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Item 1. Business

2022-03-31 compared with 2021-08-03 · 267 added, 292 removed, 47 unchanged (92% of the section changed)

Pony Group Inc., (The “Company”

or “Pony”) was incorporated on January 7, 2019 in the state of Delaware.

Pony Group Inc.

(‘Company” or “Pony”)

was incorporated on January 7, 2019 in the state of Delaware.

Our Corporate History

On March 7, 2019, Pony Group

Inc (the “Purchaser”), and Wenxian Fan, the sole owner of Pony Limousine Services Limited, entered into a Stock Purchase Agreement

(the “Purchase Agreement”), pursuant to which Wenxian Fan (the “Seller”) would sell to the Purchaser, and the

Purchaser will purchase from the Seller, 10,000 shares of the Pony Limousine Services Limited (“PonyHK”), which represented

100% of the shares.

On March 07, 2019, this transaction was completed.

Pony Limousine Services Limited

is a limited liability company formed under the laws of Hong Kong on April 28, 2016, which was formed by Wenxian Fan.

Its registered office

is located at Flat/Rm 01 11/F, Lucky Comm Bldg, 103 Des Voeux Rd West, Sheung Wan, Hong Kong.

On February 2, 2019, Universe Travel Culture

& Technology Ltd.

(“Universe Travel”) was incorporated as a wholly-owned PRC subsidiary of Pony HK.

On March 7, 2019, Pony Group Inc (the “Purchaser”),

and Wenxian Fan, the sole owner of Pony Limousine Services Limited, entered into a Stock Purchase Agreement (the “Purchase Agreement”),

pursuant to which Wenxian Fan (the “Seller”) would sell to the Purchaser, and the Purchaser will purchase from the Seller,

10,000 shares of the Pony Limousine Services Limited (“Pony HK”), which represented 100% of the shares.

On March 7, 2019,

this transaction was completed.

Pony Limousine Services Limited is a limited liability

company formed under the laws of Hong Kong on April 28, 2016, which was formed by Wenxian Fan.

Its registered office is located at Flat/Rm

01 11/F, Lucky Comm Bldg, 103 Des Voeux Rd West, Sheung Wan, Hong Kong.

On February 2, 2019, Universe Travel Culture & Technology

(“Universe Travel”) was incorporated as a wholly-owned PRC subsidiary of Pony HK.

Our Corporate Structure

1 unchanged sentence

structure, including our subsidiaries as of the date of this Report:

The business nature of the Company is to

provide carpooling, airport pick-up and drop-off, and personal drivers services for travelers between Guangdong Province and Hong Kong.

We offer our customers seamless,

customized and on-demand access to a variety of transportation options.

Currently, most of our customers are entities such as business

companies, travel agencies or societal associations.

To be as flexible and convenience as possible to our customers, we take orders from

customers any time through WeChat, Tencent QQ, email and phone call, upon which we obtain a quote from our car fleet companies and forward

it to the customer.

Once the order is confirmed, the accepted car fleet company will perform the service by sending a driver to pick up

the customer at the scheduled time.

The business nature of the Company is to provide

carpooling, airport pick-up and drop-off, and personal drivers services for travelers between Guangdong Province and Hong Kong.

We offer our customers seamless, customized and

on-demand access to a variety of transportation options.

Currently, most of our customers are entities such as business companies, travel

agencies or societal associations.

To be as flexible and convenience as possible to our customers, we take orders from customers any time

through WeChat, Tencent QQ, email and phone call, upon which we obtain a quote from our car fleet companies and forward it to the customer.

Once the order is confirmed, the accepted car fleet company will perform the service by sending a driver to pick up the customer at the

scheduled time.

We charge the car fleet company a 5-15% service fee on each completed order.

We completed 400 orders

in 2017 and 460 in 2018 and generated $2,805 and $3,229 in 2017 and 2018, respectively.

Sales and Marketing

We market our services to

users directly through word-of-mouth referrals, brand advertising.

We plan to attract consumers and promote offerings on our “Let’s

application through sponsored events, social networking sites including Facebook, Twitter and Instagram and other similar initiatives.

We market our services to users directly through

word-of-mouth referrals, brand advertising.

We plan to attract consumers and promote offerings on our “Let’s Go” application

through sponsored events, social networking sites including Facebook, Twitter and Instagram and other similar initiatives.

Our current operations experience seasonality.

4 unchanged sentences

In July 2019, we started the process of registering our trademark with the Trade Marks Registry in Hong Kong.

Competition in the car service

industry is intense and evolving.

Our primary competitors are Shenzhen Anxun Automobile Rental Co., Ltd, The Motor Transport Company of

Guangdong and Hong Kong Limited and China Comfort (Shenzhen) Travel Services Co.

