HHEGF Huahui Education Group Ltd (PK)

Risk Factors

Investing in the Company’s Ordinary Shares involves risks. The risks summarized below are qualified by reference to “Risk Factors” beginning on page 17 of this prospectus, which you should carefully consider before making a decision to purchase Ordinary Shares. If any of these risks actually occurs, the Company’s business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of the Company’s Ordinary Shares would likely decline, and you may lose all or part of your investment.

These risks include but are not limited to the following:

Risks Related to the Company’s Business

Risks Related to the Operating Subsidiaries’ Businesses

Risks Related to Doing Business in the People’s Republic of China

Risks Related to the Company’s Ordinary Shares

Risk Related to Certain Legal Consequences of Foreign Incorporation and Operations

Restrictions on the Transfers of Cash to and from the Company’s Subsidiaries and Payment of Dividends.

The Company conducts its primary operations through its China subsidiaries. The Company has not established a VIE structure with any entity in China. Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems.” The laws and regulations of the PRC currently place restrictions on currency conversion, cross-border remittances and offshore investment for PRC citizens.

There have been no cash transfers among our Chinese subsidiaries or between the parent holding company and the subsidiaries to date, except that to the extent that if expenses must be paid outside China, the Chinese subsidiaries transfer cash to the holding company for payment.  Such expenses are paid by the holding company to overseas service providers such as lawyers and auditors. In such situations, the holding company borrows cash from its Chinese subsidiaries in order to make the payment. The Chinese subsidiaries purchase foreign exchange currencies for such purpose. From January 2019 to December 2022, approximately $500,000 of such overseas payments were made. There have been no other transfers of cash or other assets between the parent holding company and its subsidiaries to date. 

We have never declared or paid any dividends on our shares or any other securities. If we pay dividends in the future, in order for us to distribute dividends to our shareholders, we will need to rely to some extent on dividends distributed by our PRC subsidiaries. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us, and such distributions will be subject to PRC withholding tax. In addition, PRC regulations currently permit payment of dividends by a PRC company only out of accumulated distributable after-tax profits, as determined in accordance the accounting standards and regulations in the PRC. See “Risk Factors - Risks Related to Our Shares - Because we have not paid dividends and have no present intention of paying dividends, investors will not realize any income from an investment in our Common Stock unless and until investors sell their shares at profit.”

If any of our PRC subsidiaries incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our PRC subsidiaries may pay dividends only out of their respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Such reserve funds cannot be distributed to us as dividends. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund, or a staff welfare and bonus fund. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary.

To the extent cash or assets are located in the PRC or Hong Kong, or in a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside the PRC or Hong Kong due to the intervention, or the imposition of restrictions and limitations on our ability or that of our subsidiaries in the PRC or Hong Kong, by the PRC government to transfer cash or assets. See “Risk Factors - Risks Related to Doing Business in China - PRC regulations on loans and direct investments by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries.

Our PRC subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their RMB revenues to pay dividends to us. However, conversion of RMB to other currencies are permitted for the purpose of dividends according to the PRC’s regulations on Foreign Exchange Control. See “Risk Factors - Risks Related to Doing Business in China - Governmental control of currency conversion may affect the value of your investment.

Our Securities

The Company’s authorized capital is $50,000, consisting of 500,000,000 Ordinary Shares, $0.0001 par value per Ordinary Share. Holders of the Company’s Ordinary Shares are entitled to one vote for each whole Ordinary Share on all matters to be voted upon by shareholders, including the election of directors. Holders of the Company’s Ordinary Shares do not have cumulative voting rights in the election of directors. All of the Company’s Ordinary Shares are equal to each other with respect to dividend rights. Holders of the Company’s Ordinary Shares are entitled to receive dividends if and when declared by its Board of Directors out of funds legally available therefor under Cayman Islands law. In the event of the Company’s liquidation, the liquidator may, after having discharged the debts, if any, of the Company, divide among the shareholders on a pari passu basis, in specie or in kind, the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purpose set such value as he deems fair upon any property to be divided as aforesaid. Holders of the Company’s Ordinary Shares have no preemptive rights to purchase any additional unissued Ordinary Shares. The Board of Directors has the ability to determine the rights, preferences and restrictions of preferred shares at their discretion.

As of June 30, 2022, there were 302,734,900 of the Company’s Ordinary Shares issued and outstanding. All of the outstanding Ordinary Shares were fully paid for. The Company does not have any options to purchase Ordinary Shares or any preferred shares outstanding. (For a more complete description of the Company’s Ordinary Shares, see “Description of Share Capital,” below.)

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, the Company may take advantage of certain exemptions from specified disclosure and other requirements that are otherwise generally applicable to public companies. These exemptions include:

The Company may take advantage of these provisions for up to five years or such earlier time that it is no longer an emerging growth company. The Company would cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year in which it has more than $1.0 billion in annual revenue; (ii) the date it qualifies as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the issuance, in any three-year period, of more than $1.0 billion in non-convertible debt securities; or (iv) the last day of the fiscal year ending after the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement.

The Company is also considered a “foreign private issuer” and will report under the Exchange Act as a non-U.S. company with foreign private issuer status. This means that, even after the Company no longer qualifies as an emerging growth company, as long as it qualifies as a foreign private issuer under the Exchange Act, the Company will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

The Company may take advantage of these exemptions until such time as it is no longer a foreign private issuer. The Company would cease to be a foreign private issuer at such time as more than 50% of its outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of the Company’s executive officers or directors are U.S. citizens or residents; (ii) more than 50% of the Company’s assets are located in the United States; or (iii) the Company’s business is administered principally in the United States.

The Company may choose to take advantage of some but not all of these reduced burdens. The Company has taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from its competitors that are public companies, or other public companies in which you have made an investment.

Securities Being Offered by Selling Shareholders

The Selling Shareholders are offering up to 31,901,900 Ordinary Shares. The Selling Shareholders may sell their Shares at a fixed price of $0.08 per Share until the Company’s Ordinary Shares are quoted on the OTCQB or a higher market and thereafter in the principal market on which its Ordinary Shares are traded at the prevailing market price, in negotiated transactions or through any other means described in the section titled “Plan of Distribution.” The Company will not receive any proceeds from the sales of Shares by the Selling Shareholders.

RISK FACTORS

Investing in the Company’s Ordinary Shares involves a high degree of risk. You should carefully consider the following risks and all other information contained in this prospectus, including the Company’s consolidated financial statements, ZDSE’s financial statements and the related notes, before making an investment decision regarding the Company’s securities. The risks and uncertainties described below are those significant risk factors, currently known and specific to the Company that management believes are relevant to an investment in the Company’s securities. If any of these risks materialize, the Company’s business, financial condition or results of operations could suffer, the price of the Company’s Ordinary Shares could decline and you could lose part or all of your investment.

Risks Related to the Company’s Business

The Company’s limited operating history makes it difficult to evaluate its future prospects and results of operations.

The Company has a limited operating history and its Operating Subsidiaries are in the process of developing their businesses. You should consider the Company’s future prospects in light of the risks and uncertainties experienced by early stage companies. Some of these risks and uncertainties relate to the Operating Subsidiaries’ ability to:

If the Company’s Operating Subsidiaries are unsuccessful in addressing any of these risks and uncertainties, their businesses and, consequently, that of the Company may be materially and adversely affected.

The Company has incurred net losses in the past and may occur losses again in the future.

The Company has experienced negative cash flow and losses from operations. During the fiscal years ended December 31, 2020 and 2021 and the six months ended June 30, 2021 and 2022, the Company experienced net losses of $240,580, 127,090, 191,159 and 315,159, respectively. There can be no assurance that the Company will not continue to experience negative cash flow and losses from operations, which could result in a loss of your entire investment in the Ordinary Shares.

Management of the Company envisions a period of rapid growth that may impose a significant burden on the Company’s administrative and operational resources which, if not effectively managed, could impair the Company’s Operating Subsidiaries’ growth.

