each of Sheng Ying Xin’s subsidiaries incorporated in China is required to set aside a portion
of its net income each year to fund certain statutory reserves. These reserves, together with the registered equity, are not distributable
as cash dividends. As a result of these laws, rules and regulations, its subsidiaries incorporated in China are restricted in their ability
to transfer a portion of their respective net assets to their shareholders as dividends. In addition, registered share capital and capital
reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. As
of December 31, 2020, these restricted assets totaled RMB 70,438,226 (approximately $11,353,962).
Limitations
on the ability of Sheng Ying Xin to make remittance to BYYNT and in turn to pay dividends HKSQ and then to HKIFS and us could limit our
ability to access cash generated by the operations of Sheng Ying Xin, including to make investments or acquisitions that could be beneficial
to our businesses, pay dividends to our shareholders or otherwise fund and conduct our business.
Restrictions
on currency exchange may limit our ability to utilize our revenue effectively.
Presently
all of our revenue is denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes
dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign
direct investment and loans. Currently, BYYNT, which is a wholly-foreign owned enterprise, may purchase foreign currency for settlement
of “current account transactions,” including payment of dividends to HKSQ VIE, without the approval of SAFE by complying
with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate its ability to purchase
foreign currencies in the future for current account transactions. Since a significant amount of our future revenue will be denominated
in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi
to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, including holders of our
ordinary shares, or pay principal and interest in foreign currencies to the holders of the notes. Foreign exchange transactions under
the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental
authorities. This could affect our ability to obtain foreign currency through debt or equity financing for HKIFS, HKSQ VIE, BYYNT, Sheng
Ying Xin and related subsidiaries.
The
recent spate of government interference by the PRC government into business activities of U.S. listed Chinese companies may negatively
impact our operations, value of our securities and/or significantly limit or completely hinder our ability to offer future securities
to investors and cause the value of such securities to significantly decline or be worthless.
Recently,
the Chinese government announced that it would step up supervision of Chinese firms listed offshore. Under the new measures, China will
improve regulation of cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent
securities issuance, market manipulation and insider trading. China will also check sources of funding for securities investment and
control leverage ratios. The Cyberspace Administration of China (“CAC”) has also opened a cybersecurity probe into several
U.S.-listed tech giants focusing on anti-monopoly, financial technology regulation and more recently, with the passage of the Data Security
Law, how companies collect, store, process and transfer data. If we are subject to such a probe or if we are required to comply with
stepped-up supervisory requirements, valuable time from our management and money may be expended in complying and/or responding to the
probe and requirements, thus diverting valuable resources and attention away from our operations. This may, in turn, negatively impact
our operations.
Further,
given the Chinese government’s significant oversight and discretion over the conduct of our business operations in Hong Kong and
China, the Chinese government may intervene or influence our operations at any time, which could result in a material change in our operations
and consequently, the value of our capital stock. The Chinese government could also significantly limit or completely hinder our ability
to offer future securities to investors and cause the value of such securities to significantly decline or be worthless.
If
our public accounting firm does not permit the Public Company Accounting Oversight Board (“PCAOB”) to inspect it within three
years pursuant to the Holding Foreign Companies Accountable Act, we may be delisted.
The
Holding Foreign Companies Accountable Act requires that the Public Company Accounting Oversight Board (“PCAOB”) be permitted
to inspect our public accounting firm within three years. If our public accounting firm does not permit, or the PCAOB is unable to conduct,
such an inspection, it may result in the delisting of our ordinary shares from the Nasdaq Capital Market.
It
may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China.
Shareholder
claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality
in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations
or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities
regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the
securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities
regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed
interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator,
such as the Department of Justice, the SEC, the PCAOB and other authorities, to directly conduct investigation or evidence collection
activities within China may further increase difficulties faced by you in protecting your interests.
Our
principal business operation is conducted in the PRC. In the event that the U.S. regulators carry out investigation on us and there is
a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out
such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation
with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism
established with the securities regulatory authority of the PRC.
Failure
to comply with laws and regulations applicable to our business in China could subject us to fines and penalties and could also cause
us to lose customers or otherwise harm our business.
Our
business is subject to regulation by various governmental agencies in China, including agencies responsible for monitoring and enforcing
compliance with various legal obligations, such as value-added telecommunication laws and regulations, privacy and data protection-related
laws and regulations, intellectual property laws, employment and labor laws, workplace safety, environmental laws, consumer protection
laws, governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain
jurisdictions, these regulatory requirements may be more stringent than in China. These laws and regulations impose added costs on our
business. Noncompliance with applicable regulations or requirements could subject us to:
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investigations,
enforcement actions, and sanctions;
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mandatory
changes to our network and products;
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disgorgement
of profits, fines, and damages;
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civil
and criminal penalties or injunctions;
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claims
for damages by our customers or channel partners;
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termination
of contracts;
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loss
of intellectual property rights;
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failure
to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings
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necessary
to conduct our operations; and
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temporary
or permanent debarment from sales to public service organizations.
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If
any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of
operations, and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant
diversion of our management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could
materially harm our business, results of operations, and financial condition.
Additionally,
companies in the technology industry have recently experienced increased regulatory scrutiny. Any reviews by regulatory agencies or legislatures
may result in substantial regulatory fines, changes to our business practices, and other penalties, which could negatively affect our
business and results of operations.
Changes
in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business
practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could
negatively affect our business and results of operations in material ways.
Moreover,
we are exposed to the risk of misconduct, errors and failure to functions by our management, employees and parties that we collaborate
with, who may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability
and penalties in relation to noncompliance with applicable laws and regulations, which could harm our reputation and business.
Risks
Related to Hudson Capital Inc. Ordinary Shares
We
have recently received several written notifications from The Nasdaq Stock Market LLC informing us that we no longer meet certain continued
listing requirements of the Nasdaq Global Market.
On
January 28, 2020, we received written notification from The Nasdaq Stock Market LLC (“Nasdaq”) that we no longer meets Listing
Rule 5450(v)(1)(A) which requires us to maintain a minimum $10,000,000 in stockholders’ equity for continued listing. The Company
reported in its last Form 6-K for the period ended June 30, 2019 that its stockholders’ equity was $9,490,313. Under the Nasdaq
Rules, the Company has 45 calendar days (no later than March 13, 2020) to submit a plan to regain compliance. We had already submitted
our plan and were awaiting the Nasdaq’s determination as to whether to grant us an extension of up to 180 calendar days from the
date of the letter to evidence compliance.
On
March 12, 2020, we received a letter from the Nasdaq indicating that, the closing bid price of the Company’s ordinary shares for
the last 30 consecutive business days did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq
Global Market pursuant to Nasdaq Listing Rule 5450(a)(1). The letter also indicated that the Company will be provided with a compliance
period of 180 calendar days, or until August 31,2020, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). The
letter further provided that if, at any time during the 180-day period, the closing bid price of the Company’s ordinary shares
is at least $1.00 for a minimum of ten consecutive business days, Nasdaq will provide the Company with written confirmation that it has
achieved compliance with the minimum bid price requirement. If the Company does not regain compliance by August 31, 2020, an additional
180 days may be granted to regain compliance if the Company (i) meets the continued listing requirement for market value of publicly
held shares and all other initial listing standards for The Nasdaq Global Market (except for the bid price requirement) and (ii) provides
written notice of its intention to cure the deficiency during the second 180-day compliance period.
On
April 16, 2020 we received a letter from the Nasdaq indicating the Company’s Market Value of Publicly Held Shares (MVPHS) did not
meet the minimum value of $5,000,000 for the last 30 consecutive business days in contravention of the Nasdaq’s Listing Rules (“Rules”).
However, the Rules also provide the Company a compliance period of 180 calendar days in which to regain compliance. We were informed
that if at any time during this compliance period the Company’s MVPHS closes at $5,000,000 or more for a minimum of ten consecutive
business days, the Nasdaq would provide the Company written confirmation of compliance and this matter would be closed. In the event
the Company does not regain compliance with the Rules prior to the expiration of the compliance period, it will receive written notification
that its securities are subject to delisting. Alternatively, the Company may consider applying to transfer the Company’s securities
to The Nasdaq Capital Market (the “Capital Market”). In order to transfer, the Company must submit an on-line Transfer Application,
pay the $5,000 application fee, and meet the Capital Market’s continued listing requirements.
Although
we transitioned to the Nasdaq Capital Market and had regained compliance with the continued listing requirements of the Nasdaq, we recently
received another written notification from the Nasdaq on May 13, 2021 informing us that we no longer meet Nasdaq Listing Rule 5550(b)(1),
which requires us to maintain a minimum $2,500,000 in stockholders’ equity for continued listing. We had reported in our last annual
report Form 20-F for the period ended December 31, 2020 that our stockholders’ equity was $631,145. Under the Nasdaq Rules, we
have 45 calendar days (no later than June 28, 2021) to submit a plan to regain compliance. If our plan is accepted, we should be granted
an extension of up to 180 calendar days from the date of written notification letter to evidence compliance. We submitted our plan and
the Nasdaq has granted us until November 9, 2021 to regain compliance. On September 28, 2021, we announced in a Form 6-K filed with the
Securities and Exchange Commission (the “Commission”) that we had consummated a sale of an aggregate of 630,000 ordinary
shares, par value $0.005 and a pre-funded warrant to purchase 650,000 ordinary Shares to ATW Opportunities Master Fund, L.P. for an aggregate
purchase price of $2,700,000 pursuant to a securities purchase agreement dated September 16, 2021 (the “Securities Purchase”).
Because of the Securities Purchase, we believe that we have regained compliance with the stockholders’ equity requirement. The
Nasdaq shall continue to monitor our ongoing compliance with the stockholders’ equity requirement and, if at the time of its next
periodic report we do not evidence compliance, we may be subject to delisting.
We
intend to take all reasonable actions to ensure compliance, including without limitation, effecting the Merger. However, there can be
no assurance that we will be able to regain compliance with the Nasdaq Rules or will otherwise be in compliance with other Nasdaq listing
criteria. In the event we are unsuccessful, our ordinary shares will be delisted and you will likely experience a devaluation in the
market price of your shares as well as face challenges in trading them forthwith.
Our
shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive
years beginning in 2021. If the bill passed by the U.S. Senate on June 22, 2021 is passed by the U.S. House of Representatives and signed
into law, this would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the Holding
Foreign Companies Accountable from three years to two. The delisting of our shares, or the threat of their being delisted, may materially
and adversely affect the value of your investment.
Our
Ordinary Shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for
three consecutive years beginning in 2021. If the bill passed by the U.S. Senate on June 22, 2021 is passed by the U.S. House of Representatives
and signed into law, this would reduce the number of consecutive non-inspection years required for triggering the prohibitions under
the Holding Foreign Companies Accountable Act from three years to two. The delisting of our shares, or the threat of their being delisted,
may materially and adversely affect the value of your investment.
The Holding Foreign Companies Accountable
Act (“HFCA Act”) was enacted on December 18, 2020. The HFCA Act states if the SEC determines
that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB
for three consecutive years beginning in 2021, the SEC shall prohibit the company’s shares from being traded on a national securities
exchange or in the over the counter trading market in the U.S.
On
March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements
of the HFCA Act. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection”
year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA
Act, including the listing and trading prohibition requirements described above.
On
June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce
the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two years.
On
December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.
The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public
accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (“Commission-Identified
Issuers”). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if
true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments
also require that a Commission-Identified Issuer that is a “foreign issuer,” as defined in Exchange Act Rule 3b-4, provide
certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the release
provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities
of certain Commission-Identified Issuers, as required by the HFCAA.
The
SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will
be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified.
If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021,
the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal
year ended December 31, 2022.
On
December 16, 2021, PCAOB announced the PCAOB HFCA Act determinations (the “PCAOB determinations”) relating to the PCAOB’s
inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong
Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in the PRC or
Hong Kong.
Our
auditor, Centurion ZD CPA & Co., the independent registered public accounting firm that issues the audit report included in this
prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject
to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with applicable professional
standards. Centurion ZD CPA & Co. is headquartered in Hong Kong and accordingly, falls within the PCAOB determinations.
Given
the recent developments, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria
to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel
and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
The
SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on
August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors
from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five
recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory
mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations
were more stringent than the HFCA Act. For example, if a company’s auditor was not subject to PCAOB inspection, the report recommended
that the transition period before a company would be delisted would end on January 1, 2022.
The
SEC had announced that the SEC staff was preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act
and to address the recommendations in the PWG report. The implications of possible additional regulation in addition to the requirements
of the HFCA Act and what was recently adopted on December 2, 2021 are uncertain. Such uncertainty could cause the market price of our
ordinary shares to be materially and adversely affected, and our securities could be delisted or prohibited from being traded on the
national securities exchange earlier than would be required by the HFCA Act. If our ordinary shares are unable to be listed on another
securities exchange by then, such a delisting would substantially impair your ability to sell or purchase our ordinary shares when you
wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on
The
recent joint statement by the SEC, proposed rule changes submitted by NASDAQ, and an act passed by the U.S. Senate and the U.S. House
of Representatives, all call for additional and more stringent criteria US-listed companies with significant operations in China. These
developments could add uncertainties to our future offerings, business operations share price and reputation.
U.S.
public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative
publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative
publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial
accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.
On
December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their
oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman
Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the
risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating
past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in
China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other
U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On
May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned
or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not
subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s
securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding
Foreign Companies Accountable Act.
On
May 21, 2021, NASDAQ filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in a “Restrictive Market”, (ii) prohibit Restrictive Market companies from directly listing on NASDAQ Capital Market, and
only permit them to list on NASDAQ Global Select or NASDAQ Global Market in connection with a direct listing and (iii) apply additional
and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
On
December 2, 221, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The
rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (“PCAOB”) is unable
to inspect or investigate (“Commission-Identified Issuers”). The final amendments require Commission-Identified Issuers to
submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting
firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign issuer,”
as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated
foreign operating entities. Further, the release provides notice regarding the procedures the SEC has established to identify issuers
and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCAA.
The
SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will
be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified.
If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021,
the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal
year ended December 31, 2022.
These
recent developments could add uncertainties to our offering and we cannot assure you whether NASDAQ or regulatory authorities would apply
additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality
control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to
the audit of our financial statements.
It
remains unclear what further actions the SEC, the PCAOB or NASDAQ will take to address these issues and what impact those actions will
have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national
securities exchange or over-the-counter stock market). In addition, the March 2021 interim final amendments and any additional actions,
proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty
for investors, the market price of our ordinary shares could be adversely affected, and we could be delisted if we and our auditor are
unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense
and management time.
As
a result of these scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply
decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits
and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect
this sector-wide scrutiny, criticism and negative publicity will have on us, our future offerings, business and our share price. If we
become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant
resources to investigate such allegations and/or defend our Company. This situation will be costly and time consuming and distract our
management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely
affected and you could sustain a significant decline in the value of our shares.
NASDAQ
may apply additional and more stringent criteria for our continued listing.
NASDAQ
Listing Rule 5101 provides NASDAQ with broad discretionary authority over the initial and continued listing of securities in NASDAQ and
NASDAQ may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing
of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs
that makes initial or continued listing of the securities on NASDAQ inadvisable or unwarranted in the opinion of NASDAQ, even though
the securities meet all enumerated criteria for initial or continued listing on NASDAQ. In addition, NASDAQ has used its discretion to
deny initial or continued listing or to apply additional and more stringent criteria in the instances, including but not limited to where
the company engaged an auditor that has not been subject to an inspection by PCAOB, an auditor that PCAOB cannot inspect, or an auditor
that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company’s audit; (ii)
where a company planned a small public offering, which would result in insiders holding a large portion of the company’s listed
securities. NASDAQ was concerned that an offering size was insufficient to establish the company’s initial valuation, and there
would not be sufficient liquidity to support a public market for the company; and (iii) where the company did not demonstrate sufficient
nexus to the U.S. capital market, including having no U.S. shareholders, operations, or members of the board of directors or management.
For the any aforementioned concerns, we may be subject to the additional and more stringent criteria of NASDAQ for our continued listing.
