F-1 1 ea154588-f1_yipointer.htm REGISTRATION STATEMENT

As filed with the U.S. Securities and Exchange Commission on January 28, 2022

Registration No. 333-         

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM F-1

 

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

Yi Po International Holdings Limited

(Exact Name of Registrant as Specified in its Charter)

 

Not Applicable

(Translation of Registrant’s name into English)

 

Cayman Islands   7500   N/A

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

320~324, Building C4, No. 5 Jinxiu Street,

Yuhuatai District, Nanjing,

Jiangsu Province, People’s Republic of China

+86-4008280910

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

 

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

(800) 221-0102

 

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

 

Copies to:

 

William S. Rosenstadt, Esq.

Mengyi “Jason” Ye, Esq.

Ortoli Rosenstadt LLP
366 Madison Avenue, 3rd Floor
New York, NY 10017
T: 212-588-0022

Benjamin A. Tan, Esq.

Sichenzia Ross Ference LLP

1185 Avenue of the Americas, 31st Floor

New York, NY 10036

T: 212-930-9700

  

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

 

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

 

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

 

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

 

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

 

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

 

Emerging growth company ☒ 

 

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

 

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

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each Class of Security being Registered  Proposed Maximum Aggregate Offering Price(1)   Amount of Registration Fee(2) 
Ordinary shares, par value US$0.000156 per share(3)  US$ 25,000,000   US$ 2317.5 
Underwriters’ Warrants(4)  US$-   US$- 
Ordinary shares, par value US$0.000156 per share, underlying the underwriters’ warrants(4)  US$1,750,000   US$162.5 
Total  US$26,750,000   US$2,480 

 

(1)Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act. Includes the offering price attributable to additional shares that the underwriters have the option to purchase to cover over-allotments, if any.

 

(2)Calculated pursuant to Rule 457(o) under the Securities Act, based on an estimate of the proposed maximum aggregate offering price

 

(3)In accordance with Rule 416(a), we are also registering an indeterminate number of additional Ordinary Shares that shall be issuable pursuant to Rule 416 to prevent dilution resulting from share splits, share dividends or similar transactions.

 

(4)The Registrant will issue to the underwriters warrants to purchase a number of Ordinary Shares equal to an aggregate of 7% of the Ordinary Shares sold in the offering (the “Underwriters’ Warrants”). The exercise price of the Underwriters’ Warrants is equal to 100% of the offering price of the Ordinary Shares offered hereby. The Underwriters’ Warrants are exercisable at any time, and from time to time, in whole or in part, within 5 years from the commencement of sales of the offering. See “Underwriting.”

 

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

 

 

 

 

 

 

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

 

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 28, 2022

 

 

Yi Po International Holdings Limited

 

Ordinary Shares

 

This is an initial public offering of ordinary shares, par value US$0.000156 per share, which we refer to as the “Ordinary Shares.” We anticipate the initial public offering price will be between US$   and US$ per share.

 

Prior to this offering, there has been no public market for our Ordinary Shares. We plan to apply to list our Ordinary Shares on the Nasdaq Capital Market under the symbol “YBZN”. This offering is contingent upon us listing our Ordinary Shares on the Nasdaq Capital Market or another national exchange. There can be no assurance that we will be successful in listing our Ordinary Shares on the Nasdaq Capital Market.

 

Weiming Jin, our Chairman of the Board of Directors and Chief Executive Officer, is currently the beneficial owner of 87% of our outstanding Ordinary Shares, of which 100% are directly held by Ausen International Investment Holdings Co., Limited, a British Virgin Islands company, which is 100% owned by Mr. Jin. Upon the closing of this offering, our directors and officers will own approximately % of our outstanding Ordinary Shares. We currently meet the definition of a “controlled company” under the corporate governance standards for Nasdaq listed companies and for so long as we remain a controlled company under this definition, we are eligible to utilize certain exemptions from the corporate governance requirements of the Nasdaq Stock Market.

