ITEM
1. BUSINESS
Introduction
Goldenbridge
Acquisition Limited (“Goldenbridge,” “we,” or “us”) is a British Virgin Islands exempted company
incorporated on August 12, 2019 as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition,
stock purchase, recapitalization, reorganization or other similar business combination, with one or more target businesses. Our efforts
to identify a prospective target business will not be limited to a particular industry or geographic region, although we currently intend
to focus on opportunities in the artificial intelligence and any other related technology innovations market.
As
a holding company with no material operations of our own, Goldenbridge Acquisition Limited conducts our operations through an office
space in Hong Kong and our sponsor and certain of our executive officers and/or directors are located in or have significant ties to
Hong Kong. As a result of us having certain of our executive officers and/or directors located in or with significant ties to Hong Kong,
there is a risk this could result in a material change to the Company’s or the business combination target’s post-combination
operations.
Goldenbridge is not a Chinese operating company,
but an offshore holding company incorporated in the British Virgin Islands (“BVI”). As a holding company with no material
operation of our own, we conduct our operations through an office space in Hong Kong. We currently do not have or intend to have any contractual
arrangement to establish a variable interest entity (“VIE”) structure with any entity in China.
Because our operations are primarily conducted
through an office space located in Hong Kong and our sponsor and certain of our executive officers and/or directors are located in or
have significant ties to Hong Kong, we may be subject to unique risks due to uncertainty of the interpretation and the application of
the PRC laws and regulations, including but not limited to the cybersecurity review and regulatory review of oversea listing of our ordinary
shares through an offshore holding company. We are also subject to the risks of uncertainty about any future actions of the Chinese government
or authorities in Hong Kong in this regard. Should the Chinese government choose to exercise significant oversight and discretion over
the conduct of our business, they may intervene in or influence our operations. Such governmental actions:
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could result in a material change in our operations and/or the value of our ordinary shares; |
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could significantly limit or completely hinder our ability to continue our operations; |
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could significantly limit or hinder our ability to offer or continue to offer our ordinary shares to investors; and |
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may cause the value of our ordinary shares to significantly decline or be worthless. |
We are aware that recently, the PRC government
initiated a series of regulatory actions and statements to regulate business operations in certain areas in China with little advance
notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed
overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the
efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon the legislative
or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations
will be modified or promulgated, if any. It is also highly uncertain what the potential impact such modified or new laws and regulations
will have on Goldenbridge’s daily business operation, its ability to accept foreign investments and the listing of our ordinary
shares on a U.S. or other foreign exchanges. These actions could result in a material change in our operations and/or the value of our
ordinary shares and could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors.
Based on our understanding of the current PRC
laws, as of the date of this annual report, Goldenbridge is not required to obtain any permissions or approvals from any PRC authorities
before listing in the U.S. and to issue our ordinary shares to foreign investors, including the Cyberspace Administration of China (the
“CAC”) or the China Securities Regulatory Commission (the “CSRC”) because (i) the CSRC currently has not issued
any definitive rule or interpretation concerning whether offerings like ours are subject to this regulation; and (ii) Goldenbridge operates
through an office space located in Hong Kong and is not included in the categories of industries and companies whose foreign securities
offerings are subject to review by the CSRC or the CAC. However, we believe that uncertainties still exist, due to the possibility that
laws, regulations, or policies in the PRC could change rapidly in the future. In the event that (i) the PRC government expanded the categories
of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC and that we are required to
obtain such permissions or approvals; or (ii) we inadvertently concluded that relevant permissions or approvals were not required or that
we did not receive or maintain relevant permissions or approvals required, any action taken by the PRC government could significantly
limit or completely hinder our operations in Hong Kong and our ability to offer or continue to offer securities to investors and could
cause the value of such securities to significantly decline or be worthless.
If
our target company is a company located in the People’s Republic of China, or PRC, or Hong Kong, or PRC Target Company, we are
subjected to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited
to limitation on foreign ownership of certain industries, and regulatory review of an overseas listing of PRC companies through a special
purpose vehicle, and the validity and enforcement of the agreements with a variable interest entity, or VIE, if our PRC Target Company
requires any of these legal requirements post business combination by us. We are also subjected to the risks of uncertainty about any
future actions of the PRC government in this regard. We may also be subject to sanctions imposed by PRC regulatory agencies including
the Chinese Securities Regulatory Commission, or CSRC, if our PRC Target Company fails to comply with their rules and regulations. If
the Chinse regulatory authorities disallow the VIE structure (as defined below) in the future, it will likely result in a material change
in our financial performance and our results of operations and/or the value of our securities post business combination if our PRC Target
Company requires a VIE structure, which could cause the value of such securities to significantly decline or become worthless. For a
detailed description of the risks relating to the VIE structure, doing business in the PRC or Hong Kong, and investment in our company
as a result of the structure, see “Risks Associated with Acquiring and Operating a Target Business with its Primary Operation
in China.” Additionally, we might be subjected to certain legal and operational risks associated with VIE’s operations
in China if our PRC Target Company requires a VIE structure. PRC laws and regulations governing our PRC Target Company’s current
business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in VIE’s operations,
significant depreciation of the value of our securities, or a complete hindrance of our ability to offer or continue to offer our securities
to investors. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in
China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over
China-based companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and
expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how
soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations
and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will
have on the PRC Target Company’s daily business operation, the ability to accept foreign investments and list on an U.S. or other
foreign exchange. For a detailed description of the risks associated with being based in China, see “Risk Factors — Risks
Associated with Acquiring and Operating a Target Business with its Primary Operation in China.”
Furthermore,
if we consummate an initial business combination with PRC Target Company or a company located in Hong Kong, we may use a corporate structure
without direct equity ownership held by foreign investors. Therefore, a series of contractual arrangements may be entered into between
the PRC operating entities, which are consolidated variable interest entities (the “VIEs”) of the combined company, as well
as the VIEs’ founders and owners, on one side, and a PRC subsidiary of the combined company which may be a company incorporated
in the British Virgin Islands, on the other side. To the extent that the combined company conducts its operations in China through its
PRC subsidiaries and VIEs, such corporate structure involves unique risks to investors after the business combination, as the combined
company does not hold any direct equity interest in the PRC operating entities. All of these contractual arrangements may be governed
by and interpreted in accordance with PRC law, and disputes arising from these contractual arrangements may be resolved in court or through
arbitration in China. However, the legal environment in the PRC is not as developed as in some other jurisdictions, such as the United
States. As a result, uncertainties in the PRC legal system could limit our ability to enforce the contractual arrangements. As of the
date of this report, there are very few precedents and little official guidance as to how contractual arrangements should be interpreted
or enforced under PRC law. The contractual arrangements have not been widely tested in a court of law in the PRC and there remain significant
uncertainties regarding the ultimate outcome of arbitration should legal action become necessary. As such, if we enter into a business
combination with a China-based business utilizing a VIE structure, we and investors may face significant uncertainty about potential
future actions by the PRC government that could affect the legality and enforceability of the contractual arrangements with the VIEs
and, consequently, significantly affect the financial performance of the combined company as a whole. For a detailed description of the
risks associated with this potential corporate structure, see “Risk Factors — Risks Associated with Acquiring and Operating
a Target Business with its Primary Operation in China” and “Business — Initial Business Combination with a Company
Based in China or Hong Kong” for further details on the VIE structure. Under the VIE arrangement, the dividends or other distributions
to be paid by our future PRC subsidiaries to their overseas holding company will depend on such PRC subsidiaries’ entitlement to
substantially all of the economic benefits of the VIEs, which are typically in the form of services fees or license fees payable by the
VIEs to our PRC subsidiaries under various VIE agreements. Such contractual arrangements may not be as effective as direct ownership
in respect of our relationship with the VIE and we may be adversely affected if we experience difficulties in settling the amounts owed
to our PRC subsidiaries by the VIEs. Regardless of whether we have a VIE structure or direct ownership structure post-business combination,
we may depend on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements. Such
dividends and other distributions may be subject to the PRC government’s regulations relating to the conversion of Renminbi into
foreign currencies and the remittance of such currencies out of the PRC, which may limit our PRC subsidiaries’ ability to distribute
earnings to us or may otherwise adversely affect us. Furthermore, even though we may wish to transfer cash proceeds raised from overseas
financing activities to our PRC subsidiaries via capital contribution or shareholder loans, the PRC government’s regulations relating
to foreign exchange may limit our ability to make loans to or inject capital into our PRC subsidiaries or the ability of our PRC subsidiaries
to pay back such loans to us.
Moreover,
if any of our future subsidiaries incurs debt on its own in the future, the instruments governing such debt may restrict the subsidiary’s
ability to pay dividends to Goldenbridge Acquisition Limited. In addition, our future PRC subsidiaries and variable interest entities
will be required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the
event of a solvent liquidation of the companies. Current PRC regulations permit indirect PRC subsidiaries to pay dividends to their parent
only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition,
companies in China are generally required to set aside at least 10% of their after-tax profits each year, if any, to fund a statutory
reserve until such reserve reaches 50% of their registered capital. Entities in China may also be required to further set aside a portion
of their after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion
of their boards of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate
future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except
in the event of liquidation.
The
PRC government also imposes controls on the conversion of Chinese currency (RMB) into foreign currencies and the remittance of currencies
out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign
currency for the payment of dividends from our profits, if any. Furthermore, if our future subsidiaries in the PRC incur debt on their
own, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our future subsidiaries
are unable to receive all of the revenues from our operations through the VIE contractual arrangements, we may be unable to pay dividends
on our ordinary shares.
Cash
dividends, if any, on our ordinary shares will be paid in U.S. dollars. If upon consummation of our business combination we are considered
a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income
and as a result may be subject to PRC withholding tax at a rate of up to 10.0%. If we have a VIE structure upon consummation of our initial
business combination, in order for us to pay dividends to our shareholders, we will rely on payments made from the VIE to us. Certain
payments from the VIE may be subject to PRC taxes, including business taxes and value added tax (VAT). Due to (i) the risks of doing
business in the PRC and Hong Kong, (ii) we conduct our operations through an office space in Hong Kong, and (iii) our sponsor and certain
of our executive officers and/or directors are located in or have significant ties to Hong Kong, we may be a less attractive partner
to target companies than a non-PRC or non-Hong Kong based SPAC, which may therefore make it more likely for us to consummate a business
combination with a target company located in the PRC or Hong Kong.
Recent
Developments
On
September 30, 2021, Goldenbridge, AgiiPlus Global Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Goldenbridge,
AgiiPlus Corporation Inc., a Cayman Islands exempted company and a wholly owned subsidiary of AgiiPlus Global Inc., AgiiPlus Inc., a
Cayman Islands exempted company (“AgiiPlus”), certain shareholders of AgiiPlus (“AgiiPlus Shareholders”), and
Mr. Jing Hu, as representative of shareholders of AgiiPlus (collectively, the “Parties”), entered into an agreement and plan
of merger (the “2021 Merger Agreement”).
On
February 22, 2022, Goldenbridge issued one unsecured promissory note in an amount of $575,000, to AgiiPlus, in exchange for AgiiPlus
depositing such amount into Goldenbridge’s trust account in order to extend the time it has available to complete a business combination
for an additional three (3) months period, from March 4, 2022 to June 4, 2022. The note was terminated and no amount will be due from
us to AgiiPlus under the terms thereof.
On
May 2, 2022, the Parties entered into a Termination and Fee Agreement (the “Termination Agreement”). Pursuant to the Termination
Agreement, the Parties agreed to mutually terminate the 2021 Merger Agreement, subject to the representations, warranties, conditions
and covenants set forth in the Termination Agreement. In conjunction with the termination of the 2021 Merger Agreement, the Additional
Agreements (as defined in the 2021 Merger Agreement) (including the Shareholder Supporting Agreements) have also been terminated in accordance
with their respective terms as of May 2, 2022, the Termination Date. The Termination Agreement provides that as a reimbursement of certain
expenses incurred by Goldenbridge in connection with the 2021 Merger Agreement and pursuing a transaction with AgiiPlus, and in consideration
of the representations, warranties, covenants and agreements contained therein, AgiiPlus shall pay to Goldenbridge an amount of $150,000
within fifteen (15) business days of the Termination Date.
On
May 23, 2022, Goldenbridge, SunCar Technology Group Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Goldenbridge
(“Purchaser”), SunCar Technology Global Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Purchaser
(“Merger Sub,” together with Goldenbridge, Purchaser, the “Purchaser Parties”), Auto Services Group Limited,
a Cayman Islands exempted company (“SunCar”), the principal shareholders of SunCar (“Principal Shareholders”),
and Ye Zaichang, as representative of the Principal Shareholders, entered into an Agreement and Plan of Merger (the “Merger Agreement”).
On
May 26, 2022, Goldenbridge issued one unsecured promissory note in an amount of $575,000, to SunCar, in exchange for SunCar depositing
such amount into Goldenbridge’s trust account in order to extend the amount of time it has available to complete a business combination
for an additional three (3) months period, from June 4, 2022 to September 4, 2022. Subsequently, on August 25, 2022, Goldenbridge issued
one unsecured promissory note in an amount of $575,000, to SunCar, in exchange for SunCar depositing such amount into Goldenbridge trust
account in order to extend the amount of time it has available to complete a business combination for an additional three (3) months
period, from September 4, 2022 to December 4, 2022. Each note does not bear interest and mature upon closing of a business combination
by Goldenbridge. In addition, each note may be converted by the holder into units of Goldenbridge identical to the units issued in Goldenbridge’s
initial public offering at a price of $10.00 per unit.
Merger
Agreement
On
May 23, 2022, Goldenbridge, SunCar Technology Group Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Goldenbridge
(“Purchaser”), SunCar Technology Global Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Purchaser
(“Merger Sub,” together with Goldenbridge, Purchaser, the “Purchaser Parties”), Auto Services Group Limited,
a Cayman Islands exempted company (“SunCar”), the principal shareholders of SunCar (“Principal Shareholders”),
and Ye Zaichang, as representative of the Principal Shareholders, entered into an agreement and plan of merger (the “Merger Agreement”).
Acquisition
Merger and Acquisition Consideration
Upon
the closing of the transactions contemplated by the Merger Agreement, Goldenbridge will merge with and into the Purchaser, resulting
in all Goldenbridge shareholders becoming shareholders of the Purchaser as described under the below section titled “Reincorporation
Merger.” Concurrently therewith, Merger Sub will merge with and into SunCar, resulting in the Purchaser acquiring 100% of the issued
and outstanding equity securities of SunCar (the “Acquisition Merger”). Upon the closing of the Acquisition Merger, ordinary
shares of Purchaser shall be reclassified into class A (“Purchaser Class A Ordinary Shares”) and class B ordinary shares
(“Purchaser Class B Ordinary Shares,” together with Purchaser Class A Ordinary Shares, collectively “Purchaser Ordinary
Shares”) whereby each Purchaser Class A Ordinary Share shall be entitled to one (1) vote on all matters subject to vote at general
and special meetings of the post-closing company, and each Purchaser Class B Ordinary Share shall be entitled to 10 votes on all matters
subject to vote at general and special meetings of the post-closing company.
The
aggregate consideration to be paid to SunCar shareholders for the Acquisition Merger is US$800 million, payable in the form of a number
of newly issued Purchaser Ordinary Shares (the “Closing Payment Shares”) valued at $10.00 per share. Under the Merger Agreement,
1,000,000 shares of the Closing Payment Shares (“Escrow Shares”) will be held in escrow for a period of six months after
the closing to satisfy indemnification obligations.
In
addition to the Closing Payment Shares, the chief executive officer of SunCar may be entitled to receive earn-out shares as follows:
(i) 1,600,000 Purchaser Class A Ordinary Shares if SunCar’s revenue equals or exceeds US$258,000,000 for the fiscal year ending
December 31, 2022, as reflected on the audited consolidated financial statements of SunCar as of and for the fiscal year ended December
31, 2022; (ii) 1,600,000 Purchaser Class A Ordinary Shares if SunCar’s revenue equals or exceeds US$352,000,000 for the fiscal
year ending December 31, 2023, as reflected on the audited consolidated financial statements of SunCar as of and for the fiscal year
ended December 31, 2023; and (iii) 1,600,000 Purchaser Class A Ordinary Shares if SunCar’s revenue equals or exceeds US$459,000,000
for the fiscal year ending December 31, 2024, as reflected on the audited consolidated financial statements of SunCar as of and for the
fiscal year ended December 31, 2024.
Furthermore,
the parties to the Merger Agreement agreed that immediately following the closing of the Acquisition Merger, Purchaser’s board
of directors will consist of five (5) directors, a majority of whom shall qualify as independent directors under Nasdaq rules.