We believe the primary competitive factors in our

markets include pricing, user experience, brand, technological innovation, safety and reliability.

We believe we compete favorably across

these factors.

We are strategically positioned in the Guangdong-Hong Kong market where the demand for traveling between these two places

However, many of our competitors and potential competitors are larger and have greater brand name recognition, longer operating

histories, larger marketing budgets and established marketing relationships, access to larger customer bases and significantly greater

resources for the development of their offerings.

For additional information about the risks to our business related to competition, see

the section titled “Risk Factors—

We face intense competition and could lose market share to our competitors, which could

adversely affect our business, financial condition and results of operations.”

Competition in the car service industry is intense

and evolving.

Our primary competitors are Shenzhen Anxun Automobile Rental Co., Ltd, The Motor Transport Company of Guangdong and Hong

Kong Limited and China Comfort (Shenzhen) Travel Services Co.

We believe the primary competitive factors in our markets include pricing,

user experience, brand, technological innovation, safety and reliability.

We believe we compete favorably across these factors.

strategically positioned in the Guangdong-Hong Kong market where the demand for traveling between these two places is high.

However, many

of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing

budgets and established marketing relationships, access to larger customer bases and significantly greater resources for the development

of their offerings.

For additional information about the risks to our business related to competition, see the section titled “Risk

Factors— We face intense competition and could lose market share to our competitors, which could adversely affect our business,

financial condition and results of operations.”

As of the date of this Report, we have a total

6 unchanged sentences

Customer Services

We lease an office at Engineer

Experiment Building, A202, 7 Gaoxin South Avenue, Nanshan District, Shenzhen, Guangdong Province, China, encompassing approximately 205

square meters of space for a monthly rent of RMB 10,000 (approximately $1,412).

We lease an office at Engineer Experiment Building, A202, 7 Gaoxin

South Avenue, Nanshan District, Shenzhen, Guangdong Province, China, encompassing approximately 205 square meters of space for a monthly

rent of RMB 10,000 (approximately $1,570).

The lease for this facility expires on February 28, 2022.

We believe the rented space is sufficient for our current operations.

We believe the rented space is sufficient

for our current operations.

We believe our facilities are sufficient for our current needs.

We currently do not have any

insurance coverage other than participation in various government statutory social security plans, including a pension contribution plan,

a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing

provident fund.

We currently do not have any insurance coverage

other than participation in various governm 可 ent statutory social

security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury

insurance plan, a maternity insurance plan and a housing provident fund.

Legal Proceedings

From time to time, we may

in the future become a party to various legal or administrative proceedings arising in the ordinary course of our business, including

actions with respect to intellectual property infringement, violation of third-party licenses or other rights, breach of contract and

labor and employment claims.

We are currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings

that, in the opinion of our management, are likely to have any material and adverse effect on our business, financial condition, cash-flow

or results of operations.

This section sets forth a

summary of the most significant laws, rules and regulations that affect our business and operations in China.

We provide our service through

third-party transportation companies and do not own the vehicle ourselves for their operations, therefore we believe we do not need the

qualifications related to vehicle transportation operations.

From time to time, we may in the future become

a party to various legal or administrative proceedings arising in the ordinary course of our business, including actions with respect

to intellectual property infringement, violation of third-party licenses or other rights, breach of contract and labor and employment

We are currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the

opinion of our management, are likely to have any material and adverse effect on our business, financial condition, cash-flow or results

of operations.

This section sets forth a summary of the most significant

laws, rules and regulations that affect our business and operations in China.

We provide our service through third-party transportation

companies and do not own the vehicle ourselves for their operations, therefore we believe we do not need the qualifications related to

vehicle transportation operations.

Regulations Relating to Foreign Investment

The Guidance Catalog of Industries for Foreign Investment

Investment activities

in the PRC by foreign investors shall comply with the Guidance Catalog of Industries for Foreign Investment, or the Catalog, which was

promulgated and is amended continuously by MOFCOM, and the National Development and Reform Commission, or NDRC.

According to the Catalog,

industries are classified as three categories:

encouraged foreign invested industries, restricted foreign invested industries and prohibited

foreign invested industries.

Any industry not listed in the Catalog or any encouraged foreign invested industry listed in the Catalog

is a permitted industry.

Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners

are required to hold the majority interests in such joint ventures.

Foreign investors are not allowed to invest in industries within the

prohibited category.

Industries not listed in the Catalogue are generally open to foreign investment unless specifically restricted by

other PRC regulations.

In June 2018, the MOFCOM

and the NDRC promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List), or the Negative List

(2018), effective in July 2018.