Cautionary
Note Regarding Forward-Looking Statements
This
prospectus supplement and the documents incorporated herein by reference contain “forward-looking statements” by us within
the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, including, without limitation, statements as to
expectations, beliefs and strategies regarding the future. These statements involve known and unknown risks, uncertainties and other
important factors that may cause our actual results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements rely on a number
of assumptions concerning future events and include, but are not limited to, statements relating to:
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the
potential effects of public health outbreaks, epidemics or pandemics, such as the coronavirus (COVID-19) pandemic;
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our
ability to navigate an evolving regulatory environment;
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●
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our
ability to maintain and deepen our relationship with certain banks as well as develop relationships with a broader base of commercial
banks and/or financial institutions;
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●
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our
ability to expand the base of borrowers;
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●
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our
ability to broaden our operations geographically;
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our
ability to enhance our risk management capabilities;
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●
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our
ability to improve our operational efficiency;
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●
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our
ability to attract, retain and motivate talented employees;
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our
ability to defend ourselves against regulatory, litigation, privacy or other claims;
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our
ability to maintain or increase the volume of loan transactions facilitated through us;
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our
ability to retain existing clients and attract new clients;
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the
retention of our senior management;
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market
acceptance of our current and future financial services; and
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our
ability to protect our intellectual property and confidential information;
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Any
forward-looking statements should be considered in light of these factors. Words such as “anticipates,” “believes,”
“forecasts,” “potential,” “goal,” “contemplates,” “expects,” “intends,”
“plans,” “projects,” “hopes,” “seeks,” “estimates,” “strategy,”
“continues,” “ongoing,” “opportunity,” “could,” “would,” “should,”
“likely,” “will,” “may,” “can,” “designed to,” “future,” “foreseeable
future” and similar expressions and variations, and negatives of these words, identify forward-looking statements. These forward-looking
statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information currently
available to management, all of which are subject to change. These forward-looking statements are not guarantees of future performance
and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the
forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability to control
or predict. You are cautioned not to put undue reliance on any forward-looking statements. Except as otherwise required by law, we do
not assume any obligation to update any forward-looking statements.
In
evaluating an investment in our ordinary shares, you should carefully consider the discussion of risks and uncertainties described under
the heading “Risk Factors” contained in this prospectus supplement, and under similar headings in other documents, including
in our Annual Report on Form 20-F for the year ended December 31, 2020, and in other filings with the SEC that are incorporated by reference
in this prospectus supplement. You should carefully read this prospectus supplement together with the information incorporated by reference
in this prospectus supplement as described under the heading “Information Incorporated by Reference; Where You Can Find More Information”,
completely and with the understanding that our actual future results may be materially different from what we expect.
All
subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in
their entirety by our cautionary statements. The forward-looking statements included or incorporated by reference herein are made only
as of the date of this prospectus supplement (or as of the date of any such document incorporated by reference). We do not intend, and
undertake no obligation, to update these forward-looking statements, except as required by law.
USE
OF PROCEEDS
We
estimate the gross proceeds to us from this offering will be approximately $1,356,178. All of the gross proceeds will be used to fund
a loan to Freight App, Inc. (the “Fr8App Loan”) evidenced by a promissory note issued by Fr8App to Hudson Capital dated February
10, 2022 (the “Promissory Note”).
CAPITALIZATION
The
following table sets forth our consolidated cash and cash equivalents and capitalization as of December 31, 2020. Such information is
set forth on the following basis:
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on
an actual basis; and
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on
an as adjusted basis, giving effect to the sale of warrants to purchase 667,750 ordinary shares with an exercise price of $0.001
per share at an offering price of $1,356,178.
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You
should read this table together with the section of this prospectus supplement entitled “Use of Proceeds” and with the financial
statements and related notes and the other information that we incorporate by reference into this prospectus supplement and the accompanying
prospectus.
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As
of December 31, 2020
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Actual
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As
adjusted
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Cash
and cash equivalent
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$
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3,274,287
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$
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4,630,465
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Total
shareholders’ equity, ordinary shares, par value $0.005 per share; Authorized unlimited shares; Issued and outstanding: 6,406,146
shares as of December 31, 2020
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631,145
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|
|
|
1,987,323
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|
|
|
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|
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|
|
|
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Total
capitalization
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$
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631,145
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|
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$
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1,987,323
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DILUTION
If
you invest in our ordinary shares, your interest will be diluted immediately to the extent of the difference between the offering price
per share and the adjusted net tangible book value per share of our ordinary shares after this offering.
Our
net tangible book value as of December 31, 2020 was approximately $0.10 per share. “Net tangible book value” is total assets
minus the sum of liabilities and intangible assets. “Net tangible book value per share” is net tangible book value divided
by the total number of shares outstanding.
After
giving effect to the sale of the and warrants in this offering at the offering price set forth on the cover page of this prospectus supplement
and after deducting estimated expenses payable by us, our as adjusted net tangible book value as of December 31, 2020 would have been
approximately $1,356,000 or $1.37 per ordinary share. This represents an immediate increase in net tangible book value of $0.53 per share
to our existing stockholders and an immediate dilution in net tangible book value of $1.37 per share to investors participating in this
offering. The following table illustrates this dilution per share to investors participating in this offering:
|
Offering
price per ordinary share
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$
|
2.00
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|
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Net
tangible book value per share as of December 31, 2020
|
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$
|
0.10
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|
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|
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|
|
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Increase
per share attributable to this offering
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$
|
2.00
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|
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As
adjusted net tangible book value per share as of December 31, 2020 after this offering
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$
|
1.37
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|
|
|
|
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Dilution
per share to new investors participating in this offering
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$
|
0.63
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The
information above is as of December 31, 2020.
DESCRIPTION
OF THE SECURITIES WE ARE OFFERING
In
this offering, we are offering warrants to purchase 677,750 ordinary shares at an exercise price of $0.001 per share at an offering price
of $1,356,178.
Ordinary
Shares
The
material terms and provisions of our ordinary shares are described under the caption “Description of Shares” beginning on
page 7 of the accompanying prospectus save as amended by the following updated paragraphs:
Variation
of the Rights of Shareholders. As permitted by the BVI Act and our memorandum and articles of association, the rights conferred
upon the holders of the shares of any class of the Company may (subject to the memorandum and articles of association) only be varied,
whether or not the Company is in liquidation, with the consent in writing of the holders of a majority of the issued shares of that class
or by a resolution approved at a duly convened and constituted meeting of the shares of that class by the affirmative vote of a majority
of the shares of that class which were present at the meeting and were voted, except where a different majority is required under our
memorandum and articles of association or the BVI Act.
Dividends.
Subject to the BVI Act and our memorandum and articles of association, the directors of the Company may, by resolution of directors,
authorize a distribution by way of dividend at a time and amount as they think fit if they are satisfied, based on reasonable grounds,
that, immediately after distribution of the dividend, the value of our assets will exceed our liabilities and we will be able to pay
our debts as they fall due. There is no further BVI Law restriction on the amount of funds which may be distributed by us by dividend.
Shareholder approval is not (except as otherwise provided in our memorandum articles of association) required to pay dividends under
BVI Law. In accordance with, and subject to, our memorandum and articles of association, no dividend shall bear interest as against the
Company (except as otherwise provided in our memorandum articles of association).
Transfer
of Shares. Subject to any applicable restrictions or limitations arising pursuant to (i) our memorandum and articles of association;
or (ii) the BVI Act, or (iii) other applicable BVI laws, any of our shareholders may transfer all or any of his or her shares by an instrument
of transfer in the usual or common form or in any other form which our directors may approve (such instrument of transfer being signed
by the transferor and containing the name and address of the transferee). The BVI Act also provides that the shares of the Company, whilst
listed on a recognized exchange such as the Nasdaq Global Market, may be transferred without the need for a written instrument of transfer
if the transfer is carried out within the laws, rules, procedures and other requirements applicable to shares registered on the recognized
exchange and subject to the Company’s memorandum and articles of association and the Listed Companies and Funds Regulations of
the British Virgin Islands. There are currently no provisions of the Listed Companies and Funds Regulations in force that would affect
this. Our memorandum and articles of association also (save as otherwise provided therein) provide that shares may be dealt with by means
of a system utilized for the purposes of holding and transferring of shares in uncertificated form.
Mergers,
Consolidations and Similar Arrangements. Under the BVI Act two or more BVI companies or a BVI company and non-BVI company, each
a “constituent company”, may merge or consolidate. The BVI Act provides for slightly different procedures depending on the
nature of the parties to the merger. A merger involves the merging of two or more companies into one of the constituent companies (to
the merger) with one constituent company continuing in existence to become the surviving company post-merger. A consolidation involves
two or more companies consolidating into a new company. A merger is effective on the date that the articles of merger (as described below)
are registered by the Registrar of Corporate Affairs in the BVI, or on such later date, not exceeding 30 days from the date of registration
as is stated in the articles of merger.
As
soon as a merger becomes effective (inter alia), (a) the surviving company (so far as is consistent with its memorandum and articles,
as amended by the articles of merger) has all rights, privileges, immunities, powers, objects and purposes of each of the constituent
companies; (b) the memorandum and articles of the surviving company are automatically amended to the extent, if any, that changes to
its memorandum and articles are contained in the articles of merger, (c) assets of every description, including choses in action and
the business of each of the constituent companies, immediately vest in the surviving company, (d) the surviving company is liable for
all claims, debts, liabilities and obligations of each of the constituent companies, (e) no conviction, judgment, ruling, order, claim,
debt, liability or obligation due or to become due, and no cause existing, against a constituent company or against any member, director,
officer or agent thereof, is released or impaired by the merger, (f) no proceedings, whether civil or criminal, pending at the time of
a merger by or against a constituent company, or against any member, director or officer, or agent thereof, are abated or discontinued
by the merger, but (i) the proceedings may be enforced, prosecuted, settled or compromised by or against the surviving company or against
the member, director, officer or agent thereof, as the case may be, or (ii) the surviving company may be substituted in the proceedings
for a constituent company.
The
Registrar of Corporate Affairs in the BVI shall strike off the Register of Companies a constituent company that is not the surviving
company in the merger.
The
BVI Act provides that any member of the Company is entitled to payment of the fair value of his shares upon dissenting from a merger,
unless the Company is the surviving company of the merger and the member continues to hold the same or similar shares. The following
is a summary of the position in respect of dissenters rights in the event of a merger under the BVI Act.
A
dissenter is in most circumstances required to give to the Company written objection to the merger, which must include a statement that
the dissenter proposes to demand payment for his shares if the merger takes place. This written objection must be given before the meeting
of members at which the merger is submitted to a vote, or at the meeting but before the vote. However, no objection is required from
a member to whom the Company did not give notice of the meeting of members or where the proposed merger is authorized by written consent
of the members without a meeting.
Within
20 days immediately following the written consent, or the meeting at which the merger was approved, the Company shall give written notice
of the consent or resolution to each member who gave written objection or from whom written objection was not required, except those
members who voted for, or consented in writing to, the proposed merger.
A
member to whom the Company was required to give notice who elects to dissent shall, within 20 days immediately following the date on
which the copy of the plan of merger or an outline of the merger is given to him, give to the Company a written notice of his decision
to elect to dissent, stating, (a) his name and address, (b) the number and classes of shares in respect of which he dissents (which must
be all shares that he holds in the Company), (c) a demand for payment of the fair value of his shares.
Upon
the giving of a notice of election to dissent, the dissenter ceases to have any of the rights of a member except the right to be paid
the fair value of his shares, and the right to institute proceedings to obtain relief on the ground that the action is illegal.
The
Company shall make a written offer to each dissenter to purchase his shares at a specified price that the Company determines to be their
fair value. Such offer must be given within 7 days immediately following the date of the expiration of the period within which members
may give their notices of election to dissent, or within 7 days immediately following the date on which the merger is put into effect,
whichever is later.
If
the Company and the dissenter fail, within 30 days immediately following the date on which the offer is made, to agree on the price to
be paid for the shares owned by the dissenter, then within 20 days, (a) the Company and the dissenter shall each designate an appraiser,
(b) the two designated appraisers together shall designate an appraiser, (c) the three appraisers shall fix the fair value of the shares
owned by the dissenter as of the close of business on the day prior to the date of the meeting or the date on which the resolution was
passed, excluding any appreciation or depreciation directly or indirectly induced by the action or its proposal, and that value is binding
on the Company and the dissenter for all purposes, (d) the Company shall pay to the dissenter the amount in money upon the surrender
by him of the certificates representing his shares, and such shares shall be cancelled.
Directors.
In accordance with, and subject to, our memorandum and articles of association (including, for the avoidance of any doubt, any
rights or restrictions attaching to any ordinary shares), (a) the directors are elected by resolution of shareholders or by resolution
of directors for such term as the shareholders or directors determine; (b) each director holds office for the term, if any, fixed by
the resolution of shareholders or resolution of directors appointing him, or until his earlier death, resignation or removal. If no term
is fixed on the appointment of a director, the director serves indefinitely until his earlier death, resignation or removal: (c) a director
may be removed from office (i) with or without cause, by a resolution of shareholders passed at a meeting of shareholders called for
the purposes of removing the director or for purposes including the removal of the director or by a written resolution passed by a least
75% of the shareholders of the Company entitled to vote or (ii) with cause, by a resolution of directors passed at a meeting of directors
called for the purpose of removing the director or for purposes including the removal of the director; (d) a director may resign his
office by giving written notice of his resignation to the Company and the resignation has effect from the date the notice is received
by the Company or from such later date as may be specified in the notice and a director shall resign forthwith as a director if he is,
or becomes, disqualified from acting as a director under the BVI Act; (e) the directors may at any time appoint any person to be a director
either to fill a vacancy or as an addition to the existing directors and where the directors appoint a person as director to fill a vacancy,
the term shall not exceed the term that remained when the person who has ceased to be a director ceased to hold office; (f) a vacancy
in relation to directors occurs if a director dies or otherwise ceases to hold office prior to the expiration of his term of office;
and (g) a director is not required to hold shares in the Company as a qualification to office.
In
accordance with, and subject to, our memorandum and articles of association, (a) any one director of the Company may call a meeting of
the directors by sending a written notice to each other director; (b) the directors of the Company or any committee thereof may meet
at such times and in such manner as the directors may determine to be necessary or desirable; (c) a director shall be given not less
than 3 days’ notice of meetings of directors, but a meeting of directors held without 3 days’ notice having been given to
all directors shall be valid if all the directors entitled to vote at the meeting who do not attend waive notice of the meeting, and
for this purpose the presence of a director at a meeting shall constitute waiver by that director and the inadvertent failure to give
notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting; (d) a meeting
of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person or by alternate not
less than one-half of the total number of directors, unless there are only 2 directors in which case the quorum is two; (e) a director
may by a written instrument appoint an alternate who need not be a director and the alternate shall be entitled to attend meetings in
the absence of the director who appointed him and to vote or consent in place of the director until the appointment lapses or is terminated;
(f) a resolution of directors is passed if either (i) the resolution is approved at a duly convened and constituted meeting of directors
of the Company or of a committee of directors of the Company by the affirmative vote of a majority of the directors present at the meeting
who voted except that where a director is given more than one vote, he shall be counted by the number of votes he casts for the purpose
of establishing a majority; or (ii) the resolution is consented to in writing by all of the directors or all of the members of a committee
of directors of the Company, as the case may be, unless (in either case) the BVI Act or our memorandum and articles of association require
a different majority.
Shareholders’
Suits. Under the provisions of the BVI Act, the memorandum and articles of association of a company are binding as between the
company and its members and between the members.
If
the majority members have infringed a minority member’s rights, the minority may seek to enforce its rights either by derivative
action or by personal action. A derivative action concerns the infringement of the company’s rights where the wrongdoers are in
control of the company and are preventing it from taking action, whereas a personal action concerns the infringement of a right that
is personal to the particular member concerned.
The
BVI Act provides for a series of remedies available to members. Where a company incorporated under the BVI Act conducts some activity
which breaches the BVI Act or the company’s memorandum and articles of association, the BVI High Court can issue a restraining
or compliance order. Members can now also bring derivative, personal and Representative Actions under certain circumstances.
Generally
any other claims against a company by its members must be based on the general laws of contract or tort applicable in the BVI or their
individual rights as members as established by the company’s memorandum and articles of association.
In
certain circumstances, a member has the right to seek various remedies against the company in the event the directors are in breach of
their duties under the BVI Act. Pursuant to Section 184B of the BVI Act, if a company or director of a company engages in, proposes to
engage in or has engaged in, conduct that contravenes the provisions of the BVI Act or the memorandum or articles of association of the
company, the courts of the British Virgin Islands may, on application of a member or director of the company, make an order directing
the company or director to comply with, or restraining the company or director from engaging in conduct that contravenes the BVI Act
or the memorandum or articles. Furthermore, pursuant to Section 184I(1) of the BVI Act, a member of a company who considers that the
affairs of the company have been, are being or likely to be, conducted in a manner that is, or any acts of the company have been, or
are likely to be oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the courts of the
British Virgin Islands for an order which, inter alia, can require the company or any other person to pay compensation to the members.
Inspection
of Books and Records. A member of the Company is entitled, on giving written notice to the Company, to inspect (a) the memorandum
and articles of association of the Company; (b) the register of members; (c) the register of directors; and (d) the minutes of meetings
and resolutions of members and of those classes of members of which he is a member; and to make copies of or take extracts from the documents
and records. Subject to the post offering amended and restated memorandum and articles of association, the directors may, if they are
satisfied that it would be contrary to the Company’s interests to allow a member to inspect any document, or part of a document,
specified in (b), (c) and (d) above, refuse to permit the member to inspect the document or limit the inspection of the document, including
limiting the making of copies or the taking of extracts from the records.
Where
a company fails or refuses to permit a member to inspect a document or permits a member to inspect a document subject to limitations,
that member may apply to the BVI High Court for an order that he should be permitted to inspect the document or to inspect the document
without limitation.