 

We are a holding company incorporated in the Cayman Islands and that we are not a Chinese operating company. As a holding company with no material operations of our own, we conduct all our operations through our subsidiary and variable interest entity, or VIE, in the People’s Republic of China, or PRC, and our VIE structure involves unique risks to investors. See “Risk Factors - Risks Relating to Our Corporate Structure.” The Ordinary Shares offered in this offering are shares of the Cayman Islands holding company. Investors of our Ordinary Shares should be aware that they may never directly hold equity interests in our subsidiaries in the PRC.

 

This is an offering of the Ordinary Shares of the offshore holding company. You are not investing in Jiangsu Easy Parking, our VIE. Neither we nor our subsidiaries own any shares in Jiangsu Easy Parking. Instead, we control and receive the economic benefits of Jiangsu Easy Parking’s business operation through a series of contractual agreements, or the VIE Agreements. As a result of our indirect ownership in the WFOE and the VIE Agreements, we are regarded as the primary beneficiary of our VIE for accounting purposes. We have consolidated the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP. The VIE structure provides contractual exposure to foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in the operating companies and investors directly holding equity interests in the Chinese operating entities. However, as of the date of this prospectus, the VIE agreements have not been tested in a court of law. We and our investors do not have an equity ownership in, direct foreign investment in, or control through such ownership/investment of the VIE. Therefore, the VIE agreements do not give us the same controlling power as if we had equity ownership in the VIE. For a detailed description of the VIE Agreements, see “Corporate Structure” on page 62.

 

You are investing in Yi Po Holdings, our holding company incorporated in Cayman Islands, and you are not investing in Jiangsu Easy Parking, our VIE, in China.

 

Because of our corporate structure, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to limitation on foreign ownership of internet technology companies, and regulatory review of oversea listings of PRC companies through a special purpose vehicle, and the validity and enforcement of the VIE Agreements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Our VIE Agreements may not be effective in providing control over Jiangsu Easy Parking. We may also be subject to sanctions imposed by PRC regulatory agencies including Chinese Securities Regulatory Commission if we fail to comply with their rules and regulations. If the Chinese regulatory authorities disallow this VIE structure in the future, it will likely result in a material change in our financial performance and our results of operations and/or the value of our Ordinary Shares, which could cause the value of such securities to significantly decline or become worthless. For a detailed description of the risks relating to our VIE structure, doing business in the PRC, and the offering as a result of the structure, see “Risk Factors - Risks Relating to Our Corporate Structure,” “Risk Factors - Risks Relating to Doing Business in China” and “Risk Factors – Risks Relating to this Offering,” beginning on page 15.

 

 

 

 

Additionally, we are subject to certain legal and operational risks associated with the majority of the operations based in China. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may cause a material change in our VIE’s operations, the value of your Ordinary Shares to significantly decline or be worthless, or a complete hinderance of our ability to offer or continue to offer our securities to investors. Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As of the date of this prospectus, we, our PRC subsidiary, and the VIE have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice, or sanction. As confirmed by our PRC counsel, we will not be subject to cybersecurity review with the Cyberspace Administration of China, or the “CAC,” when the Cybersecurity Review Measures become effective on February 15, 2022, since we currently do not have over one million users’ personal information and do not anticipate that we will be collecting over one million users’ personal information in the foreseeable future, which we understand might otherwise subject us to the Cybersecurity Review Measures; we are also not subject to network data security review by the CAC if the Draft Regulations on the Network Data Security Administration (Draft for Comments) (the “Security Administration Draft”) are enacted as proposed, since we currently do not have over one million users’ personal information and do not collect data that affects or may affect national security and we do not anticipate that we will be collecting over one million users’ personal information or data that affects or may affect national security in the foreseeable future, which we understand might otherwise subject us to the Security Administration Draft. No relevant laws or regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory Commission for our overseas listing plan. As of the date of this prospectus, we, our PRC subsidiary, and the VIEs have not received any inquiry, notice, warning, or sanctions regarding our planned overseas listing from the China Securities Regulatory Commission or any other PRC governmental authorities. Since these statements and regulatory actions are newly published, however, official guidance and related implementation rules have not been issued. It is highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of our subsidiaries and VIEs, our ability to accept foreign investments, and our listing on an U.S. exchange. The Standing Committee of the National People’s Congress (the “SCNPC”) or PRC regulatory authorities may in the future promulgate laws, regulations, or implementing rules that require us, our subsidiaries, or the VIEs to obtain regulatory approval from Chinese authorities before listing in the U.S.