Under
the Agreement, commencing from the closing of the transactions, certain SunCar shareholders shall be entitled to (i) make a written demand
for registration under the Securities Act of all or part of their shares, with one minority shareholder, KMBP Holdings Limited, having
the right to demand up to three registration statements covering some or all of its shares; and (ii)“piggy-back” registration
rights with respect to registration statements filed following the consummation of the transactions. Purchaser will bear the expenses
incurred in connection with the filing of any such registration statements.
Reincorporation
Merger
Immediately
prior to the Acquisition Merger, Goldenbridge will be merged with and into Purchaser, the separate corporate existence of Goldenbridge
will cease and Purchaser will continue as the surviving corporation (the “Reincorporation Merger”). In connection with the
Reincorporation Merger, every issued and outstanding unit of Goldenbridge shall separate into each unit’s individual components,
consisting of one ordinary share, one warrant and one right, and all units shall cease to be outstanding and shall automatically be canceled
and retired and shall cease to exist. In addition, each of Goldenbridge’s issued and outstanding securities will be converted into
an equivalent amount of Purchaser’s securities, as follows:
| ● | Each
ordinary share of Goldenbridge will be converted automatically into one Purchaser Class A
Ordinary Share; |
| ● | Each
right to acquire one-tenth of one Goldenbridge ordinary share will be converted automatically
into one right to acquire one-tenth of one Purchaser Class A Ordinary Share; |
| ● | Each
warrant entitled to purchase one half (1/2) of one Goldenbridge ordinary share at a price
of $11.50 per whole share will be converted automatically into one warrant to purchase one
half (1/2) of one Purchaser Class A Ordinary Share at a price of $11.50 per whole share;
and |
| ● | Each
unit purchase option of Goldenbridge will be converted automatically into one unit purchase
option of Purchaser. |
Representations
and Warranties
In
the Merger Agreement, SunCar and the Principal Shareholders make certain representations and warranties (with certain exceptions set
forth in the disclosure schedules to the Merger Agreement) relating to, among other things: (a) proper corporate organization of SunCar
and its affiliates and subsidiaries and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Agreement
and other transaction documents; (c) neither the execution, delivery nor performance of the Agreement need any consent, approval, license
or other action of any government authority; (d) absence of conflicts; (e) capital structure; (f) accuracy of charter documents and corporate
records; (g) required consents and approvals; (h) financial information; (i) absence of certain changes or events; (j) title to assets
and properties; (k) material contracts; (l) ownership of real property; (m) licenses and permits; (n) compliance with laws; (o) ownership
of intellectual property; (p) customers and suppliers; (q) employment and labor matters; (r) tax matters; (s) environmental matters;
(t) brokers and finders; (u) that SunCar is not an investment company; (p) no Action pending or threatened against SunCar; and (u) other
customary representations and warranties.
In
the Merger Agreement, Goldenbridge makes certain representations and warranties relating to, among other things: (a) proper corporate
organization and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Agreement and other transaction
documents; (c) no governmental authorization required; (d) Non-Contravention; (e) brokers and finders; (f) capital structure; (g) validity
of share issuance; (h) minimum trust fund amount; (i) validity of Nasdaq Stock Market listing; (j) SEC filing requirements and financial
statements; (k) litigation; (l) compliance with laws; (m) material contracts; (n) that Goldenbridge is not an investment company; and
(o) other customary representations and warranties.
Conduct
Prior to Closing; Covenants
The
parties to the Merger Agreement made customary representations, warranties and covenants in the Merger Agreement, including, among other
things, covenants with respect to the conduct of SunCar and its affiliates/subsidiaries prior to the closing of the business combination.
The parties have also agreed to customary “no shop” obligations.
The
Merger Agreement also contains covenants providing for:
| ● | SunCar
purchasing up to an aggregate of 400,000 of the insider shares held by the initial shareholders
(as defined in the final prospectus of Goldenbridge as of March 1, 2021) at a price of $10.00
per share at the closing of the Acquisition Merger; |
| ● | SunCar’s
former shareholders obtaining the rights to appoint a majority of the members of the board
of SunCar Technology Group Inc.; and |
| ● | all
rights to exculpation, indemnification and advancement of expenses existing in favor of D&O
Indemnified Persons shall survive the closing and continue in full force and effect in accordance
with their respective terms to the extent permitted by applicable Law. |
Conditions
to Closing
General
Conditions
Consummation
of the Merger Agreement and the transactions therein is conditioned on, among other things: (i) the absence of any order or provisions
of any applicable Law making the transactions illegal or otherwise preventing the transactions; (ii) SunCar and Goldenbridge receiving
approval from their respective shareholders to the transactions; (iii) there shall not be any Action brought by a third party that is
not an Affiliate of the parties thereto to enjoin or otherwise restrict the consummation of the closing; (iv) the SEC shall have declared
the Form F-4 effective; (v) no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been
issued; and (vi) each of the Additional Agreements shall have been entered into and the same shall be in full force and effect; provided
that the non-execution of the Lock-up Agreements by (a) shareholders who are not the Key Personnel nor Controlled by the Key Personnel
and (b) grantees of SunCar options that are vested as of the closing, collectively holding no more than 5% of share capital in SunCar
(on a fully-diluted basis) immediately prior to the closing shall not affect the closing or occurrence of the closing.
SunCar’s
Conditions to Closing
The
obligations of SunCar to consummate the transactions contemplated by the Merger Agreement, in addition to the conditions described above,
are conditioned upon each of the following, among other things:
| ● | Purchaser
Parties complying with all of their obligations under the Agreement in all material respects; |
| ● | subject
to applicable materiality qualifiers, the representations and warranties of Purchaser Parties
being true on and as of the closing date of the transactions and Purchaser Parties complying
with all required covenants in the Agreement; |
| ● | Purchaser
Parties complying with the reporting requirements under the Securities Act and Exchange Act,
as applicable; |
| ● | there
having been no material adverse effect to Purchaser Parties; and |
| ● | Purchaser
shall remain listed on Nasdaq and the additional listing application for the Closing Payment
Shares shall have been approved by Nasdaq. |
Purchaser
Parties’ Conditions to Closing
The
obligations of Purchaser Parties to consummate the transactions contemplated by the Merger Agreement, in addition to the conditions described
above in the first paragraph of this “Conditions to Closing” section, are conditioned upon each of the following, among other
things:
| ● | SunCar
and its subsidiaries complying with all of the obligations under the Agreement in all material
respects; |
| ● | subject
to applicable materiality qualifiers, the representations and warranties of SunCar and its
subsidiaries being true on and as of the closing date of the transactions and SunCar and
its subsidiaries complying with all required covenants in the Agreement; |
| ● | all
necessary governmental approvals have been received in form and substance reasonably satisfactory; |
| ● | there
having been no material adverse effect to SunCar’s business; |
| ● | Goldenbridge
receiving legal opinions from SunCar’s counsels in the PRC and Cayman Islands; and |
Termination
The
Merger Agreement may be terminated and/or abandoned at any time prior to the closing, whether before or after approval of the proposals
being presented to Goldenbridge’s shareholders, by:
| ● | Goldenbridge,
if SunCar has materially breached any representations, warranties, agreements or covenants
contained therein or in any Additional Agreement to be performed on or prior to the closing
date, or the Agreement or the transactions contemplated thereby fail to be authorized or
approved by the shareholders of SunCar, and such breach shall not be cured within fifteen
(15) days following receipt by SunCar of a notice describing in reasonable detail the nature
of such breach. Goldenbridge will be entitled to a break-up fee of $2,000,000 promptly after
such termination, in absence of the factors set forth under the third point regarding force
majeure below; |
| ● | SunCar,
if Goldenbridge has materially breached any of its covenants, agreements, representations,
and warranties contained therein or in any Additional Agreement to be performed on or prior
to the closing date and such breach has not been cured within fifteen (15) days following
the receipt by Goldenbridge of a notice describing in reasonable detail the nature of such
breach. SunCar will be entitled to a break-up fee of $2,000,000 promptly after such termination,
in absence of the factors set forth under the third point regarding force majeure below; |
| ● | For
the avoidance of doubt, in the event of a force majeure such as the SEC holding the clearance
of the Form F-4 for more than six months from the filing of such Registration Statement or
the SEC’s proposed rules amendment on Special Purpose Acquisition Companies dated March
30, 2022 (Release No., 33-11048; IC-34549) becomes effective, such break-up fees will not
apply. |
Indemnification
Until
six (6) months from and after the closing date, the Principal Shareholders of SunCar agreed to indemnify Purchaser from any and all losses
incurred or sustained by the Purchaser as a result of or in connection with any breach, inaccuracy or nonfulfillment of any of the representations,
warranties and covenants of SunCar contained in the Agreement. The indemnification applies only to amounts (in aggregate) in excess of
$1,000,000, and the indemnification obligations are capped at the value of the shares that are being held in escrow. Such indemnification
can only be satisfied with the cancellation of Purchaser Ordinary Shares.
The
foregoing summary of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the actual
Merger Agreement, which is filed as Exhibit 2.1 to Goldenbridge’s Current Report on Form 8-K filed with the SEC on May 26, 2022
(“Form 8-K”), and incorporated herein by reference. Capitalized terms not otherwise defined above have the meaning ascribed
to them in the Merger Agreement.
In
addition to the Merger Agreement, the following agreements have been or will be entered into in connection with the closing of the contemplated
business combination with SunCar.
Shareholder
Support Agreements
Concurrently
with the execution of the Merger Agreement, certain of SunCar’s officers, directors, founders and holders who collectively own
approximately 87.86% of SunCar’ voting stock entered into support agreements, pursuant to which each such holder agreed to vote
in favor of the business combination, subject to the terms of such shareholder support agreements. A copy of the form of shareholder
support agreement is attached to the Form 8-K as Exhibit 10.1 and incorporated herein by reference.
Insider
Share Purchase Agreement
In
connection with the closing of the transactions, SunCar and the initial shareholders of Goldenbridge will enter into an Insider Share
Purchase Agreement whereby SunCar will agree to buy up to an aggregate of 400,000 Goldenbridge ordinary shares held by the initial shareholders
at a price of $10.00 per share for up to an aggregate purchase price of $4,000,000.
Escrow
Agreement
In
connection with the closing of the transactions, the Purchaser, Ye Zaichang as the representative of SunCar shareholders, and an escrow
agent will enter into an Escrow Agreement, pursuant to which SunCar shareholders will deposit 1,000,000 of their Purchaser Ordinary Shares
to secure the indemnification obligations as contemplated by the Agreement.
Lock-up
Agreements
In
connection with the closing of the transactions, Purchaser will enter into Lock-Up Agreements with certain SunCar shareholders, which
will provide that such SunCar shareholders will not, within twelve (12) months from the closing of the business combination and subject
to certain exceptions, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of the ordinary shares
issued in connection with the Acquisition Merger, enter into a transaction that would have the same effect, or enter into any swap, hedge
or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such shares, whether any of
these transactions are to be settled by delivery of any such shares, in cash, or otherwise.
PRC
Limitation on Overseas Listing and Share Issuances (Post Business Combination)
As
we do not have any material operations in China, given that (a) the CSRC currently has not issued any definitive rule or interpretation
concerning whether offerings like ours under our prospectus dated on March 1, 2021 relating to our initial public offering are subject
to the M&A Regulations (as defined hereinafter); and (b) our company is a blank check company newly incorporated in the British Virgin
Islands rather than in China and currently our company does not own or control any equity interest in any PRC company or operate any
business in China, we believe that we are not required to obtain any licenses or approvals, under applicable PRC laws and regulations,
for offering securities to foreign investors and while seeking a target for the initial business combination. We also believe we are
not required to obtain approvals from any PRC government authorities, including the CSRC or the Cyberspace Administration of China (the
“CAC”), or any other government entity, to operate and to issue our securities to foreign investors and to list on a U.S.
exchange. As of the date of this report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to our
offering from the CSRC or any other PRC governmental authorities. However, applicable laws, regulations, or interpretations of PRC may
change, and the relevant PRC government agencies could reach a different conclusion and may subject us to a stringent approval process
from the relevant government entities in connection with our offering, continued listing on a U.S. exchange, the potential business combination,
the issuance of shares or the maintenance of our status as a publicly listed company outside China, and the post business combination
entity’s PRC operations if our business combination target is a PRC Target Company. It is uncertain when and whether we will be
required to obtain permission from the PRC government to continue to list on a U.S. exchange in the future and offer our securities to
foreign investors. If we (i) do not receive or maintain such permissions or approvals, should the approval be required in the future
by the PRC government, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations,
or interpretations change and we are required to obtain such permissions or approvals in the future, and we are denied permissions or
approvals from Chinese authorities to list on U.S. exchanges or offer our securities to foreign investors, we may not be able to continue
listing on a U.S. exchange or be subject to other severe consequences, which would materially affect the interest of the investors. In
addition, any changes in PRC law, regulations, or interpretations may severely affect our operations after our offering. The use of the
term “operate” and “operations” includes the process of searching for a target business and conducting related
activities. To that extent, we may not be able to conduct the process of searching for a potential target company in China. For more
detailed information, see “Risks Associated with Acquiring and Operating a Target Business with its Primary Operation in China
— The approval of the China Securities Regulatory Commission is not required in connection with our offering, however, if required,
we cannot predict whether we will be able to obtain such approval.” and “We and our initial business combination may
be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection and we may have to spend additional
resources and incur additional time delays to complete any such business combination or be prevented from pursuing certain investment
opportunities.”
On
March 4, 2021, the Company consummated the initial public offering (“IPO”) of 5,000,000 units (the “Units”).
Each Unit consists of one ordinary share (“Ordinary Share”), one warrant (“Warrant”) entitling its holder to
purchase one-half of one Ordinary Share at a price of $11.50 per whole share, and one right to receive one-tenth (1/10) of an Ordinary
Share upon the consummation of an initial business combination. The Units were sold at an offering price of $10.00 per Unit, generating
gross proceeds of $50,000,000. The Company granted the underwriters a 45-day option to purchase up to 750,000 additional Units to cover
over-allotments, if any. In addition, the Company sold to Maxim Group LLC (“Maxim”), for $100, an option to purchase
up to 375,000 units exercisable at $11.50 per unit, commencing on the later of the consummation of a business combination and six months
from the effective date of the Registration Statement.
Simultaneously
with the consummation of the IPO, we consummated the private placement (“Private Placement”) with our Sponsor of 350,000
units (the “Private Units”) at a price of $10.00 per Private Unit, generating gross proceeds of $3,500,000. The Private Units
are identical to the Units sold in the IPO, except that the warrants underlying the Private Units will be non-redeemable and may be exercised
on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. Additionally,
because the Private Units were issued in a private transaction, the initial purchasers and their permitted transferees will be allowed
to exercise the warrants included in the Private Units for cash even if a registration statement covering the ordinary shares issuable
upon exercise of such warrants is not effective and receive unregistered ordinary shares. Additionally, such initial purchasers agreed
not to transfer, assign or sell any of the Private Units or underlying securities (except in limited circumstances, as described in the
Registration Statement) until the completion of the Company’s initial business combination. Such Initial Purchasers were granted
certain demand and piggyback registration rights in connection with the purchase of the Private Units. The Private Units were issued
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public offering.
The
underwriters exercised the over-allotment option in full on March 9, 2021, and the closing of the issuance and sale of the additional
Units occurred on March 11, 2021. The sale of 750,000 units at a price of $10.00 per unit resulted in total gross proceeds of $7,500,000.
A
total of $57,500,000 of the net proceeds from the sale of Units in the IPO (including the over-allotment option units) and the private
placements on March 4, 2021 and March 11, 2021, were placed in a trust account established for the benefit of the Company’s public
shareholders at Morgan Stanley maintained by Continental Stock Transfer & Trust Company, LLC, acting as trustee. None of the funds
held in trust will be released from the trust account, other than interest income to pay any tax obligations, until the earlier of the
completion of an initial business combination within the required time period or our entry into liquidation if we have not completed
a business combination in the required time period. On April 6, 2021, our ordinary shares, warrants and rights underlying the Units sold
in our IPO began to trade separately on a voluntary basis.
Since
our IPO, our sole business activity has been identifying and evaluating suitable acquisition transaction candidates.
Management
is currently evaluating the impact of the COVID-19 global pandemic on the industry and has concluded that while it is reasonably possible
that the virus could have a negative effect on the Company’s consolidated financial position, results of its operations, and/or
search for a target company, the specific impact is not readily determinable as of the date of these consolidated financial statements.