A
company is required to keep at the office of its registered agent: its memorandum and articles of association of the company; the register
of members or a copy of the register of members; the register of directors or a copy of the register of directors; and copies of all
notices and other documents filed by the company in the previous ten years.
Our
registered agent is Maples Corporate Services (BVI) Limited , Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands.
A company is required to keep a copy of its register of members and register of directors at the offices of its registered agent in the
BVI, and the Company is required to notify any changes to the originals of such registers (assuming the originals are held elsewhere)
to the registered agent, in writing, within 15 days of any change; and to provide the registered agent with a written record of the physical
address of the place or places at which the original register of members or the original register of directors is kept.
Where
the place at which the original register of members or the original register of directors of the Company is changed, the Company must
provide the registered agent with the physical address of the new location of the records within 14 days of the change of location.
A
company is also required to keep at the office of its registered agent or at such other place or places, within or outside the BVI, as
the directors may determine the minutes of meetings and resolutions of shareholders and of classes of shareholders; and the minutes of
meetings and resolutions of directors and committees of directors. If such records are kept at a place other than at the office of the
Company’s registered agent, the Company is required to provide the registered agent with a written record of the physical address
of the place or places at which the records are kept and to notify the registered agent, within 14 days, of the physical address of any
new location where such records may be kept.
Warrants
The
material terms and provisions of the warrants being offered pursuant to this prospectus supplement and being issued to the investors
are described under the caption “Description of Warrants” beginning on page 17 of the accompanying prospectus save as amended
by the following updated paragraph. The form of warrant will be provided in this offering and will be filed as an exhibit to a Report
of Foreign Issuer on Form 6-K with the SEC in connection with this offering.
The
warrants to be issued to the investors will have an exercise price of $0.001 per ordinary share. The warrants are pre-funded and exercisable
on or after the date of issuance. The exercise price and number of ordinary shares issuable upon exercise is subject to appropriate adjustment
upon the occurrence of certain events, including, but not limited to, stock dividends or splits, business combination, sale of assets,
similar recapitalization transactions, or other similar transactions.
There
is no established public trading market for the warrants, and we do not expect a market to develop. We do not intend to apply to list
the warrants on any securities exchange. Without an active market, the liquidity of the warrants will be limited.
A
holder of the warrants may exercise their warrants to purchase ordinary shares by delivering an exercise notice, appropriately completed
and duly signed. Following each exercise of the warrants, the holder is required to pay the exercise price for the number of shares for
which the warrant is being exercised in cash. A holder of the warrants also will have the right to exercise its warrants on a cashless
basis. Warrants may be exercised in whole or in part. The absence of an effective registration statement or applicable exemption from
registration does not alleviate our obligation to deliver ordinary shares issuable upon exercise of a warrant.
Upon
the holder’s exercise of a warrant, we will issue the ordinary shares issuable upon exercise of the warrant within two trading
days of our receipt of notice of exercise, subject to receipt of payment of the aggregate exercise price therefor.
The
ordinary shares issuable on exercise of the warrants are duly and validly authorized and will be, when issued, delivered and paid for
in accordance with the warrants, issued and fully paid and non-assessable. We will authorize and reserve sufficient number of ordinary
shares for upon exercise of all outstanding warrants.
If,
at any time a warrant is outstanding, we consummate any fundamental transaction, as described in the warrants and generally including
any consolidation or merger into another corporation, or the sale of all or substantially all of our assets, or other transaction in
which our ordinary shares are converted into or exchanged for other securities or other consideration, the holder of any warrants will
thereafter receive, the securities or other consideration to which a holder of the number of ordinary shares then deliverable upon the
exercise or exchange of such warrants would have been entitled upon such consolidation or merger or other transaction.
The
exercisability of the warrants may be limited in certain circumstances if, after giving effect to such exercise, the holder or any of
its affiliates would beneficially own (as determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder) more than 9.99% (as applicable) of our ordinary shares.
THE
HOLDER OF A WARRANT WILL NOT POSSESS ANY RIGHTS AS A STOCKHOLDER UNDER THAT WARRANT UNTIL THE HOLDER EXERCISES THE WARRANT. THE WARRANTS
MAY BE TRANSFERRED INDEPENDENT OF THE COMMON SHARES WITH WHICH THEY WERE ISSUED, SUBJECT TO APPLICABLE LAWS.
No
Market for Warrants
There
is no established public trading market for the warrants, and we do not expect a market to develop. We do not intend to apply to list
the warrants on any securities exchange. Without an active market, the liquidity of the warrants will be limited. In addition, in the
event our ordinary share price does not exceed the per share exercise price of the warrants during the period when the warrants are exercisable,
the warrants will not have any value.
PLAN
OF DISTRIBUTION
On
December 13, 2021, we entered into a securities purchase agreement (the “Purchase Agreement”) with ATW Opportunities Master
Fund, L.P. (“ATW”) pursuant to which we agreed to sell for an aggregate purchase price of $862,000, a pre-funded warrant
(“Warrant”) to purchase 431,000 ordinary shares (the “Securities Purchase”). The closing of the Securities Purchase
would be subject to customary closing conditions. On December 16, 2021, we and ATW entered into an Amendment No. 1 to the Purchase Agreement
(“Amendment No. 1”) to (i) amend Section 2.1 of the Purchase Agreement to increase the subscription amount to $2,355,000
and amend the Warrant to purchase 1,177,500 ordinary shares instead and (ii) amend Section 5.1 of the Purchase Agreement to provide that
the closing of the Securities Purchase shall occur before the Merger. With the exception of these amendments, all other provisions of
the Purchase Agreement remain the same.
On
December 29, 2021, we, ATW and Steven Oliveira (“Oliveira”) entered into an Assignment of Securities Purchase Agreement to
assign the right to purchase 499,751 pre-funded warrants (the “Oliveira Warrant”) for a per warrant purchase price of $2.00
(for an aggregate purchase price of $999,502) and the related obligations under the Purchase Agreement from ATW to Steven Oliveira (the
“Oliveira Securities Purchase”). The assignment and the aforesaid Oliveira Securities Purchase closed on December 29, 2021.
Oliveira also notified us of his exercise to convert the Oliveira Warrant into ordinary shares on the same day.
On
February 10, 2022 we entered into another assignment of securities purchase agreement with ATW and several investors to assign these
investors the right to purchase a Warrant for 677,750 ordinary shares on the same terms and conditions as the Purchase Agreement and
Amendment No. 1.
The
Warrant and the ordinary shares underlying the Warrant will be issued pursuant to the prospectus included in the Company’s Registration
Statement on Form F-3 (Registration No. 333-233408), which was filed with the Securities and Exchange Commission (the “Commission”)
on August 22, 2019 and was declared effective on September 19, 2019, and a prospectus supplement will be filed with the Commission on
the closing of the securities purchase by these investors.
No
placement agent was engaged in this offering.
We
established the price following negotiations with ATW investors and with reference to the prevailing market price of our ordinary shares,
recent trends in such price and other factors. We anticipate that the sale of the securities will be completed on the date indicated
on the cover page of this prospectus supplement, subject to customary closing conditions. On the closing date, the following will occur:
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We
will receive funds in the amount of the aggregate purchase price of approximately $1,356,178 and the Fr8App Loan which will be wired
directly from ATW to Freight App, Inc.; and
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We
will deliver the warrants to the investors.
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In
connection with this offering, this prospectus supplement and the accompanying prospectus will be delivered electronically.
We
currently anticipate that the sale of the warrants offered by this prospectus supplement, the accompanying base prospectus and the Purchase
Agreement will be completed on or about February 10, 2022 subject to customary closing conditions. At the closing, the warrants will
be issued and delivered by us to the investors.
Nasdaq
Listing
Our
ordinary shares are listed on the Nasdaq Capital Market under the symbol “HUSN”.
LEGAL
MATTERS
Sichenzia
Ross Ference LLP is acting as counsel to our company regarding U.S. securities law matters. The current address of Sichenzia Ross Ference
LLP is 1185 Avenue of the Americas, 31st Floor, New York, NY 10036. Maples & Calder is acting as our British Virgin Islands counsel.
The current address of Maples & Calder is 5th Floor, Ritter House, PO Box 173, Road Town, Tortola, British Virgin Islands.
EXPERTS
Our
consolidated financial statements as of and for the years ended December 31, 2020 and 2019 appearing in our Annual Report for the year
ended December 31, 2020 have been audited by Centurion ZD CPA & Co., as set forth in its report thereon, included therein, and incorporated
herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on
the authority of such firm as experts in accounting and auditing. The current address of Centurion ZD CPA & Co. is Unit 1304, 13/F,
Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong.
Our
consolidated financial statements as of December 31, 2018 and for the year then ended incorporated by reference in this prospectus supplement
and have been so included in reliance on the report of Wei, Wei & Co., LLP, as independent registered public accounting firm, given
on the authority of said firm as expert in accounting and auditing. The current address of Wei, Wei & Co., LLP is 133-10 39th Ave,
Flushing, NY 11354.
WHERE
YOU CAN FIND MORE INFORMATION
We
are a British Virgin Islands corporation and are a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act
of 1934, as amended (the “Exchange Act”). As a foreign private issuer, we are exempt from the rules under the Exchange Act
related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the
reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
We
are subject to the reporting requirements of the Exchange Act and file annual, and current reports and other information with the SEC.
These reports and other information are available at the SEC’s website at http://www.sec.gov.
This
prospectus supplement and the accompanying prospectus are only part of a registration statement on Form F-3 that we have filed with the
SEC under the Securities Act and therefore omit certain information contained in the registration statement. We have also filed exhibits
and schedules with the registration statement that are excluded from this prospectus supplement and the accompanying prospectus, and
you should refer to the applicable exhibit or schedule for a complete description of any statement referring to any contract or other
document. You may inspect a copy of the registration statement, including the exhibits and schedules, without charge, at the public reference
room or obtain a copy from the SEC upon payment of the fees prescribed by the SEC.
We
also maintain a website at https://www.hudsoncapitalusa.com, through which you can access our SEC filings. The information set forth
on our website is not part of this prospectus supplement or the accompanying prospectus.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
SEC allows us to “incorporate by reference” the information we file with the SEC. This permits us to disclose important information
to you by referring to these filed documents. Any information referred to in this way is considered part of this prospectus supplement.
The information incorporated by reference is an important part of this prospectus supplement and the accompanying prospectus, and information
that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the following documents
that have been filed with the SEC:
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our
Annual Report on Form
20-F for the year ended December 31, 2020 filed with the SEC on May 5, 2021;
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All
other reports filed by us pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the
Annual Report on Form 20-F referred to in the paragraph above; and;
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the
description of our ordinary shares contained in Item 1 of our registration statement on Form
8-A, filed with the SEC on July 28, 2017 under the Exchange Act, and any amendment or report filed for the purpose of updating
that description.
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All
documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and
prior to the termination of the offering of the securities offered by this prospectus are incorporated by reference into this prospectus
and form part of this prospectus from the date of filing or furnishing of these documents. Any documents that we furnish to the SEC on
Form 6-K subsequent to the date of this prospectus will be incorporated by reference into this prospectus only to the extent specifically
set forth in the Form 6-K.
Any
statement contained in a document that is incorporated by reference into this prospectus will be deemed to be modified or superseded
for the purposes of this prospectus to the extent that a statement contained in this prospectus, or in any other subsequently filed document
which also is or is deemed to be incorporated by reference into this prospectus, modifies or supersedes that statement. The modifying
or superseding statement does not need to state that it has modified or superseded a prior statement or include any other information
set forth in the document that it modifies or supersedes.
Upon
request, we will provide, without charge, to each person who receives this prospectus, a copy of any or all of the documents incorporated
by reference (other than exhibits to the documents that are not specifically incorporated by reference in the documents). Please direct
written or oral requests for copies to our Chief Executive Officer at 19 West 44th Street, Suite 1001, New York, NY 10036.
CHINA
INTERNET NATIONWIDE FINANCIAL SERVICES, INC.
$50,000,000
Ordinary
Shares
Share
Purchase Contracts
Share
Purchase Units
Warrants
Debt
Securities
Rights
Units
We
may offer, from time to time, in one or more offerings, ordinary shares, share purchase contracts, share purchase units, warrants, debt
securities, rights or units, which we collectively refer to as the “securities”. The aggregate initial offering price of
the securities that we may offer and sell under this prospectus will not exceed $50,000,000. We may offer and sell any combination of
the securities described in this prospectus in different series, at times, in amounts, at prices and on terms to be determined at, or
prior to, the time of each offering. This prospectus describes the general terms of these securities and the general manner in which
these securities will be offered. We will provide the specific terms of these securities in supplements to this prospectus. The prospectus
supplements will also describe the specific manner in which these securities will be offered and may also supplement, update or amend
information contained in this prospectus. This prospectus may not be used to consummate a sale of securities unless accompanied by the
applicable prospectus supplement. You should read this prospectus and any applicable prospectus supplement before you invest.
The
securities covered by this prospectus may be offered through one or more underwriters, dealers and agents or directly to purchasers.
The names of any underwriters, dealers or agents, if any, will be included in a supplement to this prospectus. For general information
about the distribution of securities offered, please see “Plan of Distribution”.
Our
ordinary shares issued pursuant to a registration statement on Form F-1 (No. 333-217326) are traded on the Nasdaq Global Market under
the symbol “CIFS”. On August 21, 2019, the closing price of our ordinary shares as reported by the Nasdaq Global Market was
$1.69 per ordinary share. As of August 21, 2019, the aggregate market value of our outstanding ordinary shares held by non-affiliates
using the closing price on the Nasdaq Global Market of $1.69 was approximately $12,800,377 based on 22,114,188 outstanding ordinary shares,
of which approximately 7,574,188 ordinary shares were held by non-affiliates. We have not offered any securities pursuant to General
Instruction I.B.5 of Form F-3 during the prior 12 calendar month period that ends on, and includes, the date of this prospectus.
This
prospectus may not be used to offer or sell our securities unless accompanied by a prospectus supplement. The information contained or
incorporated in this prospectus or in any prospectus supplement is accurate only as of the date of this prospectus, or such prospectus
supplement, as applicable, regardless of the time of delivery of this prospectus or any sale of our securities.
Investing
in our securities being offered pursuant to this prospectus involves a high degree of risk. You should carefully read and consider the
‘‘Risk Factors’’ section of this prospectus and in the applicable prospectus supplement before you make your
investment decision.
Neither
the Securities and Exchange Commission, the Government of the British Virgin Islands (and any of its regulatory authorities), nor any
state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The
date of this prospectus is September 19, 2019
You
should rely only on the information contained or incorporated by reference in this prospectus or any prospectus supplement. We have not
authorized any person to provide you with different or additional information. If anyone provides you with different or inconsistent
information, you should not rely on it. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy
securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus
or any prospectus supplement, as well as information we have previously filed with the SEC and incorporated by reference, is accurate
as of the date on the front of those documents only. Our business, financial condition, results of operations and prospects may have
changed since those dates.
ABOUT
THIS PROSPECTUS
This
prospectus is a part of a registration statement that we have filed with the SEC utilizing a “shelf” registration process.
Under this shelf registration process, we may sell any combination of the securities described in this prospectus in one or more offerings
up to an aggregate offering price of $50,000,000.
Each
time we sell securities, we will provide a supplement to this prospectus that contains specific information about the securities being
offered and the specific terms of that offering. The supplement may also add, update or change information contained in this prospectus.
If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the prospectus
supplement.
We
may offer and sell securities to, or through, underwriting syndicates or dealers, through agents or directly to purchasers. The prospectus
supplement for each offering of securities will describe in detail the plan of distribution for that offering.
In
connection with any offering of securities (unless otherwise specified in a prospectus supplement), the underwriters or agents may over-allot
or effect transactions which stabilize or maintain the market price of the securities offered at a higher level than that which might
exist in the open market. Such transactions, if commenced, may be interrupted or discontinued at any time. See “Plan of Distribution.”
Please
carefully read both this prospectus and any prospectus supplement together with the documents incorporated herein by reference under
“Incorporation by Reference” and the additional information described below under “Where You Can Get More Information.”
Prospective
investors should be aware that the acquisition of the securities described herein may have tax consequences. You should read the tax
discussion contained in the applicable prospectus supplement and consult your tax advisor with respect to your own particular circumstances.
You
should rely only on the information contained or incorporated by reference in this prospectus and any prospectus supplement. We have
not authorized anyone to provide you with different information. The distribution or possession of this prospectus in or from certain
jurisdictions may be restricted by law. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified
to do so or to any person to whom it is not permitted to make such offer or sale. The information contained in this prospectus is accurate
only as of the date of this prospectus and any information incorporated by reference is accurate as of the date of the applicable document
incorporated by reference, regardless of the time of delivery of this prospectus or of any sale of the securities. Our business, financial
condition, results of operations and prospects may have changed since those dates.