Management’s strategy envisions a period of rapid growth that may impose a significant burden on the Company’s administrative and operational resources. The growth of the Operating Subsidiaries’ businesses will require significant investments of capital and management’s close attention. Management’s ability to effectively manage the Operating Subsidiaries’ growth will require it to substantially expand the capabilities of the Company’s and the Operating Subsidiaries’ administrative and operational resources and their ability to attract, train, manage and retain qualified management, IT, sales and marketing, coaching and other personnel; management may be unable to do so. In addition, management’s failure to successfully manage the Operating Subsidiaries’ growth could result in their sales not increasing commensurately with capital investments. If management is unable to successfully manage the Operating Subsidiaries’ growth, the Company may be unable to achieve its goals.

Management may not be able to raise the additional capital necessary to execute the Company’s and the Operating Subsidiaries’ respective business strategies, which could result in the curtailment of operations.

Management will need to raise additional funds to fully fund the Operating Subsidiaries’ existing operations and for development and expansion of their businesses. Management has no current arrangements with respect to sources of additional financing and the needed additional financing may not be available on commercially reasonable terms on a timely basis or at all. The inability to obtain additional financing when needed would have a negative effect on the Company and its Operating Subsidiaries, including possibly requiring the Company to curtail its Operating Subsidiaries’ operations. If any future financing involves the sale of equity securities, the Ordinary Shares held by the Company’s shareholders could be substantially diluted. If the Company borrows money or issues debt securities, the Company will be subject to the risks associated with indebtedness, including the risk that interest rates may fluctuate and the possibility that the Company may not be able to pay principal and interest on the indebtedness when due. Insufficient funds would prevent the Company from implementing its and its Operating Subsidiaries’ respective business plans and would require the Company to delay, scale back or eliminate certain of their and its operations.

The Company will be required to hire and retain skilled managerial, IT, sales and marketing, coaching and other personnel for itself and for its Operating Subsidiaries.

The Company’s continued success depends in large part on its ability to attract, train, motivate and retain qualified management, IT, sales and marketing, coaching and other personnel. Any failure to attract and retain the required specialized personnel that are integral to the Operating Subsidiaries’ businesses may have a negative impact on their operations, which would have a negative impact on their and the Company’s revenues. There can be no assurance that the Company will be able to attract and retain skilled persons and the loss of skilled coaches or managerial, technical, sales or other personnel would adversely affect both the Operating Subsidiaries and the Company.

The Company is dependent upon its officers and management for direction and the loss of any of these persons could adversely affect the Company’s operations and results.

The Company is dependent upon its officers for implementation of its proposed strategy and execution of its business plan. The loss of any of the Company’s officers could have a material adverse effect upon its results of operations and financial position. The Company does not maintain “key person” life insurance for any of its officers. The loss of any of the Company’s officers could delay or prevent the achievement of its business objectives.

The Company is currently dependent on its Operating Subsidiaries for its revenue.

Although the Company currently has a total of 14 subsidiaries, the Company is totally dependent on its Operating Subsidiaries, particularly ZDSE, for its revenue. Accordingly, the Company’s financial condition and results of operations are, and will continue to be, directly tied to those of its Operating Subsidiaries unless and until the Company’s other subsidiaries commence generating significant revenue. There can be no assurance that either the Company’s Operating Subsidiaries or any of its other direct or indirect subsidiaries will generate net income at any future time.

The Company may be sued or become a party to litigation, which could require significant management time and attention and result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

The Company may be subject to a number of lawsuits from time to time arising in the ordinary course of its and its Operating Subsidiaries’ businesses. The expense of defending itself and its Operating Subsidiaries’ against such litigation may be significant. The amount of time to resolve these lawsuits is unpredictable and defending the litigation may divert management’s attention from the day-to-day operations of its business, which could adversely affect the Company’s business, results of operations and cash flows. In addition, an unfavorable outcome in such litigation could have a material adverse effect on the Company’s business, results of operations and cash flows.

Sales of the Company’s Ordinary Shares in the public market by the Selling Shareholders following the commencement of trading may limit appreciation and may cause the market price of the Company’s Ordinary Shares to decline.

Sales of the Shares offered hereby in the public market by Selling Shareholders following the commencement of trading in the Company’s Ordinary Shares may limit appreciation in the trading price of the Ordinary Shares and could result in the market price of the Company’s Ordinary Shares declining.

The Company has identified material weaknesses in its internal control over financial reporting. If the Company fails to maintain an effective system of internal control over financial reporting, the Company may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in the Company’s financial and other public reporting, which would harm its business and the trading price of its Ordinary Shares.

Effective internal control over financial reporting is necessary for the Company to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause the Company to fail to meet its reporting obligations. Ineffective internal control could also cause investors to lose confidence in the Company’s reported financial information, which could have a negative effect on the trading price of the Ordinary Shares.

Management has identified material weaknesses in its internal control over financial reporting in the Company and its subsidiaries. As defined in Regulation 12b-2 under the Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented, or detected on a timely basis. Specifically, management determined that it had the following material weaknesses in its internal control over financial reporting: (i) the Company does not have a financial expert on U.S. GAAP in top management; (ii) the Company does not have an audit committee; and (iii) the Company does not have standard procedures for all accounting cycles. Although the financial statements and footnotes are reviewed by management, the Company does not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions.

Even if the Company develops effective internal controls over financial reporting, such controls may become inadequate due to changes in conditions, or the degree of compliance with such policies or procedures may deteriorate, which could result in the discovery of additional material weaknesses and deficiencies. In any event, the process of determining whether the Company’s existing internal control over financial reporting is compliant with Section 404 of the Sarbanes-Oxley Act (“Section 404”) and is sufficiently effective requires the investment of substantial time and resources by senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, the Company cannot predict the outcome of this process and whether management will need to implement remedial actions in order to establish effective controls over financial reporting. The determination of whether or not the Company’s internal controls are sufficient, and any remedial actions required could result in the Company incurring additional costs that it did not anticipate, including the hiring of additional outside consultants. The Company may also fail to timely complete its evaluation, testing and any remediation required to comply with Section 404.

The Company is required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting. However, for as long as the Company is not an “accelerated filer”, the Company’s independent registered public accounting firm will not be required to attest to the effectiveness of its internal control over financial reporting pursuant to Section 404. While the Company could be a smaller reporting company for an indefinite amount of time, and thus relieved of the above-mentioned attestation requirement, an independent assessment of the effectiveness of its internal control over financial reporting could detect problems that management’s assessment might not detect. Such undetected material weaknesses in the Company’s internal control over financial reporting could lead to financial statement restatements and require it to incur the expense of remediation.

The PCAOB’s HFCAA Determination Report dated December 16, 2021, that the Board is unable to inspect or investigate completely registered public accounting firms headquartered in China or Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in China or Hong Kong (“the Determination”) could result in the prohibition of trading in the Company’s securities by not being allowed to list on a U.S. exchange, and as a result, an exchange may determine to delist the Company’s securities, which would materially affect the interest of its investors.

The HFCAA, which was enacted on December 18, 2020, states that if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit the company’s shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States. Thus, under the HFCAA, in the event the Company’s auditor is not subject to PCAOB inspections for three consecutive years, the Company’s Shares could be prohibited from trading on any U.S. stock exchange or in the OTC Markets.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above.

On June 22, 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA) which, if signed into law, would reduce the time period for the delisting of foreign companies under the HFCAA to two consecutive years instead of three years. In the event the HFCAA is so amended, it will reduce the time before the Company’s Ordinary Shares may be prohibited from trading or delisted from an exchange if its auditor is not subject to inspection by the PCAOB. Thus, under the AHFCAA, in the event the Company’s auditor is not subject to PCAOB inspections for two consecutive years, the Company’s Shares could be prohibited from trading on any U.S. stock exchange or in the OTC Markets.