The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Trading
in our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect
or fully investigate our auditor. In that case, Nasdaq could delist our securities. The delisting of our securities, or the threat of
their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct
inspections may deprive our investors with the benefits of such inspections. For more detailed information, see “Risk Factors
- Trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot
inspect or fully investigate our auditor. In that case, Nasdaq could delist our securities. The delisting of our securities, or the threat
of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to
conduct inspections may deprive our investors with the benefits of such inspections.” Our auditor is based in the United States
and subject to inspection by PCAOB.
Our
Management Team
We
will seek to capitalize on the comprehensive experience and contacts of our executive officers in consummating an initial business combination.
Our management team is currently comprised of Yongsheng Liu, Chairman,Chief Executive Officer and Chief Financial Officer, and Ray Chen,
our Chief Operating Officer. Our management team brings a wealth of experience in identifying, negotiating with and conducting due diligence
on potential candidates for acquisition.
Mr.
Liu and Mr. Chen have experience with initial public offerings and business combinations for blank check companies. They have worked
together on the formation, initial public offering and business combination for Wealthbridge Acquisition Limited (“Wealthbridge”)
and Goldenstone Acquisition Limited (“Goldenstone”). Mr. Liu served as Chief Executive Officer and Chairman of Wealthbridge
which consummated an initial public offering in February 2019 and closed its business combination with Scienjoy Inc. (“Scienjoy”)
in May 2020, and has been serving as vice chairman of Scienjoy’s board of director since May 2020. Mr. Liu has served as the Chief
Operating Officer of Goldenstone since April 2021. Mr. Chen served as Chief Operating Officer of Wealthbridge until May 2020 and currently
serves as investor relation consultant of Scienjoy. Mr. Chen has served as Director and Chief Financial Officer of Goldenstone since
April 2021.
Mr.
Liu has over 10 years of experience in mergers and acquisitions, including cross-border transactions involving the United States and
China, which Mr. Liu actively participated in (in a variety capacities) from initial deal sourcing and negotiations through consummation.
Mr. Chen also has over 10 years of extensive experience with mergers and acquisitions, especially with respect to target sourcing, deal
structuring, and investment relations.
With
a management team with experience in merger and acquisitions for blank check companies, connections to the Asian-American community in
the United States, and experience in business development, we believe we can source attractive deals and find compelling investment opportunities
from private and public sources to create value for shareholders. See the section titled “Management” for complete
information on the experience of our officers and directors.
Notwithstanding
the foregoing, our officers and directors are not required to commit their full time to our affairs and will allocate their time to other
businesses, which may result in a conflict of interest in allocating their time between our operations and our search for a business
combination and their other businesses. We presently expect each of our employees to devote such amount of time as they reasonably believe
is necessary to our business (which could range from only a few hours a week while we are trying to locate a potential target business
to a majority of their time as we move into serious negotiations with a target business for a business combination). As more fully discussed
in “Management — Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination
opportunity that falls within the line of business of any entity to which he has pre-existing fiduciary or contractual obligations, he
may be required to present such business combination opportunity to such entity, subject to his or her fiduciary duties under the British
Virgin Islands law, prior to presenting such business combination opportunity to us. Most of our officers and directors currently have
certain pre-existing fiduciary duties or contractual obligations.
In
addition, past performance by our management team is not a guarantee either (i) of success with respect to any business combination we
may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. Furthermore, the members
of the management team may not remain with us subsequent to the consummation of a business combination.
Competitive
Advantages
Experienced
Management Team with Proven Track Record
Our
management team has a proven track record of successful executing business combination and generating attractive return for investors
as evidenced by the completion of business combination between Wealthbridge and Scienjoy in May 2020.
Together
with our management team, we believe we have a broad network of contacts and corporate relationship that makes us efficient at:
|
● |
Sourcing and evaluating
businesses, and |
|
● |
Bridging cultural differences
to negotiate and execute a transaction in a timely and professional manner. |
By
leveraging our management team’s industry expertise, performing disciplined due diligence, being cautious downside protection,
and providing post-acquisition value-add capabilities, we believe that we will be able to acquire a target business that will achieve
significant returns for investors.
Status
as a Publicly Listed Company
We
believe our structure will make us an attractive business combination partner to prospective target businesses. As a publicly listed
company, we will offer a target business an alternative to the traditional initial public offering. We believe that target businesses
will favor this alternative, which we believe is less expensive, while offering greater certainty of execution than the traditional initial
public offering. During an initial public offering, there are typically expenses incurred in marketing, which would be costlier than
a business combination with us. Furthermore, once a proposed business combination is approved by our shareholders (if applicable) and
the transaction is consummated, the target business will have effectively become public, whereas an initial public offering is always
subject to the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering
from occurring. Once public, we believe the target business would have greater access to capital and additional means of creating management
incentives that are better aligned with shareholders’ interests than it would as a private company. It can offer further benefits
by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management staffs.
Strong
Financial Position and Flexibility
With
the funds held in our trust account, we can offer a target business a variety of options to facilitate a business combination and fund
future expansion and growth of its business. Because we are able to consummate a business combination using the cash proceeds from this
offering, our share capital, debt or a combination of the foregoing, we have the flexibility to use an efficient structure allowing us
to tailor the consideration to be paid to the target business to address the needs of the parties. However, if a business combination
requires us to use substantially all of our cash to pay for the purchase price, we may need to arrange third party financing to help
fund our business combination. Since we have no specific business combination under consideration, we have not taken any steps to secure
third party financing.
Acquisition
Strategy
Our
acquisition strategy will seek to capitalize on M&A and operational expertise and relationship of both our management team and our
board of directors, to identify attractive businesses that have capacity to grow rapidly by utilizing a public vehicle. Although we are
not limited to any particular industry, we intend to primarily focus on companies operating in the Artificial Intelligence (“AI”)
industry. There is no restriction in the geographic location of targets that we can pursue, although we intend to initially prioritize
geographic locations in North America, as our officers and directors consist of successful entrepreneurs and senior executives with decades
of operating and M&A experiences in the region.
AI
has the potential to improve social productivity, bring disruptive changes to people’s production and life including lower labor
cost, better products and services, new markets and more employment opportunities and is growing fully commercialized and bring
profound changes to all industries. AI technologies have been deployed in financial, healthcare, security and a number of other areas,
with widening application scenarios. It is an industry above all industries. Considering the growing impact of AI on social and economic
development, US, Asia and European Union have released favorable policies to include AI into national strategies.
Acquisition
Criteria
The
focus of our management team is to create shareholder value by leveraging its experience to improve the efficiency of the business while
implementing strategies to grow revenue and profits organically and/or through acquisitions. Consistent with our strategy, we have identified
the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. While we intend
to use these criteria and guidelines in evaluating prospective businesses, we may deviate from these criteria and guidelines should we
see fit to do so:
We
intend to acquire companies with enterprise values of between $150 million and $300 million that are preferably already cash-generative.
We believe we have greater access to companies within this range and the negotiation process is generally less time consuming than companies
that are much larger.
|
● |
Long-term Revenue Visibility
with Defensible Market Position |
We
intend to seek target companies that are at an inflection point, such as those requiring additional management expertise, are able to
innovate by developing new products or services, or where we believe we can drive improved financial performance and where an acquisition
may help facilitate growth.
|
● |
Benefits from Being
a U.S. Public Company (Value Creation and Marketing Opportunities) |
We
intend to seek target companies that should offer attractive risk-adjusted equity returns for our shareholders. We intend to seek to
acquire a target on terms and in a manner that leverages our experience. We expect to evaluate financial returns based on (i) the potential
for organic growth in cash flows, (ii) the ability to achieve cost savings, (iii) the ability to accelerate growth, including through
the opportunity for follow-on acquisitions and (iv) the prospects for creating value through other value creation initiatives. Potential
upside from growth in the target business’ earnings and an improved capital structure will be weighed against any identified downside
risks.
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be
based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management
may deem relevant.
Competitive
Weaknesses
We
believe our competitive weaknesses to be the following:
Limited
Financial Resources
Our
financial reserves will be relatively limited when contrasted with those of venture capital firms, leveraged buyout firms and operating
businesses competing for acquisitions. In addition, our financial resources could be reduced because of our obligation to convert shares
held by our public shareholders as well as any tender offer we conduct.
Lack
of experience with blank check companies
Our
management team is not experienced in pursuing business combinations on behalf of blank check companies. Other blank check companies
may be sponsored and managed by individuals with prior experience in completing business combinations between blank check companies and
target businesses. Our managements’ lack of experience may not be viewed favorably by target businesses.
Limited
technical and human resources
As
a blank check company, we have limited technical and human resources. Many venture capital funds, leveraged buyout firms and operating
businesses possess greater technical and human resources than we do and thus we may be at a disadvantage when competing with them for
target businesses.
Delay
associated with shareholder approval or tender offer
We
may be required to seek shareholder approval of our initial business combination. If we are not required to obtain shareholder approval
of an initial business combination, we will allow our shareholders to sell their shares to us pursuant to a tender offer. Both seeking
shareholder approval and conducting a tender offer will delay the consummation of our initial business combination. Other companies competing
with us for acquisition opportunities may not be subject to similar requirement, or may be able to satisfy such requirements more quickly
than we can. As a result, we may be at a disadvantage in competing for these opportunities.
Initial
Business Combination with a Company Based in China or Hong Kong
Our
initial business combination target company may include a company located in the PRC or Hong Kong. Because of such ties to China or Hong
Kong, we are subjected to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including
but not limited to limitation on foreign ownership of certain industries and regulatory review of overseas listing of PRC companies through
a special purpose vehicle and the validity and enforcement of the VIE agreements, if the PRC Target Company requires any of these legal
requirements post business combination by us. Due to PRC legal restrictions on foreign ownership in certain industries, neither we nor
our subsidiaries may own any direct equity interest in the PRC target company’s operating entity in a restricted industry (“Target
Operating Entity”). Instead, we may conduct operations in China through a series of contractual arrangements with a VIE in China.
Such contractual arrangements by and among PRC subsidiaries, the VIE, and the VIE’s shareholders may include (i) certain power
of attorney agreements, a share pledge agreement and certain loan agreements; (ii) an exclusive business cooperation agreement which
allows us to receive substantially all of the economic benefits from the VIE; and (iii) certain exclusive option agreements and certain
spouse consent letters which provide us with an exclusive option to purchase all or part of the equity interests in and/or assets of
the VIE when and to the extent permitted by PRC laws (“VIE Structure”). The PRC Target Company, through contractual arrangements,
can consolidate the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP or IFRS, if it
has the power to direct activities that most significantly impact the economic performance of the VIE and have the obligation to absorb
losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
These
contractual arrangements may not be as effective as direct ownership in respect of our relationship with the VIE. If the VIE or its shareholders
fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by the VIE may be
indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal
remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties regarding the interpretation
and enforcement of the relevant laws and regulations. Furthermore, in connection with litigation, arbitration or other judicial or dispute
resolution proceedings, assets under the name of any of record holder of equity interest in the VIE, including such equity interest of
such record holder, may be put under court custody. As a consequence, we cannot be certain that the equity interest will be disposed
pursuant to the contractual arrangement or that the ownership by the record holder of such equity interest will be unchallenged. See
“Risk Factors — Risks Associated with Acquiring and Operating a Target Business with its Primary Operation in China —
If the PRC government deems that the contractual arrangements in relation to the potential PRC target company, the VIE, do not comply
with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing
regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.”
In addition, if we acquire a target company that operates its business in the PRC through contractual arrangements, investors in our
securities following a business combination would not hold equity interests in the VIE domiciled in China that is under our control and
would instead hold equity interests in a British Virgin Islands holding company. You may never directly hold equity interests in PRC
operating companies.
All
of these contractual arrangements may be governed by and interpreted in accordance with PRC law, and disputes arising from these contractual
arrangements may be resolved in court or through arbitration in China. Accordingly, these contracts will be interpreted in accordance
with PRC laws and any disputes will be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed
as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability
to enforce the contractual arrangements. As at the date of this annual report, there are very few precedents and little official guidance
as to how contractual arrangements should be interpreted or enforced under PRC law. The contractual arrangements have not been widely
tested in a court of law in the PRC and there remain significant uncertainties regarding the ultimate outcome of arbitration should legal
action become necessary. In the event we are unable to enforce the contractual arrangements with the PRC target company or the VIE entity
of the PRC target company post business combination, we may not be able to exercise the power to direct activities that most impact the
economic performance, bears the risks of, and enjoys the rewards for the purpose of consolidating the financial results of the VIE in
our consolidated financial statements in accordance with U.S. GAAP or IFRS (as discussed above) and we may be precluded from operating
the business, which will have a material adverse effect on our financial condition and results of operations. In addition, there is uncertainty
as to whether the courts of the British Virgin Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such
persons predicated upon the civil liability provisions of the securities laws of the United States or any state. For a description of
the uncertainties of the VIE arrangements, see “Risk Factors — Risks Associated with Acquiring and Operating a Target
Business with its Primary Operation in China.”
Transfers
of Cash to and from our Potential VIE (Post Business Combination)
Goldenbridge
Acquisition Limited is a holding company with no operations of its own. Our initial business combination target company may include a
PRC Target Company which might require a VIE structure. As such, we may be required to conduct our operations in China primarily through
our subsidiary and VIE in China. As a result, although other means are available for us to obtain financing at the holding company level,
Goldenbridge Acquisition Limited’s ability to pay dividends to its shareholders and to service any debt it may incur may depend
upon dividends paid by our PRC Target Company’s subsidiaries. If any of our subsidiaries incurs debt on its own in the future,
the instruments governing such debt may restrict its ability to pay dividends to Goldenbridge Acquisition Limited. In addition, our PRC
Target Company’s subsidiaries and VIE are required to make appropriations to certain statutory reserve funds, which are not distributable
as cash dividends except in the event of a solvent liquidation of the companies.
Current
PRC regulations permit the PRC Target Company’s indirect PRC subsidiaries to pay dividends to an overseas subsidiary, for example
a subsidiary located in Hong Kong, only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards
and regulations. In addition, each of the PRC Target Company’s subsidiaries in China is required to set aside at least 10% of its
after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such
entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although
the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be
used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective
companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.
The
PRC government also imposes controls on the conversion of Renminbi (“RMB”), the legal currency of the PRC, into foreign currencies
and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures
necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if the PRC target
company’s subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their
ability to pay dividends or make other payments. If we or the PRC target company and its subsidiaries are unable to receive all of the
revenues from their operations through the VIE agreements, we may be unable to pay dividends on our ordinary shares.
Cash
dividends, if any, on our ordinary shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes,
any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding
tax at a rate of up to 10.0%.
In
order for us to pay dividends to our shareholders, we may rely on payments made from the VIE to the target’s PRC subsidiary, a
wholly foreign-owned enterprise (“WFOE”), pursuant to VIE agreements between them, and the distribution of such payments
to our overseas subsidiary as dividends from thee WFOE. Certain payments from the VIE to WFOE are subject to PRC taxes, including business
taxes and VAT.
Recent
PCAOB Developments
The
PCAOB is currently unable to conduct inspections on accounting firms in the PRC or Hong Kong without the approval of the relevant government
authorities. The auditor and its audit work in the PRC or Hong Kong may not be inspected fully by the PCAOB. Inspections of other auditors
conducted by the PCAOB outside China have at times identified deficiencies in those auditors’ audit procedures and quality control
procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections of
audit work undertaken in China or Hong Kong prevents the PCAOB from regularly evaluating the PRC auditor’s audits and its quality
control procedures. As a result, shareholders may be deprived of the benefits of PCAOB inspections if we complete a business combination
with such companies.
Future
developments in U.S. laws may restrict our ability or willingness to complete certain business combinations with companies. For instance,
the enacted Holding Foreign Companies Accountable Act (“HFCAA”) could restrict our ability to consummate a business combination
with a target business unless that business met certain standards of the PCAOB and would require delisting of a company from U.S. national
securities exchanges if the PCAOB is unable to inspect its public accounting firm for three consecutive years. The HFCAA also requires
public companies to disclose, among other things, whether they are owned or controlled by a foreign government, specifically, those based
in China. We may not be able to consummate a business combination with a favored target business due to these laws. Furthermore, on June 22,
2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if signed into
law, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its
auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.
The
documentation we may be required to submit to the SEC proving certain beneficial ownership requirements and establishing that we are
not owned or controlled by a foreign government in the event that we use a foreign public accounting firm not subject to inspection by
the PCAOB or where the PCAOB is unable to completely inspect or investigate our accounting practices or financial statements because
of a position taken by an authority in the foreign jurisdiction could be onerous and time consuming to prepare. The HFCAA mandates the
SEC to identify issuers of SEC-registered securities whose audited financial reports are prepared by an accounting firm that the
PCAOB is unable to inspect due to restrictions imposed by an authority in the foreign jurisdiction where the audits are performed. If
such identified issuer’s auditor cannot be inspected by the PCAOB for three consecutive years, the trading of such issuer’s
securities on any U.S. national securities exchanges, as well as any over-the-counter trading in the U.S., will be prohibited.