Except
where the context otherwise requires and for purposes of this prospectus only, “we”, “us”, “our company”,
“Company”, “our”, “CIFS” refer to China Internet Nationwide Financial Services, Inc., its subsidiaries,
Hongkong Internet Financial Services Limited (“HKIFS”) and Beijing Yingxin Yijia Network Technology Co., Ltd (“WFOE”)
and CIFS (Xiamen) Financial Leasing Co., Ltd, in the context of describing our operations and consolidated financial information, our
consolidated affiliated entities in China, including but not limited to Sheng Ying Xin (Beijing) Management Consulting Co., Ltd, Kashgar
Sheng Yingxin Enterprise Consulting Co., Ltd., Fu Hui (Shenzhen) Commercial Factoring Co., Ltd., Yingda Xincheng (Beijing) Insurance
Broker Co., Ltd., Fuhui (Xiamen) Commercial Factoring Co., Ltd., Zhizhen Investment & Research (Beijing) Information Consulting Co.,
Ltd. and Hangzhou Yuchuang Investment Partnership.
We
have relied on statistics provided by a variety of publicly-available sources regarding China’s expectations of growth. We did
not, directly or indirectly, sponsor or participate in the publication of such materials, and these materials are not incorporated in
this prospectus other than to the extent specifically cited in this prospectus. We have sought to provide current information in this
prospectus and believe that the statistics provided in this prospectus remain up-to-date and reliable, and these materials are not incorporated
in this prospectus other than to the extent specifically cited in this prospectus.
ABOUT
THE COMPANY
Overview
We
are in the business of providing financial advisory services to meet the financial and capital needs of our clients, which are comprised
largely of small-to-medium sized enterprises (“SMEs”). Through our wholly-owned subsidiaries, Hongkong Internet Financial
Services Limited (“HKIFS”) and Beijing Yingxin Yijia Network Technology Co., Ltd (“WFOE”) and our contractually
controlled and managed company, Sheng Ying Xin (Beijing) Management Consulting Co., Ltd (“Sheng Ying Xin” or “SYX”)
and its wholly-owned subsidiary, Kashgar Sheng Yingxin Enterprise Consulting Co., Ltd. (“Kashgar SYX”), we offer commercial
payment advisory services, international corporate financing advisory services and intermediary bank loan advisory services. Historically,
we have also made direct loans to certain qualified borrowers. We do not anticipate making any more direct loans but instead, we will
be depositing our funds in trust accounts with certain bank lenders, who will, in turn, make loans to borrowers.
We
generate revenues from service fees in connection with our (i) commercial payment advisory services, (ii) international corporate financing
advisory services, (iii) intermediary bank loan advisory services and (iv) factoring services. Additionally, we earn some interest income
from our direct or entrusted lending activities but we do not regard this a separate line of business as returns from these (entrusted)
loans are limited and infrequent.
Further
details concerning our business, including information with respect to our assets, operations and development history, are provided in
our Annual Report on Form 20-F and the other documents incorporated by reference into this prospectus. See “Documents Incorporated
by Reference.” You are encouraged to thoroughly review the documents incorporated by reference into this prospectus as they contain
important information concerning our business and our prospects.
We
are currently headquartered at 93 Jianguo Road, No. 6 Building, 11th Floor, Chaoyang District, Beijing, People’s Republic of China
100020 and out telephone number is +86 010-5820389. Our registered agent in the British Virgin Islands is Start Incorp Services Limited
located at Start Chambers, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands.
Below
is a chart illustrating our current corporate structure:
RISK
FACTORS
Investing
in our securities involves risks. Before investing in any securities offered pursuant to this prospectus, you should carefully consider
the risk factors and uncertainties set forth under the heading “Item 3.D. Risk Factors” in our Annual Report, as amended,
on Form 20-F for the year ended December 31, 2018, which is incorporated in this prospectus by reference, as updated by our subsequent
filings under the Exchange Act and, if applicable, in any accompanying prospectus supplement subsequently filed relating to a specific
offering or sale.
SPECIAL
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact,
including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives
for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to
identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections
about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term
and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive
and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor
can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties
and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and
adversely from those anticipated or implied in the forward-looking statements.
You
should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking
statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, we undertake
no duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual
results or revised expectations.
EXCHANGE
RATE DATA
Our
financial information is presented in U.S. dollars. The functional currency of CIFS and HKFS is United States dollars (“US$”
or “$”). The functional currency of Yingxin Yijia, CIFS (Xiamen) Financial Leasing, Sheng Ying Xin and its subsidiaries are
Renminbi (“RMB”), and the PRC is the primary economic environment in which the Company operates.
Transactions
which are denominated in currencies other than the functional currency are converted into the functional currency at the exchange rate
at the dates of the transactions. Exchange gains and losses resulting from transactions denominated in a currency other than functional
currency are included in statements of operations as foreign currency transaction gains or losses. Our financial statements have been
translated into U.S. dollars in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) ASC 830, “Foreign Currency Matters”. For those entities which use RMB as its functional currency, the
financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and
liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates
when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated
other comprehensive income (loss) in shareholders’ equity.
We
make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case
may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct
regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. We do not currently engage in currency
hedging transactions.
The
following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. (www.federalreserve.gov).
|
|
|
|
High
|
|
|
Low
|
|
|
Period
End
|
|
|
Average
|
|
|
2013
|
|
|
|
6.2438
|
|
|
|
6.0537
|
|
|
|
6.0537
|
|
|
|
6.1478
|
|
|
2014
|
|
|
|
6.2591
|
|
|
|
6.0402
|
|
|
|
6.2046
|
|
|
|
6.1620
|
|
|
2015
|
|
|
|
6.4896
|
|
|
|
6.1870
|
|
|
|
6.4778
|
|
|
|
6.2827
|
|
|
2016
|
|
|
|
6.9580
|
|
|
|
6.4480
|
|
|
|
6.9430
|
|
|
|
6.6400
|
|
|
2017
|
|
|
|
6.9575
|
|
|
|
6.4773
|
|
|
|
6.5063
|
|
|
|
6.7569
|
|
|
2018
|
|
|
|
6.9737
|
|
|
|
6.2649
|
|
|
|
6.8755
|
|
|
|
6.6090
|
|
|
January
|
|
|
|
6.5263
|
|
|
|
6.2841
|
|
|
|
6.3990
|
|
|
|
6.4727
|
|
|
February
|
|
|
|
6.3471
|
|
|
|
6.2649
|
|
|
|
6.3280
|
|
|
|
6.3183
|
|
|
March
|
|
|
|
6.3565
|
|
|
|
6.2685
|
|
|
|
6.2726
|
|
|
|
6.3174
|
|
|
April
|
|
|
|
6.3340
|
|
|
|
6.2655
|
|
|
|
6.3325
|
|
|
|
6.2967
|
|
|
May
|
|
|
|
6.4175
|
|
|
|
6.3325
|
|
|
|
6.4096
|
|
|
|
6.3701
|
|
|
June
|
|
|
|
6.6235
|
|
|
|
6.3850
|
|
|
|
6.6171
|
|
|
|
6.4651
|
|
|
July
|
|
|
|
6.8102
|
|
|
|
6.6123
|
|
|
|
6.8038
|
|
|
|
6.7164
|
|
|
August
|
|
|
|
6.9330
|
|
|
|
6.8018
|
|
|
|
6.8300
|
|
|
|
6.8453
|
|
|
September
|
|
|
|
6.8880
|
|
|
|
6.8270
|
|
|
|
6.8680
|
|
|
|
6.8551
|
|
|
October
|
|
|
|
6.9737
|
|
|
|
6.8680
|
|
|
|
6.9737
|
|
|
|
6.9191
|
|
|
November
|
|
|
|
6.9558
|
|
|
|
6.8894
|
|
|
|
6.9558
|
|
|
|
6.9367
|
|
|
December
|
|
|
|
6.9077
|
|
|
|
6.8343
|
|
|
|
6.8755
|
|
|
|
6.8837
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
|
6.8708
|
|
|
|
6.6958
|
|
|
|
6.6958
|
|
|
|
6.7863
|
|
|
February
|
|
|
|
6.7907
|
|
|
|
6.6822
|
|
|
|
6.6912
|
|
|
|
6.7367
|
|
|
March
|
|
|
|
6.7381
|
|
|
|
6.6916
|
|
|
|
6.7112
|
|
|
|
6.7119
|
|
|
April
|
|
|
|
6.7418
|
|
|
|
6.6870
|
|
|
|
6.7347
|
|
|
|
6.7161
|
|
|
May
|
|
|
|
6.9182
|
|
|
|
6.7319
|
|
|
|
6.9027
|
|
|
|
6.8519
|
|
|
June
|
|
|
|
6.9298
|
|
|
|
6.8510
|
|
|
|
6.8650
|
|
|
|
6.8977
|
|
|
July
|
|
|
|
6.8927
|
|
|
|
6.8487
|
|
|
|
6.8833
|
|
|
|
6.5784
|
|
CAPITALIZATION
AND INDEBTNESS
Our
capitalization and indebtedness will be set forth in a prospectus supplement or in a report on Form 6-K subsequently furnished to the
SEC and specifically incorporated herein by reference.
USE
OF PROCEEDS
Unless
we otherwise indicate in a prospectus supplement, we currently intend to use the net proceeds from the sale of our securities for general
working capital.
More
detailed information regarding the use of proceeds from the sale of securities, including any determinable milestones at the applicable
time, will be described in any applicable prospectus supplement. We may also, from time to time, issue securities otherwise than pursuant
to a prospectus supplement to this prospectus.
DIVIDEND
POLICY
Our
dividend policy is set forth under the heading “Item 8.A. Consolidated Statements and Other Financial Information” in our
Annual Report, as amended, on Form 20-F for the year ended December 31, 2018, which is incorporated in this prospectus by reference,
as updated by our subsequent filings under the Exchange Act.
OFFER
AND LISTING DETAILS
We
may offer and issue from time to time ordinary shares, share purchase contracts, share purchase units, warrants, debt securities, rights
or units, or any combination thereof, up to an aggregate initial offering price of up to $50,000,000 in one or more transactions under
this shelf prospectus. The price of securities offered will depend on a number of factors that may be relevant at the time of offer.
See “Plan of Distribution.”
The
ordinary shares have been listed on the Nasdaq Global Market under the symbol “CIFS” since August 8, 2017.
The
following tables sets forth, for the periods indicated, the high and low trading prices of the ordinary shares as reported on the Nasdaq
Global Market prior to the filing of this prospectus.
Ordinary
Shares (symbol: “CIFS”)
Nasdaq
|
|
|
Market
Price Per Share
|
|
|
|
|
High
|
|
|
Low
|
|
|
Quarterly:
|
|
|
|
|
|
|
|
August
8, 2017 – September 30, 2017
|
|
$
|
20.04
|
|
|
$
|
11.13
|
|
|
October 1, 2017 –
December 31, 2017
|
|
$
|
61.00
|
|
|
$
|
20.85
|
|
|
January 1, 2018 –
March 31, 2018
|
|
$
|
47.98
|
|
|
$
|
31.57
|
|
|
April 1, 2018 –
June 30, 2018
|
|
$
|
34.85
|
|
|
$
|
14.95
|
|
|
July 1, 2018 –
September 30, 2018
|
|
$
|
16.65
|
|
|
$
|
7.99
|
|
|
October 1, 2018 –
December 31, 2018
|
|
$
|
8.55
|
|
|
$
|
0.635
|
|
|
January 1, 2019 –
March 31, 2019
|
|
$
|
4.96
|
|
|
$
|
0.853
|
|
|
April 1, 2019 –
June 30, 2019
|
|
$
|
3.76
|
|
|
$
|
1.28
|
|
|
July 1, 2019 –
date of filing
|
|
$
|
2.20
|
|
|
$
|
1.65
|
|
DESCRIPTION
OF SHARES
Ordinary
Shares
China
Internet Nationwide Financial Services Inc. is a holding company incorporated under the laws of the British Virgin Islands on September
28, 2015 under the BVI Business Companies Act, 2004 (the “BVI Act”) as a company limited by shares.
Our
amended and restated memorandum and articles of association authorizes us to issue an unlimited number of shares of a single class each
with a par value of US$0.001 each. As of December 31, 2018, the date of our most recent balance sheet included in our financial statements,
there were 22,114,188 ordinary shares issued and outstanding. We issued a warrant to our underwriter to purchase 91,042 ordinary shares
upon the successful completion of our initial public offering (“IPO”) at an exercise price of 120% of the IPO price, namely
$12 per share.
All
of our issued ordinary shares are fully paid and non-assessable. The Company may, but is not required to if the rules of the Nasdaq Global
Market allow, issue share certificates specifying the number of ordinary shares held by each holder of ordinary shares in the Company.
Our shareholders may freely hold and vote their ordinary shares.
Our
memorandum and articles of association permit the directors, by way of resolution of directors, to fix the emoluments of directors with
respect to services to be rendered in any capacity to the Company. All decisions about the compensation of directors will be recommended
by the compensation committee, and approved by way of resolution of directors of the Company.
The
following are summaries of the material provisions of our memorandum and articles of association and the BVI Act, insofar as they relate
to the material terms of our ordinary shares.
General
All
of our issued ordinary shares are fully paid and non-assessable. Each holder of ordinary shares is entitled to a certificate specifying
the number of ordinary shares held by him, her or it. Our shareholders may freely hold and vote their ordinary shares.
Transfer
Agent
Our
transfer agent for our ordinary shares is Transhare Securities Transfer and Registrar, 15500 Roosevelt Blvd., Suite 302, Clearwater,
FL 33760.
Memorandum
and Articles of Association
The
following discussion describes our amended and restated memorandum and articles of association that (subject to any limitations, restrictions
or modifications in our memorandum and articles of association; and subject to any rights or restrictions attaching to any shares) will
be in effect upon the completion of this offering:
Objects
and Purposes, Register, and Shareholders. Subject to the BVI Act and British Virgin Islands’ law (“BVI Law”),
our objects and purposes are unlimited. Our register of members will be maintained by our transfer agent, Transhare Securities Transfer
and Registrar. Under the BVI Act, a British Virgin Islands (“BVI”) company may treat the registered holder of a share as
the only person entitled to (a) exercise any voting rights attaching to the share, (b) receive notices, (c) receive a distribution in
respect of the share and (d) exercise other rights and powers attaching to the share. Consequently, as a matter of BVI Law, where a shareholder’s
shares are registered in the name of a nominee such as Cede & Co, the nominee is entitled to receive notices, receive distributions
and exercise rights in respect of any such shares registered in its name. The beneficial owners of the shares registered in a nominee’s
name will therefore be reliant on their contractual arrangements with the nominee in order to receive notices and dividends and ensure
the nominee exercises voting and other rights in respect of the shares in accordance with their directions.
Directors’
Powers. Under the BVI Act, subject to any modifications or limitations in a company’s memorandum and articles of association,
a company’s business and affairs are managed by, or under the direction or supervision of, its directors; and directors generally
have all powers necessary to manage a company. A director must disclose any interest he has on any proposal, arrangement or contract
not entered into in the ordinary course of business and on usual terms and conditions. An interested director may (subject to the memorandum
and articles of association) vote on a transaction in which he has an interest. In accordance with, and subject to, our memorandum and
articles of association, the directors may by resolution of directors exercise all the powers of the Company to incur indebtedness, liabilities
or obligations and to secure indebtedness, liabilities or obligations whether of the Company or of any third party.
Rights,
Preferences and Restrictions of Ordinary Shares. Our directors may (subject to the memorandum and articles of association and
BVI Law) authorize dividends at such time and in such amount as they determine. Each ordinary share is entitled to one vote on any resolution
of shareholders. In the event of a liquidation or dissolution of the Company, each ordinary share (subject to the memorandum and articles
of association) is entitled to an equal share in all surplus assets remaining available for distribution to them after payment and discharge
of all claims, debts, liabilities and obligations of the Company and after provision is made for each class of shares (if any) having
preference over the ordinary shares. There are no sinking fund provisions applicable to our ordinary shares. Holders of our ordinary
shares have no pre-emptive rights. Subject to the provisions of the BVI Act, we may, (subject to the memorandum and articles of association)
with the consent of the shareholder whose shares are to be purchased , repurchase our ordinary shares in certain circumstances provided
that the Company will, immediately after the repurchase, satisfy the solvency test. The Company will satisfy the solvency test, if (i)
the value of the Company’s assets exceeds its liabilities; and (ii) the Company is able to pay its debts as they fall due.