The Negative List (2018) expands the scope of permitted industries by foreign investment by reducing the

number of industries that fall within the Negative List (2018) where restrictions on the shareholding percentage or requirements on the

composition of board or senior management still exists.

In June 2019, the MOFCOM and the NDRC promulgated the Special Administrative Measures

for the Access of Foreign Investment (Negative List) (2019 Edition), or the Negative List (2019) to replace the Negative List (2018),

effective in July 2019.

Investment activities in the PRC by foreign investors

shall comply with the Guidance Catalog of Industries for Foreign Investment, or the Catalog, which was promulgated and is amended continuously

by MOFCOM, and the National Development and Reform Commission, or NDRC.

According to the Catalog, industries are classified as three categories:

encouraged foreign invested industries, restricted foreign invested industries and prohibited foreign invested industries.

not listed in the Catalog or any encouraged foreign invested industry listed in the Catalog is a permitted industry.

Some restricted industries

are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests

in such joint ventures.

Foreign investors are not allowed to invest in industries within the prohibited category.

Industries not listed

in the Catalogue are generally open to foreign investment unless specifically restricted by other PRC regulations.

In June 2018, the MOFCOM and the NDRC promulgated

the Special Administrative Measures for the Access of Foreign Investment (Negative List), or the Negative List (2018), effective in July

The Negative List (2018) expands the scope of permitted industries by foreign investment by reducing the number of industries that

fall within the Negative List (2018) where restrictions on the shareholding percentage or requirements on the composition of board or

senior management still exists.

In June 2019, the MOFCOM and the NDRC promulgated the Special Administrative Measures for the Access of

Foreign Investment (Negative List) (2019 Edition), or the Negative List (2019) to replace the Negative List (2018), effective in July

The Negative List (2019) has reduced 8 special management measures in the Negative List (2018).

We believe that

our current business is to provide travel services and therefore falls in neither the Negative List (2018) nor the Negative List (2019).

We believe that our current business

is to provide travel services and therefore falls in neither the Negative List (2018) nor the Negative List (2019).

Foreign Investment Law

On March 15, 2019,

the National People’s Congress promulgated the Foreign Investment Law, which will become effective on January 1, 2020 and replace

three existing laws on foreign investments in China, namely, the Sino-Foreign Equity Joint Venture Enterprise Law and the Foreign Owned

Enterprise Law, together with their implementations and ancillary regulations to become the legal foundation for foreign investment in

According to the Foreign Investment

Law, the State Council will publish or approve to publish a catalogue for special administrative measures, or the “negative list.”

The Foreign Investment Law grants national treatment to foreign invested entities, except for those foreign invested entities that operate

in industries deemed to be either “restricted”

or “prohibited”

in the “negative list.”

“negative list”

has yet to be published, it is unclear whether it will differ from the current Negative List.

Investment Law provides that foreign invested entities operating in foreign restricted or prohibited industries will require market entry

clearance and other approvals from relevant PRC governmental authorities.

Furthermore, the Foreign Investment Law provides that foreign

invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate

governance within five years after the implementing of the Foreign Investment Law.

On March 15, 2019, the National People’s

Congress promulgated the Foreign Investment Law, which will become effective on January 1, 2020 and replace three existing laws on foreign

investments in China, namely, the Sino-Foreign Equity Joint Venture Enterprise Law and the Foreign Owned Enterprise Law, together with

their implementations and ancillary regulations to become the legal foundation for foreign investment in the PRC.

According to the Foreign Investment Law, the State

Council will publish or approve to publish a catalogue for special administrative measures, or the “negative list.” The Foreign

Investment Law grants national treatment to foreign invested entities, except for those foreign invested entities that operate in industries

deemed to be either “restricted” or “prohibited” in the “negative list.” Because the “negative

list” has yet to be published, it is unclear whether it will differ from the current Negative List.

The Foreign Investment Law provides

that foreign invested entities operating in foreign restricted or prohibited industries will require market entry clearance and other

approvals from relevant PRC governmental authorities.

Furthermore, the Foreign Investment Law provides that foreign invested enterprises

established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within

five years after the implementing of the Foreign Investment Law.

Interim Administrative Measures for the Record-filing of the Incorporation

and Change of Foreign-invested Enterprises

On September 3, 2016, the

Standing Committee of the National People’s Congress promulgated the Order of the Standing Committee of the National People’s

Congress on Amending Four Laws Including the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises (the “Order”),

which provides record-filing in lieu of administrative approval for the establishments and alterations of foreign invested enterprises

(the “FIEs”) not subject to special administrative measures.

On September 3, 2016, the Standing Committee of

the National People’s Congress promulgated the Order of the Standing Committee of the National People’s Congress on Amending

Four Laws Including the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises (the “Order”), which

provides record-filing in lieu of administrative approval for the establishments and alterations of foreign invested enterprises (the

“FIEs”) not subject to special administrative measures.