On
March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements
of the HFCAA. An identified issuer 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.
On
November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable
Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether it is unable to inspect
or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or
more authorities in that jurisdiction.
On
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA.
The rules apply to registrants that 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 PCAOB is unable to inspect or investigate completely because of a
position taken by an authority in foreign jurisdictions.
On
December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely
registered public accounting firms headquartered in: (i) China, and (ii) Hong Kong. Our auditor, Friedman LLP, headquartered in New York,
NY, is an independent registered public accounting firm with the PCAOB and has been inspected by the PCAOB on a regular basis. The PCAOB
currently has access to inspect the working papers of our auditor. Our auditor is not headquartered in China or Hong Kong and
was not identified in this report as a firm subject to the PCAOB’s determination.
On
August 26, 2022, the PCAOB entered into a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance
of the PRC and, as summarized in the “Statement on Agreement Governing Inspections and Investigations of Audit Firms Based in China
and Hong Kong” published on the U.S. Securities and Exchange Commission’s official website, the parties agreed to the following:
(i) in accordance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the PCAOB shall have independent discretion to select
any issuer audits for inspection or investigation; (ii) the PCAOB shall have direct access to interview or take testimony from all personnel
of the audit firms whose issuer engagements are being inspected or investigated; (iii) the PCAOB shall have the unfettered ability to
transfer information to the SEC, in accordance with the Sarbanes-Oxley Act; and (iv) the PCAOB inspectors shall have access to complete
audit work papers without any redactions, with view-only procedures for certain targeted pieces of information such as personally identifiable
information. The PCAOB is required to reassess its determinations as to whether it is able to carry out inspection and investigation
completely and without obstruction by the end of 2022.
In
the event that we complete a business combination with a company with substantial operations in China and PCAOB is not able to fully
conduct inspections of our auditor’s work papers in China, it could cause us to fail to be in compliance with U.S. securities laws
and regulations, we could cease to be listed on a U.S. securities exchange, and U.S. trading of our shares could be prohibited under
the HFCAA. Any of these actions, or uncertainties in the market about the possibility of such actions, could adversely affect our prospects
to successfully complete a business combination with a China or Hong Kong-based company, our access to the U.S. capital markets
and the price of our shares.
Future
developments in respect of increased U.S. regulatory access to audit information are uncertain, as the legislative developments are subject
to the legislative process and the regulatory developments are subject to the rule-making process and other administrative procedures.
For
more detailed information, see “Risk Factors - Trading in our securities may be prohibited under the Holding Foreign Companies
Accountable Act if the PCAOB determines that it cannot inspect or fully investigate our auditor. In that case, Nasdaq could delist our
securities. The delisting of our securities, or the threat of their being delisted, may materially and adversely affect the value of
your investment. Additionally, the inability of the PCAOB to conduct inspections may deprive our investors with the benefits of such
inspections.”
Cash
transfer through our organization
Goldenbridge
Acquisition Limited is a newly organized blank check company incorporated under the laws of the British Virgin Islands for the purpose
of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets
of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities.
As of June 30, 2022, the Company had not commenced any operations. All activities through June 30, 2022 relate to the Company’s
formation and the Public Offering. Currently, we maintain our operating bank account in Hong Kong and obtain cash transfers from our
Sponsor to fund and pay the offering expenses and daily operating activities, as needed. Cash transfers to and from our bank account
are reflected within cash and cash equivalents, and we maintained $110,643 balance in cash and cash equivalents, as of June 30, 2022.
Up
to June 30, 2022, we received the cumulative cash transfer of $1,150,000 from our Sponsor. No dividends or distribution have been made
to date.
Effecting
a Business Combination
General
We
are not presently engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time following
our IPO. We intend to utilize cash derived from the proceeds of our IPO and the private placement of private units, our share capital,
debt or a combination of these in effecting a business combination. Although substantially all of the net proceeds of our IPO and the
private placement of private units are intended to be applied generally toward effecting a business combination as described in this
report, the proceeds are not otherwise being designated for any more specific purposes. Accordingly, investors in our IPO were investing
without first having an opportunity to evaluate the specific merits or risks of any one or more business combinations. A business combination
may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish
a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself.
These include time delays, significant expense, loss of voting control and compliance with various U.S. Federal and state securities
laws. In the alternative, we may seek to consummate a business combination with a company that may be in its early stages of development
or growth. While we may seek to effect simultaneous business combinations with more than one target business, we will probably have the
ability, as a result of our limited resources, to effect only a single business combination.
Selection
of a Target Business
Subject
to the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (excluding any
deferred underwriting discounts and commissions and taxes payable on the income earned on the trust account) at the time of the execution
of a definitive agreement for our initial business combination, as described below in more detail, we will have virtually unrestricted
flexibility in identifying and selecting a prospective acquisition candidate. We have not established any other specific attributes or
criteria (financial or otherwise) for prospective target businesses. To the extent we effect a business combination with a company or
an entity in its early stage of development or growth, including entities without established records of sales or earnings, we may be
affected by numerous risks inherent in the business and operations of early stage or potential emerging growth companies. Although our
management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain
or assess all significant risk factors.
Sources
of Target Businesses
We
anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers,
venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community.
Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or
mailings which will not commence until after the completion of this offering. These sources may also introduce us to target businesses
they think we may be interested in on an unsolicited basis, since many of these sources will have read this annual report and know what
types of businesses we are targeting. Our officers and directors, as well as their respective affiliates, may also bring to our attention
target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions
they may have, as well as attending trade shows or conventions. We may engage the services of professional firms or other individuals
that specialize in business acquisitions on any formal basis, in which event we may pay a finder’s fee, consulting fee or other
compensation to be determined in an arm’s length negotiation based on the terms of the transaction. In no event, however, will
any of our existing officers, directors, special advisors or initial shareholders, or any entity with which they are affiliated, be paid
any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation
of a business combination (regardless of the type of transaction), except that Yongsheng Liu, our Chief Executive Officer will receive
HK$50,000 (or approximately US$6,427 based on an exchange rate of HK$7.78 to US$1.00 on August 23, 2021) per month for his services to
us. If we decide to enter into a business combination with a target business that is affiliated with our officers, directors or initial
shareholders, we will do so only if we have obtained an opinion from an independent investment banking firm that the business combination
is fair to our unaffiliated shareholders from a financial point of view. However, as of the date of this annual report, there is no affiliated
entity that we consider a business combination target.
Selection
of a Target Business and Structuring of a Business Combination
Subject
to the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (excluding any
deferred underwriting discounts and commissions and taxes payable on the income earned on the trust account) at the time of the execution
of a definitive agreement for our initial business combination, as described below in more detail, our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target business. We have not established any other specific attributes
or criteria (financial or otherwise) for prospective target businesses. In evaluating a prospective target business, our management may
consider a variety of factors, including one or more of the following:
|
● |
financial condition and
results of operation; |
|
● |
experience and skill of
management and availability of additional personnel; |
|
● |
stage of development of
its products, processes or services; |
|
● |
degree of current or potential
market acceptance of the products, processes or services; |
|
● |
proprietary features and
degree of intellectual property or other protection for its products, processes or services; |
|
● |
regulatory environment
of the industry; and |
|
● |
costs associated with effecting
the business combination. |
We
believe such factors will be important in evaluating prospective target businesses, regardless of the location or industry in which such
target business operates. However, this list is not intended to be exhaustive. Furthermore, we may decide to enter into a business combination
with a target business that does not meet these criteria and guidelines.
Any
evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as
well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective.
In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among other things,
meetings with incumbent management and inspection of facilities, as well as review of financial and other information which is made available
to us. This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage, although
we have no current intention to engage any such third parties.
The
time and costs required to select and evaluate a target business and to structure and complete the business combination cannot presently
be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target
business with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital available
to otherwise complete a business combination.
Fair
Market Value of Target Business
Pursuant
to Nasdaq listing rules, the target business or businesses that we acquire must collectively have a fair market value equal to at least
80% of the balance of the funds in the trust account (excluding any deferred underwriting discounts and commissions and taxes payable
on the income earned on the trust account) at the time of the execution of a definitive agreement for our initial business combination,
although we may acquire a target business whose fair market value significantly exceeds 80% of the trust account balance. We anticipate
structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however,
structure a business combination where we merge directly with the target business or where we acquire less than 100% of such interests
or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons,
but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting
securities of the target, our shareholders prior to the business combination may collectively own a minority interest in the post-transaction
company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue
a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital of a target. In this
case, we could acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new
shares, our shareholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding
shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses
are owned or acquired by the post-transaction company, only the portion of such business or businesses that is owned or acquired is what
will be valued for purposes of the 80% of net assets test, assuming that we obtain and maintain a listing for our securities on NASDAQ.
In order to consummate such an acquisition, we may issue a significant amount of our debt or equity securities to the sellers of such
businesses and/or seek to raise additional funds through a private offering of debt or equity securities. Since we have no specific business
combination under consideration, we have not entered into any such fund raising arrangement and have no current intention of doing so.
The fair market value of the target will be determined by our board of directors based upon one or more standards generally accepted
by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). If our board is not able to independently
determine that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment
banking firm, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to
acquire, with respect to the satisfaction of such criteria. We will not be required to obtain an opinion from an independent investment
banking firm, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to
acquire, as to the fair market value if our board of directors independently determines that the target business complies with the 80%
threshold.
We
will not be required to comply with the 80% fair market value requirement if we are delisted from NASDAQ. If Nasdaq delists our securities
from trading on its exchange, we would not be required to satisfy the fair market value requirement described above and could complete
a business combination with a target business having a fair market value substantially below 80% of the balance in the trust account.
Lack
of Business Diversification
Our
business combination must be with a target business or businesses that collectively satisfy the minimum valuation standard at the time
of such acquisition, as discussed above, although this process may entail the simultaneous acquisitions of several operating businesses
at the same time. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance
of a single business. Unlike other entities which may have the resources to complete several business combinations of entities operating
in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations
or benefit from the possible spreading of risks or offsetting of losses. By consummating a business combination with only a single entity,
our lack of diversification may:
|
● |
subject us to numerous
economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to a business combination, and |
|
● |
result in our dependency
upon the performance of a single operating business or the development or market acceptance of a single or limited number of products,
processes or services. |
If
we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of
such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may
make it more difficult for us, and delay our ability, to complete the business combination. With multiple acquisitions, we could also
face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations
(if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or
products of the acquired companies in a single operating business.
Limited
Ability to Evaluate the Target Business’ Management
Although
we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business combination,
we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure
you that the future management will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the
future role of our officers and directors, if any, in the target business following a business combination cannot presently be stated
with any certainty. While it is possible that some of our key personnel will remain associated in senior management or advisory positions
with us following a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a
business combination. Moreover, they would only be able to remain with the company after the consummation of a business combination if
they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take
place simultaneously with the negotiation of the business combination and could provide for them to receive compensation in the form
of cash payments and/or our securities for services they would render to the company after the consummation of the business combination.
While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target
business, their ability to remain with the company after the consummation of a business combination will not be the determining factor
in our decision as to whether or not we will proceed with any potential business combination. Additionally, our officers and directors
may not have significant experience or knowledge relating to the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We
cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will
have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Shareholders
May Not Have the Ability to Approve an Initial Business Combination
In
connection with any proposed business combination, we will either (1) seek shareholder approval of our initial business combination at
a meeting called for such purpose at which public shareholders may seek to convert their public shares, regardless of whether they vote
for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable) or (2) provide our public shareholders with the opportunity to sell their public shares to
us by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein. Notwithstanding the foregoing, our initial shareholders have agreed, pursuant to written letter agreements with us, not to convert
any public shares held by them into their pro rata share of the aggregate amount then on deposit in the trust account.
If we determine to engage in a tender offer, such tender offer will be structured so that each shareholder may tender any or all of his,
her or its public shares rather than some pro rata portion of his, her or its shares. The decision as to whether we
will seek shareholder approval of a proposed business combination or will allow shareholders to sell their shares to us in a tender offer
will be made by us based on a variety of factors such as the timing of the transaction, or whether the terms of the transaction would
otherwise require us to seek shareholder approval. If we so choose and we are legally permitted to do so, we have the flexibility to
avoid a shareholder vote and allow our shareholders to sell their shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act
which regulate issuer tender offers. In that case, we will file tender offer documents with the SEC which will contain substantially
the same financial and other information about the initial business combination as is required under the SEC’s proxy rules. We
will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and,
solely if we seek shareholder approval, a majority of the issued and outstanding ordinary shares voted are voted in favor of the business
combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities
Act. However, if we seek to consummate an initial business combination with a target business that imposes any type of working capital
closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial
business combination, our net tangible asset threshold may limit our ability to consummate such initial business combination (as we may
be required to have a lesser number of shares converted or sold to us) and may force us to seek third party financing which may not be
available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial business combination and we
may not be able to locate another suitable target within the applicable time period, if at all. Public shareholders may therefore have
to wait 21 months, or until December 4, 2022,in order to be able to receive a pro rata share of the trust account.
Our
initial shareholders and our officers and directors have agreed (1) to vote any ordinary shares owned by them in favor of any proposed
business combination, (2) not to convert any ordinary shares in connection with a shareholder vote to approve a proposed initial business
combination and (3) not sell any ordinary shares in any tender in connection with a proposed initial business combination. As a result,
if we sought shareholder approval of a proposed transaction we could need as little as 56,251 of our public shares (or approximately
1.12% of our public shares) to be voted in favor of the transaction in order to have such transaction approved (assuming the over-allotment
option is not exercised and the initial shareholders do not purchase any units in this offering or units or shares in the after-market).
If
we hold a meeting to approve a proposed business combination and a significant number of shareholders vote, or indicate an intention
to vote, against such proposed business combination, our officers, directors, initial shareholders or their affiliates could make such
purchases in the open market or in private transactions in order to influence the vote. Notwithstanding the foregoing, our officers,
directors, initial shareholders and their affiliates will not make purchases of ordinary shares if the purchases would violate Section
9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s stock.
Ability
to Extend Time to Complete Business Combination
We
initially had until March 4, 2022 to consummate our initial business combination. However, we have extended the period of time to consummate
a business combination three (3) times, until December 4, 2022, after additional funds totaling $1,725,000 were deposited into the trust
account. Pursuant to the terms of our amended and restated memorandum and articles of association and the trust agreement to be entered
into between us and Continental Stock Transfer & Trust Company, LLC, in order to extend the time available for us to consummate our
initial business combination, our insiders or their affiliates or designees, upon five days advance notice prior to the applicable deadline,
deposited into the trust account $575,000 ($0.10 per share in either case) for each three month extension, for the extension to December
4, 2022.
Conversion/Tender
Rights
At
any meeting called to approve an initial business combination, public shareholders may seek to convert their public shares, regardless
of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount
then on deposit in the trust account, less any taxes then due but not yet paid. Notwithstanding the foregoing, our initial shareholders
have agreed, pursuant to written letter agreements with us, not to convert any public shares held by them into their pro rata share
of the aggregate amount then on deposit in the trust account. The conversion rights will be effected under our amended and restated memorandum
and articles of association and British Virgin Islands law as redemptions. If we hold a meeting to approve an initial business combination,
a holder will always have the ability to vote against a proposed business combination and not seek conversion of his shares.
Alternatively, if we engage in a tender offer,
each public shareholder will be provided the opportunity to sell his public shares to us in such tender offer. The tender offer rules
require us to hold the tender offer open for at least 20 business days. Accordingly, this is the minimum amount of time we would need
to provide holders to determine whether they want to sell their public shares to us in the tender offer or remain an investor in our company.
Our initial shareholders, officers and directors
will not have conversion rights with respect to any ordinary shares owned by them, directly or indirectly, whether acquired prior to this
offering or purchased by them in this offering or in the aftermarket.
We may also require public shareholders, whether
they are a record holder or hold their shares in “street name,” to either tender their certificates (if any) to our transfer
agent or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holder’s option, at any time at or prior to the vote on the business combination. Once the shares are
converted by the holder, and effectively redeemed by us under British Virgin Islands law, the transfer agent will then update our Register
of Members to reflect all conversions. The proxy solicitation materials that we will furnish to shareholders in connection with the vote
for any proposed business combination will indicate whether we are requiring shareholders to satisfy such delivery requirements. Accordingly,
a shareholder would have from the time our proxy statement is mailed through the vote on the business combination to deliver his shares
if he wishes to seek to exercise his conversion rights. Under our amended and restated memorandum and articles of association, we are
required to provide at least 10 days’ advance notice of any shareholder meeting, which would be the minimum amount of time a shareholder
would have to determine whether to exercise conversion rights. As a result, if we require public shareholders who wish to convert their
ordinary shares into the right to receive a pro rata portion of the funds in the trust account to comply with the foregoing
delivery requirements, holders may not have sufficient time to receive the notice and deliver their shares for conversion. Accordingly,
investors may not be able to exercise their conversion rights and may be forced to retain our securities when they otherwise would not
want to.