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 the 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 (the “Determination Report”), which found that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. In addition, the Determination Report identified the specific registered public accounting firms subject to these determinations.

On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China – the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong completely, consistent with U.S. law. While this Statement of Protocol may lead to full resolution of the previously identified issues, there can be no assurance that this will be the case. In such an event, there can be no assurance that we will continue to be able to comply with the requirements imposed by the U.S. regulators or Nasdaq

The Company’s auditor, Pan-China Singapore PAC (“Pan-China Singapore”), the independent registered public accounting firm that issued the audit report included in this prospectus, is subject to PCAOB inspections. Pan-China Singapore is headquartered in Singapore and there are no limitations in Singapore on PCAOB inspections. Therefore, the Company believes that, as of the date of this prospectus, its auditor is not subject to the determinations announced by the PCAOB on December 16, 2021, relating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in the PRC or Hong Kong because of a position taken by one or more authorities in the PRC or Hong Kong. However, Pan-China Singapore is a member firm of Pan-China Certified Public Accountants LLP, which is located in Mainland China, (“Pan-China”) and Pan China has been identified as a specific registered public accounting firm subject to the PCAOB Determination Report. Pan-China has five member firms, which are located in Mainland China, Hong Kong, Taiwan, Singapore and Germany. The member firms operate as separate, distinct, independent and autonomous CPA firms. Pan-China in Mainland China may be required and engaged on an “as needed” basis to assist as second staff in the audit of the Company. Any such engaged second staff are and will be under the direct supervision and direction of Pan-China Singapore. Any and all relevant copies of the Company’s records and work papers are and will be transmitted to Singapore where they are and will be readily available for PCAOB inspection. Therefore, we believe that, as of the date of this prospectus, our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021, relating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in the PRC or Hong Kong because of a position taken by one or more authorities in the PRC or Hong Kong. However, there can be no assurance that the SEC will not determine that our auditor is subject to the PCAOB’s December 16, 2021 determinations.

In addition, to the extent that the Company’s auditor’s work papers may, in the future, become located in China, such work papers will not be subject to inspection by the PCAOB because the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities. Inspections of certain other firms that the PCAOB has conducted outside of China 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. The inability of the PCAOB to conduct inspections of the Company’s auditor’s work papers in China would make it more difficult to evaluate the effectiveness of its auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. As a result, the Company’s investors may be deprived of the benefits of the PCAOB’s oversight of its auditor through such inspections and they may lose confidence in the Company’s reported financial information and procedures and the quality of its financial statements. The Company cannot assure you whether Nasdaq or other regulatory authorities will apply additional or more stringent criteria to it. Such uncertainty could cause the market price of the Company’s Ordinary Shares to be materially and adversely affected.

The Company will be required to comply with the rules adopted by the SEC if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above. Further, the United States Senate passed the Accelerated Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCAA to require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.

During the prior fiscal years ended December 31, 2020 and 2021, including through the date of this prospectus, the Company’s auditor does not have any documentation related to their audit reports located in China. However, to the extent that the Company’s independent registered public accounting firm’s audit documentation related to their audit reports for the Company may be located in China in the future, the PCAOB may not be able to inspect such audit documentation and, as a result, you may be deprived of the benefits of such inspection.

There may be conflicts of interest between the Company’s management and its non-management shareholders.

Conflicts of interest create the risk that the Company’s officers and directors may have an incentive to act adversely to the interests of the Company. A conflict of interest may arise between the Company’s officers and directors’ personal pecuniary interests and their fiduciary duty to its shareholders.

Risks Related to the Operating Subsidiaries’ Businesses

The Operating Subsidiaries’ businesses depend on the market recognition of their brands. If the Operating Subsidiaries are not able to maintain their reputations and enhance their brand recognition, their businesses and operating results may be materially and adversely affected.

The Operating Subsidiaries’ track records in providing quality services will determine whether they become recognized as leading brands in their industries. Management believes that market recognition of its Operating Subsidiaries’ brands is a key factor to ensuring the Company’s future success. As the Operating Subsidiaries continue to grow in size and broaden the scope of their programs and services, however, it may become increasingly difficult to maintain the quality and consistency of the services they offer, which may negatively impact their brands and the popularity of the products and services offered thereunder.

The Operating Subsidiaries’ brand values will also be affected by client perceptions. Those perceptions are affected by a number of factors; some of them are based on first-hand observation of the Operating Subsidiaries’ product and service quality while others may be based on indirect information from media or other sources. Incidents and any negative publicity related thereto, even if factually incorrect, may lead to significant deterioration of the Operating Subsidiaries’ brand images and reputations, and consequently negatively affect clients’ interest in their services and products, as well as top-notch executive coaches’ interest in being associated with ZDSE’s brand. Particularly in the age of digital media and social network, impacts of negative publicity associated with any single incident could be easily amplified and potentially cause impacts that go beyond our estimation or control.

In addition, with respect to ZDSE, scientific studies on education are constantly evolving and new or innovative conclusions on education methodologies or philosophies may affect clients’ perceptions of ZDSE’s services and products. If ZDSE is unable to maintain its reputation, enhance its brand recognition or increase positive awareness of its coaching products and services, it may be difficult to maintain and grow client enrollment or attract more business partners to join ZDSE’s network, and its business and growth prospects may be materially and adversely affected. Similarly, if HHMT and HEMC are unable to maintain their reputations, enhance their brand recognition or increase positive awareness of their products and services, it may be difficult to maintain and grow their customer bases and their businesses and growth prospects may be materially and adversely affected.

If the Operating Subsidiaries fail to maintain and increase their client bases, the Company’s revenues may decline, and the Company may not be able to sustain profitability.

The success of the Operating Subsidiaries’ businesses depends largely on their numbers of clients. Therefore, their ability to continue to attract new clients and to retain existing clients is critical to their continued success and growth. ZDSE’s client enrollment is affected by several factors, including its ability to develop new program materials and improve existing modules, expand its geographic reach and maintain consistent and high coaching and service quality; all of the Operating Subsidiaries must manage their growth while maintaining consistent and high service quality, effectively market and precisely target their services to a broader base of prospective clients and respond effectively to competition. If the Operating Subsidiaries are unable to continue to attract a sufficient number of new clients or to retain existing clients, their revenues may decline or they may not be able to sustain profitability, either of which could have a material adverse effect on their businesses, financial condition and results of operations.

ZDSE’s business relies on its ability to recruit, train and retain dedicated and qualified coaches and management personnel.

ZDSE’s coaches are critical to the quality of its services and reputation. Management seeks to recruit, train and retain qualified and dedicated coaches; however, there is a limited pool of executive coaches with the attributes that management requires. In addition, any foreign management hires must hold valid working permits, which may not be obtained in a timely manner, or at all. Despite management’s various initiatives, investments to secure qualified personnel and competitive compensation, management still may not be able to recruit, train and retain sufficient qualified coaches to keep pace with ZDSE’s growth while maintaining consistent coaching quality in the different markets it serves. A shortage of qualified coaches or a deterioration in the quality of coaches’ services, whether actual or perceived, or a significant increase in the average compensation paid by competitors to their coaches would have a material adverse effect on ZDSE’s and, consequently, the Company’s business, financial condition and results of operations.

The leadership and executive coaching market in China is rapidly evolving, highly fragmented and intensely competitive.

The leadership and executive coaching market in China is rapidly evolving, highly fragmented and intensely competitive with relatively easy entry. Competition in this industry may persist and even intensify. As more competitors enter the market, ZDSE will have to compete based on brand image, program content and structure and service quality. New competitors may enter the market and one or more competitors may develop and implement training courses or methodologies that may adversely affect ZDSE’s ability to sell its services to new clients. Competitors continually introduce new programs and services that may compete directly with ZDSE’s services, or that may make its programs uncompetitive or obsolete. Larger competitors may have superior abilities to compete for clients and skilled professionals, reducing ZDSE’s ability to deliver quality work to its clients. Some of ZDSE’s competitors may have greater financial or other resources than it does. The Company’s other Operating Subsidiaries face similar competitive challenges. Management cannot assure you that any of its Operating Subsidiaries will be able to compete successfully against existing or potential competitors, and if they fail to gain or maintain, or if they lose market share, the Company’s business, financial condition and results of operations may be materially and adversely affected.