 

See Risk Factors – Risks Relating to Doing Business in China” beginning on page 25 and “– Risks Relating to this Offering,” beginning on page 40.

 

Yi Po International Holdings Limited is permitted under the laws of Cayman Islands to provide funding to our subsidiaries in Hong Kong and PRC through loans or capital contributions without restrictions on the amount of the funds. Our subsidiary in Hong Kong is also permitted under the laws of Hong Kong SAR to provide funding to Yi Po International Holdings Limited through dividend distribution without restrictions on the amount of the funds. Current PRC regulations permit Yi Po WFOE to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. As of the date of this prospectus, our Company, our subsidiaries, and the VIE have not distributed any earnings or settled any amounts owed under the VIE Agreements. Our Company, our subsidiaries, and the VIE do not have any plan to distribute earnings or settle amounts owed under the VIE Agreements in the foreseeable future. As of the date of this prospectus, none of our subsidiaries or VIE have made any dividends or distributions to our Company and our Company has not made any dividends or distributions to our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. If we determine to pay dividends on any of our ordinary shares in the future, as a holding company, we will depend on receipt of funds from our PRC subsidiary and from the VIEs to our PRC subsidiary in accordance with the VIE Agreements. See “Prospectus Summa–y - Transfers of Cash to and from Our VIE.”

 

Furthermore, as more stringent criteria have been imposed by the SEC and the PCAOB recently, our ordinary shares may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditors for three consecutive years beginning in 2021. Our auditor, WWC, P.C., is not subject to the determinations as to inability to inspect or investigate registered firms completely announced by the PCAOB on December 16, 2021. It is based in San Mateo, California and has been inspected by the PCAOB on a regular basis, with the last inspection in 2020, and therefore not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our ordinary shares is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, Nasdaq may determine to delist our ordinary shares and trading in our ordinary shares could be prohibited. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would reduce the period of time for foreign companies to comply with PCAOB audits to two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. See “Risk Factors — Risks Related to Doing Business in China – The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering” on page 37.

 

We are an “Emerging Growth Company” under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements. Please read “Implications of Our Being an ‘Emerging Growth Company’” beginning on page 15 of this prospectus for more information.

 

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 15 to read about factors you should consider before buying our Ordinary Shares.

 

    Per Share     Total(4)  
Offering price(1)   US$           US$           
Underwriting discounts (2)   US$       US$    
Proceeds to our company before expenses(3)   US$       US$    

 

(1)

Initial public offering price per share is assumed as US$ per share.

 

(2)

We have agreed to pay the underwriter a discount equal to (i) 7% of the gross proceeds of the offering for investors introduced to us by the underwriter and (ii) 7% of the gross proceeds for investors sourced by the Company. This table assumes all investors are introduced to us by the underwriter. Additionally we have agreed to pay to the underwriter a discount equal to one percent (1)% of the gross proceeds of the offering as non-accountable expenses. We have agreed to issue to the underwriter, on the applicable closing date of this offering, warrants (the “Underwriters’ Warrants”) in an amount equal to 7% of the aggregate number of Ordinary Shares sold by us in this offering. For a description of other terms of the Underwriters’ Warrants and a description of the other compensation to be received by the underwriters, see “Underwriting.”

(3)Excludes fees and expenses payable to the underwriters. The total amount of underwriters’ expenses related to this offering is set forth in the section entitled “Expenses Relating to This Offering”

 

(4)Assumes that the underwriters do not exercise any portion of their over-allotment option.