In
accordance with the BVI Act:
|
|
(i)
|
the
Company may purchase, redeem or otherwise acquire its own shares in accordance with either (a) Sections 60, 61 and 62 of the BVI
Act (save to the extent that those Sections are negated, modified or inconsistent with provisions for the purchase, redemption or
acquisition of its own shares specified in the Company’s memorandum and articles of association); or (b) such other provisions
for the purchase, redemption or acquisition of its own shares as may be specified in the Company’s memorandum and articles
of association. The Company’s memorandum and articles of association provide that such Sections 60, 61 and 62 do not apply
to the Company; and
|
|
|
(ii)
|
where
a company may purchase, redeem or otherwise acquire its own shares otherwise than in accordance with Sections 60, 61 and 62 of the
BVI Act, it may not purchase, redeem or otherwise acquire the shares without the consent of the member whose shares are to be purchased,
redeemed or otherwise acquired, unless the Company is permitted by the memorandum and articles of association to purchase, redeem
or otherwise acquire the shares without that consent; and
|
|
|
(iii)
|
unless
the shares are held as treasury shares in accordance with Section 64 of the BVI Act, any shares acquired by the Company are deemed
to be cancelled immediately on purchase, redemption or other acquisition.
|
Variation
of the Rights of Shareholders. As permitted by the BVI Act and our memorandum and articles of association, the rights conferred
upon the holders of the shares of any class of the Company may (subject to the memorandum and articles of association) only be varied,
whether or not the Company is in liquidation, with the consent in writing of the holders of a majority of the issued shares of that class
or by a resolution approved at a duly convened and constituted meeting of the shares of that class by the affirmative vote of a majority
of the shares of that class which were present at the meeting and were voted, except where a different majority is required under our
memorandum and articles of association or the BVI Act. A greater majority is required in relation to a scheme of arrangement and may
be required in relation to a plan of arrangement.
Shareholder
Meetings. In accordance with, and subject to, our memorandum and articles of association, (a) any director of the Company may
convene meetings of the shareholders at such times as the director considers necessary or desirable (and the director convening a meeting
of shareholders may fix as the record date for determining those shareholders that are entitled to vote at the meeting the date notice
is given of the meeting, or such other date as may be specified in the notice, being a date not earlier than the date of the notice);
and (b) upon the written request of shareholders entitled to exercise 30% or more of the voting rights in respect of the matter for which
the meeting is requested, the directors shall convene a meeting of shareholders. Under BVI Law, the memorandum and articles of association
may be amended to decrease but not increase the required percentage to call a meeting above 30%. In accordance with, and subject to,
our memorandum and articles of association, (a) the director convening a meeting shall give not less than 7 days’ notice of a meeting
of shareholders to those shareholders whose names on the date the notice is given appear as shareholders in the register of members of
the Company and are entitled to vote at the meeting; and the other directors; (b) a meeting of shareholders held in contravention of
the requirement to give notice is valid if shareholders holding at least 90% of the total voting rights on all the matters to be considered
at the meeting have waived notice of the meeting and, for this purpose, the presence of a shareholder at the meeting shall constitute
waiver in relation to all of the shares that that shareholder holds; (c) a meeting of shareholders is duly constituted if, at the commencement
of the meeting, there are present in person or by proxy not less than 50%of the votes of the shares entitled to vote on resolutions of
shareholders to be considered at the meeting; and (d) if within two hours from the time appointed for the meeting a quorum is not present,
the meeting, if convened upon the request of the shareholders, shall be dissolved; in any other case it shall stand adjourned to the
next business day in the jurisdiction in which the meeting was to have been held at the same time and place or to such other time and
place as the directors may determine, and if at the adjourned meeting there are present within one hour from the time appointed for the
meeting in person or by proxy not less than one third of the votes of the shares entitled to vote on the matters to be considered by
the meeting, those present shall constitute a quorum but otherwise the meeting shall be dissolved.
Dividends.
Subject to the BVI Act and our memorandum and articles of association, the directors of the Company may, by resolution of directors,
authorize a distribution by way of dividend at a time and amount as they think fit if they are satisfied, based on reasonable grounds,
that, immediately after distribution of the dividend, the value of our assets will exceed our liabilities and we will be able to pay
our debts as they fall due. There is no further BVI Law restriction on the amount of funds which may be distributed by us by dividend,
including all amounts paid by way of the subscription price for ordinary shares regardless of whether such amounts may be wholly or partially
treated as share capital or share premium under certain accounting principles. Shareholder approval is not (except as otherwise provided
in our memorandum articles of association) required to pay dividends under BVI Law. In accordance with, and subject to, our memorandum
and articles of association, no dividend shall bear interest as against the Company (except as otherwise provided in our memorandum articles
of association).
Disclosure
of the Securities and Exchange Commission’s Position on Indemnification for Securities Act Liabilities. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has 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.
Transfer
of Shares. Subject to any applicable restrictions or limitations arising pursuant to (i) our memorandum and articles of association;
or (ii) the BVI Act, any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in the usual or
common form or in any other form which our directors may approve (such instrument of transfer being signed by the transferor and containing
the name and address of the transferee). The BVI Act also provides that the shares of the Company, whilst listed on a recognized exchange
such as the Nasdaq Global Market, may be transferred without the need for a written instrument of transfer if the transfer is carried
out within the laws, rules, procedures and other requirements applicable to shares registered on the recognized exchange and subject
to the Company’s memorandum and articles of association and the Listed Companies and Funds Regulations of the British Virgin Islands.
There are currently no provisions of the Listed Companies and Funds Regulations in force that would affect this. Our memorandum and articles
of association also (save as otherwise provided therein) provide that shares may be dealt with by means of a system utilized for the
purposes of holding and transferring of shares in uncertificated form.
Summary
of Certain Significant Provisions of BVI Law
The
BVI Act differs from laws applicable to US corporations and their shareholders. Set forth below is a summary of certain significant provisions
of the BVI Act applicable to us (save to the extent that such provisions have been, to the extent permitted under the BVI Act, negated
or modified in our memorandum and articles of association in accordance with the BVI Act).
Mergers,
Consolidations and Similar Arrangements. The BVI Act provides for mergers as that expression is understood under US corporate
law. Common law mergers are also permitted outside of the scope of the BVI Act. Under the BVI Act, two or more companies may either merge
into one of such existing companies, or the surviving company, or consolidate with both existing companies ceasing to exist and forming
a new company, or the consolidated company. The procedure for a merger or consolidation between the Company and another company (which
need not be a BVI company, and which may be the Company’s parent, but need not be) is set out in the BVI Act. The directors of
the BVI company or BVI companies which are to merge or consolidate must approve a written plan of merger or consolidation which must
also be authorized by a resolution of members (and the outstanding shares of every class of shares that are entitled to vote on the merger
or consolidation as a class if the memorandum articles of association so provide or if the plan of merger or consolidation contains any
provisions that, if contained in a proposed amendment to the memorandum and articles of association, would entitle the class to vote
on the proposed amendment as a class) of the shareholders of the BVI company or BVI companies which are to merge. A foreign company which
is able under the laws of its foreign jurisdiction to participate in the merger or consolidation is required by the BVI Act to comply
with the laws of that foreign jurisdiction in relation to the merger or consolidation. The Company must then execute articles of merger
or consolidation, containing certain prescribed details. The plan and articles of merger or consolidation are then filed with the Registrar
of Corporate Affairs in the BVI, or the Registrar. If the surviving company or the consolidated company is to be incorporated under the
laws of a jurisdiction outside BVI, it shall file the additional instruments required under Section 174(2)(b) of the BVI Act. The Registrar
then (if he is satisfied that the requirements of the BVI Act have been complied with) registers, in the case of a merger, the articles
of merger or consolidation and any amendment to the memorandum and articles of association of the surviving company and, in the case
of a consolidation, the memorandum and articles of association of the new consolidated company and issues a certificate of merger or
consolidation (which is conclusive evidence of compliance with all requirements of the BVI Act in respect of the merger or consolidation).
The merger or consolidation is effective on the date that the articles of merger or consolidation are registered by the Registrar or
on such subsequent date, not exceeding thirty days, as is stated in the articles of merger or consolidation but if the surviving company
or the consolidated company is a company incorporated under the laws of a jurisdiction outside the BVI, the merger or consolidation is
effective as provided by the laws of that other jurisdiction.
As
soon as a merger or consolidation becomes effective (inter alia), (a) the surviving company or consolidated company (so far as is consistent
with its amended memorandum and articles, as amended or established by the articles of association of merger or consolidation) has all
rights, privileges, immunities, powers, objects and purposes of each of the constituent companies; (b) the memorandum and articles of
association of any surviving company are automatically amended to the extent, if any, that changes to its amended memorandum and articles
of association are contained in the articles of merger; (c) assets of every description, including choses-in-action and the business
of each of the constituent companies, immediately vest in the surviving company or consolidated company; (d) the surviving company or
consolidated company is liable for all claims, debts, liabilities and obligations of each of the constituent companies; (e) no conviction,
judgment, ruling, order, claim, debt, liability or obligation due or to become due, and no cause existing, against a constituent company
or against any shareholder, director, officer or agent thereof, is released or impaired by the merger or consolidation; and (f) no proceedings,
whether civil or criminal, pending at the time of a merger or consolidation by or against a constituent company, or against any shareholder,
director, officer or agent thereof, are abated or discontinued by the merger or consolidation, but: (i) the proceedings may be enforced,
prosecuted, settled or compromised by or against the surviving company or consolidated company or against the shareholder, director,
officer or agent thereof, as the case may be or (ii) the surviving company or consolidated company may be substituted in the proceedings
for a constituent company but if the surviving company or the consolidated company is incorporated under the laws of a jurisdiction outside
the BVI, the effect of the merger or consolidation is the same as noted previously except in so far as the laws of the other jurisdiction
otherwise provide.
The
Registrar shall strike off the register of companies each constituent company that is not the surviving company in the case of a merger
and all constituent companies in the case of a consolidation (save that this shall not apply to a foreign company).
If
the directors determine it to be in the best interests of the Company, it is also possible for a merger to be approved as a court approved
plan of arrangement or as a scheme of arrangement in accordance with (in each such case) the BVI Act. The convening of any necessary
shareholders meetings and subsequently the arrangement must be authorized by the BVI court. A scheme of arrangement requires the approval
of 75% of the votes of the shareholders or class of shareholders, as the case may be. If the effect of the scheme is different in relation
to different shareholders, it may be necessary for them to vote separately in relation to the scheme, with it being required to secure
the requisite approval level of each separate voting group. Under a plan of arrangement, a BVI court may determine what shareholder approvals
are required and the manner of obtaining the approval.
Continuation
into a Jurisdiction Outside the BVI. In accordance with, and subject to, our memorandum and articles of association, the Company
may by resolution of shareholders or by a resolution passed unanimously by all directors of the Company continue as a company incorporated
under the laws of a jurisdiction outside the BVI in the manner provided under those laws. The Company does not cease to be a BVI company
unless the foreign law permits continuation and the BVI company has complied with the requirements of that foreign law. Where a company
that wishes to continue as a company incorporated under the laws of a jurisdiction outside the BVI has a charge registered in respect
of the property of the company undersection 163 of the BVI Act which has not been released or satisfied, it shall, before continuing
and provided that the charge does not contain a covenant prohibiting continuation of the company outside the BVI, provide a written declaration
addressed to the Registrar specifying that: (a) a notice of satisfaction or release in respect of the charge has been filed and registered
under section 165 of the BVI Act; (b) where paragraph (a) has not been complied with, the chargee to whom the registered charge relates
has been notified in writing of the intention to continue the company as a company incorporated under the laws of a jurisdiction outside
the BVI and the chargee has given his or her consent or has not objected to the continuation; or (c) where paragraph (a) has not been
satisfied and the chargee, after notification under paragraph (b), has not given his or her consent or objected to the continuation,
the chargee’s interest secured by the registered charge shall not be diminished or in any way compromised by the continuation and
the charge shall operate as a liability of the continued company incorporated under the laws of a jurisdiction outside of the BVI. Where
a company is continued under the laws of a jurisdiction outside the BVI, (a) the company continues to be liable for all of its claims,
debts, liabilities and obligations that existed prior to its continuation, (b) no conviction, judgment, ruling, order, claim, debt, liability
or obligation due or to become due, and no cause existing, against the company or against any shareholder, director, officer or agent
thereof, is released or impaired by its continuation as a company under the laws of the jurisdiction outside the BVI, (c) no proceedings,
whether civil or criminal, pending by or against the company, or against any shareholder, director, officer or agent thereof, are abated
or discontinued by its continuation as a company under the laws of the jurisdiction outside the BVI, but the proceedings may be enforced,
prosecuted, settled or compromised by or against the Company or against the shareholder, director, officer or agent thereof, as the case
may be; and (d) service of process may continue to be effected on the registered agent of the company in the BVI in respect of any claim,
debt, liability or obligation of the Company during its existence as a company under the BVI Act.
Directors.
In accordance with, and subject to, our memorandum and articles of association (including, for the avoidance of any doubt, any
rights or restrictions attaching to any ordinary shares), (a) the directors are elected by resolution of shareholders or by resolution
of directors for such term as the shareholders or directors determine; (b) each director holds office for the term, if any, fixed by
the resolution of shareholders or resolution of directors appointing him, or until his earlier death, resignation or removal. If no term
is fixed on the appointment of a director, the director serves indefinitely until his earlier death, resignation or removal: (c) a director
may be removed from office (i) with or without cause, by a resolution of shareholders passed at a meeting of shareholders called for
the purposes of removing the director or for purposes including the removal of the director or by a written resolution passed by a least
75% of the shareholders of the Company entitled to vote or (ii) with cause, by a resolution of directors passed at a meeting of directors
called for the purpose of removing the director or for purposes including the removal of the director; (d) a director may resign his
office by giving written notice of his resignation to the Company and the resignation has effect from the date the notice is received
by the Company or from such later date as may be specified in the notice and a director shall resign forthwith as a director if he is,
or becomes, disqualified from acting as a director under the BVI Act; (e) the directors may at any time appoint any person to be a director
either to fill a vacancy or as an addition to the existing directors and where the directors appoint a person as director to fill a vacancy,
the term shall not exceed the term that remained when the person who has ceased to be a director ceased to hold office; (f) a vacancy
in relation to directors occurs if a director dies or otherwise ceases to hold office prior to the expiration of his term of office;
and (g) a director is not required to hold shares in the Company as a qualification to office.
In
accordance with, and subject to, our memorandum and articles of association, (a) any one director of the Company may call a meeting of
the directors by sending a written notice to each other director; (b) the directors of the Company or any committee thereof may meet
at such times and in such manner as the directors may determine to be necessary or desirable; (c) a director shall be given not less
than 3 days’ notice of meetings of directors, but a meeting of directors held without 3 days’ notice having been given to
all directors shall be valid if all the directors entitled to vote at the meeting who do not attend waive notice of the meeting, and
for this purpose the presence of a director at a meeting shall constitute waiver by that director and the inadvertent failure to give
notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting; (d) a meeting
of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person or by alternate not
less than one-half of the total number of directors, unless there are only 2 directors in which case the quorum is two; (e) a director
may by a written instrument appoint an alternate who need not be a director and the alternate shall be entitled to attend meetings in
the absence of the director who appointed him and to vote or consent in place of the director until the appointment lapses or is terminated;
(f) a resolution of directors is passed if either (i) the resolution is approved at a duly convened and constituted meeting of directors
of the Company or of a committee of directors of the Company by the affirmative vote of a majority of the directors present at the meeting
who voted except that where a director is given more than one vote, he shall be counted by the number of votes he casts for the purpose
of establishing a majority; or (ii) the resolution is consented to in writing by a majority of directors or by a majority of members
of a committee of directors of the Company, as the case may be, unless (in either case) the BVI Act or our memorandum and articles of
association require a different majority.
Indemnification
of Directors. In accordance with, and subject to, our memorandum and articles of association (including the limitations detailed
therein), the Company shall indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in
settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who (a) is or was
a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative
or investigative, by reason of the fact that the person is or was a director of the Company; or (b) is or was, at the request of the
Company, serving as a director of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust
or other enterprise.
In
accordance with, and subject to, our memorandum and articles of association (including the limitations detailed therein), (a) the indemnity
referred to above only applies if the person acted honestly and in good faith with a view to the best interests of the Company and, in
the case of criminal proceedings, the person had no reasonable cause to believe that their conduct was unlawful; (b) the decision of
the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to
whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes
of the articles of association, unless a question of law is involved; and (c) the termination of any proceedings by any judgment, order,
settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly
and in good faith and with a view to the best interests of the Company or that the person had reasonable cause to believe that his conduct
was unlawful.
In
accordance with, and subject to, our memorandum and articles of association, the Company may purchase and maintain insurance in relation
to any person who is or was a director, officer or liquidator of the Company, or who at the request of the Company is or was serving
as a director, officer or liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture,
trust or other enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or
not the Company has or would have had the power to indemnify the person against the liability as provided in the articles of association.
Directors
and Conflicts of Interest. As noted above, pursuant to the BVI Act and the Company’s memorandum and articles of association,
a director of a company who has an interest in a transaction and who has declared such interest to the other directors, may:
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(a)
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vote
on a matter relating to the transaction;
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(b)
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attend
a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting
for the purposes of a quorum; and
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(c)
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sign
a document on behalf of the Company, or do any other thing in his capacity as a director, that relates to the transaction,
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and,
subject to compliance with the BVI Act shall not, by reason of his office be accountable to the Company for any benefit which he derives
from such transaction and no such transaction shall be liable to be avoided on the grounds of any such interest or benefit.
In
accordance with, and subject to, our memorandum and articles of association, (a) a director of the Company shall, forthwith after becoming
aware of the fact that he is interested in a transaction entered into or to be entered into by the Company, disclose the interest to
all other directors of the Company; and (b) for the purposes noted foregoing, a disclosure to all other directors to the effect that
a director is a member, director or officer of another named entity or has a fiduciary relationship with respect to the entity or a named
individual and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into
with that entity or individual, is a sufficient disclosure of interest in relation to that transaction.