ZDSE may not be successful in introducing new products or enhancing its existing products.

ZDSE currently offers only one module sequence - “The Way of Management.” It intends to continue developing new products, as well as further enhancing its existing products. This process is subject to risks and uncertainties, such as unexpected technical, operational, logistical or other problems that could delay the process temporarily or permanently. Moreover, management cannot assure you that any of these new products or enhancements of existing products will fulfill client needs, match the quality or popularity of those developed by competitors, achieve widespread market acceptance or generate incremental revenues.

In addition, introducing new products or enhancing existing products requires the Company to make various investments in program and materials development and management, incur personnel expenses and potentially reallocate other resources. If ZDSE is unable to develop new products or cannot do so in a cost-effective manner or is otherwise unable to manage effectively the quality of those products, the Company’s financial condition and results of operations could be adversely affected.

The Operating Subsidiaries’ success depends on the continuing efforts of their senior management teams and other key personnel and their businesses may be harmed if they lose their services.

The Operating Subsidiaries’ success depends in part on the continued application of services, efforts and motivation of their senior management teams and key personnel. If one or more of their senior management members or key personnel are unable to continue in their present positions, the affected subsidiary may not be able to find replacements successfully, and its business may be disrupted.

The Operating Subsidiaries will need to continue to hire additional personnel as their businesses grow. A shortage in the supply of personnel with the requisite skills could negatively impact their ability to manage their existing businesses, including launching new products and services and expanding operations. In addition, there is competition for experienced personnel in the executive coaching industry and key personnel could leave ZDSE to join competitors. Losing the services of experienced personnel may be disruptive to and cause uncertainty for the Operating Subsidiaries’ businesses, which may have a material adverse effect on their and, consequently, the Company’s business, financial condition and results of operations.

The Operating Subsidiaries could incur additional liabilities or their reputations could be damaged if they do not protect client data or if their information systems are breached.

ZDSE is dependent on information technology networks and systems to process, transmit and store electronic information and to communicate between and among its locations in China and with its clients. Security breaches of this infrastructure could lead to shutdowns or disruptions of ZDSE’s systems and potential unauthorized disclosure of confidential information. ZDSE is also required at times to manage, utilize and store sensitive or confidential client or employee data. As a result, ZDSE is subject to laws and regulations designed to protect this information. If any person, including any of ZDSE’s employees, mismanages or misappropriates such data, ZDSE could be subject to monetary damages, fines and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential client or employee data, whether through systems failure, employee negligence, fraud or misappropriation, could damage ZDSE’s reputation and cause it to lose clients.

Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve. China’s Cybersecurity Law (“CSL”), which came into effect in June 2017, regulates how organizations should protect digital information and outlines measures to safeguard Internet systems, products and services against cyberattacks. The CSL was supplemented in May 2018 with the Personal Information Security Specification, which was amended and strengthened in February 2019. Although these amendments attempt to ease the compliance burden placed on businesses, the laws could impose significant limitations, require changes to ZDSE’s business or restrict its use or storage of personal information, which may increase ZDSE’s compliance expenses and make its business more costly or less efficient to conduct.

The Company’s Operating Subsidiaries’ businesses are sensitive to general economic conditions.

The Company’s Operating Subsidiaries’ businesses may be negatively affected by a downturn in general economic conditions and rising labor and material costs in China. Furthermore, a serious and/or prolonged economic downturn combined with a negative or uncertain political climate could adversely affect their clients’ financial condition and the amount they are able to spend for such services. These conditions may reduce the demand for the Company’s Operating Subsidiaries’ services or depress the pricing of those services and have an adverse impact on the Company’s results of operations. Changes in global economic conditions may also shift demand to services for which the Company does not have competitive advantages, and this could negatively affect the amount of business that the Company is able to obtain. Such economic, political and client spending conditions are influenced by a wide range of factors that are beyond the Company’s control and that the Company has no comparative advantage in forecasting. If the Company is unable to successfully anticipate these changing conditions, the Company may be unable to effectively plan for and respond to those changes, and the Company’s business could be adversely affected.

ZDSE’s business success also depends in part upon continued growth in the use of coaching. In challenging economic environments, its clients may reduce or defer their spending on new services and solutions in order to focus on other priorities. At the same time, many companies have already invested substantial resources in their current means of conducting their business and they may be reluctant or slow to adopt new approaches that could disrupt existing personnel and/or processes. If growth in the general use of coaching services in business or ZDSE’s clients’ spending on these items declines, or if ZDSE cannot convince its clients or potential clients to embrace new services and solutions, the Company’s results of operations could be adversely affected.

In addition, the executive coaching business tends to lag behind economic cycles and, consequently, the benefits of an economic recovery following a period of economic downturn may take longer for ZDSE to realize than other segments of the economy.

Cyber security risks and the failure to maintain the integrity of data belonging to the Company, employees and customers could expose the Company to data loss, litigation and liability, and its reputation could be significantly harmed.

The Company collects and retains large volumes of data relating to its business and from its employees and clients for business purposes, including for transactional and promotional purposes, and its various information technology systems enter, process, summarize and report such data. The integrity and protection of this data is critical to its business. The Company is subject to significant security and privacy regulations, as well as requirements imposed by the credit card industry. Maintaining compliance with these evolving regulations and requirements could be difficult and may increase the Company’s expenses. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of data relating to the Company, its employees or its customers, which could harm the Company’s reputation, disrupt our operations or result in remedial and other costs, fines or lawsuits.

The Company’s business is subject to risks arising from epidemic diseases, such as the recent COVID-19 outbreak.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. On March 11, 2020, the World Health Organization categorized it as a pandemic. To reduce the spread of COVID-19, the Chinese government has employed measures including city lockdowns, quarantines, travel restrictions, suspension of business activities and school closures.

The Company’s business has been and may continue to be adversely impacted. The Company’s Operating Subsidiaries are located in China, as are all of their employees and customers. Due to the outbreak, ZDSE (the Company’s primary Operating Subsidiary) had to temporarily suspend offline teaching and conduct all of its coaching and student support activities online. As a result of the epidemic, ZDSE’s revenues in the first half of 2020 fell by 70.6% and, although ZDSE resumed operations on June 1, 2020, its revenue for the fiscal year ended December 31, 2020 was 44.5% lower than its revenue for the fiscal year ended December 31, 2019. In addition, lockdown measures and travel restrictions impeded ZDSE’s ability to work towards expanding its coaching network. Reoccurrences of the coronavirus in China have resulted in continuing lockdown measures being imposed by the government. As a result, ZDSE’s revenues in 2021 were 25% below its revenue for the fiscal year ended December 31, 2019 and its revenues for the six months ended June 30, 2022 were 43% below its revenues for the six months ended June 30, 2021.

The potential long-term downturn caused by and the duration of the COVID-19 outbreak is difficult to assess or predict and the full impact of the virus on the Company’s operations will depend on many factors beyond its control. A prolonged slowdown in the Chinese economy and/or negative business sentiment could potentially have a significant negative impact on the executive coaching market. There can be no assurance that there will not be large re-occurrences of COVID-19 in the future. A major resurgence of the epidemic in China could be expected to significantly reduce the demand for the Company’s Operating Subsidiary’s services. In addition, ZDSE’s business operations could be disrupted again if any of its employees is suspected of contracting COVID-19, since employees could be quarantined and/or facilities shut down for disinfection. An additional negative result of a resurgence would be if the government reinstituted bans on large-scale events and gatherings because such bans could cause the cancellation of many large-scale events that could not be rescheduled, which would have a direct negative impact on HHMT’s revenue. The extent to which the COVID-19 outbreak will impact the Company’s Operating Subsidiaries’ businesses, results of operations and financial condition remains uncertain. The Company’s business, results of operations, financial condition and prospects could be materially adversely affected to the extent that COVID-19 persists in China or harms the Chinese and global economies in general. The Company will continue to pay close attention to the development of the coronavirus epidemic situation, and evaluate and actively respond to other possible impacts on the Company’s financial situation and operating results.