In order to provide more guidance for foreign-invested Enterprises,

the MOFCOM issued the Interim Administrative Measures for the Record-filing for the Establishment and Alteration of Foreign-invested Enterprises

(the “Interim Measure”) on October 8, 2016 (Revised in July 30, 2017 and June 29, 2018), or the Measures.

The Measures provided

1 unchanged sentence

The M&A Rules

The Provisions Regarding Mergers

and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, was jointly promulgated by MOFCOM, China Securities

Regulatory Commission, or CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, State Administration

of Taxation, State Administration of Industry and Commerce and State Administration of Foreign Exchange, or SAFE, on August 8, 2006 and

became effective as of September 8, 2006, and were later amended on June 22, 2009.

This M&A Rules governs among other things, the

purchase and subscription by foreign investors of equity interests in a domestic enterprise, and the purchase and operation by foreign

investors of the assets and business of a domestic enterprise.

An offshore special purpose vehicle, or SPV, is defined under the M&A

Rules as an offshore entity directly or indirectly controlled by Chinese individuals or enterprises for the purpose of an overseas listing,

and the main assets of which are the rights and interests in affiliated domestic enterprises.

Under the M&A Rules, if a SPV intends

to merge with or acquire any domestic enterprise affiliated from the Chinese individuals or enterprises that control the SPV, such proposed

merger for approval.

The M&A Rules also require that a SPV shall obtain an approval from the CSRC prior to the listing and trading

of its securities on an overseas stock exchange.

The Provisions Regarding Mergers and Acquisitions

of Domestic Enterprises by Foreign Investors, or the M&A Rules, was jointly promulgated by MOFCOM, China Securities Regulatory Commission,

or CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, State Administration of Taxation, State

Administration of Industry and Commerce and State Administration of Foreign Exchange, or SAFE, on August 8, 2006 and became effective

as of September 8, 2006, and were later amended on June 22, 2009.

This M&A Rules governs among other things, the purchase and subscription

by foreign investors of equity interests in a domestic enterprise, and the purchase and operation by foreign investors of the assets and

business of a domestic enterprise.

An offshore special purpose vehicle, or SPV, is defined under the M&A Rules as an offshore entity

directly or indirectly controlled by Chinese individuals or enterprises for the purpose of an overseas listing, and the main assets of

which are the rights and interests in affiliated domestic enterprises.

Under the M&A Rules, if a SPV intends to merge with or acquire

any domestic enterprise affiliated from the Chinese individuals or enterprises that control the SPV, such proposed merger for approval.

The M&A Rules also require that a SPV shall obtain an approval from the CSRC prior to the listing and trading of its securities on

an overseas stock exchange.

Regulations Relating to Intellectual Property Rights

Software Copyright

The Copyright Law of

the PRC, promulgated in 1990 and amended it in 2001 and 2010, and the Regulations on Computer Software Protection, promulgated by the

State Council of the PRC on December 20, 2001 and revised on January 8, 2011 and January 1, 2013, provide protection to the rights and

interests of computer software copyright holders.

Pursuant to the Regulations on Computer Software Protection, software developed by PRC

citizens, legal entities or other organizations is automatically protected immediately after its development, regardless of whether the

software was published.

A software copyright owner may register with the designated registration authorities and obtain a registration

certificate, which serves as preliminary proof of ownership of the copyright and other registered matters.

The operational procedures

for the registration of software copyright and the registration of software copyright license and transfer agreements are set forth in

the Measures on Computer Software Copyright Registration promulgated by the National Copyright Administration on February 20, 2002.

The NPCSC adopted the

Patent Law of the PRC in 1984 and amended it in 1992, 2000 and 2008, respectively.

A patentable invention, utility model or design must

meet three conditions:

The Copyright Law of the PRC, promulgated in 1990

and amended it in 2001 and 2010, and the Regulations on Computer Software Protection, promulgated by the State Council of the PRC on December

20, 2001 and revised on January 8, 2011 and January 1, 2013, provide protection to the rights and interests of computer software copyright

Pursuant to the Regulations on Computer Software Protection, software developed by PRC citizens, legal entities or other organizations

is automatically protected immediately after its development, regardless of whether the software was published.

A software copyright owner

may register with the designated registration authorities and obtain a registration certificate, which serves as preliminary proof of

ownership of the copyright and other registered matters.

The operational procedures for the registration of software copyright and the

registration of software copyright license and transfer agreements are set forth in the Measures on Computer Software Copyright Registration

promulgated by the National Copyright Administration on February 20, 2002.

The NPCSC adopted the Patent Law of the PRC in

1984 and amended it in 1992, 2000 and 2008, respectively.