There is a nominal cost associated with this tendering
process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the
tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting holder. However, this fee
would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver shares is
a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event
we require shareholders seeking to exercise conversion rights to deliver their shares prior to the consummation of the proposed business
combination and the proposed business combination is not consummated, this may result in an increased cost to shareholders.
Any request to convert or tender such shares once
made, may be withdrawn at any time up to the vote on the proposed business combination or expiration of the tender offer. Furthermore,
if a holder of a public share delivered his certificate in connection with an election of their conversion or tender and subsequently
decides prior to the vote on the business combination or the expiration of the tender offer not to elect to exercise such rights, he may
simply request that the transfer agent return the certificate (physically or electronically).
If the initial business combination is not approved
or completed for any reason, then our public shareholders who elected to exercise their conversion or tender rights would not be entitled
to convert their shares for the applicable pro rata share of the trust account. In such case, we will promptly return
any shares delivered by public holders.
Automatic Liquidation of Trust Account if No Business Combination
If we do not complete a business combination by
December 4, 2022, it will trigger our automatic winding up, liquidation and subsequent dissolution pursuant to the terms of our amended
and restated memorandum and articles of association. As a result, this has the same effect as if we had formally gone through a voluntary
liquidation procedure under the Companies Law. Accordingly, no vote would be required from our shareholders to commence such a voluntary
winding up, liquidation and subsequent dissolution. Pursuant to the terms of our amended and restated memorandum and articles of association
and the trust agreement entered into between us and Continental Stock Transfer & Trust Company, in order to extend the time available
for us to consummate our initial business combination, our insiders or their affiliates or designees, upon five days advance notice prior
to the applicable deadline, deposited into the trust account $575,000 for each three month extension, for the extension to December 4,
2022. If we are unable to consummate our initial business combination within such time period, we will, as promptly as possible but not
more than ten business days thereafter, redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust
account, including a pro rata portion of any interest earned on the funds held in the trust account and not necessary to pay our taxes,
then seek to liquidate and dissolve. However, we may not be able to distribute such amounts as a result of claims of creditors which may
take priority over the claims of our public shareholders. In the event of our liquidation and subsequent dissolution, the public rights
will expire and will be worthless.
The amount in the trust account under the Companies
Law will be treated as funds distributable under the Companies Law provided that immediately following the date on which the proposed
distribution is proposed to be made, we are able to pay our debts as they fall due in the ordinary course of business. If we are forced
to liquidate the trust account, we anticipate that we would distribute to our public shareholders the amount in the trust account calculated
as of the date that is two days prior to the distribution date (including any accrued interest). Prior to such distribution, we would
be required to assess all claims that may be potentially brought against us by our creditors for amounts they are actually owed and make
provision for such amounts, as creditors take priority over our public shareholders with respect to amounts that are owed to them. We
cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our shareholders could
potentially be liable for any claims of creditors to the extent of distributions received by them as an unlawful payment in the event
we enter an insolvent liquidation. Furthermore, while we will seek to have all vendors and service providers (which would include any
third parties we engaged to assist us in any way in connection with our search for a target business) and prospective target businesses
execute agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust
account, there is no guarantee that they will execute such agreements. Nor is there any guarantee that, even if such entities execute
such agreements with us, they will not seek recourse against the trust account or that a court would conclude that such agreements are
legally enforceable.
Each of our initial shareholders and our officers
and directors have agreed to waive its rights to participate in any liquidation of our trust account or other assets with respect to the
insider shares and private units and to vote their insider shares, private shares in favor of any liquidation and plan of distribution
which we submit to a vote of shareholders. There will be no distribution from the trust account with respect to our warrants or rights,
which will expire worthless.
If we are unable to complete an initial business
combination and expend all of the net proceeds of our IPO, other than the proceeds deposited in the trust account, and without taking
into account interest, if any, earned on the trust account, the initial per-share distribution from the trust account would be $10.22. The
proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would be prior to the claims
of our public shareholders.
Although we have sought and will continue to seek
to have all vendors, including lenders for money borrowed, prospective target businesses or other entities we engage execute agreements
with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public
shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be
prevented from bringing claims against the trust account, including but not limited to, fraudulent inducement, breach of fiduciary responsibility
or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with
a claim against our assets, including the funds held in the trust account. If any third party refused to execute an agreement waiving
such claims to the monies held in the trust account, we would perform an analysis of the alternatives available to us if we chose not
to engage such third party and evaluate if such engagement would be in the best interest of our shareholders if such third party refused
to waive such claims. Examples of possible instances where we may engage a third party that refused to execute a waiver include the engagement
of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other
consultants that would agree to execute a waiver or in cases where management is unable to find a provider of required services willing
to provide the waiver. In any event, our management would perform an analysis of the alternatives available to it and would only enter
into an agreement with a third party that did not execute a waiver if management believed that such third party’s engagement would
be significantly more beneficial to us than any alternative. In addition, there is no guarantee that such entities will agree to waive
any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not
seek recourse against the trust account for any reason.
Cross Wealth Investment Holding Limited, which
is owned by our director, Jining Li, has agreed that, if we liquidate the trust account prior to the consummation of a business combination,
it will be liable to pay debts and obligations to target businesses or vendors or other entities that are owed money by us for services
rendered or contracted for or products sold to us in excess of the net proceeds of our IPO not held in the trust account, but only to
the extent necessary to ensure that such debts or obligations do not reduce the amounts in the trust account and only if such parties
have not executed a waiver agreement. However, we cannot assure you that he will be able to satisfy those obligations if he is required
to do so. Accordingly, the actual per-share distribution could be less than $10.22 due to claims of creditors.
We may redeem the outstanding warrants (excluding
the private warrants and warrants underlying the units that may be issued upon conversion of working capital loans but including any outstanding
warrants issued upon exercise of the unit purchase option issued to Maxim Group LLC), in whole and not in part, at a price of $0.01 per
warrant:
| ● | at any time while the warrants are exercisable, |
| ● | upon a minimum of 30 days’ prior written notice of
redemption, |
| ● | if, and only if, the last sales price of our ordinary shares
equals or exceeds $16.50 per share for any 20 trading days within a 30 trading day period ending three business days before we send the
notice of redemption, and |
| ● | if, and only if, there is a current registration statement
in effect with respect to the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period
referred to above and continuing each day thereafter until the date of redemption. |
If the foregoing conditions are satisfied and we issue a notice of redemption, each warrant holder can exercise his, her or its warrant
prior to the scheduled redemption date. However, the price of the ordinary shares may fall below the $16.50 trigger price as well as the
$11.50 warrant exercise price per full share after the redemption notice is issued and not limit our ability to complete the redemption.
The redemption criteria for our warrants have
been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide
a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as
a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If we call the warrants for redemption as
described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary shares
equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the
difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value.
The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending
on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether we will exercise
our option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including
the price of our ordinary shares at the time the warrants are called for redemption, our cash needs at such time and concerns regarding
dilutive share issuances.
Competition
In identifying, evaluating and selecting a target
business, we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities
are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many
of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited
when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses that we could
acquire with the net proceeds of this offering, our ability to compete in acquiring certain sizable target businesses may be limited by
our available financial resources.
The following also may not be viewed favorably
by certain target businesses:
| ● | our obligation to seek shareholder
approval of a business combination or obtain the necessary financial information to be sent to shareholders in connection with such business
combination may delay or prevent the completion of a transaction; |
| ● | our obligation to convert public
shares held by our public shareholders may reduce the resources available to us for a business combination; |
| ● | Nasdaq may require us to file
a new listing application and meet its initial listing requirements to maintain the listing of our securities following a business combination; |
| ● | our outstanding warrants, rights
and unit purchase options and the potential future dilution they represent; |
| ● | our obligation to pay the deferred
underwriting discounts and commissions to Maxim Group LLC upon consummation of our initial business combination; |
| ● | our obligation to either repay
or issue units upon conversion of up to $500,000 of working capital loans that may be made to us by our initial shareholders, officers,
directors or their affiliates; |
| ● | our obligation to register
the resale of the insider shares, as well as the private units (and underlying securities) and any securities issued to our initial shareholders,
officers, directors or their affiliates upon conversion of working capital loans; and |
| ● | the impact on the target business’
assets as a result of unknown liabilities under the securities laws or otherwise depending on developments involving us prior to the
consummation of a business combination. |
Any of these factors may place us at a competitive
disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity
and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities having
a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a business combination,
there will be, in all likelihood, intense competition from competitors of the target business. We cannot assure you that, subsequent to
a business combination, we will have the resources or ability to compete effectively.
Facilities
We maintain our principal executive office at
15/F, Aubin House, 171-172 Gloucester Road, Wanchai, Hong Kong. The cost for this space is provided to us by Golden Bridge Capital Limited,
which is also owned by Mr. Jining Li, the Company’s director and also the affiliate of the sponsor, as part of the $10,000 per month
payment we make to it for office space and related services. We consider our current office space adequate for our current operations.
Employees
We have three executive officers, one of whom,
Yongsheng Liu, our Chief Executive Officer, is also an employee. These individuals are not obligated to devote any specific number of
hours to our matters and intend to devote only as much time as they deem necessary to our affairs. The amount of time they will devote
in any time period will vary based on whether a target business has been selected for the business combination and the stage of the business
combination process the company is in. Accordingly, once management locates a suitable target business to acquire, they will spend more
time investigating such target business and negotiating and processing the business combination (and consequently spend more time to our
affairs) than they would prior to locating a suitable target business. We presently expect our executive officers to devote such amount
of time as they reasonably believe is necessary to our business (which could range from only a few hours a week while we are trying to
locate a potential target business to a majority of their time as we move into serious negotiations with a target business for a business
combination). We do not intend to have any full time employees prior to the consummation of a business combination.
ITEM 1A. RISK FACTORS
Our ordinary shares subject to redemption
are classified for as outside permanent equity and the changes in classification could have a material effect on our financial results.
In addition, in preparation of the Company’s
financial statements as of and for the year ended June 30, 2021, the Company concluded it should restate its financial statements to classify
all ordinary shares subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable
equity instruments, ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480), paragraph 10-S99, redemption provisions not solely
within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. The Company
had previously classified a portion of its ordinary shares in permanent equity. Although the Company did not specify a maximum redemption
threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible
assets to be less than $5,000,001. The Company considered that the threshold would not change the nature of the underlying shares as redeemable
and thus would be required to be disclosed outside equity. As a result, the Company revised its previously filed financial statements
to classify all ordinary shares as temporary equity and to recognize accretion from the initial book value to redemption value at the
time of its Initial Public Offering and in accordance with ASC 480. The change in the carrying value of redeemable shares of ordinary
shares resulted in charges against accumulated deficit.
We have identified a material weakness in
our internal control over financial reporting as of June 30, 2022. If we are unable to develop and maintain an effective system of internal
control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely
affect investor confidence in us and materially and adversely affect our business and operating results.
Following the issuance of the SEC Statement, our
management and our audit committee concluded that, in light of the SEC Statement, it was appropriate to restate our previously issued
audited financial statements as of and for the year ended June 30, 2021. See “—the changes on classification of permanent
equity could have a material effect on our financial results.” As part of such process, we identified a material weakness in our
internal controls over financial reporting. Specifically, the Company’s management has concluded that control around the interpretation
and accounting for certain complex financial instruments was not effectively designed or maintained as they relate to the accounting for
warrants and ordinary shares subject to possible redemption.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal controls
are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material
weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately
have the intended effects.
Trading in our securities may be prohibited
under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate our auditor. In
that case, Nasdaq could delist our securities. The delisting of our securities, or the threat of their being delisted, may materially
and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections may deprive our investors
with the benefits of such inspections.
The Holding Foreign Companies Accountable Act,
or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have 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 our shares or other securities from being traded on a national securities exchange or in the over the counter
trading market in the U.S..
Our current auditor, the independent registered
public accounting firm that issues the audit report included elsewhere in this annual report, 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 the applicable professional standards. However, if it is later determined
that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction,
Nasdaq could delist our securities, including our units, ordinary shares and redeemable warrants, and the SEC shall prohibit them from
being traded on a national securities exchange or in the over the counter trading market in the U.S. For example, if we effect our
initial business combination with a business located in the PRC or Hong Kong and if our new auditor is located in China or Hong Kong,
with operations in and who performs audit operations of registrants in China or Hong Kong, a jurisdiction where the PCAOB has been
unable to conduct inspections without the approval of the relevant authorities, the work of our new auditor as it relates to those operations
may not be inspected by the PCAOB. If our securities are delisted and prohibited from being traded on a national securities exchange or
in the over the counter trading market in the U.S. due to the PCAOB not being able to conduct inspections or full investigations
of our auditor, it would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and
uncertainty associated with potential delisting and prohibition could have a negative impact on the price of our securities. Also, such
delisting and prohibition could significantly affect the Company’s ability to raise capital on acceptable terms, or at all, which
could have a material adverse effect on the Company’s business, financial condition and prospects.
In May 2013, the PCAOB announced that it
had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance, which establishes
a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by
the PCAOB in the PRC or by the CSRC or the PRC Ministry of Finance in the United States. The PCAOB continues to be in discussions
with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with the PCAOB
and audit Chinese companies that trade on U.S. exchanges.
On March 24, 2021, the SEC adopted interim
final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We will be required
to comply with these rules if the SEC identifies us as having a “non-inspection” year under a process to be subsequently established
by the SEC. 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
HFCAA from three years to two.
On November 5, 2021, the SEC approved the
PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. Rule 6100 provides a framework
for the PCAOB to use when determining, as contemplated under the HFCAA, whether it is unable to inspect or investigate completely registered
public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On December 2, 2021, the SEC issued amendments
to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. The rules
apply to registrants that 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 PCAOB is unable to inspect or investigate completely because of a position taken
by an authority in foreign jurisdictions.
On August 26, 2022, the PCAOB entered into a Statement
of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the PRC and, as summarized in the “Statement
on Agreement Governing Inspections and Investigations of Audit Firms Based in China and Hong Kong” published on the U.S. Securities
and Exchange Commission’s official website, the parties agreed to the following: (i) in accordance with the Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation;
(ii) the PCAOB shall have direct access to interview or take testimony from all personnel of the audit firms whose issuer engagements
are being inspected or investigated; (iii) the PCAOB shall have the unfettered ability to transfer information to the SEC, in accordance
with the Sarbanes-Oxley Act; and (iv) the PCAOB inspectors shall have access to complete audit work papers without any redactions, with
view-only procedures for certain targeted pieces of information such as personally identifiable information. The PCAOB is required to
reassess its determinations as to whether it is able to carry out inspection and investigation completely and without obstruction by the
end of 2022.
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 fulfill its statutory mandate. Some of the concepts of these
recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the
HFCAA. For example, if a company 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 has announced that the SEC staff is preparing
a consolidated proposal for the rules regarding the implementation of the HFCAA and to address the recommendations in the PWG report.
It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations
will be adopted. The SEC has also announced amendments to various annual report forms to accommodate the certification and disclosure
requirements of the HFCAA. There could be additional regulatory or legislative requirements or guidance that could impact us if our
auditor is not subject to PCAOB inspection. The implications of these possible regulations in addition to the requirements of the HFCAA
are uncertain, and such uncertainty could cause the market price of our securities to be materially and adversely affected. If, for whatever
reason, the PCAOB is unable to conduct inspections or full investigations of our auditor, the Company could be delisted or prohibited
from being traded over the counter earlier than would be required by the HFCAA. If our securities are unable to be listed on another
securities exchange by then, such delisting and prohibition would substantially impair your ability to sell or purchase our securities
when you wish to do so, and the risk and uncertainty associated with potential delisting and prohibition could have a negative impact
on the price of our securities. Also, such delisting and prohibition could significantly affect the Company’s ability to raise capital
on acceptable terms, or at all, which would have a material adverse effect on the Company’s business, financial condition and prospects.