Shareholders’
Suits. The enforcement of the Company’s rights will ordinarily be a matter for its directors.
In
certain circumstances, a shareholder has the right to seek various remedies against the Company in the event the directors are in breach
of their duties under the BVI Act. Pursuant to Section 184B of the BVI Act, if a company or director of a company engages, proposes to
engage in, or has engaged in conduct that contravenes the provisions of the BVI Act or the memorandum and articles of association of
the Company, the BVI court may, on application of a shareholder or director of the Company, make an order directing the Company or director
to comply with, or restraining the Company or director from engaging in conduct that contravenes, the BVI Act or the memorandum and articles
of association.
Furthermore,
pursuant to Section 184I(1) of the BVI Act a shareholder of a company who considers that the affairs of the Company have been, are being
or are likely to be, conducted in a manner that is, or any acts of the Company have been, or are likely to be oppressive, unfairly discriminatory,
or unfairly prejudicial to him in that capacity, may apply to the BVI court for an order which, inter alia, can require the Company or
any other person to pay compensation to the shareholder.
The
BVI Act provides for a series of remedies available to shareholders. Where a company incorporated under the BVI Act conducts some activity
which contravenes the BVI Act or the Company’s memorandum and articles of association, the court can issue a restraining or compliance
order. Under Section 184G of the BVI Act, a shareholder of a company may bring an action against the Company for breach of a duty owed
by the Company to him as a shareholder. A shareholder also pursuant to Section 184C of the BVI Act may, with the leave of the BVI court,
bring proceedings or intervene in proceedings in the name of the Company, in certain circumstances. Such actions are known as derivative
actions. The BVI court may only grant leave to bring a derivative action where it is satisfied that:
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the
Company does not intend to bring, diligently continue or defend or discontinue proceedings; and
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it
is in the interests of the Company that the conduct of the proceedings not be left to the directors or to the determination of the
shareholders as a whole.
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When
considering whether to grant leave, the BVI court is also required to have regard to the following matters:
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whether
the shareholder is acting in good faith;
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whether
a derivative action is in the Company’s interests, taking into account the directors’
views on
commercial
matters;
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whether
the proceedings are likely to succeed;
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the
costs of the proceedings in relation to the relief likely to be obtained; and
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whether
an alternative remedy to the derivative claim is available.
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Any
shareholder of a company may apply to the BVI court under the Insolvency Act, 2003 of the BVI, or the Insolvency Act, for the appointment
of a liquidator to liquidate the Company and the court may appoint a liquidator for the Company if it is of the opinion that it is just
and equitable to do so.
Appraisal
Rights. The BVI Act provides that any shareholder of a company is entitled to payment of the fair value of his shares upon dissenting
from any of the following: (a) a merger if the company is a constituent company, unless the company is the surviving company and the
shareholder continues to hold the same or similar shares; (b) a consolidation, if the company is a constituent company; (c) any sale,
transfer, lease, exchange or other disposition of more than 50% in value of the assets or business of the company if not made in the
usual or regular course of the business carried on by the company but not including: (i) a disposition pursuant to an order of the court
having jurisdiction in the matter, (ii) a disposition for money on terms requiring all or substantially all net proceeds to be distributed
to the shareholders in accordance with their respective interests within one year after the date of disposition, or (iii) a transfer
pursuant to the power of the directors to transfer assets for the protection thereof; (d) a compulsory redemption of 10% or fewer of
the issued shares of the company required by the holders of 90% or more of the votes of the outstanding shares of the company pursuant
to the terms of Section 176 of the BVI Act; and (e) an arrangement, if permitted by the BVI court.
Generally,
any other claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the BVI or
their individual rights as shareholders as established by the company’s memorandum and articles of association. There are common
law rights for the protection of shareholders that may be invoked, largely derived from English common law. For example, under the rule
established in the English case known as Foss v. Harbottle, a court will generally refuse to interfere with the management of a company
at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the
majority or the board of directors. However, every shareholder is entitled to seek to have the affairs of the company conducted properly
according to law and the constituent documents of the Company. As such, if those who control the Company have persistently disregarded
the requirements of company law or the provisions of the company’s memorandum and articles of association, then the courts may
grant relief. Generally, the areas in which the courts will intervene are the following:
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a
company is acting or proposing to act illegally or beyond the scope of its authority;
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the
act complained of, although not beyond the scope of the authority, could only be effected if duly authorized by more than the number
of votes which have actually been obtained;
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the
individual rights of the plaintiff shareholder have been infringed or are about to be infringed; or
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those
who control the Company are perpetrating a “fraud on the minority.”
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Share
Repurchases and Redemptions. As permitted by the BVI Act and subject to our memorandum and articles of association, shares may
be repurchased, redeemed or otherwise acquired by us by resolution of directors and with the consent of the shareholder whose shares
are being purchased. Depending on the circumstances of the redemption or repurchase, our directors may need to determine that, immediately
following the redemption or repurchase, we will be able to satisfy our debts as they fall due and the value of our assets exceeds our
liabilities. Our directors may only exercise this power on our behalf, subject to the BVI Act, our memorandum and articles of association
and to any applicable requirements imposed from time to time by the SEC, the Nasdaq Global Market or any other stock exchange on which
our securities are listed.
Inspection
of Books and Records. Under the BVI Act, members of the general public, on payment of a nominal fee, can obtain copies of the
public records of a company available at the office of the Registrar, including the Company’s certificate of incorporation, its
memorandum and articles of association (with any amendments thereto), records of license fees paid to date, any articles of dissolution,
any articles of merger, and a register of charges created by the Company (if the Company has elected to file such a register or an applicable
chargee has caused the same to be filed).
A
shareholder of a company is entitled, on giving written notice to the Company, to inspect:
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(a)
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the
memorandum and articles of association;
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(b)
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the
register of members;
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(c)
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the
register of directors; and
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(d)
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the
minutes of meetings and resolutions of shareholders and of those classes of shares of which he is a shareholder.
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In
addition, a shareholder may make copies of or take extracts from the documents and records referred to in (a) through (d) above. However,
subject to the memorandum and articles of association of the Company, the directors may, if they are satisfied that it would be contrary
to the Company’s interests to allow a shareholder to inspect any document, or part of any document, specified in (b), (c) or (d)
above, refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making
of copies or the taking of extracts from the records. Where a company fails or refuses to permit a shareholder to inspect a document
or permits a shareholder to inspect a document subject to limitations, that shareholder may apply to the BVI court for an order that
he should be permitted to inspect the document or to inspect the document without limitation.
Our
registered agent is Start Incorp Services Limited of Start Chambers, Wickham’s Cay II,P.O. Box 2221, Road Town, Tortola, British
Virgin Islands. A company is required to keep a copy of its register of members and register of directors at the offices of its registered
agent in the BVI, and the Company is required to notify any changes to the originals of such registers (assuming the originals are held
elsewhere) to the registered agent, in writing, within 15 days of any change; and to provide the registered agent with a written record
of the physical address of the place or places at which the original register of members or the original register of directors is kept.
Where
the place at which the original register of members or the original register of directors of the Company is changed, the Company must
provide the registered agent with the physical address of the new location of the records within 14 days of the change of location.
A
company is also required to keep at the office of its registered agent or at such other place or places, within or outside the BVI, as
the directors may determine the minutes of meetings and resolutions of shareholders and of classes of shareholders; and the minutes of
meetings and resolutions of directors and committees of directors. If such records are kept at a place other than at the office of the
Company’s registered agent, the Company is required to provide the registered agent with a written record of the physical address
of the place or places at which the records are kept and to notify the registered agent, within 14 days, of the physical address of any
new location where such records may be kept.
Dissolution;
Winding Up. As permitted by the BVI Act and subject to our memorandum and articles of association, we may be voluntarily liquidated
and dissolved under Part XII of the BVI Act by resolution of directors and resolution of shareholders if we have no liabilities or we
are able to pay our debts as they fall due and the value of our assets equals or exceeds our liabilities.
We
also may be wound up and dissolved in circumstances where we are insolvent in accordance with the terms of the Insolvency Act.
Anti-Money
Laundering Laws. In order to comply with legislation and regulations aimed at the prevention of money laundering we are required
to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to verify their identity. Where
permitted, and subject to certain conditions, we also may delegate the maintenance of our anti-money laundering procedures (including
the acquisition of due diligence information) to a suitable person. We reserve the right to request such information as is necessary
to verify the identity of a subscriber. In the event of delay or failure on the part of the subscriber in producing any information required
for verification purposes, we may refuse to accept the application, in which case any funds received will be returned without interest
to the account from which they were originally debited.
If
any person resident in the BVI knows or suspects that another person is engaged in money laundering or terrorist financing and the information
for that knowledge or suspicion came to his or her attention in the course of his or her business the person will be required to report
his belief or suspicion to the Financial Investigation Agency of the BVI, pursuant to the Proceeds of Criminal Conduct Act 1997 (as amended).
Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any
enactment or otherwise.
Exchange
controls. We know of no BVI laws, decrees, regulations or other legislation that limit the import or export of capital or the
payment of dividends to shareholders who do not reside in the BVI.
DESCRIPTION
OF WARRANTS
The
following description, together with the additional information we may include in any applicable prospectus supplements, summarizes the
material terms and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant
certificates. While the terms summarized below will apply generally to any warrants that we may offer under this prospectus, we will
describe the particular terms of any series of warrants that we may offer in more detail in the applicable prospectus supplement. If
we indicate in the prospectus supplement, the terms of any warrants offered under that prospectus supplement may differ from the terms
described below. However, no prospectus supplement shall fundamentally change the terms that are set forth in this prospectus or offer
a security that is not registered and described in this prospectus at the time of its effectiveness. Specific warrant agreements will
contain additional important terms and provisions and will be incorporated by reference as an exhibit to the registration statement that
includes this prospectus or as an exhibit to a report filed under the Exchange Act.
General
We
may issue warrants that entitle the holder to purchase ordinary shares, debt securities or any combination thereof. We may issue warrants
independently or together with ordinary shares, debt securities or any combination thereof, and the warrants may be attached to or separate
from these securities.
We
will describe in the applicable prospectus supplement the terms of the series of warrants, including:
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the
offering price and aggregate number of warrants offered;
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the
currency for which the warrants may be purchased, if not United States dollars;
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if
applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with
each such security or each principal amount of such security;
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if
applicable, the date on and after which the warrants and the related securities will be separately transferable;
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in
the case of warrants to purchase ordinary shares, the number of ordinary shares purchasable upon the exercise of one warrant and
the price at which these shares may be purchased upon such exercise;
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in
the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant
and the price at, and currency, if not United States dollars, in which, this principal amount of debt securities may be purchased
upon such exercise;
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the
effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
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the
terms of any rights to redeem or call the warrants;
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any
provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the
dates on which the right to exercise the warrants will commence and expire;
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the
manner in which the warrant agreement and warrants may be modified;
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federal
income tax consequences of holding or exercising the warrants;
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the
terms of the securities issuable upon exercise of the warrants; and
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any
other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before
exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise,
including:
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in
the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, or interest
on, the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture; or
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in
the case of warrants to purchase our ordinary shares, the right to receive dividends, if any, or, payments upon our liquidation,
dissolution or winding up or to exercise voting rights, if any.
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Exercise
of Warrants
Each
warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price
that we describe in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders
of the warrants may exercise the warrants at any time up to the specified time on the expiration date that we set forth in the applicable
prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Holders
of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with
specified information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable
prospectus supplement. We will set forth on the reverse side of the warrant certificate and in the applicable prospectus supplement the
information that the holder of the warrant will be required to deliver to the warrant agent.
Upon
receipt of the required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue a new
warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants
may surrender securities as all or part of the exercise price for warrants.
Enforceability
of Rights by Holders of Warrants
Each
warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship
of agency or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of
warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or
warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action
its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
Warrant
Agreements Will Not Be Qualified Under Trust Indenture Act
No
warrant agreement will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture
Act. Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect
to their warrants.
Modification
of the Warrant Agreement
The
warrant agreements may permit us and the warrant agent, if any, without the consent of the warrant holders, to supplement or amend the
agreement in the following circumstances:
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to
cure any ambiguity;
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to
correct or supplement any provision which may be defective or inconsistent with any other provisions; or
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to
add new provisions regarding matters or questions that we and the warrant agent may deem necessary or desirable and which do not
adversely affect the interests of the warrant holders.
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DESCRIPTION
OF DEBT SECURITIES
As
used in this prospectus, debt securities mean the debentures, notes, bonds and other evidences of indebtedness that we may issue from
time to time. The debt securities may be either secured or unsecured and will either be senior debt securities or subordinated debt securities.
The debt securities will be issued under one or more separate indentures between us and a trustee to be specified in an accompanying
prospectus supplement. Senior debt securities will be issued under a new senior indenture. Subordinated debt securities will be issued
under a subordinated indenture. Together, the senior indentures and the subordinated indentures are sometimes referred to in this prospectus
as the indentures. This prospectus, together with the applicable prospectus supplement, will describe the terms of a particular series
of debt securities.
The
statements and descriptions in this prospectus or in any prospectus supplement regarding provisions of the indentures and debt securities
are summaries thereof, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the indentures (and any amendments or supplements we may enter into from time to time which are permitted under each
indenture) and the debt securities, including the definitions therein of certain terms.
General
Unless
otherwise specified in a prospectus supplement, the debt securities will be direct unsecured obligations of the Company. The senior debt
securities will rank equally with any of our other senior and unsubordinated debt. The subordinated debt securities will be subordinate
and junior in right of payment to any senior indebtedness.
Unless
otherwise specified in a prospectus supplement, the indentures do not limit the aggregate principal amount of debt securities that we
may issue and provide that we may issue debt securities from time to time at par or at a discount, and in the case of the new indentures,
if any, in one or more series, with the same or various maturities. Unless indicated in a prospectus supplement, we may issue additional
debt securities of a particular series without the consent of the holders of the debt securities of such series outstanding at the time
of the issuance. Any such additional debt securities, together with all other outstanding debt securities of that series, will constitute
a single series of debt securities under the applicable indenture.
Each
prospectus supplement will describe the terms relating to the specific series of debt securities being offered. These terms will include
some or all of the following:
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the
title of the debt securities and whether they are subordinated debt securities or senior debt securities;
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any
limit on the aggregate principal amount of the debt securities;
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the
ability to issue additional debt securities of the same series;
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the
price or prices at which we will sell the debt securities;
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the
maturity date or dates of the debt securities on which principal will be payable;
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the
rate or rates of interest, if any, which may be fixed or variable, at which the debt securities will bear interest, or the method
of determining such rate or rates, if any;
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the
date or dates from which any interest will accrue or the method by which such date or dates will be determined;
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the
right, if any, to extend the interest payment periods and the duration of any such deferral period, including the maximum consecutive
period during which interest payment periods may be extended;
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whether
the amount of payments of principal of (and premium, if any) or interest on the debt securities may be determined with reference
to any index, formula or other method, such as one or more currencies, commodities, equity indices or other indices, and the manner
of determining the amount of such payments;
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the
dates on which we will pay interest on the debt securities and the regular record date for determining who is entitled to the interest
payable on any interest payment date;
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the
place or places where the principal of (and premium, if any) and interest on the debt securities will be payable, where any securities
may be surrendered for registration of transfer, exchange or conversion, as applicable, and notices and demands may be delivered
to or upon us pursuant to the indenture;
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if
we possess the option to do so, the periods within which and the prices at which we may redeem the debt securities, in whole or in
part, pursuant to optional redemption provisions, and the other terms and conditions of any such provisions;
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our
obligation, if any, to redeem, repay or purchase debt securities by making periodic payments to a sinking fund or through an analogous
provision or at the option of holders of the debt securities, and the period or periods within which and the price or prices at which
we will redeem, repay or purchase the debt securities, in whole or in part, pursuant to such obligation, and the other terms and
conditions of such obligation;
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the
denominations in which the debt securities will be issued, if other than denominations of $1,000 and integral multiples of $1,000;
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the
portion, or methods of determining the portion, of the principal amount of the debt securities which we must pay upon the acceleration
of the maturity of the debt securities in connection with an event of default (as described below), if other than the full principal
amount;
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the
currency, currencies or currency unit in which we will pay the principal of (and premium, if any) or interest, if any, on the debt
securities, if not United States dollars;
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provisions,
if any, granting special rights to holders of the debt securities upon the occurrence of specified events;
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any
deletions from, modifications of or additions to the events of default or our covenants with respect to the applicable series of
debt securities, and whether or not such events of default or covenants are consistent with those contained in the applicable indenture;
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any
limitation on our ability to incur debt, redeem shares, sell our assets or other restrictions;
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the
application, if any, of the terms of the indenture relating to defeasance and covenant defeasance (which terms are described below)
to the debt securities;
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whether
the subordination provisions summarized below or different subordination provisions will apply to the debt securities;
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the
terms, if any, upon which the holders may convert or exchange the debt securities into or for our ordinary shares or other securities
or property;
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whether
any of the debt securities will be issued in global form and, if so, the terms and conditions upon which global debt securities may
be exchanged for certificated debt securities;
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any
change in the right of the trustee or the requisite holders of debt securities to declare the principal amount thereof due and payable
because of an event of default;
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the
depository for global or certificated debt securities;
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any
special tax implications of the debt securities;
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any
foreign tax consequences applicable to the debt securities, including any debt securities denominated and made payable, as described
in the prospectus supplements, in foreign currencies, or units based on or related to foreign currencies;
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any
trustees, authenticating or paying agents, transfer agents or registrars, or other agents with respect to the debt securities;
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any
other terms of the debt securities not inconsistent with the provisions of the indentures, as amended or supplemented;
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to
whom any interest on any debt security shall be payable, if other than the person in whose name the security is registered, on the
record date for such interest, the extent to which, or the manner in which, any interest payable on a temporary global debt security
will be paid if other than in the manner provided in the applicable indenture;
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if
the principal of or any premium or interest on any debt securities of the series is to be payable in one or more currencies or currency
units other than as stated, the currency, currencies or currency units in which it shall be paid and the periods within and terms
and conditions upon which such election is to be made and the amounts payable (or the manner in which such amount shall be determined);
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the
portion of the principal amount of any securities of the series which shall be payable upon declaration of acceleration of the maturity
of the debt securities pursuant to the applicable indenture if other than the entire principal amount; and
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if
the principal amount payable at the stated maturity of any debt security of the series will not be determinable as of any one or
more dates prior to the stated maturity, the amount which shall be deemed to be the principal amount of such securities as of any
such date for any purpose, including the principal amount thereof which shall be due and payable upon any maturity other than the
stated maturity or which shall be deemed to be outstanding as of any date prior to the stated maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be determined).