A patentable invention, utility model or design must meet three conditions:

novelty, inventiveness and practical applicability.

Patents cannot be granted for scientific discoveries, rules

and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by

means of nuclear transformation.

The Patent Office under the State Intellectual Property Office is responsible for receiving, examining

and approving patent applications.

A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or

design, starting from the application date.

Except under certain specific circumstances provided by law, any third party user must obtain

consent or a proper license from the patent owner to use the patent, otherwise the use will constitute an infringement of the rights of

the patent holder.

On November 5, 2004, the MIIT

promulgated the Measures for Administration of Domain Names for the Chinese Internet, or the Domain Name Measures.

According to the Domain

Name Measures, “domain name”

shall refer to the character identifier for identifying and locating the hierarchical structure

of a computer on the Internet, which corresponds to the Internet protocol (IP) address of the computer concerned.

A domain name registration

service shall observe the principle of “first apply, first register”.

Where the domain name is completed, the applicant for

the domain name registration shall be the holder of the domain name.

The PRC Trademark Law,

adopted in 1982 and revised in 2001 and 2013, respectively, with its implementation rules adopted in 2002 and revised in 2014, protects

registered trademarks.

The Trademark Office handles trademark registrations and grants a protection term of ten years to registered trademarks.

Patents cannot be granted for scientific discoveries, rules and methods for intellectual

activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation.

The Patent Office under the State Intellectual Property Office is responsible for receiving, examining and approving patent applications.

A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application

Except under certain specific circumstances provided by law, any third party user must obtain consent or a proper license from the

patent owner to use the patent, otherwise the use will constitute an infringement of the rights of the patent holder.

On November 5, 2004, the MIIT promulgated the Measures

for Administration of Domain Names for the Chinese Internet, or the Domain Name Measures.

According to the Domain Name Measures, “domain

name” shall refer to the character identifier for identifying and locating the hierarchical structure of a computer on the Internet,

which corresponds to the Internet protocol (IP) address of the computer concerned.

A domain name registration service shall observe the

principle of “first apply, first register”.

Where the domain name is completed, the applicant for the domain name registration

shall be the holder of the domain name.

The PRC Trademark Law, adopted in 1982 and revised

in 2001 and 2013, respectively, with its implementation rules adopted in 2002 and revised in 2014, protects registered trademarks.

Trademark Office handles trademark registrations and grants a protection term of ten years to registered trademarks.

Regulations on Foreign Exchange

Foreign Exchange Settlement

of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital

of Foreign-invested Enterprises, which was promulgated by the SAFE on March 30, 2015 and became effective as of June 1, 2015, adopts the

approach of discretional foreign exchange settlement, under which the foreign exchange capital in the capital account of a foreign-invested

enterprise for which the foreign-invested enterprise has obtained confirmation by the local SAFE branches regarding the rights and interests

of monetary contribution (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the

actual operation needs of such foreign-invested enterprise.

The capital in Renminbi obtained by the foreign-invested enterprise from the

discretionary settlement of foreign exchange capital shall be managed under the account pending for foreign exchange settlement payment.

The proportion of discretionary settlement of foreign exchange capital is temporarily determined as 100%, subject to the adjustment of

The Circular of the State Administration of Foreign

Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, which

was promulgated by the SAFE on March 30, 2015 and became effective as of June 1, 2015, adopts the approach of discretional foreign exchange

settlement, under which the foreign exchange capital in the capital account of a foreign-invested enterprise for which the foreign-invested

enterprise has obtained confirmation by the local SAFE branches regarding the rights and interests of monetary contribution (or the book-entry

registration of monetary contribution by the banks) can be settled at the banks based on the actual operation needs of such foreign-invested

The capital in Renminbi obtained by the foreign-invested enterprise from the discretionary settlement of foreign exchange

capital shall be managed under the account pending for foreign exchange settlement payment.

The proportion of discretionary settlement

of foreign exchange capital is temporarily determined as 100%, subject to the adjustment of the SAFE.

Regulations Relating to Foreign Exchange Registration

of Overseas Investment by PRC Residents

SAFE Circular 37 promulgated

by the SAFE in July 2014, requires PRC residents or entities to register with the SAFE or its local branch their establishment or control

of an offshore entity established for the purpose of overseas investment or financing.

In addition, such PRC residents or entities must

update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of its basic

information (including change of such PRC citizens or residents, name and operation term, and etc.) increases or decreases in investment

amount, transfers or exchanges of shares, or mergers or divisions, etc.

enacted the Notice of the SAFE on Further Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment, or

the SAFE Notice 13, on February 13, 2015, which allows PRC residents or entities to register with qualified banks their establishment

or control of an offshore entity established for the purpose of overseas investment or financing.