 

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

This offering is being conducted on a firm commitment basis. The underwriters are obligated to take and pay for all of the shares if any such shares are taken. We have granted the underwriters an option, exercisable one or more times in whole or in part, to purchase up to additional Ordinary Shares from us at the initial public offering price, less underwriting discounts, within 45 days from the closing of this offering to cover over-allotments, if any. If the underwriters exercise the option in full, the total underwriting discounts payable will be US$ , and the total proceeds to us, before expenses, will be US$ .

 

The underwriters expect to deliver the ordinary shares against payment as set forth under “Underwriting,” on or about , 2022.

 

 

The date of this prospectus is     , 2022

 

 

 

 

TABLE OF CONTENTS

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS iv
PROSPECTUS SUMMARY 1
THE OFFERING 13
SUMMARY OF FINANCIAL POSITION AND CASH FLOWS OF YI PO INTERNATIONAL HOLDINGS LIMITED, SUBSIDIARIES, AND THE VIE 14
RISK FACTORS 15
USE OF PROCEEDS 45
DIVIDEND POLICY 46
CAPITALIZATION 47
DILUTION 48
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 49
BUSINESS 62
REGULATION 74
MANAGEMENT 86
PRINCIPAL SHAREHOLDERS 92
RELATED PARTY TRANSACTIONS 93
DESCRIPTION OF SHARE CAPITAL 94
SHARES ELIGIBLE FOR FUTURE SALE 103
TAXATION 104
UNDERWRITING 110
ENFORCEABILITY OF CIVIL LIABILITIES 113
EXPENSES RELATING TO THIS OFFERING 115
LEGAL MATTERS 116
EXPERTS 117
WHERE YOU CAN FIND ADDITIONAL INFORMATION 118
INDEX TO FINANCIAL STATEMENTS F-1

 

i

 

 

Neither we nor any of the underwriters have authorized anyone to provide you with any information or to make any representations other than as contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor the underwriters take responsibility for, and provide no assurance about the reliability of, any information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.

 

No action is being taken in any jurisdiction outside the U.S. to permit a public offering of our securities or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the U.S. are required to inform themselves about and to observe any restrictions about this offering and the distribution of this prospectus applicable to those jurisdictions.

 

ii

 

 

Conventions Which Apply to this Prospectus

 

Unless we indicate otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

 

Except where the context otherwise requires and for purposes of this prospectus only, “we”, “us”, “our company”, “Company”, “Group”, “our” and “Yi Po” refer to Yi Po International Holdings Limited and its Affiliated Entities.

 

 

Affiliated Entities” refers to our subsidiaries and our VIE;

     
  “China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this prospectus only, Taiwan region, Hong Kong, and Macau;

 

 

“HK$”, “HKD”, or “Hong Kong dollars” refers to the legal currency of Hong Kong;

 

 

“Jiangsu Easy Parking” refers to Jiangsu Easy Parking Intelligent Technology Co., Ltd., our VIE in the PRC;

 

  “Ordinary Shares” refers to the Company’s ordinary shares, par value US$0.000156 per share;

 

  “SEC” refers to the United States Securities and Exchange Commission;

 

  “US$”, “USD”, “$”, or “U.S. dollars” refers to the legal currency of the United States;

 

 

“VIE” refers to Jiangsu Easy Parking, our variable interest entity;

     
  “VIE Agreements” refers to a series of contractual arrangements, including the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and the Share Pledge Agreement between Yi Po WFOE and VIE;

 

  “Yi Po Holdings” refers to Yi Po International Holdings Limited, a Cayman Islands exempted company;

 

  “Yi Po HK” refers to Guangyan Hong Kong Group Co., Limited, a Hong Kong company and a wholly-owned subsidiary of Yi Po Holdings;

 

  “Yi Po WFOE” refers to Nanjing Dingxu Xinhui Technology Co. Ltd., a wholly foreign-owned company organized under the laws of the PRC and a wholly-owned subsidiary of Yi Po HK;

 

This prospectus contains translations of certain RMB amounts into U.S. dollar amounts at specified rates solely for the convenience of the reader. All reference to “U.S. dollars”, “USD”, “US$” or “$” are to United States dollars. The relevant exchange rates are listed below:

 

    As of
December 31,
 
    2020     2019  
             
Period-end RMB: US$1 exchange rate     6,5249       6,9762  
Period-end HKD: US$1 exchange rate     7.7530       7.7877  
Period-average RMB: US$1 exchange rate     6.8976       6.8985  
Period-average HKD: US$1 exchange rate     7.7562       7.8348  

 

We plan to amend our Memorandum and Articles of Association in order to effect a 1-for-16 reverse stock split of our Ordinary Shares. Throughout this registration statement, each reference to a number of our Ordinary Shares excludes effect to the reverse split, unless otherwise indicated.