The Company may also experience negative effects from future public health crises beyond its control. These events are impossible to forecast, their negative effects may be difficult to mitigate and they could adversely affect the Company’s business, financial condition and results of operations.

Risks Related to Doing Business in the People’s Republic of China

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on the Operating Subsidiaries’ businesses and operations.

Substantially all of the Company’s assets and operations are located in the PRC. Accordingly, the Company’s business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in the PRC generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, 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 the PRC 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 the PRC’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 past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in the PRC, in the policies of the Chinese government or in the laws and regulations in the PRC could have a material adverse effect on the overall economic growth of the PRC. Such developments could adversely affect the Operating Subsidiaries’ businesses and operating results, lead to a reduction in demand for their services and adversely affect their competitive position. 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 the Company’s Operating Subsidiaries. For example, the Operating Subsidiaries’ 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 adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in the PRC, which may adversely affect the Company’s business and operating results.

Because all of the Operating Subsidiaries’ operations are in China, their businesses are subject to the complex and rapidly evolving PRC laws and regulations. The Chinese government may exercise significant oversight and discretion over the conduct of the Company’s Operating Subsidiaries’ businesses and may intervene in or influence their operations at any time, which could result in a material decrease in the value of the Shares being registered and a material change in the Company’s operations.

As a business operating in China, the Company’s Operating Subsidiaries are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly. The PRC government has the power to exercise significant oversight and discretion over the conduct of their business, and the regulations to which the Operating Subsidiaries are subject may change rapidly and with little notice to the Company or its shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with the Company’s 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: (i) delay or impede the Company’s Operating Subsidiaries’ development; (ii) result in negative publicity or increase their operating costs; (iii) require significant management time and attention; and (iv) subject the Operating Subsidiaries to remedies, administrative penalties and even criminal liabilities that may harm the Company’s business, including fines assessed for current or historical operations.

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 manner in which the Company conducts its Operating Subsidiaries’ businesses and could require the Company to change certain aspects of its Operating Subsidiaries’ businesses to ensure compliance, which could decrease demand for their products, reduce revenues, increase costs, require the Company’s Operating Subsidiaries to obtain more licenses, permits, approvals or certificates, or subject the Company to additional liabilities. To the extent any new or more stringent measures are required to be implemented, the Company’s business, financial condition and results of operations could be adversely affected and the value of the Company’s Ordinary Shares that are being registered could be materially decreased. See “Regulations in China Applicable to Our Business” on page 59 of this prospectus.

If the Chinese government were to impose new requirements for approval from the PRC authorities to issue the Company’s Ordinary Shares to foreign investors or list on a foreign exchange, such action could significantly limit or completely hinder the Company’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

Based on the opinion of the Company’s PRC counsel, Zhuojian Law Firm, as of the date of this prospectus, the Company: (i) is not required to obtain permissions from any PRC authorities to operate or issue its Shares to foreign investors, (ii) is not subject to permission requirements from the China Securities Regulatory Commission (the “CSRC”), the Cyberspace Administration of China (the “CAC”) or any other entity that is required to approve the Company’s PRC Operating Subsidiary’s operations; and (iii) has not received or been denied such permissions by any PRC authorities. In addition, the Company is currently not required to obtain any pre-approval from Chinese authorities to list on a U.S. stock exchange. However, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.

Given the current PRC regulatory environment, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. The Company has been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings, including this offering. As of the date of this prospectus, the Company has not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. If the Company is required to obtain approval in the future and is denied permission from Chinese authorities to list on U.S. exchanges, it will not be able to list on a U.S. exchange, which would cause the Company’s Ordinary Shares to significantly decline in value or be worthless.

According to the Administration Provision and the Measures (Draft for Comments), only new initial public offerings and refinancing by existent overseas listed Chinese companies will be required to go through the filing process with PRC administrations; other existent overseas listed companies will be allowed sufficient transition period to complete their filing procedure, which means if the Company completes the offering prior to the effectiveness of Administration Provisions and Measures, the Company will certainly go through the filing process in the future, perhaps because of refinancing or given by sufficient transition period to complete filing procedure as an existent overseas listed Chinese company. However, it is uncertain when the Administration Provision and the Measures will take effect or if they will take effect as currently drafted.

If it is determined in the future that the approval of the CSRC, the CAC or any other regulatory authority is required for this offering, the Company may face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on the Company’s operations in China, limit its ability to pay dividends outside of China, limit its operations in China or take other actions that could have a material adverse effect on the Company’s business, financial condition, results of operations and prospects, as well as the trading price of its securities. The CSRC, the CAC or other PRC regulatory agencies also may take actions requiring the Company, or making it advisable for the Company, to halt this offering before settlement and delivery of its Ordinary Shares. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC, the CAC or other regulatory PRC agencies later promulgate new rules requiring that the Company obtains their approvals for this offering, the Company may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the Company’s ability to continue to offer securities to investors, or could cause the trading price of its securities and the value of its securities to significantly decline or cause its Shares to be worthless.

Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, based on new laws such as the Measures for Cybersecurity Review, could significantly limit or completely hinder the Company’s ability to offer or continue to offer securities to overseas investors and cause such securities to significantly decline in value or to 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. The PRC, through the Cyberspace Administration of China (the “CAC”), has recently proposed new rules and enacted new laws 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. Pursuant to Article 6 of the Measures for Cybersecurity Review (Draft for Comments), companies holding data on more than 1 million users must now apply for cybersecurity approval when seeking listings in other nations due to the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” On January 4, 2022 and effective February 15, 2022, the CAC issued the Revised Measures on Cyberspace Security (the “Revised Measures”), which requires that operators of critical information infrastructure (“CII”) intending to procure network products and services that may affect national security undergo cybersecurity review. This has impacted and could potentially impact a broad range of data-rich tech companies. The Revised Measures expand the scope of reviewed business entities to now include network platform (“NP”) operators intending to engage in certain activities, such as applying to list abroad. The Revised Measures establish a Cybersecurity Review Office (the “CRO”), an administrative body within the CAC, to formulate the regulations for cybersecurity review and to lead the cybersecurity review process. Applicable CII operators and NP operators are required to submit an application to the CRO, and the CRO will assess whether a cybersecurity review is required.

If an entity is a CII operator or a NP operator, it is required to apply for cybersecurity review if any of the following three conditions is met: (i) the CII operator proposes to procure network products and services that affect or may affect national security; (ii) the NP operator proposed to carry out data processing activities that affect or may affect national security; (iii) or the NP operator controls personal information of more than 1,000,000 users and proposes to apply for overseas listing. The term “overseas listings” is often interpreted as listings outside of China, such as in the U.S., “network products and services” include core network equipment, high capability computers and servers, high capacity data storage, large databases and applications, network security equipment, cloud computing services; “data processing” means the collection, storage, use, processing, transmission, provision and disclosure of data.

Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CRSC or the CAC could significantly limit or completely hinder the Company’s ability to offer or continue to offer securities to overseas investors and could cause such securities to significantly decline in value or to be worthless.