Inspections of audit firms that the PCAOB has
conducted have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as
part of the inspection process to improve future audit quality. If the PCAOB were unable to conduct inspections or full investigations
of the Company’s auditor, investors in our securities would be deprived of the benefits of such PCAOB inspections. In addition,
the inability of the PCAOB to conduct inspections or full investigations of auditors would may make it more difficult to evaluate the
effectiveness of the Company’s independent registered public accounting firm’s audit procedures or quality control procedures
as compared to auditors that are subject to the PCAOB inspections, which could cause investors and potential investors in our stock to
lose confidence in the audit procedures of our auditor and reported financial information and the quality of our financial statements.
U.S. laws and regulations, including the
Holding Foreign Companies Accountable Act and Accelerating Holding Foreign Companies Accountable Act, may restrict or eliminate our ability
to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in China
or Hong Kong.
The PCAOB is currently unable to conduct inspections
on accounting firms in the PRC and Hong Kong without the approval of the relevant government authorities. The auditor and its audit work
in the PRC or Hong Kong may not be inspected fully by the PCAOB. Inspections of other auditors conducted by the PCAOB outside China have
at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part
of the inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in China or Hong Kong
prevents the PCAOB from regularly evaluating the PRC or Hong Kong auditor’s audits and its quality control procedures. As a result,
shareholders may be deprived of the benefits of PCAOB inspections if we complete a business combination with such companies.
Future developments in U.S. laws may restrict
our ability or willingness to complete certain business combinations with companies. For instance, the recently enacted Holding Foreign
Companies Accountable Act (the “HFCAA”) would restrict our ability to consummate a business combination with a target business
unless that business met certain standards of the PCAOB and would require delisting of a company from U.S. national securities exchanges
if the PCAOB is unable to inspect its public accounting firm for three consecutive years. The HFCAA also requires public companies to
disclose, among other things, whether they are owned or controlled by a foreign government, specifically, those based in China. We may
not be able to consummate a business combination with a favored target business due to these laws. Furthermore, on June 22, 2021,
the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if signed into law, would
amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is
not subject to PCAOB inspections for two consecutive years instead of three consecutive years. On December 2, 2021, the SEC issued
amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act.
The rules apply to registrants that 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 PCAOB is unable to inspect or investigate completely because of a position
taken by an authority in foreign jurisdictions.
The documentation we may be required to submit
to the SEC proving certain beneficial ownership requirements and establishing that we are not owned or controlled by a foreign government
in the event that we use a foreign public accounting firm not subject to inspection by the PCAOB or where the PCAOB is unable to completely
inspect or investigate our accounting practices or financial statements because of a position taken by an authority in the foreign jurisdiction
could be onerous and time consuming to prepare. HFCAA mandates the SEC to identify issuers of SEC-registered securities whose audited
financial reports are prepared by an accounting firm that the PCAOB is unable to inspect due to restrictions imposed by an authority in
the foreign jurisdiction where the audits are performed. If such identified issuer’s auditor cannot be inspected by the PCAOB for
three consecutive years, the trading of such issuer’s securities on any U.S. national securities exchanges, as well as any over-the-counter trading
in the U.S., will be prohibited.
On March 24, 2021, the SEC adopted interim
final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. An identified issuer 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. On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding
Foreign Companies Accountable Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA,
whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because
of a position taken by one or more authorities in that jurisdiction.
On December 16, 2021, the PCAOB issued a
Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered
in: (i) China, and (ii) Hong Kong. Our auditor, Friedman LLP, headquartered in Manhattan, New York with no branches or offices outside
the United States, is an independent registered public accounting firm registered with the PCAOB and is subject to laws in the United
States pursuant to which the PCAOB conducts regular inspections to assess Friedman LLP’s compliance with applicable professional
standards. The PCAOB currently has access to inspecting the working papers of our auditor. Our auditor is not headquartered in China or
Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination.
On August 26, 2022, the PCAOB entered into a Statement
of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the PRC and, as summarized in the “Statement
on Agreement Governing Inspections and Investigations of Audit Firms Based in China and Hong Kong” published on the U.S. Securities
and Exchange Commission’s official website, the parties agreed to the following: (i) in accordance with the Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation;
(ii) the PCAOB shall have direct access to interview or take testimony from all personnel of the audit firms whose issuer engagements
are being inspected or investigated; (iii) the PCAOB shall have the unfettered ability to transfer information to the SEC, in accordance
with the Sarbanes-Oxley Act; and (iv) the PCAOB inspectors shall have access to complete audit work papers without any redactions, with
view-only procedures for certain targeted pieces of information such as personally identifiable information. The PCAOB is required to
reassess its determinations as to whether it is able to carry out inspection and investigation completely and without obstruction by the
end of 2022.
In the event that we complete a business combination
with a company with substantial operations in China or Hong Kong and PCAOB is not able to fully conduct inspections of our auditor’s
work papers in China or Hong Kong, it could cause us to fail to be in compliance with U.S. securities laws and regulations, we could cease
to be listed on a U.S. securities exchange, and U.S. trading of our shares could be prohibited under the HFCAA. Any of these actions,
or uncertainties in the market about the possibility of such actions, could adversely affect our prospects to successfully complete a
business combination with a China or Hong Kong-based company, our access to the U.S. capital markets and the price of our shares.
Future developments in respect of increase U.S.
regulatory access to audit information are uncertain, as the legislative developments are subject to the legislative process and the regulatory
developments are subject to the rule-making process and other administrative procedures.
Other developments in U.S. laws and regulatory
environment, including but not limited to executive orders such as Executive Order (E.O.) 13959, “Addressing the Threat from Securities
Investments That Finance Communist Chinese Military Companies,” may further restrict our ability to complete a business combination
with certain China-based businesses.
We may not be able to complete an initial
business combination with a U.S. target company since such initial business combination may be subject to U.S. foreign investment regulations
and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (CFIUS), or ultimately prohibited.
Cross Wealth Investment Holding Limited, our sponsor,
a British Virgin Islands company, which is controlled by our director, Jining Li, a Hong Kong national. Our sponsor owns approximately
6.22% of our outstanding shares as of the date of this annual report. Certain federally licensed businesses in the United States, such
as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition, CFIUS is an interagency
committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine
the effect of such transactions on the national security of the United States. Because we may be considered a “foreign person”
under such rules and regulations, any proposed business combination between us and a U.S. business engaged in a regulated industry or
which may affect national security, we could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS
was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-passive, non-controlling investments
in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing
regulations that are now in force, also subject certain categories of investments to mandatory filings. If our potential initial business
combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate a business combination
with such business. In addition, if our potential business combination falls within CFIUS’s jurisdiction, we may be required to
make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial business combination without
notifying CFIUS and risk CFIUS intervention, before or after closing the initial business combination. CFIUS may decide to block or delay
our initial business combination, impose conditions to mitigate national security concerns with respect to such initial business combination
or order us to divest all or a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance.
The foreign ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent
us from pursuing certain initial business combination opportunities that we believe would otherwise be beneficial to us and our shareholders.
A s a result, the pool of potential targets with which we could complete an initial business combination may be limited and we may be
adversely affected in terms of competing with other special purpose acquisition companies which do not have similar foreign ownership
issues.
Moreover, the process of government review, whether
by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial business combination (12 months
from the consummation of our IPO, or up to 21 months, if we extend the time to complete a business combination as described in the
prospectus dated March 1, 2021 relating to our IPO) our failure to obtain any required approvals within the requisite time period may
require us to liquidate. If we liquidate, our public shareholders may only receive $10.22 per share initially, and our warrants and
rights will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance
of realizing future gains on your investment through any price appreciation in the combined company.
Risks Related to Doing Business in Jurisdictions We Operate
All our operations are through our office space located in Hong
Kong. However, due to the long arm provisions under the current PRC laws and regulations, the Chinese government may exercise significant
oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result
in a material change in our operations and/or the value of our ordinary shares. Changes in the policies, regulations, rules, and the enforcement
of laws of the Chinese government may also be quick with little advance notice and our assertions and beliefs of the risk imposed by the
PRC legal and regulatory system cannot be certain.
Goldenbridge is a holding company with no material operations of its
own and we conduct our operation through our office located in Hong Kong. As of the date of this annual report, we are not materially
affected by recent statements by the Chinese Government indicating an extent to exert more oversight and control over offerings that are
conducted overseas and/or foreign investment in China-based issuers. However, due to long arm provisions under the current PRC laws
and regulations, there remains regulatory uncertainty with respect to the implementation and interpretation of laws in China. The PRC
government may choose to exercise significant oversight and discretion, and the policies, regulations, rules, and the enforcement of laws
of the Chinese government to which we are subject may change rapidly and with little advance notice to us or our shareholders. As a result,
the application, interpretation, and enforcement of new and existing laws and regulations in the PRC and our assertions and beliefs of
the risk imposed by the PRC legal and regulatory system are often uncertain. In addition, these laws and regulations may be interpreted
and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices. New laws,
regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries
or investigations or any other government actions may:
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delay or impede our development; |
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result in negative publicity or increase our operating costs; |
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require significant management time and attention; and |
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subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices. |
We are aware that recently, the PRC government initiated a series of
regulatory actions and statements to regulate business operations in certain areas in China with little advance notice, including cracking
down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable
interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making
bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,
if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept
foreign investments and list on an U.S. or other foreign exchange.
Chinese government may intervene or influence our operations at any
time or may exert more control over offerings conducted overseas and foreign investment in China-based issuers, which may result
in a material change in our operations and/or the value of our ordinary shares. The promulgation of new laws or regulations, or the new
interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or way we conduct
our business and could require us to change certain aspects of our business to ensure compliance, which could increase costs, require
us to obtain licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent
measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well
as materially decrease the value of our ordinary shares, potentially rendering it worthless.
If the Chinese government chooses to exert more oversight and
control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action may significantly limit
or completely hinder our ability to offer or continue to offer ordinary shares to investors and cause the value of our ordinary shares
to significantly decline or be worthless.
Recent statements by the Chinese government have indicated an intent
to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in China-based issuers.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council
jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development of
the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight
of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish
and improve the system of extraterritorial application of the PRC securities laws. On December 24, 2021, the CSRC published the Provisions
of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Administration
Provisions”), and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (the
“Measures”), which are now open for public comment.
Furthermore, on July 10, 2021, the CAC issued a revised draft
of the Measures for Cybersecurity Review for public comments, which required that, among others, in addition to “operator of critical
information infrastructure”, any “data processor” controlling personal information of no less than one million users
which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further elaborated the factors to
be considered when assessing the national security risks of the relevant activities. On December 28, 2021, the CAC, the National
Development and Reform Commission (“NDRC”), and several other administrations jointly issued the revised Measures for Cybersecurity
Review, or the “Revised Review Measures”, which became effective and replaced the existing Measures for Cybersecurity Review
on February 15, 2022. According to the Revised Review Measures, if an “online platform operator” that is in possession
of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review. Based
on a set of Q&A published on the official website of the State Cipher Code Administration in connection with the issuance of the Revised
Review Measures, an official of the said administration indicated that an online platform operator should apply for a cybersecurity review
prior to the submission of its listing application with non-PRC securities regulators. Moreover, the CAC released the draft of the
Regulations on Network Data Security Management in November 2021 for public consultation, which among other things, stipulates that a
data processor listed overseas must conduct an annual data security review by itself or by engaging a data security service provider and
submit the annual data security review report for a given year to the municipal cybersecurity department before January 31 of the following
year. Given the recency of the issuance of the Revised Review Measures and their pending effectiveness, there is a general lack of guidance
and substantial uncertainties exist with respect to their interpretation and implementation.
We do not currently expect the Revised Review Measures to have an impact
on our business, operations or our offering as we do not believe that Goldenbridge is deemed to be an “operator of critical information
infrastructure” or a “data processor” controlling personal information of no less than one million users, that are required
to file for cybersecurity review before listing in the U.S., because (i) Goldenbridge is incorporated in the BVI and operating through
an office located in Hong Kong and the Revised Review Measures remains unclear whether it shall be applied to a BVI holding company operating
through an office located in Hong Kong; (ii) Goldenbridge operates without any subsidiary or VIE structure in mainland China; (iii) as
of date of this annual report, Goldenbridge has not collected and stored any personal information of PRC individuals; and (vi) as of the
date of this annual report, Goldenbridge has not been informed by any PRC governmental authority of any requirement that it files for
a cybersecurity review. However, there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity
laws and regulations. If Goldenbridge is deemed to be an “operator of critical information infrastructure” or a “data
processor” controlling personal information of no less than one million users, Goldenbridge’s operation and the listing of
our ordinary shares in the U.S. could be subject to CAC’s cybersecurity review in the future.
Based on our understanding of the current PRC laws, as of the date
of this annual report, Goldenbridge is not required to obtain any permission or approval from PRC authorities to obtain any licenses or
approvals for offering securities to foreign investors and while seeking a target for the initial business combination, or to operate
and to issue our securities to foreign investors and to list on a US exchange, including the CSRC or the CAC, because (i) the CSRC currently
has not issued any definitive rule or interpretation concerning whether offerings like ours are subject to this regulation; and (ii) Goldenbridge
was established in the BVI and operates through an office space located in Hong Kong and is not included in the categories of industries
and companies whose foreign securities offerings are subject to review by the CSRC or the CAC.
Uncertainties still exist, due to the possibility that laws, regulations,
or policies in the PRC could change rapidly in the future. In the event that (i) the PRC government expanded the categories of industries
and companies whose foreign securities offerings are subject to review by the CSRC or the CAC that we are required to obtain such permissions
or approvals; or (ii) we inadvertently concluded that relevant permissions or approvals were not required or that we did not receive
or maintain relevant permissions or approvals required, any action taken by the PRC government could significantly limit or completely
hinder our operations in PRC and our ability and to offer or continue to offer securities to investors and could cause the value of such
securities to significantly decline or be worthless.
The Hong Kong legal system embodies uncertainties
which could limit the legal protections available to the Company.
Hong Kong is a Special Administrative Region of the PRC and enjoys
a high degree of autonomy under the “one country, two systems” principle. The Hong Kong Special Administrative Region’s
constitutional document, the Basic Law, ensures that the current political situation will remain in effect for 50 years. Hong Kong has
enjoyed the freedom to function in a high degree of autonomy for its affairs, including currencies, immigration and custom, independent
judiciary system and parliamentary system. However, we are not in any position to guarantee the implementation of the “one country,
two systems” principle and the level of autonomy as currently in place at the moment. Any changes in the state of political environment
in Hong Kong may materially and adversely affect our business and operation.
A downturn in the Hong Kong, China or global economy, and economic
and political policies of China could materially and adversely affect our business and financial condition.
Our business, prospects, financial condition and results of operations
may be influenced to a significant degree by political, economic and social conditions in Hong Kong and China generally and by continued
economic growth in Hong Kong and China as a whole. The Chinese economy differs from the economies of most developed countries in many
respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation
of resources. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically
and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide
the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us.
Economic conditions in Hong Kong and China are sensitive to global
economic conditions. Any prolonged slowdown in the global or Chinese economy may have a negative impact on our business, results of operations
and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability to access the
capital markets to meet liquidity needs.
The recent outbreak of war in Ukraine has already affected global economic
markets, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s
recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European
Union and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely affect global
energy and financial markets and thus could affect our client’s business and our business, even though we do not have any direct
exposure to Russia or the adjoining geographic regions. The extent and duration of the military action, sanctions, and resulting market
disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions
may magnify the impact of other risks described in this section. We cannot predict the progress or outcome of the situation in Ukraine,
as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities,
or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in
turn have a material adverse effect on the operations, results of operations, financial condition, liquidity and business outlook of our
business.
Risks Associated with Acquiring and Operating a Target Business
with its Primary Operation in China
Our principal executive offices are located in
Hong Kong, our Sponsor is located in Hong Kong, and certain of our executive officers and/or directors are located in or have significant
ties to Hong Kong, and we may seek to acquire a company that is based in China or Hong Kong or a PRC Target Company which might require
a VIE structure in an initial business combination. Because of such ties to China or Hong Kong, we may be subjected to the laws, rules
and regulations of the PRC. Accordingly, we will be subject to the following risks associated with acquiring and operating a target business
with its primary operation in China.
If the PRC government deems that the contractual
arrangements in relation to the potential PRC Target Company, the VIE, do not comply with PRC regulatory restrictions on foreign investment
in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject
to severe penalties or be forced to relinquish our interests in those operations.
We are a holding company with no operations of
its own. Our initial business combination target company may include a PRC Target Company which might require a VIE structure. The PRC
Target Company, through contractual arrangements, can consolidate the financial results of the VIE in our consolidated financial statements
in accordance with U.S. GAAP or IFRS, if it has the power to direct activities that most significantly impact the economic performance
of the VIE and have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant
to the VIE. In that case, following the consummation of a business combination with a PRC Target Company, our securities would be securities
of an offshore holding company instead of shares of the VIE in China. For a summary of the VIE contractual arrangements, see “Proposed
Business — Initial Business Combination with a Company Based in China or Hong Kong.”