 

iii

 

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

  our goals and strategies;

 

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

 

  introduction of new product and service offerings;

 

  expected changes in our revenues, costs or expenditures;

 

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

 

  expected growth of our customers, including consolidated account customers;

 

  competition in our industry;

 

  government policies and regulations relating to our industry; and
     
  uncertainty about the spread of the COVID-19 virus and the impact it may have on the Company’s operations, the demand for the Company’s products and services, and economic activity in general; and

 

We describe certain material risks, uncertainties, and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.

 

iv

 

 

PROSPECTUS SUMMARY

 

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our Ordinary Shares, discussed under “Risk Factors,” before deciding whether to buy our Ordinary Shares.

 

Investors should note that Yi Po Holdings, our ultimate Cayman Islands holding company, does not directly own any substantive operations in the PRC and our businesses in the PRC described in this prospectus are operated through Jiangsu Easy Parking, our VIE in China.

 

Overview

 

Yi Po Holdings is a holding company that was incorporated under the laws of the Cayman Islands on March 19, 2020. As a holding company with no material operations of our own, we conduct our operations in China through our VIE. Yi Po Holdings, through its Affiliated Entities, provides intelligent parking management systems and intelligent parking lot gate products in the PRC.

 

We, through our VIE in China, entered into the intelligent parking industry in 2018. At present, we have installed our intelligent parking management system in approximately 42 parking lots   across 18 cities in China, including 6 parking lots self-operated by us.

 

Through our VIE in China, our intelligent parking management system is widely-used in the self-operated parking lots business and the cooperatively operated parking lots business, which is an electronic network system with automatic vehicle login, entrance and exit authentication, monitoring, and charging management functionalities. Through our VIE, we launched a national network parking platform that provides vehicle owners with diverse services such as parking space search, navigation guidance, touchless payment, membership discounts, and owner’s car search, to provide convenient parking experiences to vehicle owners. We also provide intelligent parking lot gate products, which combine our intelligent parking software system with electromechanical products (i.e. ordinary parking lot gate). Our vehicle access efficiency is manifested by the intelligent management system installed in the parking lot gate products, which save and store information such as records of vehicles’ entrance and exit, time of entrance and exit.

 

We have a broad marketing network in China, and have established cooperative relationships with 28 regional dealers who provide marketing and promotion services nationwide. The extensive dealer licensing channels reduce our overall operating costs. The dealers facilitate the cooperation between us and our partners to in the operation and management of parking lots and parking spaces. The dealers also promote and publicize our intelligent parking management system and our national network parking platform.

 

With the rapid development of urbanization in China and the improvement of resident awareness of safety precautions, the demand for intelligent parking management system products in commercial and residential buildings has increased. This translates into a huge market for the intelligent parking lots. Based on our grasp of the market and investment in the intelligent parking industry, we were awarded the honors of “China’s most influential brand in the intelligent parking industry in 2020” and “China’s most valuable intelligent parking platform for investment and cooperation in 2020”  by China Brand Influence Evaluation Committee, a well-recognized organization in China.

 

As we gradually deepen our understanding of different vertical industries such as the transportation industry, property management industry, and urban planning industry, our goal is to combine the digital and intelligent development needs of each vertical industry to develop and provide more comprehensive intelligent parking solutions. We believe that our intelligent parking management system will enhance the sustainability of our business. Through our VIE, we also plan to collaborate with the merchants on our national network parking platform, which may lead to more business cooperation opportunities.