However, remedial registration applications

made by PRC residents that previously failed to comply with the SAFE Circular 37 will continue to fall under the jurisdiction of the relevant

local branch of the SAFE.

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required

SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from distributing profits to the offshore parent

and from carrying out subsequent cross-border foreign exchange activities.

Further, the special purpose vehicle may be restricted in its

ability to contribute additional capital into its PRC subsidiary.

SAFE Circular 37 promulgated by the SAFE in July

2014, requires PRC residents or entities to register with the SAFE or its local branch their establishment or control of an offshore entity

established for the purpose of overseas investment or financing.

In addition, such PRC residents or entities must update their SAFE registrations

when the offshore special purpose vehicle undergoes material events relating to any change of its basic information (including change

of such PRC citizens or residents, name and operation term, and etc.) increases or decreases in investment amount, transfers or exchanges

of shares, or mergers or divisions, etc.

SAFE further enacted the Notice of the SAFE on

Further Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment, or the SAFE Notice 13, on February 13,

2015, which allows PRC residents or entities to register with qualified banks their establishment or control of an offshore entity established

for the purpose of overseas investment or financing.

However, remedial registration applications made by PRC residents that previously

failed to comply with the SAFE Circular 37 will continue to fall under the jurisdiction of the relevant local branch of the SAFE.

event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries

of that special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying out subsequent cross-border

foreign exchange activities.

Further, the special purpose vehicle may be restricted in its ability to contribute additional capital into

its PRC subsidiary.

Regulations Relating to Dividend Distribution

The principal laws

and regulations regulating the distribution of dividends by FIEs in the PRC include the Company Law of the PRC, as amended in 1999, 2004,

2005, 2013 and 2018, the Wholly Foreign-owned Enterprise Law of the PRC promulgated in 1986 and last amended in 2016 and its implementation

regulations promulgated in 1990 and subsequently amended in 2001 and 2014, the Equity Joint Venture Law of the PRC promulgated in 1979

and last amended in 2016 and its implementation regulations promulgated in 1983 and last amended in 2014, and the Cooperative Joint Venture

Law of the PRC promulgated in 1988 and last amended in 2017 and its implementation regulations promulgated in 1995 and last amended in

Under the current regulatory regime in the PRC, FIEs in the PRC may pay dividends only out of their accumulated profit, if any,

determined in accordance with PRC accounting standards and regulations.

Except otherwise provided by the laws regarding foreign investment,

a PRC company is required to set aside at least 10% of its after-tax profit as general reserves until the cumulative amount of such reserves

reaches 50% of the company’s registered capital.

A PRC company shall not distribute any profits until any losses from prior fiscal

years have been offset.

Profits retained from prior fiscal years may be distributed together with distributable profits from the current

The principal laws and regulations regulating the

distribution of dividends by FIEs in the PRC include the Company Law of the PRC, as amended in 1999, 2004, 2005, 2013 and 2018, the Wholly

Foreign-owned Enterprise Law of the PRC promulgated in 1986 and last amended in 2016 and its implementation regulations promulgated in

1990 and subsequently amended in 2001 and 2014, the Equity Joint Venture Law of the PRC promulgated in 1979 and last amended in 2016 and

its implementation regulations promulgated in 1983 and last amended in 2014, and the Cooperative Joint Venture Law of the PRC promulgated

in 1988 and last amended in 2017 and its implementation regulations promulgated in 1995 and last amended in 2017.

Under the current regulatory

regime in the PRC, FIEs in the PRC may pay dividends only out of their accumulated profit, if any, determined in accordance with PRC accounting

standards and regulations.

Except otherwise provided by the laws regarding foreign investment, a PRC company is required to set aside

at least 10% of its after-tax profit as general reserves until the cumulative amount of such reserves reaches 50% of the company’s

registered capital.

A PRC company shall not distribute any profits until any losses from prior fiscal years have been offset.

retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Regulations Relating to Foreign Debts

Considering that certain

foreign debts may be generated during the oversea or domestic investment from PRC residents, the State Administration of Foreign Exchange

promulgated the Administrative Measures for Registration of Foreign Debts, or the Measures, on April 28, 2013 and became effective on

May 13, 2013.

This Measures require the entity to complete several regulatory procedures in terms of foreign debts.

For example, after

borrowed the foreign debts, debtors shall carry out registration on local SAFE in relation to the execution of the contract, the drawdown,

the prepayment or the foreign exchange settlement and sales within a specific period.

For any change of the foreign debts contract, an

amendment registration shall be carried out with the local SAFE.