The Company is primarily in the business of professional management coaching through ZDSE and business planning and event planning and production through HHMT, which do not involve the collection of user data, implicate cybersecurity or involve any other type of restricted industry. Based on the opinion of the Company’s PRC counsel, it is management’s understanding that its Operating Subsidiaries are not subject to cybersecurity review under the Revised Measures nor are the Ordinary Shares subject to the review or prior approval of the CAC or the CRSC. 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 CRSC or the CAC could significantly limit or completely hinder the Company’s ability to offer or continue to offer securities to overseas investors and could cause such securities to significantly decline in value or to be worthless.

The Chinese government may exert substantial influence over the manner in which the Company’s Operating Subsidiaries conduct their respective business operations in China.

The Chinese government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The Company’s Operating Subsidiaries’ ability to conduct their operations in China may be harmed by changes in its laws and regulations, including those relating to regulation of the coaching, business planning and event planning and production industries, taxation and other matters. Management believes that the Company’s Operating Subsidiaries’ operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which the Operating Subsidiaries’ operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on their part to ensure compliance with such regulations or interpretations. Accordingly, government actions in the future could have a significant effect on the Company and its business.

China’s economic policies could affect the Company’s Operating Subsidiaries’ businesses.

Substantially all of the Company’s Operating Subsidiaries’ assets are located in China and substantially all of their revenue is derived from their operations in China. Accordingly, the Company’s results of operations and prospects are subject, to a significant extent, to economic, political and legal developments in China.

While China’s economy has experienced significant growth over the past decades, growth has been irregular, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect the Company’s Operating Subsidiaries’ businesses and operating results, lead to reduction in demand for their services and adversely affect their competitive positions. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of China but may also have a negative effect on the Company. For example, the Company’s operating results and financial condition may be adversely affected by government control over capital investments or changes in tax regulations.

The economy of China has been transitioning from a planned economy to a more market-oriented economy. In recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises; however, a substantial portion of productive assets in China are still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Any lack of requisite approvals, licenses or permits applicable to the Company’s Operating Subsidiaries’ businesses may have a material and adverse impact on the Company’s business, financial condition and results of operation.

In accordance with the relevant laws and regulations in the PRC, the Company’s Operating Subsidiaries are required to maintain various approvals, licenses and permits to operate their businesses, including but not limited to, business licenses. These approvals, licenses and permits are obtained upon satisfactory compliance with, among other things, the applicable laws and regulations.

The large number of regulatory measures imposed by various governmental entities in the PRC include the following: (i) Regulations Relating to Consumer Protection; (ii) Regulations Relating to Product Quality; (iii) Regulations Relating to Competition; (iv) Administrative Measures for the Administration of Sales Promotional Activities of Retailers; (v) Regulations Related to Online Trading: Administrative Measure for Online Trading; (vi) Regulations Relating to Intellectual Property: Copyright, Trademark, Patent and Domain Name; (vii) Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to their PRC Subsidiaries; (viii) Regulations Relating to Foreign Exchange; (ix) Regulations Relating to Dividend Distributions; (x) Regulations Relating to Overseas Listings; (xi) Regulations Relating to Employment; (xii) Regulations Relating to Customer Rights Protection; and (xiv) Regulations Relating to Tax: Income Tax, Value-Added Tax.

As of the date of this prospectus, the Company’s Operating Subsidiaries have received all necessary governmental approvals for operations in the PRC and have not been denied any such approvals. For further discussion, including the possible consequences for non-compliance, see “Regulations in China Applicable to our Business.”

Any PRC regulations pertaining to the Company’s corporate structure, loans to and investment in PRC entities by offshore holding companies may delay the Company from making loans or capital contributions to the Company’s Operating Subsidiaries, which could materially and adversely affect the Company’s liquidity and its ability to fund and expand its business.

With regards to the Company’s corporate structure, any funds the Company may transfer to its Operating Subsidiaries, either as a loan or as an increase in registered capital, are subject to approval by or registration with relevant government authorities in China regardless of the amount of the transfer. According to the relevant PRC regulations, capital contributions to the Company’s Operating Subsidiaries are subject to the submission of reports of changes through the enterprise registration system and registration with a local bank authorized by SAFE. In addition, any foreign loan procured by the Company’s Operating Subsidiaries is required to be registered with SAFE and such loan is required to be registered with the NPRC. The Company may not be able to complete such registrations or obtain necessary approvals on a timely basis with respect to future capital contributions or foreign loans by it to its Operating Subsidiaries. If the Company fails to complete such registration or other procedures, the Company’s ability to maintain its corporate structure while capitalizing its Operating Subsidiaries’ operations may be negatively affected, which could adversely affect the Company’s liquidity and its ability to fund and expand its business.

The Company relies to a significant extent on dividends and other distributions on equity paid by its Operating Subsidiaries to fund offshore cash and financing requirements and any limitation on the ability of its PRC Operating Subsidiaries to transfer cash out of China and/or make remittance to pay dividends to the Company could limit its ability to access cash generated by the operations of those entities.

The Company is a holding company and relies to a significant extent on dividends and other distributions on equity paid by its Operating Subsidiaries for its offshore cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders, fund inter-company loans, service any debt it may incur outside of China and pay expenses. The laws, rules and regulations applicable to the Company’s PRC subsidiaries permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicable accounting standards and regulations.

Under PRC laws, rules and regulations, each of the Operating Subsidiaries is required to set aside at least 10% of its after-tax profits each year, after making up for previous years’ accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such fund reaches 50% of its registered capital. As a result of these laws, rules and regulations, the Company’s Operating Subsidiaries incorporated in China are restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends. As of December 31, 2021 and 2020, none of our Operating Subsidiaries had any such restricted assets. However, there can be no assurance that the PRC government will not intervene or impose further restrictions on the Company’s ability to transfer or distribute cash within its organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect the Company’s business, financial condition and results of operations.

Limitations on the ability of the Company’s PRC subsidiaries to make remittance to pay dividends to the Company could limit the Company’s ability to access cash generated by the operations of those entities, including to make investments or acquisitions that could be beneficial to the Company’s business, to pay dividends to its shareholders or to otherwise fund and conduct its business.

Fluctuation of the RMB may affect our financial condition by affecting the volume of cross-border money flow.

The value of the RMB fluctuates and is subject to changes in the PRC’s political and economic conditions. Since July 2005, the conversion of RMB into foreign currencies, including USD, has been based on rates set by the People’s Bank of China which are set based upon the interbank foreign exchange market rates and current exchange rates of a basket of currencies on the world financial markets.

The Company may face obstacles from the communist system in the PRC.

Foreign companies conducting operations in the PRC face significant political, economic and legal risks. The communist regime in the PRC may hinder Western investment.

The Company may have difficulty establishing adequate management, legal and financial controls in the PRC.

The PRC historically has been deficient in Western style management and financial reporting concepts and practices, as well as in modern banking, computer and other control systems. The Company may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, the Company may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.

Because the Company’s assets and operations are located in China, you may have difficulty enforcing any civil liabilities against the Company under the securities and other laws of the United States or any state.

The Company is a holding company, and all of its assets are located in the PRC. In addition, the Company’s directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon these non-residents, or to enforce against them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state.

There is uncertainty as to whether courts of the PRC would enforce:

Enforcement of a foreign judgment in the PRC also may be limited or otherwise affected by applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors’ rights generally and will be subject to a statutory limitation of time within which proceedings may be brought.

It may be difficult for overseas regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation or implementation of rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by the Company’s shareholders in protecting their interests.

The PRC legal system embodies uncertainties, which could limit law enforcement availability.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past several decades has significantly enhanced the protections afforded to various forms of foreign investment in China. The Company’s PRC subsidiaries are subject to PRC laws and regulations. However, these laws and regulations change frequently, and the interpretation and enforcement involve uncertainties. For instance, the Company may have to resort to administrative and court proceedings to enforce the legal protection that it is entitled to by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting statutory and contractual terms, it may be difficult to evaluate the outcome of administrative court proceedings and the level of law enforcement that the Company would receive in more developed legal systems. Such uncertainties, including the inability to enforce the Company’s contracts, could affect its business and operation. In addition, confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, the Company cannot predict the effect of future developments in the PRC legal system, particularly with regard to its business, including the promulgation of new laws. This may include changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the availability of law enforcement, including the Company’s ability to enforce its agreements.