We will rely on WFOE’s contractual arrangements
with the VIE and its shareholders to operate the business. These contractual arrangements may not be as effective as direct ownership
in respect of our relationship with the VIE. Under the contractual arrangements, as a legal matter, if the VIE or any of its shareholders
executing the VIE Agreements fails to perform its, his or her respective obligations under the contractual arrangements, we may have to
incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including seeking
specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if shareholders
of a variable interest entity were to refuse to transfer their equity interests in such variable interest entity to us or our designated
persons when we exercise the purchase option pursuant to the contractual arrangements, we may have to take a legal action to compel them
to fulfill their contractual obligations.
If (i) the applicable PRC authorities invalidate
the contractual arrangements for violation of PRC laws, rules and regulations, (ii) any variable interest entity or its shareholders terminate
the contractual arrangements, (iii) any variable interest entity or its shareholders fail to perform its/his/her obligations under the
contractual arrangements, or (iv) if these regulations change or are interpreted differently in the future, the PRC Target Company’s
business operations in China would be materially and adversely affected, and the value of your securities would substantially decrease
or even become worthless. Further, if we fail to renew the contractual arrangements upon their expiration, we would not be able to continue
the business operations unless the then current PRC law allows us to directly operate businesses in China.
In addition, if any VIE or all or part of its
assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities,
which could materially and adversely affect our business, financial condition and results of operations. If any of the variable interest
entities undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim
rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect
our business and our ability to generate revenues.
All of the contractual arrangements will be governed
by PRC law and provided for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts will be interpreted
in accordance with PRC laws and any disputes will be resolved in accordance with PRC legal procedures. The legal environment in the PRC
is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could
limit our ability to enforce the contractual arrangements. In the event we are unable to enforce the contractual arrangements, we may
not be able to exercise the power to direct activities that most impact the economic performance, bears the risks of, and enjoys the rewards
for the purpose of consolidating the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP
or IFRS (as discussed above) and we may be precluded from operating our business, which would have a material adverse effect on our financial
condition and results of operations.
Although based on industry practices, VIE contractual
arrangements among WFOE, the VIE and its shareholders governed by PRC laws are valid, binding and enforceable, and will not result in
any violation of PRC laws or regulations currently in effect, however, there are substantial uncertainties regarding the interpretation
and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may ultimately take
a view that is contrary to the accepted industry practices with respect to VIE contractual arrangements. In addition, it is uncertain
whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would
provide. PRC government authorities may deem that foreign ownership is directly or indirectly involved in the VIE’s shareholding
structure. If our potential corporate structure and contractual arrangements are deemed by the Ministry of Industry and Information Technology,
or MIIT, or the Ministry of Commerce, or MOFCOM, or other regulators having competent authority to be illegal, either in whole or in part,
we may lose control of the consolidated VIE and have to modify such structure to comply with regulatory requirements. However, there can
be no assurance that we can achieve this without material disruption to the PRC Target Company’s business. Furthermore, if we or
the VIE is found to be in violation of any existing or future PRC laws 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, without limitation:
| ● | revoking the business license
and/or operating licenses of WFOE or the VIE; |
| ● | discontinuing or placing restrictions
or onerous conditions on our operations through any transactions among WFOE, the VIE and its subsidiaries; |
| ● | imposing fines, confiscating
the income from WFOE, the VIE or its subsidiaries, or imposing other requirements with which we or the VIE may not be able to comply; |
| ● | placing restrictions on our
right to collect revenues; |
| ● | requiring us to restructure
our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges
of the VIE, which in turn would affect our ability to consolidate, exercises the power to direct activities that most impact the economic
performance, bears the risks of, or enjoys the rewards normally associated with ownership of the entity; or |
| ● | taking other regulatory or
enforcement actions against us that could be harmful to our business. |
The imposition of any of these penalties will
result in a material and adverse effect on our potential ability to conduct the business. In addition, it is unclear what impact the PRC
government actions will have on us and on our ability to consolidate the financial results of the VIE in our consolidated financial statements,
if the PRC government authorities were to find our potential corporate structure and contractual arrangements to be in violation of PRC
laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of the
VIE or our right to receive substantially all the economic benefits and residual returns from the VIE and we are not able to restructure
our ownership structure and operations in a timely and satisfactory manner, we will no longer be able to consolidate the financial results
of the VIE in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed
on us in this event, it will have a material adverse effect on our financial condition, results of operations and our securities shares
may decline in value or be worthless.
The contractual arrangements under a VIE
Structure may not be as effective as direct ownership in respect of our relationship with the VIE, and thus, we may incur substantial
costs to enforce the terms of the arrangements, which we may not be able to enforce at all.
The contractual arrangements may not be as effective
as direct ownership in respect of our relationship with the VIE. For example, the VIE and its shareholders could breach their contractual
arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that
are detrimental to our interests. If we had direct ownership of the VIE, we would be able to exercise our rights as a shareholder to effect
changes in the board of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations,
at the management and operational level. However, under the VIE Agreements, we rely on the performance by the VIE and its shareholders
of their obligations under the contracts to exercise control over the VIE. The shareholders of the consolidated VIE may not act in the
best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which
we intend to operate certain portions of our business through the contractual arrangements with the VIE.
If the VIE or its shareholders fail to perform
their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources
to enforce such arrangements. For example, if the shareholders of the VIE refuse to transfer their equity interest in the VIE to us or
our designee if we exercise the purchase option pursuant to the contractual arrangements, or if they otherwise act in bad faith toward
us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third parties
claim any interest in such shareholders’ equity interests in the VIE, our ability to exercise shareholders’ rights or foreclose
the share pledge according to the contractual arrangements may be impaired. If these or other disputes between the shareholders of the
VIE and third parties were to impair our relationship with the VIE, our ability to consolidate the financial results of the VIE would
be affected, which would in turn result in a material adverse effect on the business, operations and financial condition.
Any failure by the VIE or its shareholders
to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.
The shareholders of the VIE are referred as its
nominee shareholders because although they remain the holders of equity interests on record in the VIE, pursuant to the terms of the relevant
power of attorney, such shareholders have irrevocably authorized the individual appointed by the WFOE to exercise their rights as a shareholder
of the relevant VIE. If the VIE, or its shareholders fail to perform their respective obligations under the contractual arrangements,
we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal
remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you
will be effective under PRC laws. For example, if the shareholders of the VIE were to refuse to transfer their equity interest in the
VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to
act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.
All of these contractual arrangements may be governed
by and interpreted in accordance with PRC law, and disputes arising from these contractual arrangements may be resolved in court or through
arbitration in China. Accordingly, these contracts will be interpreted in accordance with PRC laws and any disputes will be resolved in
accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United
States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. See “Risks
Associated with Acquiring and Operating a Target Business with its Primary Operation in China — Uncertainties with respect to the
PRC legal system could adversely affect us.” Meanwhile, there are very few precedents and little formal guidance as to how contractual
arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain
significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under
PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined
unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the
prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would
require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant
delay or other obstacles in the process of enforcing these contractual arrangements, we may not consolidate the financial results of the
VIE in our consolidated financial statements in accordance with U.S. GAAP or IFRS, and our ability to conduct our business may be negatively
affected.
In the event we were to successfully consummate
a business combination with a target business with primary operation in PRC, we will be subject to restrictions on dividend payments following
consummation of our initial business combination.
After we consummate our initial business combination,
we may rely on dividends and other distributions from our operating company to provide us with cash flow and to meet our other obligations.
Current regulations in China would permit our operating company in China to pay dividends to us only out of its accumulated distributable
profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our operating company in China
will be required to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of its accumulated profits
each year. Such cash reserve may not be distributed as cash dividends. In addition, if PRC Target Company’s operating company in
China incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make
other payments to us.
The PRC government may intervene or influence
the Target Operating Entity’s business operations at any time or may exert more control over offerings conducted overseas and foreign
investment in China based issuers, which could result in a material change in the Target Operating Entity’s business operations
post business combination and/or the value of our securities. Additionally, the governmental and regulatory interference could significantly
limit or completely hinder our ability to offer or continue to offer securities to investors post business combination and cause the value
of such securities to significantly decline or be worthless.
Statements by the Chinese government in 2021 have
indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in China-based issuers.
The PRC has proposed new rules in 2021 that would require companies collecting or holding large amounts of data to undergo a cybersecurity
review prior to listing in foreign countries, a move that would significantly tighten oversight over China based internet giants. On November 14,
2021, the Cyberspace Administration of China, or CAC, has publicly solicited opinion on the Regulation on Network Data Security Management
(Consultation Draft), which stipulates that data processor that undertakes data processing activities using Internet networks within China
shall apply for the cybersecurity review if it conducts data processing activities that will or may have an impact on the national security.
The review is mandatory if the data processor controls more than 1 million users’ personal information and intends to be listed
in a foreign country, or if the data processor that will or may impact the national security seeks to be listed in Hong Kong. As of the
date of this report, the Draft Regulation on Network Data Security Management has not been formally adopted. On December 28, 2021,
the Cyberspace Administration of China, jointly with 12 departments under the State Council, promulgated the Measures for Cybersecurity
Review, which became effective on February 15, 2022. According to the Measures for Cybersecurity Review, operators of critical information
infrastructure purchasing network products and services, and data processors carrying out data processing activities that affect or may
affect national security, shall conduct cyber security review. An operator, including operators of critical information infrastructure
and data processors, who controls more than 1 million users’ personal information must report to the Cyber Security Review
Office for a cybersecurity review if it intends to be listed in a foreign country.
Our initial business combination target company
may include a PRC Target Company. Therefore, it is uncertain whether such PRC Target Company will be involved in the collection of user
data, implicate cybersecurity, or involve any other type of restricted industry. Based on our understanding of currently applicable PRC
laws and regulations, our registered public offering in the U.S. is not subject to the review or prior approval of the CAC or the CSRC.
Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the
future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings
are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer
securities to investors and could cause the value of such securities to significantly decline or be worthless.
As a result of merger and acquisition regulations
implemented on September 8, 2006 (amended on June 22, 2009) relating to acquisitions of assets and equity interests of Chinese
companies by foreign persons, it is expected that acquisitions will take longer and be subject to economic scrutiny by the PRC government
authorities such that we may not be able to complete a transaction.
On September 8, 2006, the Ministry of Commerce,
together with several other government agencies, promulgated the Regulations on Merger and Acquisition of Domestic Enterprises by Foreign
Investors (the “M&A Regulations”, including its amendment on June 22, 2009), which implemented a comprehensive set
of regulations governing the approval process by which a Chinese company may participate in an acquisition of its assets or its equity
interests and by which a Chinese company may obtain public trading of its securities on a securities exchange outside the PRC. Although
there was a complex series of regulations in place prior to September 8, 2006 for approval of Chinese enterprises that were administered
by a combination of provincial and centralized agencies, the M&A Regulations have largely centralized and expanded the approval process
to the Ministry of Commerce, the State Administration of Industry and Commerce (SAIC), the State Administration of Foreign Exchange (SAFE)
or its branch offices, the State Asset Supervision and Administration Commission (SASAC), and the CSRC. Depending on the structure of
the transaction, these M&A Regulations will require the Chinese parties to make a series of applications and supplemental applications
to one or more of the aforementioned agencies, some of which must be made within strict time limits and depending on approvals from one
or the other of the aforementioned agencies. The application process has been supplemented to require the presentation of economic data
concerning a transaction, including appraisals of the business to be acquired and evaluations of the acquirer which will permit the government
to assess the economics of a transaction in addition to the compliance with legal requirements. If obtained, approvals will have expiration
dates by which a transaction must be completed. Also, completed transactions must be reported to the Ministry of Commerce and some of
the other agencies within a short period after closing or be subject to an unwinding of the transaction. Therefore, acquisitions in China
may not be able to be completed because the terms of the transaction may not satisfy aspects of the approval process and may not be completed,
even if approved, if they are not consummated within the time permitted by the approvals granted.
China Securities Regulatory Commission and
other Chinese government agencies may exert more oversight and control over offerings that are conducted overseas and foreign investment
in China-based issuers. If we seek to enter into a business combination with a PRC Target Company, additional compliance procedures
may be required in connection with future offerings of our securities and our business combination process, and, if required, we cannot
predict whether we will be able to obtain such approval. As a result, both our investors and us face uncertainty about future actions
by the PRC government that could significantly affect our ability to offer or continue to offer securities to investors and cause the
value of our securities to significantly decline or be worthless.
On July 6, 2021, the General Office of the
Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal
activities in the securities market and promote the high-quality development of the capital markets, which, among other things, requires
the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance
supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of
the PRC securities laws. Since this document is relatively new, uncertainties still exist in relation to how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will
be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our future business
combination with a company with major operation in China. Therefore, CSRC and other Chinese government agencies may exert more oversight
and control over offerings that are conducted overseas and foreign investment in China-based issuers. Additional compliance procedures
may be required in connection with this offering and our business combination process, and, if required, we cannot predict whether we
will be able to obtain such approval. As a result, both you and us face uncertainty about future actions by the PRC government that could
significantly affect our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly
decline or be worthless.
The Chinese government may exercise significant
oversight and discretion over the conduct of our post-combination entity’s business and may intervene in or influence its operations
at any time, which could result in a material change in its operations and/or the value of our securities. We are also currently not required
to obtain approval from Chinese authorities to list on U.S. exchanges, however, if the PRC Target Company and the VIE were required to
obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue
listing on U.S. exchange, which would materially affect the interest of the investors.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability
to operate through a PRC Target Company and a VIE in China may be harmed by changes in its laws and regulations, including those relating
to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions
may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts
on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including
any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local
variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions
thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
For example, the Chinese cybersecurity regulator
announced on July 2, 2021 that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the
company’s app be removed from smartphone app stores. On July 24, 2021, the General Office of the Communist Party of China Central
Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden of Excessive Homework
and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment in such firms via
mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.
As such, the PRC Target Company’s business
segments may be subject to various government and regulatory interference in the provinces in which they operate. The PRC Target Company
could be subject to regulations by various political and regulatory entities, including various local and municipal agencies and government
sub-divisions, and these regulations may be interpreted and applied inconsistently by different agencies or authorities. The PRC Target
Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure
to comply, and such compliance or any associated inquiries or investigations or any other government actions may:
| ● | delay or impede our development; |
| ● | result in negative publicity
or increase the Company’s operating costs; |
| ● | require significant management
time and attention; and |
| ● | subject the post-combination entity
to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current
or historical operations, or demands or orders that we modify or even cease our business practices. |
Our initial business combination target company
may include a PRC Target Company. Therefore, it is uncertain when and whether we and the post-combination entity will be required
to obtain permission from the PRC government to list on U.S. exchanges, and even when such permission is obtained, whether it will be
denied or rescinded. Further, the promulgation of new laws or regulations, or the new interpretation of existing laws and regulations,
in each case that restrict or otherwise unfavorably may impact the ability or way the post-combination entity may conduct its business
and could require it to change certain aspects of its business to ensure compliance, which could decrease demand for its products or services,
reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject it to additional liabilities.
As such, the post-combination entity’s operations could be adversely affected, directly or indirectly, by existing or future
PRC laws and regulations relating to its business or industry, which could result in a material adverse change in the value of our securities,
potentially rendering it worthless. As a result, both our investors and us face uncertainty about future actions by the PRC government
that could significantly affect our ability to offer or continue to offer securities to investors and cause the value of our securities
to significantly decline or be worthless.
Changes in the policies, regulations, rules,
and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon our
ability to operate profitably in the PRC.
Our post-combination entity may conduct most
of its operations and generate most of its revenue in the PRC. Accordingly, economic, political and legal developments in the PRC will
significantly affect our post-combination entity’s business, financial condition, results of operations and prospects. Policies,
regulations, rules, and the enforcement of laws of the PRC government can have significant effects on economic conditions in the PRC and
the ability of businesses to operate profitably. Our post-combination entity’s ability to operate profitably in the PRC may
be adversely affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation, particularly
those dealing with the Internet, including censorship and other restriction on material which can be transmitted over the Internet, security,
intellectual property, money laundering, taxation and other laws that affect our post-combination entity’s ability to operate
its business. Any actions by the PRC government to exert more oversight and control over offerings (including businesses whose primary
operations are in Hong Kong) that are conducted overseas and/or foreign investments in Hong Kong- or PRC-based issuers could significantly
limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to
significantly decline or be worthless.