Considering that certain foreign debts may be generated

during the oversea or domestic investment from PRC residents, the State Administration of Foreign Exchange promulgated the Administrative

Measures for Registration of Foreign Debts, or the Measures, on April 28, 2013 and became effective on May 13, 2013.

This Measures require

the entity to complete several regulatory procedures in terms of foreign debts.

For example, after borrowed the foreign debts, debtors

shall carry out registration on local SAFE in relation to the execution of the contract, the drawdown, the prepayment or the foreign exchange

settlement and sales within a specific period.

For any change of the foreign debts contract, an amendment registration shall be carried

out with the local SAFE.

Regulations Relating to Employment and Social Insurance

Pursuant to the PRC Labor Law effective

as of January 1, 1995 (as amended on August 27, 2009), and the PRC Labor Contract Law effective as of January 1, 2008 (as amended on December

28, 2012), a written labor contract shall be executed by employer and an employee when the employment relationship is established, and

an employer is under an obligation to sign an unlimited- term labor contract with any employee who has worked for the employer for ten

consecutive years.

In addition, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into

twice consecutively, the resulting contract must include an unlimited term, with certain exceptions.

All employers are required to establish

a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace

safety training.

Moreover, all PRC enterprises are generally required to implement a standard working time system of eight hours a day

and forty hours a week, and if the implementation of such standard working time system is not appropriate due to the nature of the job

or the on, the enterprise may implement a flexible working time system or comprehensive working time system after obtaining approvals

from the relevant authorities.

According to the Social Insurance Law of

China effective from July 1, 2011, and the Housing Fund Regulation which was amended and became effective on March 24, 2002, employers

in China shall pay contributions to the social insurance plan and the housing fund plan for their employees, and such contribution amount

payable shall be calculated based on the employee actual salary in accordance with the relevant regulations.

Pursuant to the PRC Labor Law effective as of January

1, 1995 (as amended on August 27, 2009), and the PRC Labor Contract Law effective as of January 1, 2008 (as amended on December 28, 2012),

a written labor contract shall be executed by employer and an employee when the employment relationship is established, and an employer

is under an obligation to sign an unlimited- term labor contract with any employee who has worked for the employer for ten consecutive

In addition, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively,

the resulting contract must include an unlimited term, with certain exceptions.

All employers are required to establish a system for labor

safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace safety training.

all PRC enterprises are generally required to implement a standard working time system of eight hours a day and forty hours a week, and

if the implementation of such standard working time system is not appropriate due to the nature of the job or the on, the enterprise may

implement a flexible working time system or comprehensive working time system after obtaining approvals from the relevant authorities.

According to the Social Insurance Law of China

effective from July 1, 2011, and the Housing Fund Regulation which was amended and became effective on March 24, 2002, employers in China

shall pay contributions to the social insurance plan and the housing fund plan for their employees, and such contribution amount payable

shall be calculated based on the employee actual salary in accordance with the relevant regulations.

Regulations on Tax

PRC Enterprise Income Tax Law

On March 16, 2007,

the National People’s Congress promulgated the Law of the PRC on Enterprise Income Tax, which was amended on February 24, 2017 and

December 29, 2018, and on December 6, 2007, the State Council of the PRC enacted The Regulations for the Implementation of the Law on

Enterprise Income Tax, or collectively, the EIT Law.

According to the EIT Law, taxpayers consist of resident enterprises and non-resident

Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established

in accordance with the laws of foreign countries but whose “de facto management body”

is located in the PRC.

enterprises are defined as enterprises that are set up in accordance with the laws of foreign countries and whose de facto management

body is located outside the PRC, but have either established institutions or premises in the PRC or have income generated from inside

Under the EIT Law and relevant implementing regulations, enterprises are subject to a uniform corporate income tax rate of 25%.

However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent

establishments or premises in the PRC but their relevant income derived in the PRC is not related to those establishments, then their

enterprise income tax would be set at a rate of 10% for their income sourced from inside the PRC.

As noted, the EIT Law

provides that an income tax rate of 10% will be applicable to dividends or other gains received by investors who are “non-resident

enterprises”

and who meet the requirements for the lower enterprise income tax rate.

Such income tax on dividends may be reduced

further by the tax treaties between China and the jurisdictions in which our non-PRC shareholders reside.

Specifically, pursuant to an

Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal

Evasion, or the Double Tax Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong enterprise (being the beneficial owner

of dividends from a PRC enterprise) is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements

under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends that the Hong Kong enterprise

receives from the PRC enterprise may be reduced to 5% subject to approval from the relevant tax authority.

However, based on the Notice

on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or Notice No.

81, issued on February 20, 2009

by the State Tax Administration, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such

reduced income tax rate due to a corporate structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust

the preferential tax treatment.