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Unless
otherwise specified in the applicable prospectus supplement, the debt securities will not be listed on any securities exchange and will
be issued in fully-registered form without coupons.
Debt
securities may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. The applicable prospectus supplement will describe the federal income tax consequences
and special considerations applicable to any such debt securities. The debt securities may also be issued as indexed securities or securities
denominated in foreign currencies, currency units or composite currencies, as described in more detail in the prospectus supplement relating
to any of the particular debt securities. The prospectus supplement relating to specific debt securities will also describe any special
considerations and certain additional tax considerations applicable to such debt securities.
Subordination
The
prospectus supplement relating to any offering of subordinated debt securities will describe the specific subordination provisions. However,
unless otherwise noted in the prospectus supplement, subordinated debt securities will be subordinate and junior in right of payment
to any existing senior indebtedness.
Unless
otherwise specified in the applicable prospectus supplement, under the subordinated indenture, “senior indebtedness” means
all amounts due on obligations in connection with any of the following, whether outstanding at the date of execution of the subordinated
indenture, or thereafter incurred or created:
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the
principal of (and premium, if any) and interest due on our indebtedness for borrowed money and indebtedness evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
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all
of our capital lease obligations or attributable debt (as defined in the indentures) in respect of sale and leaseback transactions;
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all
obligations representing the balance deferred and unpaid of the purchase price of any property or services, which purchase price
is due more than six months after the date of placing such property in service or taking delivery and title thereto, except any such
balance that constitutes an accrued expense or trade payable or any similar obligation to trade creditors;
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all
of our obligations in respect of interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest
rate cap agreements and interest rate collar agreements; other agreements or arrangements designed to manage interest rates or interest
rate risk; and other agreements or arrangements designed to protect against fluctuations in currency exchange rates or commodity
prices;
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all
obligations of the types referred to above of other persons for the payment of which we are responsible or liable as obligor, guarantor
or otherwise; and
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all
obligations of the types referred to above of other persons secured by any lien on any property or asset of ours (whether or not
such obligation is assumed by us).
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However,
senior indebtedness does not include:
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any
indebtedness which expressly provides that such indebtedness shall not be senior in right of payment to the subordinated debt securities,
or that such indebtedness shall be subordinated to any other of our indebtedness, unless such indebtedness expressly provides that
such indebtedness shall be senior in right of payment to the subordinated debt securities;
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any
of our obligations to our subsidiaries or of a subsidiary guarantor to us or any other of our other subsidiaries;
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any
liability for federal, state, local or other taxes owed or owing by us or any subsidiary guarantor,
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any
accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
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any
obligations with respect to any capital stock;
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any
indebtedness incurred in violation of the indenture, provided that indebtedness under our credit facilities will not cease to be
senior indebtedness under this bullet point if the lenders of such indebtedness obtained an officer’s certificate as of the
date of incurrence of such indebtedness to the effect that such indebtedness was permitted to be incurred by the indenture; and
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any
of our indebtedness in respect of the subordinated debt securities.
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Senior
indebtedness shall continue to be senior indebtedness and be entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of such senior indebtedness.
Unless
otherwise noted in an accompanying prospectus supplement, if we default in the payment of any principal of (or premium, if any) or interest
on any senior indebtedness when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or
otherwise, then, unless and until such default is cured or waived or ceases to exist, we will make no direct or indirect payment (in
cash, property, securities, by set-off or otherwise) in respect of the principal of or interest on the subordinated debt securities or
in respect of any redemption, retirement, purchase or other requisition of any of the subordinated debt securities.
In
the event of the acceleration of the maturity of any subordinated debt securities, the holders of all senior debt securities outstanding
at the time of such acceleration, subject to any security interest, will first be entitled to receive payment in full of all amounts
due on the senior debt securities before the holders of the subordinated debt securities will be entitled to receive any payment of principal
(and premium, if any) or interest on the subordinated debt securities.
If
any of the following events occurs, we will pay in full all senior indebtedness before we make any payment or distribution under the
subordinated debt securities, whether in cash, securities or other property, to any holder of subordinated debt securities:
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any
dissolution or winding-up or liquidation or reorganization of China Internet Nationwide Financial Service, Inc. whether voluntary
or involuntary or in bankruptcy,
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insolvency
or receivership;
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any
general assignment by us for the benefit of creditors; or
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any
other marshaling of our assets or liabilities.
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In
such event, any payment or distribution under the subordinated debt securities, whether in cash, securities or other property, which
would otherwise (but for the subordination provisions) be payable or deliverable in respect of the subordinated debt securities, will
be paid or delivered directly to the holders of senior indebtedness in accordance with the priorities then existing among such holders
until all senior indebtedness has been paid in full. If any payment or distribution under the subordinated debt securities is received
by the trustee of any subordinated debt securities in contravention of any of the terms of the subordinated indenture and before all
the senior indebtedness has been paid in full, such payment or distribution will be received in trust for the benefit of, and paid over
or delivered and transferred to, the holders of the senior indebtedness at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all senior indebtedness remaining unpaid to the extent necessary to pay
all such senior indebtedness in full.
The
subordinated indenture does not limit the issuance of additional senior indebtedness.
Events
of Default, Notice and Waiver
Unless
an accompanying prospectus supplement states otherwise, the following shall constitute “events of default” under the indentures
with respect to each series of debt securities:
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we
default for 30 consecutive days in the payment when due of interest on the debt securities;
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we
default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the debt
securities;
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our
failure to observe or perform any other of our covenants or agreements with respect to such debt securities for 60 days after we
receive notice of such failure;
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certain
events of bankruptcy, insolvency or reorganization of the China Internet Nationwide Financial
Services,
Inc.; or
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any
other event of default provided with respect to securities of that series.
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Unless
an accompanying prospectus supplement states otherwise, if an event of default with respect to any debt securities of any series outstanding
under either of the indentures shall occur and be continuing, the trustee under such indenture or the holders of at least 25% (or at
least 10%, in respect of a remedy (other than acceleration) for certain events of default relating to the payment of dividends) in aggregate
principal amount of the debt securities of that series outstanding may declare, by notice as provided in the applicable indenture, the
principal amount (or such lesser amount as may be provided for in the debt securities of that series) of all the debt securities of that
series outstanding to be due and payable immediately; provided that, in the case of an event of default involving certain events in bankruptcy,
insolvency or reorganization, acceleration is automatic; and, provided further, that after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate principal amount of the outstanding debt securities of that series
may, under certain circumstances, rescind and annul such acceleration if all events of default, other than the nonpayment of accelerated
principal, have been cured or waived. Upon the acceleration of the maturity of original issue discount securities, an amount less than
the principal amount thereof will become due and payable. Reference is made to the prospectus supplement relating to any original issue
discount securities for the particular provisions relating to acceleration of maturity thereof.
Any
past default under either indenture with respect to debt securities of any series, and any event of default arising therefrom, may be
waived by the holders of a majority in principal amount of all debt securities of such series outstanding under such indenture, except
in the case of (1) default in the payment of the principal of (or premium, if any) or interest on any debt securities of such series
or (2) certain events of default relating to the payment of dividends.
The
trustee is required within 90 days after the occurrence of a default (which is known to the trustee and is continuing), with respect
to the debt securities of any series (without regard to any grace period or notice requirements), to give to the holders of the debt
securities of such series notice of such default.
The
trustee, subject to its duties during default to act with the required standard of care, may require indemnification by the holders of
the debt securities of any series with respect to which a default has occurred before proceeding to exercise any right or power under
the indentures at the request of the holders of the debt securities of such series. Subject to such right of indemnification and to certain
other limitations, the holders of a majority in principal amount of the outstanding debt securities of any series under either indenture
may direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee with respect to the debt securities of such series, provided that such direction shall not be in conflict
with any rule of law or with the applicable indenture and the trustee may take any other action deemed proper by the trustee which is
not inconsistent with such direction.
No
holder of a debt security of any series may institute any action against us under either of the indentures (except actions for payment
of overdue principal of (and premium, if any) or interest on such debt security or for the conversion or exchange of such debt security
in accordance with its terms) unless (1) the holder has given to the trustee written notice of an event of default and of the continuance
thereof with respect to the debt securities of such series specifying an event of default, as required under the applicable indenture,
(2) the holders of at least 25% in aggregate principal amount of the debt securities of that series then outstanding under such indenture
shall have requested the trustee to institute such action and offered to the trustee indemnity reasonably satisfactory to it against
the costs, expenses and liabilities to be incurred in compliance with such request; (3) the trustee shall not have instituted such action
within 60 days of such request and (4) no direction inconsistent with such written request has been given to the trustee during such
60-day period by the holders of a majority in principal amount of the debt securities of that series. We are required to furnish annually
to the trustee statements as to our compliance with all conditions and covenants under each indenture.
Discharge,
Defeasance and Covenant Defeasance
We
may discharge or defease our obligations under the indenture as set forth below, unless otherwise indicated in the applicable prospectus
supplement.
We
may discharge certain obligations to holders of any series of debt securities issued under either the senior indenture or the subordinated
indenture which have not already been delivered to the trustee for cancellation by irrevocably depositing with the trustee money in an
amount sufficient to pay and discharge the entire indebtedness on such debt securities not previously delivered to the trustee for cancellation,
for principal and any premium and interest to the date of such deposit (in the case of debt securities which have become due and payable)
or to the stated maturity or redemption date, as the case may be, and we or, if applicable, any guarantor, have paid all other sums payable
under the applicable indenture.
If
indicated in the applicable prospectus supplement, we may elect either (1) to defease and be discharged from any and all obligations
with respect to the debt securities of or within any series (except in all cases as otherwise provided in the relevant indenture) (“legal
defeasance”) or (2) to be released from our obligations with respect to certain covenants applicable to the debt securities of
or within any series (“covenant defeasance”), upon the deposit with the relevant indenture trustee, in trust for such purpose,
of money and/or government obligations which through the payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of (and premium, if any) or interest on such debt securities to maturity or redemption,
as the case may be, and any mandatory sinking fund or analogous payments thereon. As a condition to legal defeasance or covenant defeasance,
we must deliver to the trustee an opinion of counsel to the effect that the holders of such debt securities will not recognize income,
gain or loss for federal income tax purposes as a result of such legal defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts and in the same manner and at the same times as would have been the case if such legal defeasance or covenant
defeasance had not occurred. Such opinion of counsel, in the case of legal defeasance under clause (i) above, must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable federal income tax law occurring after the date of the relevant
indenture. In addition, in the case of either legal defeasance or covenant defeasance, we shall have delivered to the trustee (1) if
applicable, an officer’s certificate to the effect that the relevant debt securities exchange(s) have informed us that neither
such debt securities nor any other debt securities of the same series, if then listed on any securities exchange, will be delisted as
a result of such deposit and (2) an officer’s certificate and an opinion of counsel, each stating that all conditions precedent
with respect to such legal defeasance or covenant defeasance have been complied with.
We
may exercise our defeasance option with respect to such debt securities notwithstanding our prior exercise of our covenant defeasance
option.
Modification
and Waiver
Under
the indentures, unless an accompanying prospectus supplement states otherwise, we and the applicable trustee may supplement the indentures
for certain purposes which would not materially adversely affect the interests or rights of the holders of debt securities of a series
without the consent of those holders. We and the applicable trustee may also modify the indentures or any supplemental indenture in a
manner that affects the interests or rights of the holders of debt securities with the consent of the holders of at least a majority
in aggregate principal amount of the outstanding debt securities of each affected series issued under the indenture. However, the indentures
require the consent of each holder of debt securities that would be affected by any modification which would:
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reduce
the principal amount of debt securities whose holders must consent to an amendment, supplement or waiver;
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reduce
the principal of or change the fixed maturity of any debt security or, except as provided in any prospectus supplement, alter or
waive any of the provisions with respect to the redemption of the debt securities;
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reduce
the rate of or change the time for payment of interest, including default interest, on any debt security;
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waive
a default or event of default in the payment of principal of or interest or premium, if any, on, the debt securities (except a rescission
of acceleration of the debt securities by the holders of at least a majority in aggregate principal amount of the then outstanding
debt securities and a waiver of the payment default that resulted from such acceleration);
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make
any debt security payable in money other than that stated in the debt securities;
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make
any change in the provisions of the applicable indenture relating to waivers of past defaults or the rights of holders of the debt
securities to receive payments of principal of, or interest or premium, if any, on, the debt securities;
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waive
a redemption payment with respect to any debt security (except as otherwise provided in the applicable prospectus supplement);
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except
in connection with an offer by us to purchase all debt securities, (1) waive certain events of default relating to the payment of
dividends or (2) amend certain covenants relating to the payment of dividends and the purchase or redemption of certain equity interests;
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make
any change to the subordination or ranking provisions of the indenture or the related definitions that adversely affect the rights
of any holder; or
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●
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make
any change in the preceding amendment and waiver provisions.
|
The
indentures permit the holders of at least a majority in aggregate principal amount of the outstanding debt securities of any series issued
under the indenture which is affected by the modification or amendment to waive our compliance with certain covenants contained in the
indentures.
Payment
and Paying Agents
Unless
otherwise indicated in the applicable prospectus supplement, payment of interest on a debt security on any interest payment date will
be made to the person in whose name a debt security is registered at the close of business on the record date for the interest.
Unless
otherwise indicated in the applicable prospectus supplement, principal, interest and premium on the debt securities of a particular series
will be payable at the office of such paying agent or paying agents as we may designate for such purpose from time to time. Notwithstanding
the foregoing, at our option, payment of any interest may be made by check mailed to the address of the person entitled thereto as such
address appears in the security register.
Unless
otherwise indicated in the applicable prospectus supplement, a paying agent designated by us will act as paying agent for payments with
respect to debt securities of each series. All paying agents initially designated by us for the debt securities of a particular series
will be named in the applicable prospectus supplement. We may at any time designate additional paying agents or rescind the designation
of any paying agent or approve a change in the office through which any paying agent acts, except that we will be required to maintain
a paying agent in each place of payment for the debt securities of a particular series.
All
moneys paid by us to a paying agent for the payment of the principal, interest or premium on any debt security which remain unclaimed
at the end of two years after such principal, interest or premium has become due and payable will be repaid to us upon request, and the
holder of such debt security thereafter may look only to us for payment thereof.
Denominations,
Registrations and Transfer
Unless
an accompanying prospectus supplement states otherwise, debt securities will be represented by one or more global certificates registered
in the name of a nominee for The Depository Trust Company, or DTC. In such case, each holder’s beneficial interest in the global
securities will be shown on the records of DTC and transfers of beneficial interests will only be effected through DTC’s records.
A
holder of debt securities may only exchange a beneficial interest in a global security for certificated securities registered in the
holder’s name if:
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●
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we
deliver to the trustee notice from DTC that it is unwilling or unable to continue to act as depository or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a successor depositary is not appointed by us within 120 days
after the date of such notice from DTC;
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|
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●
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we
in our sole discretion determine that the debt securities (in whole but not in part) should be exchanged for definitive debt securities
and deliver a written notice to such effect to the trustee; or
|
|
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●
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there
has occurred and is continuing a default or event of default with respect to the debt securities.
|
If
debt securities are issued in certificated form, they will only be issued in the minimum denomination specified in the accompanying prospectus
supplement and integral multiples of such denomination. Transfers and exchanges of such debt securities will only be permitted in such
minimum denomination. Transfers of debt securities in certificated form may be registered at the trustee’s corporate office or
at the offices of any paying agent or trustee appointed by us under the indentures. Exchanges of debt securities for an equal aggregate
principal amount of debt securities in different denominations may also be made at such locations.