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

Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where they operate their businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. The Company’s failure in making contributions to various employee benefit plans and in complying with applicable PRC labor-related laws may subject it to late payment penalties. The Company may be required to make up the contributions for these plans as well as to pay late fees and fines. If the Company is subject to late fees or fines in relation to the underpaid employee benefits, its financial condition and results of operations may be adversely affected.

The Company may rely on dividends and other distributions on equity paid by its PRC subsidiaries to fund any cash and financing requirements the Company may have, and any limitation on the ability of its PRC subsidiaries to make payments to the Company could have a material and adverse effect on its ability to conduct its business.

The Company is a Cayman Islands holding company and it relies principally on dividends and other distributions on equity from its PRC subsidiaries for its cash requirements, including for services of any debt the Company may incur. The Company’s PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit the Company’s PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, the Company’s PRC subsidiaries are 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. The Company’s PRC subsidiaries, as foreign invested enterprises, or FIEs, are also required to further set aside a portion of their after-tax profit to fund an employee welfare fund, although the amount to be set aside, if any, is determined at their discretion. These reserves are not distributable as cash dividends. If the Company’s PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to the Company. Any limitation on the ability of the Company’s PRC subsidiaries to distribute dividends or other payments to their shareholders could materially and adversely limit its ability to grow, make investments or acquisitions that could be beneficial to its business, pay dividends or otherwise fund and conduct its business.

Changes to PRC tax laws may subject the Company to greater taxes.

The Company bases its tax position upon the anticipated nature and conduct of its business and upon the Company’s understanding of the tax laws of the various administrative regions and countries in which it has assets or conduct activities. However, the Company’s tax position is subject to review and possible challenge by taxing authorities and to possible changes in law, which may have retroactive effect. The Company cannot determine in advance the extent to which some jurisdictions may require it to pay taxes or make payments in lieu of taxes.

Chinese regulations relating to overseas investment by Chinese residents may restrict the Company’s overseas and cross-border investment activities and adversely affect the implementation of its strategy as well as its business and prospects.

On July 4, 2014, the State Administration of Foreign Exchange of China, or SAFE, issued the Circular on the Administration of Foreign Exchange Issues Related to Overseas Investment, Financing and Roundtrip Investment by Domestic Residents through Offshore Special Purpose Vehicles, or the SAFE Circular 37, which replaced the former circular commonly known as “SAFE Circular 75” promulgated on October 21, 2005. The SAFE Circular 37 requires Chinese residents to register with the competent local SAFE branch in connection with their direct establishment or indirect control of an offshore special purpose vehicle, for the purpose of overseas investment and financing, with such Chinese residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. The SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as any change of basic information (including change of the Chinese residents, name and operation term), increase or decrease of capital contribution by Chinese individuals, share transfer or exchange, merger, division or other material event. In the event that a Chinese shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the Chinese subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its Chinese subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under Chinese law for evasion of foreign exchange controls.

The failure of the Company’s Chinese beneficial owners to comply with the registration procedures set forth in the SAFE Circular 37 may subject such beneficial owners and its Chinese subsidiaries to fines and legal sanctions. Such failure may also result in restrictions on the Company’s Chinese subsidiaries’ ability to distribute profits to it or the Company’s ability to inject capital into its Chinese subsidiaries or otherwise materially adversely affect its business, financial condition and results of operations.

Risks Related to the Company’s Ordinary Shares

There is currently no trading market for the Company’s Ordinary Shares.

There currently is no trading market for the Company’s Ordinary Shares.

The Company has registered 31,901,900 of its outstanding Ordinary Shares for resale in the United States and is in the process of applying for its Ordinary Shares to be admitted to quotation on the OTCQB. The Company cannot assure you that its Ordinary Shares will be admitted to quotation on the OTCQB, or that, if the Ordinary Shares are admitted to quotation on the OTCQB, a regular public market will ever develop. There is no guarantee that the Company’s Ordinary Shares will ever be quoted on the OTCQB or any exchange. Furthermore, you will likely not be able to sell your securities if a regular trading market for the Company’s securities does not develop and the Company cannot predict the extent, if any, to which investor interest will lead to the development of a regular trading market in its Ordinary Shares. There is a risk that the absence of potential buyers will prevent any potential sellers from selling their Ordinary Shares.

The Company is an emerging growth company within the meaning of the Securities Act and will take advantage of certain reduced reporting requirements.

The Company is an “emerging growth company,” as defined in the JOBS Act and may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as it is an emerging growth company. As a result, if the Company elects not to comply with such auditor attestation requirements, the Company’s investors may not have access to certain information they may deem important.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act that allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

The offering price of the Company’s Ordinary Shares was determined based on management’s assessment of the market for similar companies in the United States OTC Market and should not be used as an indicator of the future market price of the securities.

Since the Company’s Ordinary Shares were not listed or quoted on any exchange or quotation system, the offering price of $0.08 per share for the Shares was determined based on management’s assessment of the market for similar companies in the United States OTC Market. The facts considered in determining the offering price were the Company’s financial condition and prospects, the Company’s limited operating history and the general condition of the securities market. The offering price bears no relationship to the book value, assets or earnings of the Company or any other recognized criterion of value. The offering price should not be regarded as an indicator of the future market price of the Ordinary Shares.

Enforcement actions by FINRA will make it difficult for investors to dispose of their Ordinary Shares as long as they remain an OTC security.

In order to be able to publicly trade a security, such security is required to have a trading symbol. Trading symbols for OTC securities are assigned by FINRA following a submission by a market maker of a Form 211. In the past, the review of such submissions by FINRA was a routine matter that would typically be completed within weeks. Recently, FINRA reviews have often taken well in excess of six months, with many securities being subject to indefinite delays. As a result of the enhanced regulatory scrutiny and long review process, many market makers are now declining to submit Forms 211.

In addition, and in response to increased scrutiny and recent regulatory actions by FINRA, many brokers have started to refuse deposits of OTC securities, whether restricted or free trading and regardless of the price at which these securities are traded, even after they obtained a trading symbol. As a result, investors may find it increasingly difficult to dispose of their Ordinary Shares.

The Company may not be able to achieve secondary trading of its Ordinary Shares in certain states because its Shares are not nationally traded, which could subject its shareholders to significant restrictions and costs.

The Company’s Ordinary Shares are not eligible for trading on the NASDAQ Capital Market or on a national securities exchange. Therefore, the Company’s Ordinary Shares are subject to the securities laws of the various states and jurisdictions of the United States in addition to federal securities law. While the Company may register its Ordinary Shares or qualify for exemptions for its Ordinary Shares in one or more states, if the Company fails to do so the investors in those states where the Company has not taken such steps may not be allowed to purchase the Company’s Ordinary Shares or those who presently hold the Company’s Ordinary Shares may not be able to resell their Ordinary Shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on the Company’s shareholders.

It is likely that there will be significant volatility in the trading price of the Company’s Ordinary Shares.

In the event that a public market for the Company’s Ordinary Shares is created or maintained in the future, market prices for the Ordinary Shares will be influenced by many factors and will be subject to significant fluctuations in response to variations in the Company’s operating results and other factors. The Company’s stock price will also be affected by the trading price of the stock of its competitors, investor perceptions of its Operating Subsidiaries, interest rates, general economic conditions and those specific to its industry, developments with regard to its Operating Subsidiaries’ operations and activities, its future financial condition and changes in its management.