Moreover, based on the Announcement on Certain Issues Concerning the Recognition of Beneficial Owners

in Tax Treaties, which was issued on February 3, 2018 by the State Tax Administration, conduit companies, which are established for the

purpose of evading or reducing tax, or transferring or accumulating profits, shall not be recognized as beneficial owners and are thus

not entitled to the above tax benefits.

On March 16, 2007, the National People’s

Congress promulgated the Law of the PRC on Enterprise Income Tax, which was amended on February 24, 2017 and December 29, 2018, and on

December 6, 2007, the State Council of the PRC enacted The Regulations for the Implementation of the Law on Enterprise Income Tax, or

collectively, the EIT Law.

According to the EIT Law, taxpayers consist of resident enterprises and non-resident enterprises.

enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established in accordance

with the laws of foreign countries but whose “de facto management body” is located in the PRC.

Non-resident enterprises are

defined as enterprises that are set up in accordance with the laws of foreign countries and whose de facto management body is located

outside the PRC, but have either established institutions or premises in the PRC or have income generated from inside the PRC.

EIT Law and relevant implementing regulations, enterprises are subject to a uniform corporate income tax rate of 25%.

However, if non-resident

enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishments or premises

in the PRC but their relevant income derived in the PRC is not related to those establishments, then their enterprise income tax would

be set at a rate of 10% for their income sourced from inside the PRC.

As noted, the EIT Law provides that an income tax

rate of 10% will be applicable to dividends or other gains received by investors who are “non-resident enterprises” and who

meet the requirements for the lower enterprise income tax rate.

Such income tax on dividends may be reduced further by the tax treaties

between China and the jurisdictions in which our non-PRC shareholders reside.

Specifically, pursuant to an Arrangement between the PRC

and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, or the Double Tax

Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong enterprise (being the beneficial owner of dividends from a PRC enterprise)

is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance

Arrangement and other applicable laws, the 10% withholding tax on the dividends that the Hong Kong enterprise receives from the PRC enterprise

may be reduced to 5% subject to approval from the relevant tax authority.

However, based on the Notice on Certain Issues with Respect

to the Enforcement of Dividend Provisions in Tax Treaties, or Notice No.

81, issued on February 20, 2009 by the State Tax Administration,

if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a

corporate structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.

based on the Announcement on Certain Issues Concerning the Recognition of Beneficial Owners in Tax Treaties, which was issued on February

3, 2018 by the State Tax Administration, conduit companies, which are established for the purpose of evading or reducing tax, or transferring

or accumulating profits, shall not be recognized as beneficial owners and are thus not entitled to the above tax benefits.

PRC Value-added Tax Law

The Provisional Regulations

of the PRC on Value-added Tax were promulgated by the State Council of the PRC on December 13,1993 and subsequently amended on November

10, 2008, February 6, 2016 and November 19, 2017.

The Detailed Rules for the Implementation of the Provisional Regulations of the PRC

on Value-added Tax (Revised in 2011) was promulgated by the Ministry of Finance and the SAT on December 15, 2008 and subsequently amended

on October 28, 2011 (collectively, the “VAT Law”).

According to the VAT Law, all enterprises and individuals engaged in the

sale of goods, provision of processing, repair and replacement services, and importation of goods within the territory of the PRC must

pay value-added tax, or VAT.

Other than exports (subject to 0% VAT rate) and certain products listed in the VAT Law (subject to 11% VAT

rate), the sale and importation of goods were generally subject to a VAT rate of 17%.

Pursuant to the Circular of the Ministry of Finance

and the State Administration of Taxation on Adjusting Value-added Tax Rates, which became effective on May 1, 2018, the previous applicable

VAT rate of 17% and 11% are adjusted to 16% and 10%, respectively.

The Provisional Regulations of the PRC on Value-added

Tax were promulgated by the State Council of the PRC on December 13,1993 and subsequently amended on November 10, 2008, February 6, 2016

and November 19, 2017.

The Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-added Tax (Revised

in 2011) was promulgated by the Ministry of Finance and the SAT on December 15, 2008 and subsequently amended on October 28, 2011 (collectively,

the “VAT Law”).

According to the VAT Law, all enterprises and individuals engaged in the sale of goods, provision of processing,

repair and replacement services, and importation of goods within the territory of the PRC must pay value-added tax, or VAT.

exports (subject to 0% VAT rate) and certain products listed in the VAT Law (subject to 11% VAT rate), the sale and importation of goods

were generally subject to a VAT rate of 17%.

Pursuant to the Circular of the Ministry of Finance and the State Administration of Taxation

on Adjusting Value-added Tax Rates, which became effective on May 1, 2018, the previous applicable VAT rate of 17% and 11% are adjusted

to 16% and 10%, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business