Governing
Law
The
indentures and debt securities will be governed by, and construed in accordance with, the laws of the State of New York, without regard
to its principles of conflicts of laws, except to the extent the Trust Indenture Act is applicable or as otherwise agreed to by the parties
thereto.
Trustee
The
trustee or trustees under the indentures will be named in any applicable prospectus supplement.
Conversion
or Exchange Rights
The
prospectus supplement will describe the terms, if any, on which a series of debt securities may be convertible into or exchangeable for
our ordinary shares or other debt securities. These terms will include provisions as to whether conversion or exchange is mandatory,
at the option of the holder or at our option. These provisions may allow or require the number of shares of our ordinary shares or other
securities to be received by the holders of such series of debt securities to be adjusted. Any such conversion or exchange will comply
with applicable BVI Law and our memorandum and articles of association.
DESCRIPTION
OF UNITS
We
may issue units comprising one or more of the other securities described in this prospectus in any combination. Each unit will be issued
so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights
and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities
included in the unit may not be held or transferred separately, at any time or at any time before a specified date or occurrence.
The
applicable prospectus supplement may describe:
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●
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the
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those
securities may be held or transferred separately;
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●
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any
provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and
|
|
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●
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whether
the units will be issued in fully registered or global form.
|
The
applicable prospectus supplement will describe the terms of any units. The preceding description and any description of units in the
applicable prospectus supplement does not purport to be complete and is subject to and is qualified in its entirety by reference to the
unit agreement and, if applicable, collateral arrangements and depository arrangements relating to such units.
DESCRIPTION
OF SHARE PURCHASE CONTRACTS AND SHARE PURCHASE UNITS
We
may issue share purchase contracts, including contracts obligating holders to purchase from us, and obligating us to sell to the holders,
a specified number of ordinary shares or other securities registered hereunder at a future date or dates, which we refer to in this prospectus
as “share purchase contracts.” The price per share of the securities and the number of shares of the securities may be fixed
at the time the share purchase contracts are issued or may be determined by reference to a specific formula set forth in the share purchase
contracts.
The
share purchase contracts may be issued separately or as part of units consisting of a share purchase contract and debt securities, warrants,
other securities registered hereunder or debt obligations of third parties, including U.S. treasury securities, securing the holders’
obligations to purchase the securities under the share purchase contracts, which we refer to herein as “share purchase units.”
The share purchase contracts may require holders to secure their obligations under the share purchase contracts in a specified manner.
The share purchase contracts also may require us to make periodic payments to the holders of the share purchase units or vice versa,
and those payments may be unsecured or refunded on some basis.
The
share purchase contracts, and, if applicable, collateral or depositary arrangements, relating to the share purchase contracts or share
purchase units, will be filed with the SEC in connection with the offering of share purchase contracts or share purchase units. The prospectus
supplement relating to a particular issue of share purchase contracts or share purchase units will describe the terms of those share
purchase contracts or share purchase units, including the following:
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●
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if
applicable, a discussion of material tax considerations; and
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●
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any
other information we think is important about the share purchase contracts or the share purchase units.
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DESCRIPTION
OF RIGHTS
We
may issue rights to purchase ordinary shares that we may offer to our securityholders. The rights may or may not be transferable by the
persons purchasing or receiving the rights. In connection with any rights offering, we may enter into a standby underwriting or other
arrangement with one or more underwriters or other persons pursuant to which such underwriters or other persons would purchase any offered
securities remaining unsubscribed for after such rights offering. Each series of rights will be issued under a separate rights agent
agreement to be entered into between us and a bank or trust company, as rights agent, that we will name in the applicable prospectus
supplement. The rights agent will act solely as our agent in connection with the rights and will not assume any obligation or relationship
of agency or trust for or with any holders of rights certificates or beneficial owners of rights.
The
prospectus supplement relating to any rights that we offer will include specific terms relating to the offering, including, among other
matters:
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●
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the
date of determining the securityholders entitled to the rights distribution;
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●
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the
aggregate number of rights issued and the aggregate number of ordinary shares purchasable upon exercise of the rights;
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●
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the
exercise price;
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●
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the
conditions to completion of the rights offering;
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●
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the
date on which the right to exercise the rights will commence and the date on which the rights will expire; and
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●
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applicable
tax considerations.
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Each
right would entitle the holder of the rights to purchase for cash the principal amount of debt securities or ordinary shares at the exercise
price set forth in the applicable prospectus supplement. Rights may be exercised at any time up to the close of business on the expiration
date for the rights provided in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised
rights will become void.
If
less than all of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to persons
other than our security holders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant
to standby arrangements, as described in the applicable prospectus supplement.
TAXATION
Information
regarding taxation is set forth under the heading “Item 10.E. Taxation” in our Annual Report, as amended, on Form 20-F for
the year ended December 31, 2018, which is incorporated in this prospectus by reference, as updated by our subsequent filings under the
Exchange Act.
PLAN
OF DISTRIBUTION
We
may sell the securities described in this prospectus through underwriters or dealers, through agents, or directly to one or more purchasers
or through a combination of these methods. The applicable prospectus supplement will describe the terms of the offering of the securities,
including:
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●
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the
name or names of any underwriters, if any, and if required, any dealers or agents, and the amount of securities underwritten or purchased
by each of them, if any;
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●
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the
public offering price or purchase price of the securities from us and the net proceeds to us from the sale of the securities;
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●
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any
underwriting discounts and other items constituting underwriters’ compensation;
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●
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any
discounts or concessions allowed or re-allowed or paid to dealers; and
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●
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any
securities exchange or market on which the securities may be listed.
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We
may distribute the securities from time to time in one or more transactions at:
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●
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a
fixed price or prices, which may be changed;
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●
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market
prices prevailing at the time of sale;
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●
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varying
prices determined at the time of sale related to such prevailing market prices; or
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●
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negotiated
prices.
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Only
underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
If
we use underwriters in the sale, the underwriters will either acquire the securities for their own account and may resell the securities
from time to time in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale, or
sell the shares on a “best efforts, minimum/maximum basis” when the underwriters agree to do their best to sell the securities
to the public. We may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Any public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may change from
time to time.
If
we use a dealer in the sale of the securities being offered pursuant to this prospectus or any prospectus supplement, the securities
will be sold directly to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined
by the dealer at the time of resale.
Our
ordinary shares are listed on the Nasdaq Global Market. Unless otherwise specified in the related prospectus supplement, all securities
we offer, other than ordinary shares, will be new issues of securities with no established trading market. Any underwriter may make a
market in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice. We may
apply to list any series of warrants or other securities that we offer on an exchange, but we are not obligated to do so. Therefore,
there may not be liquidity or a trading market for any series of securities.
We
may sell the securities directly or through agents we designate from time to time. We will name any agent involved in the offering and
sale of securities and we will describe any commissions we may pay the agent in the applicable prospectus supplement.
We
may authorize agents or underwriters to solicit offers by institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts
in the applicable prospectus supplement.
In
connection with the sale of the securities, underwriters, dealers or agents may receive compensation from us or from purchasers of the
securities for whom they act as agents in the form of discounts, concessions or commissions. Underwriters may sell the securities to
or through dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters
or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution
of the securities, and any institutional investors or others that purchase securities directly and then resell the securities, may be
deemed to be underwriters, and any discounts or commissions received by them from us and any profit on the resale of the securities by
them may be deemed to be underwriting discounts and commissions under the Securities Act.
We
may provide agents and underwriters with indemnification against particular civil liabilities, including liabilities under the Securities
Act, or contribution with respect to payments that the agents or underwriters may make with respect to such liabilities. Agents and underwriters
may engage in transactions with, or perform services for, us in the ordinary course of business.
In
addition, we may enter into derivative transactions with third parties (including the writing of options), or sell securities not covered
by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection
with such a transaction, the third parties may, pursuant to this prospectus and the applicable prospectus supplement, sell securities
covered by this prospectus and the applicable prospectus supplement. If so, the third party may use securities borrowed from us or others
to settle such sales and may use securities received from us to close out any related short positions. We may also loan or pledge securities
covered by this prospectus and the applicable prospectus supplement to third parties, who may sell the loaned securities or, in an event
of default in the case of a pledge, sell the pledged securities pursuant to this prospectus and the applicable prospectus supplement.
The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement or in
a post-effective amendment.
To
facilitate an offering of a series of securities, persons participating in the offering may engage in transactions that stabilize, maintain,
or otherwise affect the market price of the securities. This may include over-allotments or short sales of the securities, which involves
the sale by persons participating in the offering of more securities than have been sold to them by us. In those circumstances, such
persons would cover such over-allotments or short positions by purchasing in the open market or by exercising the over-allotment option
granted to those persons. In addition, those persons may stabilize or maintain the price of the securities by bidding for or purchasing
securities in the open market or by imposing penalty bids, whereby selling concessions allowed to underwriters or dealers participating
in any such offering may be reclaimed if securities sold by them are repurchased in connection with stabilization transactions. The effect
of these transactions may be to stabilize or maintain the market price of the securities at a level above that which might otherwise
prevail in the open market. Such transactions, if commenced, may be discontinued at any time. We make no representation or prediction
as to the direction or magnitude of any effect that the transactions described above, if implemented, may have on the price of our securities.
EXPENSES
The
following table sets forth the estimated costs and expenses, other than underwriting discounts and commissions, payable by us in connection
with the offering of the securities being registered. All the amounts shown are estimates, except for the SEC registration fee.
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SEC
registration fee
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$
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6,060
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|
|
FINRA
fee
|
|
$
|
*
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|
Legal
fees and expenses
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|
$
|
*
|
|
|
Accounting
fees and expenses
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|
$
|
*
|
|
|
Printing
fees and expenses
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|
$
|
*
|
|
|
Miscellaneous
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|
$
|
*
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|
|
Total
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|
$
|
6,060
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|
*
Estimated expenses are not presently known. The foregoing sets forth the general categories of expenses (other than underwriting discounts
and commissions) that the Company anticipates it will incur in connection with the offering of securities under the registration statement.
An estimate of the aggregate expenses in connection with the issuance and distribution of the securities being offered will be included
in the applicable prospectus supplement.
WHERE
YOU CAN GET MORE INFORMATION
We
have filed with the SEC a registration statement on Form F-3 under the Securities Act with respect to the securities described in this
prospectus and any accompanying prospectus supplement, as applicable. This prospectus and any accompanying prospectus supplement, which
constitute a part of that registration statement, do not contain all of the information set forth in that registration statement and
its exhibits. For further information with respect to us and our securities, you should consult the registration statement and its exhibits.
We
are subject to the informational requirements of the Exchange Act, and, in accordance with the Exchange Act, we also must file reports
with, and furnish other information to, the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required to publish financial
statements as promptly as U.S. companies. However, we file with the SEC an annual report on Form 20-F containing financial statements
audited by an independent registered public accounting firm, and we submit to the SEC, on Form 6-K, unaudited interim financial information.
You
may read and copy any document we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains an internet
site (www.sec.gov) that makes available reports and other information that we file or furnish electronically with it.
INCORPORATION
BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus the documents we file with, or furnish to, it, which means
that we can disclose important information to you by referring you to these documents. The information that we incorporate by reference
into this prospectus forms a part of this prospectus, and information that we file later with the SEC automatically updates and supersedes
any information in this prospectus. We incorporate by reference into this prospectus the documents listed below:
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●
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our
Annual Report on Form
20-F for the fiscal year ended December 31, 2018 filed with the SEC on May 10, 2019
|
All
documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and
prior to the termination of the offering of the securities offered by this prospectus are incorporated by reference into this prospectus
and form part of this prospectus from the date of filing or furnishing of these documents. Any documents that we furnish to the SEC on
Form 6-K subsequent to the date of this prospectus will be incorporated by reference into this prospectus only to the extent specifically
set forth in the Form 6-K.
Any
statement contained in a document that is incorporated by reference into this prospectus will be deemed to be modified or superseded
for the purposes of this prospectus to the extent that a statement contained in this prospectus, or in any other subsequently filed document
which also is or is deemed to be incorporated by reference into this prospectus, modifies or supersedes that statement. The modifying
or superseding statement does not need to state that it has modified or superseded a prior statement or include any other information
set forth in the document that it modifies or supersedes.
Upon
request, we will provide, without charge, to each person who receives this prospectus, a copy of any or all of the documents incorporated
by reference (other than exhibits to the documents that are not specifically incorporated by reference in the documents). Please direct
written or oral requests for copies to our Chief Executive Officer at 19 West 44th Street, Suite 1001, New York, NY 10036.
ENFORCEABILITY
OF CIVIL LIABILITIES
We
are incorporated under the laws of the British Virgin Islands with limited liability. We are incorporated in the British Virgin Islands
because of certain benefits associated with being a British Virgin Islands company, such as 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, the British Virgin Islands has a less developed body of securities laws as compared to the United States
and provides protections for investors to a lesser extent. In addition, British Virgin Islands companies may not have standing to sue
before the federal courts of the United States.
Substantially
all of our assets are located outside the United States. In addition, a majority of our directors and officers are nationals and/or residents
of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United
States. As a result, it may be difficult for investors to effect service of process within the United States upon us or such persons
or to enforce against them or against us, 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 thereof.
We
have appointed Transhare Securities Transfer and Registrar, as our agent to receive service of process with respect to any action brought
against us in the United States District Court for districts in the State of New York under the federal securities laws of the United
States or of any State of the United States or any action brought against us in the Supreme Court of the State of New York under the
securities laws of the State of New York.
There
is uncertainty as to whether the courts of China would (1) recognize or enforce judgments of United States courts obtained against us
or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or (2)
be competent to hear original actions brought in each respective jurisdiction, against us or such persons predicated upon the securities
laws of the United States or any state thereof.
The
recognition and enforcement of foreign judgments are provided for under the Chinese Civil Procedure Law. Chinese courts may recognize
and enforce foreign judgments in accordance with the requirements of the Chinese Civil Procedure Law based either on treaties between
China and the country where the judgment is made or in reciprocity between jurisdictions. China does not have any treaties or other agreements
with the British Virgin Islands or the United States that provide for the reciprocal recognition and enforcement of foreign judgments.
As a result, it is uncertain whether a Chinese court would enforce a judgment rendered by a court in either of these two jurisdictions.
The
United States and the British Virgin Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of
courts of the United States in civil and commercial matters and that a final judgment for the payment of money rendered by any general
or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws,
may not be enforceable in the British Virgin Islands. A final and conclusive judgment obtained in U.S. federal or state courts under
which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a revenue authority for taxes or other charges
of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) may be the subject
of an action on a debt in the court of the British Virgin Islands.
MATERIAL
CHANGES
Except
as otherwise described in our Annual Report on Form 20-F for the fiscal year ended December 31, 2018, in our Reports on Form 6-K filed
or submitted under the Exchange Act and incorporated by reference herein and as disclosed in this prospectus, no reportable material
changes have occurred since December 31, 2018.
LEGAL
MATTERS
Sichenzia
Ross Ference LLP is acting as counsel to our company regarding U.S. securities law matters. The current address of Sichenzia Ross Ference
LLP is 1185 Avenue of the Americas, 37th
Floor, New York, NY 10036. Harney Westwood & Riegels LP
is acting as our British Virgin Islands counsel. The current address of Harney Westwood & Riegels LP is Craigmuir Chambers, PO Box
71, Road Town, Tortola VG1110, British Virgin Islands. Any underwriters or placement agents will be represented by their own counsel.
EXPERTS
Our
consolidated financial statements as of December 31, 2018 and for the year then ended incorporated by reference in this prospectus and
have been so included in reliance on the reports of Wei, Wei & Co., LLP, as our independent registered public accounting firm, given
on the authority of said firms as experts in accounting and auditing. The current address of Wei, Wei & Co., LLP is 133-10 39th Ave,
Flushing, NY 11354.
Our
consolidated financial statements as of December 31, 2017 and for the year then ended incorporated by reference in this prospectus and
have been so included in reliance on the report of Marcum Bernstein & Pinchuk LLP, as independent registered public accounting firm,
given on the authority of said firm as expert in accounting and auditing. The current address of Marcum Bernstein & Pinchuk LLP is
7 Pennsylvania Plaza Suite 830, New York, NY 10001.
INTERESTS
OF EXPERTS AND COUNSEL
No
named expert of or counselor to us was employed on a contingent basis, or owns an amount of our shares (or those of our subsidiaries)
which is material to that person, or has a material, direct or indirect economic interest in us or that depends of the success of the
offering.
COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
Warrants
to Purchase 677,750 Ordinary Shares
HUDSON
CAPITAL INC.
PROSPECTUS
SUPPLEMENT
February
10, 2022
Hudson Capital (NASDAQ:HUSN)
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Hudson Capital (NASDAQ:HUSN)
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