Risks relating to low priced stocks

The Company’s Ordinary Shares are not quoted and traded on any market or on any exchange, and the price at which the Ordinary Shares will trade in the future cannot currently be estimated. There can be no assurance that trading will be commenced or sustained, although management intends to take such actions as are necessary to initiate trading on the OTCQB. The trading price of the Ordinary Shares will most likely be below $5.00. If the Company’s Ordinary Shares trade below $5.00 per share, trading in the Shares may be subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock (generally, any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions) and a two business day “cooling off period” before broker-dealers can effect transactions in penny stocks. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. These, and the other burdens imposed upon broker-dealers by the penny stock requirements, could discourage broker-dealers from effecting transactions in the Company’s Ordinary Shares which could severely limit the market liquidity of its Ordinary Shares and the ability of holders of the Company’s Ordinary Shares to sell them.

The Company does not intend to pay dividends.

The Company has not paid any cash dividends on any of its securities since inception and the Company does not anticipate paying any cash dividends on any of its securities in the foreseeable future.

Future sales of the Company’s securities, or the perception in the markets that these sales may occur, could depress its stock price.

The Company currently has issued and outstanding approximately 302,734,900 Ordinary Shares, 31,901,900 of which have been registered for resale in the U.S. The remaining 270,833,000 Ordinary Shares also may be sold in the future if registered under the Securities Act or if the shareholder qualifies for an exemption from registration under Rule 144, Rule 701 or other applicable exemption under the Securities Act. The market price of the Company’s capital stock could drop significantly if the holders of these restricted Ordinary Shares sell them or are perceived by the market as intending to sell them. These factors also could make it more difficult for the Company to raise capital or make acquisitions through the issuance of additional Ordinary Shares or other equity securities.

The ability of the Board of Directors of the Company to issue preferred shares and any anti-takeover provisions we adopt may depress the value of its Ordinary Shares.

The Company’s Articles of Association authorize its Board of Directors to provide for preferred shares in one or more classes or series within a class upon authority of the Board without further shareholder approval. Any preferred shares issued in the future may rank senior to the Ordinary Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Company, or both, and any such preferred shares may have class or series voting rights. In addition, the Board of Directors may, in the future, adopt anti-takeover measures (albeit the Board of Directors may not introduce any anti-takeover measures in our Articles of Association within a Special Resolution of Shareholders). The authority of the Board of Directors to issue preferred shares and any future anti-takeover measures it may adopt may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of the Company not approved by its Board of Directors. As a result, the Company’s shareholders may lose opportunities to dispose of their Ordinary Shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price of the Ordinary Shares and the voting and other rights of the Company’s shareholders may also be affected.

A sale or perceived sale of a substantial number of the Company’s Ordinary Shares may cause the price of its Shares to decline.

If the Company’s shareholders sell substantial amounts of its Ordinary Shares in the public market, the market price of the Ordinary Shares could fall. Moreover, the perceived risk of this potential price decline could cause shareholders to attempt to sell their Ordinary Shares and investors to short the Company’s Ordinary Shares. These sales also may make it more difficult for the Company to sell equity or equity-related securities in the future at a time and price that it deems reasonable or appropriate.

Resales of the Company’s Ordinary Shares in the public market by the Selling Shareholders may cause the market price of its Ordinary Shares to decline.

Sales of the Shares offered hereby could have the effect of depressing the market price for the Company’s Ordinary Shares.

The Company is controlled by Feier Co. Limited, whose interest may differ from those of the other shareholders.

As of the date of this prospectus, Feier Co. Limited, which is wholly owned by Mr. Guiting Rao, is the record and beneficial owner of approximately 50.54% of the Company’s outstanding Ordinary Shares. Mr. Rao is in a position to elect the entire Board of Directors and to control the business and affairs of the Company including significant corporate actions such as mergers and acquisitions, the sale or purchase of assets and the issuance and sale of the Company’s securities. The Company also may be prevented from entering into transactions that could be beneficial to the Company’s other shareholders. The interest of the Company’s largest shareholder may differ from the interests of its other shareholders.

The Company’s principal shareholder may engage in a transaction to cause the Company to repurchase its Ordinary Shares.

In order to provide an interest in the Company to a third party, the Company’s principal shareholder may choose to cause the Company to sell its securities to third parties, with the proceeds of such sale being utilized by the Company to repurchase its Ordinary Shares. As a result of such transaction, our management, principal shareholders and Board of Directors may change.

This prospectus contains forward-looking statements and information relating to the Company, its industry and other businesses.

The forward-looking statements contained in this prospectus are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to its management. When used in this prospectus, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect the Company’s current views with respect to future events and are subject to risks and uncertainties that may cause its actual results to differ materially from those contemplated in its forward-looking statements. The Company cautions you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. The Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

Risks Related to Certain Legal Consequences of Foreign Incorporation and Operations

The Company’s shareholders may face difficulties in protecting their interests, and their ability to protect their rights through the U.S. federal courts may be limited because the Company is incorporated under Cayman Islands law, the Company conducts substantially all of its operations in China and all of its directors and officers reside outside the United States.

The Company is incorporated in the Cayman Islands and conducts substantially all of its operations through its Operating Subsidiaries in China. All of the Company’s directors and officers reside outside the United States and their assets are located outside of the United States. As a result, it may be difficult or impossible for a shareholder to bring an action against the Company or against these individuals in the Cayman Islands or in China in the event that a shareholder believes that his rights have been infringed under the securities laws or otherwise. Even if a shareholder is successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render the shareholder unable to enforce a judgment against the Company’s assets or the assets of its directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

The Company’s corporate affairs are governed by its memorandum and articles of association, as amended and restated from time to time, and by the Companies Law (Revised) and common law of the Cayman Islands. The rights of shareholders to take legal action against the Company and its directors, actions by minority shareholders and the fiduciary responsibilities of its directors are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which provides persuasive, but not binding, authority on a court in the Cayman Islands. The rights of the Company’s shareholders and the fiduciary responsibilities of its directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States and provides significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in U.S. federal courts.

As a result, the Company’s shareholders may have more difficulty in protecting their interests through actions against the Company, its management, its directors or its major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

The Company’s shareholders do not have the same protections or information generally available to shareholders of U.S. corporations because the reporting requirements for foreign private issuers are more limited than those applicable to public corporations organized in the United States.

The Company is a foreign private issuer within the meaning of rules promulgated under the Exchange Act. The Company is not subject to certain provisions of the Exchange Act applicable to United States public companies, including: the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K, the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations with respect to a security registered under the Exchange Act and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer’s equity securities within six months or less). Because the Company is not subject to these rules, its shareholders are not afforded the same protections or information generally available to investors in public companies organized in the United States.

Judgments against the Company and management may be difficult to obtain or enforce.

The Company is organized as an exempted company under the laws of the Cayman Islands and its principal executive offices are located in the PRC. Outside the United States, it may be difficult for investors to enforce judgments obtained against the Company in actions brought in the United States, including actions predicated upon the civil liability provisions of United States federal securities laws. In addition, the Company’s sole officer and director resides outside the United States, and his assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon him or to enforce against the Company or him judgments predicated upon the liability provisions of United States federal securities laws.

There is uncertainty as to whether the courts of the Cayman Islands and the PRC, respectively, would:

It is uncertain whether the courts of the Cayman Islands will allow shareholders of our Company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as the Company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any reexamination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

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

Because the Company is incorporated in the Cayman Islands, you may not have the same protections as shareholders of U.S. corporations.

The Company is organized under the laws of the Cayman Islands. Principles of law relating to matters affecting the validity of corporate procedures, the fiduciary duties of its management, directors and controlling shareholder and the rights of its shareholders differ from, and may not be as protective of shareholders as, those that would apply if the Company were incorporated in a jurisdiction within the United States. The Company’s directors have the power to take certain actions without shareholder approval, including approving certain fundamental corporate transactions, such as reorganizations and the sale or transfer of assets. In addition, there is doubt that the courts of the Cayman Islands would enforce liabilities predicated upon United States federal securities laws.