 

Our revenues consist of (i) dealer licensing fee; (ii) parking space rental fee; and (iii) advertising revenue. Our net revenues were $2,795,500 For the six months ended June 30, 2021 as compared to $1,619,245 for the same period in 2020, an increase of $1,176,255, or 72.64%. Our net revenues were $2,786,853 for the years ended December 31, 2020 as compared to $92,428 for the same period in 2019, an increase of $2,694,425, or 2915.16%.

 

Our net income increased by $353,532 or 67.10%, to $526,907 for the six months ended June 30, 2021, from $880,438 for the six months ended June 30, 2020. Our net income increased by $432,904 or 914.73%, to $480,230 for the year ended December 31, 2020, from $47,326 for the year ended December 31, 2019.

 

Impact of COVID-19

 

The ongoing outbreak of a novel strain of coronavirus (“COVID-19”) has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities globally for the past year. In March 2020, the World Health Organization declared COVID-19 as a pandemic. Given the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of our business operations and our workforce are concentrated in China, we believe there is a risk that our business, results of operations, and financial condition will be adversely affected. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding the duration and severity of COVID-19 and the actions taken by government authorities and other entities to contain COVID-19 or mitigate its impact, almost all of which are beyond our control.

 

The impact of COVID-19 on our business, financial conditions and operating results includes, but is not limited to the following:

 

  According to the requirements of relevant Chinese regulatory authorities, from the end of January 2020 to March 2020, our employees and dealers were temporarily prohibited from going out in accordance   with Nanjing local government policies. Our business reopened in April 2020.

 

In the first half of 2020, we suspended all on-site marketing and advertising activities. We transferred these activities online during the pandemic. As of June 2020, we have resumed on-site marketing and advertising activities.

 

1

 

Our business performance was negatively affected in the first half of 2020. However, due to the effective control of the pandemic in China in the second half of 2020, business performance has rebounded. In addition, we have also received interest from investors who are interested in the smart parking industry and want to join us as dealers.

 

Because of the uncertainty surrounding the COVID-19 outbreak, business disruption and its related financial impact related to the outbreak of and response to COVID-19 cannot be reasonably estimated at this time. We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We may, however, need additional capital in the future to fund our continuing operations. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. In addition, the COVID-19 outbreak was declared to be a pandemic by the World Health Organization on March 10, 2020. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate it are expected to continue to have an adverse impact on our planned operations. Such events could result in the complete or partial closure of our offices which could impact our operations. In addition, it could impact economies and financial markets, resulting in an economic downturn that could impact our ability to raise capital or slow down potential business opportunities. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

 

Our Competitive Strengths

 

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

 

Integrated national network parking platform: With an integrated national network parking platform and through the coordination and combination of different functional systems, we provide a city-level intelligent parking full-process services, in which the information of parking lot management, operation, maintenance, and charging is transmitted digitally and electronically through the national network parking platform. It can quickly meet the increasingly diversified, complex and personalized needs of customers with lower operating costs in the market competition.

 

Convenient payment services: If the vehicle owner uses the parking lot, the owner can pay the parking fee by scanning the QR code of the parking lot or through our national network parking platform. Our system is quickly connected to mobile payment options, including WeChat, Alipay, UnionPay, and ETC.

 

  Marketing network advantages: Our dealers in 28 cities have established cooperative relationships with us and are responsible for providing nationwide marketing and promotion services. The dealers provide promotion and publicity, facilitate us and potential partners, i.e. parking lots’ owners, to reach cooperation in the operation of parking lots through installing our intelligent parking management system and parking lot gates and using our national network parking platform.

 

Our Growth Strategies

 

Our business model and competitive strengths provide us with multiple avenues for growth. We intend to execute the following key strategies: 

 

 

We actively participate in the digitalization and intellectualization of parking lot management and focus on the development of intelligent parking solutions: We believe that our ability to provide one-stop parking solutions for vehicle owners enables us to take full advantage of the opportunities from the digital industrialization of the parking lot management. Intelligent parking solutions are expected to become our core business and play an increasingly important role in our business. We plan to extend the application of our intelligent parking solutions to more industries and sectors, including intelligent cities and intelligent communities.