We and our initial business combination
may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection and we may have to spend additional
resources and incur additional time delays to complete any such business combination or be prevented from pursuing certain investment
opportunities.
We and our initial business combination, if with
a PRC Target Company, may be subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential
and private information, such as personal information and other data. These laws continue to develop, and the PRC government may adopt
other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.
For instance, various regulatory bodies in China,
including CAC, the Ministry of Public Security and the State Administration for Market Regulation, have enforced data privacy and protection
laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity
Review Measures, which came into effect on June 1, 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information
infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.
On November 14, 2021, the Cyberspace Administration of China has publicly solicited opinion on the Regulation on Network Data Security
Management (Consultation Draft), which stipulates that data processor that undertakes data processing activities using Internet networks
within China shall apply for the cybersecurity review if it conducts data processing activities that will or may have an impact on the
national security. The review is mandatory if the data processor controls more than 1 million users’ personal information and
intends to be listed in a foreign country, or if the data processor that will or may impact the national security seeks to be listed in
Hong Kong. As of the date of this report, the Draft Regulation on Network Data Security Management has not been formally adopted. On December 28,
2021, the Cyberspace Administration of China, jointly with 12 departments under the State Council, promulgated the Measures for Cybersecurity
Review, which became effective on February 15, 2022. According to the Measures for Cybersecurity Review, operators of critical information
infrastructure purchasing network products and services, and data processors carrying out data processing activities that affect or may
affect national security, shall conduct cyber security review. An operator, including operators of critical information infrastructure
and data processors, who controls more than 1 million users’ personal information must report to the Cyber Security Review
Office for a cybersecurity review if it intends to be listed in a foreign country.
Certain internet platforms in China have been
reportedly subject to heightened regulatory scrutiny in relation to cybersecurity matters. As of the date of this report, we have not
been informed by any PRC governmental authority of any requirement that we file for a cybersecurity review. As a result, it will not affect
our process of searching for a business combination target until further certainty in the interpretation and enforcement of relevant PRC
cybersecurity laws and regulations. However, if we or the combined company following a business combination are deemed to be a critical
information infrastructure operator or a company that is engaged in data processing and holds personal information of more than one million
users, we could be subject to PRC cybersecurity review.
As there remains significant uncertainty in the
interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we or the combined company following a business combination
could be subject to cybersecurity review, and if so, it is uncertain whether we can or how long it will take us to obtain such approval
or complete such procedures and any such approval could be rescinded and we may not be able to pass such review in relation to this offering,
searching for a business combination target, or a business combination. In addition, we could become subject to enhanced cybersecurity
review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of the cybersecurity review
procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension
of business, website closure, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions,
which may have material adverse effect on our business, financial condition or results of operations.
On June 10, 2021, the Standing Committee
of the PRC National People’s Congress, or SCNPC, promulgated the PRC Data Security Law, which will take effect in September 2021.
The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and
introduces a data classification and hierarchical protection system based on the importance of data in economic and social development,
and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations
when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national
security review procedure for data activities that may affect national security and imposes export restrictions on certain data and information.
On August 20, 2021, the SCNPC 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.
These rules could result in us not being able
to acquire a potential target in the PRC, or our using time and working capital to pursue a transaction that cannot be completed because
of the actions of regulators. As uncertainties remain regarding the interpretation and implementation of these laws and regulations, we
cannot assure you that we or the combined company following a business combination will comply with such regulations in all respects and
we or the combined company following a business combination may be ordered to rectify or terminate any actions that are deemed illegal
by regulatory authorities. We or the combined company following a business combination may also become subject to fines and/or other sanctions
which may have material adverse effect on our business, operations and financial condition.
If we become directly subject to the recent
scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to
investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss
of your investment in our ordinary shares, especially if such matter cannot be addressed and resolved favorably.
Recently, U.S. public companies that have substantially
all of their operations in China, have been subjected to 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 around financial and accounting
irregularities, 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. As a result of the scrutiny, criticism and negative publicity, the publicly
traded stock of many U.S. listed Chinese companies has 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 our Company
if we target a PRC company with respect to the initial business combination. 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 the Company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless,
we will be severely hampered and your investment in our securities could be rendered worthless.
Compliance with the PRC Antitrust law may
limit our ability to effect our initial business combination.
The PRC Antitrust Law became effective on August 1,
2008. The government authorities in charge of antitrust matters in China are the Antitrust Commission and other antitrust authorities
under the State Council. The PRC Antitrust Law regulates (1) monopoly agreements, including decisions or actions in concert that preclude
or impede competition, entered into by business operators; (2) abuse of dominant market position by business operators; and (3) concentration
of business operators that may have the effect of precluding or impeding competition. To implement the Antitrust Law, in 2008, the State
Council formulated the regulations that require filing of concentration of business operators, pursuant to which concentration of business
operators refers to (1) merger with other business operators; (2) gaining control over other business operators through acquisition of
equity interest or assets of other business operators; and (3) gaining control over other business operators through exerting influence
on other business operators through contracts or other means. In 2009, the Ministry of Commerce, to which the Antitrust Commission is
affiliated, promulgated the Measures for Filing of Concentration of Business Operators (amended by the Guidelines for Filing of Concentration
of Business Operators in 2014), which set forth the criteria of concentration and the requirement of miscellaneous documents for the purpose
of filing. The business combination we contemplate may be considered the concentration of business operators, and to the extent required
by the Antitrust Law and the criteria established by the State Council, we must file with the antitrust authority under the PRC State
Council prior to conducting the contemplated business combination. If the antitrust authority decides not to further investigate whether
the contemplated business combination has the effect of precluding or impeding competition or fails to make a decision within 30 days
from receipt of relevant materials, we may proceed to consummate the contemplated business combination. If antitrust authority decides
to prohibit the contemplated business combination after further investigation, we must terminate such business combination and would then
be forced to either attempt to complete a new business combination if it was prior to 15 wait months from the closing of our offering
or we would be required to return any amounts which were held in the trust account to our shareholders. When we evaluate a potential business
combination, we will consider the need to comply with the Antitrust Law and other relevant regulations which may limit our ability to
effect an acquisition or may result in our modifying or not pursuing a particular transaction.
Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
The PRC tax authorities have enhanced their scrutiny
over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise,
by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January
2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
Under Circular 698, where a non-resident enterprise
conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly
by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject
to PRC corporate income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial
purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular 698 also provides
that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a
price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income
of the transaction.
In February 2015, the SAT issued Circular 7 to
replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different
from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but
also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company.
In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced
safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Circular 7 also
brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable
assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly
by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee,
or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance
over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable
commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such
indirect transfer may be subject to PRC corporate income tax, and the transferee or other person who is obligated to pay for the transfer
is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
We may face uncertainties on the reporting and
consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in
our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises
with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the
filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations
or being taxed, under Circular 59 or Circular 698 and Circular 7, and may be required to expend valuable resources to comply with
Circular 59, Circular 698 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under
these circulars, which may have a material adverse effect on our financial condition and results of operations.
The PRC tax authorities have the discretion under
SAT Circular 59, Circular 698 and Circular 7 to make adjustments to the taxable capital gains based on the difference between the
fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions
in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are
considered a non-resident enterprise under the PRC corporate income tax law and if the PRC tax authorities make adjustments to the
taxable income of the transactions under SAT Circular 59 or Circular 698 and Circular 7, our income tax costs associated with such
potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.
The approval of the China Securities Regulatory
Commission is not required in connection with our offering, however, if required, we cannot predict whether we will be able to obtain
such approval.
The M&A Regulations, adopted by six PRC regulatory
agencies requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled
by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s
securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying
documents and materials required to be submitted to it by any such special purpose vehicle seeking CSRC’s approval of overseas listings.
However, substantial uncertainty remains regarding the scope and applicability of the M&A Regulations and the CSRC approval requirement
to offshore special purpose vehicles.
In addition, the Opinions jointly issued by the
General Office of the Central Committee of the Communist Party of China and the General Office of the State Council (the “Opinions”),
which were made available to the public on July 6, 2021, call for strengthened regulation over illegal securities activities and
supervision of overseas listings by China-based companies and propose to take effective measures, such as promoting the development
of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. The Opinions
also provide that the State Council will revise provisions regarding the overseas issuance and listing of shares by companies limited
by shares and will clarify the duties of domestic regulatory authorities. As of the date of this report, no official guidance and related
implementation rules have been issued in relation to the recently issued Opinions and the interpretation and implementation of the Opinions
remain unclear at this stage.
Based on our understanding of the current PRC
laws and regulations, our company is not required to obtain any prior permission under the M&A Regulations or the Opinions from any
PRC governmental authorities (including the CSRC) for consummating our offering, given that: (a) the CSRC currently has not issued any
definitive rule or interpretation concerning whether offerings like ours under our prospectus dated March 1, 2021 are subject to the M&A
Regulations; and (b) our company is a blank check company newly incorporated in the British Virgin Islands rather than in China and currently
our company does not own or control any equity interest in any PRC company or operate any business in China. As of the date of this annual
report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or any other
PRC governmental authorities. However, there remains some uncertainty and no assurance as to how our interpretations to the M&A Rules
and the Opinions will be interpreted or implemented by the relevant PRC governmental authorities, including the CSRC, or that the CSRC
or any other PRC governmental authorities would not promulgate new rules or adopt new interpretation of existing rules that would require
us to obtain CSRC or other PRC governmental approvals for our offering or, in the context of an overseas offering or if we decide to consummate
the business combination with a target business based in and primarily operating in China.
Furthermore, CAC, issued the draft amendment to
the Cybersecurity Review Measures in July 2021, which provides, among other things, that an application for cyber security review shall
be made by an issuer who is a critical information infrastructure operator or a data processing operator as defined therein before such
issuer’s listing in a foreign country if the issuer possesses personal information of more than one million users, and that the
relevant governmental authorities in the PRC may initiate cybersecurity review if such governmental authorities determine an operator’s
cyber products or services, data processing or potential listing in a foreign country affect or may affect national security. Such draft
amendment was released for public comment, and its provisions and anticipated adoption or effective date are subject to changes and thus
its interpretation and implementation remain substantially uncertain.
While the application of the M&A Rules remains
unclear, we believe that the CSRC approval was not required in the context of our offering. However, there can be no assurance that the
relevant PRC government agencies, including the CSRC, would reach the same conclusion. If the CSRC or another PRC governmental authority
subsequently determines that its approval is needed for our offering, or for our business combination with a target business based in
and primarily operating in China, or approval obtained for the business combination is subsequently rescinded, we may face adverse actions
or sanctions by the CSRC or other PRC governmental authorities. These governmental authorities may delay a potential business combination,
impose fines and penalties, limit our operations in China, or take other actions that could result in our inability to consummate an initial
business combination with a China-based business, or materially adversely affect our business, financial condition, results of operations,
reputation and prospects, as well as the trading price of our securities or the continued listing on U.S. exchange. Any changes in PRC
law, regulations, or interpretations may severely affect our operations after our IPO. The use of the term “operate” and “operations”
includes the process of searching for a target business and conducting related activities. To that extent, we may not be able to conduct
the process of searching of a potential target company in China.
If we decide to consummate our business combination
with a target business based in and primarily operating in China, the combined company’s business operations in China through its
subsidiaries and VIEs, as applicable, are subject to relevant requirements to obtain applicable licenses from PRC governmental authorities
under relevant PRC laws and regulations.
Uncertainties with respect to the PRC legal
system could adversely affect us.
Our principal executive offices are located in
Hong Kong, our Sponsor is located in Hong Kong, and certain of our executive officers and/or directors are located in or have significant
ties to Hong Kong, and we may seek to acquire a company that is based in China or Hong Kong in an initial business combination. The uncertainties
in the interpretation and enforcement of PRC laws, rules and regulations would apply to us if we were to acquire a company that is based
in China or Hong Kong regardless of whether we have a VIE structure or direct ownership structure post-business combination. Because
of such ties to China or Hong Kong, we may be governed by PRC laws and regulations. PRC companies and variable interests entities are
generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable
to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference
but have limited precedential value.
Since 1979, PRC legislation and regulations have
significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully
integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China.
In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their
nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. 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) that may
have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation.
In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.
PRC regulation of loans and direct investment
by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our offering to make loans or additional
capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand
our business.
Any loans to PRC subsidiaries are subject to PRC
regulations. For example, loans by us to subsidiaries in China, which are foreign invested entities (“FIEs”), to finance their
activities cannot exceed statutory limits and must be registered with SAFE. On March 30, 2015, SAFE promulgated Hui Fa [2015] No.19,
a notice regulating the conversion by a foreign-invested company of foreign currency into RMB. The foreign exchange capital, for
which the monetary contribution has been confirmed by the foreign exchange authorities (or for which the monetary contribution has been
registered for account entry) in the capital account of a foreign-invested enterprise may be settled at a bank as required by the
enterprise’s actual management needs. Foreign-invested enterprises with investment as their main business (including foreign-oriented companies,
foreign-invested venture capital enterprises and foreign-invested equity investment enterprises) are allowed to, under the premise
of authenticity and compliance of their domestic investment projects, carry out based on their actual investment scales direct settlement
of foreign exchange capital or transfer the RMB funds in the foreign exchange settlement account for pending payment to the invested enterprises’
accounts.
On May 10, 2013, SAFE released Circular 21,
which came into effect on May 13, 2013. According to Circular 21, SAFE has simplified the foreign exchange administration procedures
with respect to the registration, account openings and conversions, settlements of FDI-related foreign exchange, as well as fund
remittances.
Circular 21 may significantly limit our ability
to convert, transfer and use the net proceeds from this offering and any offering of additional equity securities in China, which may
adversely affect our liquidity and our ability to fund and expand our business in the PRC.
We may also decide to finance the PRC Target Company’s
subsidiaries by means of capital contributions. These capital contributions must be approved by MOFCOM or its local counterpart, which
usually takes no more than 30 working days to complete. We may not be able to obtain these government approvals on a timely basis, if
at all, with respect to future capital contributions by us to the PRC Target Company’s subsidiaries. If we fail to receive such
approvals, we will not be able to capitalize our PRC operations, which could adversely affect our liquidity and our ability to fund and
expand our business.
Changes in China’s economic, political
or social conditions or government policies could have a material adverse effect on the PRC Target Company’s business and results
of operations we may pursue in the future.
If our initial business combination target is
a PRC company or Hong Kong with operations in China or Hong Kong, its business, prospects, financial condition and results of operations
may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth
in China as a whole.
The Chinese economy differs from the economies
of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese
government also exercises significant control over China’s economic growth through allocating resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries
or companies.
While the Chinese economy has experienced significant
growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government
has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit
the overall Chinese economy, but may have a negative effect on us. For example, the PRC Target Company’s financial condition and
results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition,
in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic
growth. These measures may cause decreased economic activity in China, and since 2012, China’s economic growth has slowed down.
Any prolonged slowdown in the Chinese economy may reduce the demand for the PRC Target Company’s products and services and materially
and adversely affect its business and results of operations.
You may face difficulties in protecting
your interests and exercising your rights as a shareholder since we conduct substantially all of our operations in China, and certain
of our executive officers and/or directors reside outside the U.S.
Although we are incorporated in the British Virgin
Islands, our initial business combination target may be a PRC or Hong Kong company with substantially all of its operations in China.
Further, certain of our current executive officers and/or our directors reside outside the U.S. and substantially all of the assets of
those persons are located outside of the U.S. It may be difficult for you to conduct due diligence on the Company or such directors in
your election of the directors and attend shareholders meeting if the meeting is held in China. As a result of all of the above, our public
shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders
than would shareholders of a corporation doing business entirely or predominantly within the U.S.
You may experience difficulties in effecting
service of legal process, enforcing foreign judgments or bringing actions in China against us or our management based on foreign laws.
Although we are incorporated in the British Virgin
Islands, our initial business combination target may be a PRC or Hong Kong company with substantially all of its operations in China.
Further, our Sponsor and two of our directors are located in Hong Kong and substantially all of the assets of those persons are located
outside the U.S.. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons located
in Hong Kong. In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts
with the British Virgin Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of
a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult
or impossible.
Governmental control of currency conversion
may affect the value of your investment.
The PRC government imposes controls on the convertibility
of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Our initial business combination target
may be a PRC company with substantially all of its revenues in RMB. If a VIE structure is required for the PRC Target Company, all of
our income will be primarily derived from dividend payments from PRC subsidiaries. Shortages in the availability of foreign currency may
restrict the ability of the PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise
satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items,
including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies
without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities
is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies
for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy
our currency demands post business combination, we may not be able to pay dividends in foreign currencies to our security-holders.