 

  We develop online technology platforms and marketing channels: We continue to improve and optimize our national network parking platform, which provides vehicle owners with functions such as parking space search, navigation guidance, touchless payment, membership discounts, and owner’s car search. Such parking platform strives to meet the diverse needs of vehicle owners and provides them with digital parking information and convenient parking experiences.

 

  We reduce the overall operation costs: Considering the intense competition in the intelligent parking industry and the COVID-19 outbreak, we intend to reduce our overall costs through dealer licensing   to strengthen our short-term cash flow. The dealers facilitate us and potential partners to achieve operation and management cooperation of parking lot and parking space, and promote and publicize our intelligent parking management system and our national network parking platform.

 

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Corporate Structure

 

The following diagram illustrates the corporate structure of Yi Po International Holdings Limited and its Affiliated Entities as of the date of this prospectus:

 

 

Our Subsidiaries and Business Functions

 

Yi Po Holdings is a Cayman Islands exempted company incorporated on March 19, 2020. We are a holding company incorporated in the Cayman Islands and not a Chinese operating company. As a holding company with no material operations of our own, we conduct our business in China through our Affiliated Entities. The consolidation of our Company and our Affiliated Entities has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. As a result of our indirect ownership in the WFOE and the VIE Agreements, we are regarded as the primary beneficiary of our VIE for accounting purposes. We have consolidated the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP. The VIE structure provides contractual exposure to foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in the operating companies and investors directly holding equity interests in the Chinese operating entities. However, as of the date of this prospectus, the VIE agreements have not been tested in a court of law.

 

Yi Po HK was incorporated on April 28, 2020 under the law of Hong Kong SAR. Yi Po HK is our wholly-owned subsidiary and is currently not engaging in any active business and merely acting as a holding company.

 

Yi Po WFOE was incorporated on March 16, 2021 under the laws of the People’s Republic of China. It is a wholly-owned subsidiary of Yi Po HK and a wholly foreign-owned entity under the PRC laws. Yi Po WFOE had entered into VIE Agreements with Jiangsu Easy Parking and its shareholders.

 

Jiangsu Easy Parking was incorporated on August 22, 2018 under the laws of the People’s Republic of China. Its registered business scope includes intelligent technology, smart parking technology research and development, computer software development, technical services and consulting, parking lot management service, etc. Jiangsu Easy Parking is our operating company.

 

Contractual Arrangements between Yi Po WFOE and Jiangsu Easy Parking

 

Due to PRC legal restrictions on foreign ownership, neither we nor our subsidiaries own any direct equity interest in Jiangsu Easy Parking. Instead, we control and receive the economic benefits of Jiangsu Easy Parking’s business operation through a series of contractual arrangements. Yi Po WFOE, Jiangsu Easy Parking and Jiangsu Easy Parking Shareholders entered into a series of contractual arrangements, also known as VIE Agreements, on August 24, 2021. Weiming Jin and Xin Jin are the shareholders of Jiangsu Easy Parking, our VIE. Weiming Jin owns 51% of the shares and Xin Jin owns 49% of the shares.

 

The VIE agreements are designed to provide Yi Po WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Jiangsu Easy Parking, including absolute control rights and the rights to the assets, property and revenue of Jiangsu Easy Parking. If Jiangsu Easy Parking or the Jiangsu Easy Parking Shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over Jiangsu Easy Parking. Furthermore, if we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of our variable interest entity in our financial statements. 

 

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Each of the VIE Agreements is described in detail below:

 

Exclusive Option Agreement

 

Under the Exclusive Option Agreement, the Jiangsu Easy Parking Shareholders irrevocably granted Yi Po WFOE (or its designee) an exclusive right to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, a portion or whole of the equity interests or assets in Jiangsu Easy Parking held by the Jiangsu Easy Parking Shareholders. The purchase price is RMB 10 and subject to any appraisal or restrictions required by applicable PRC laws and regulations.

 

The agreement takes effect upon parties signing the agreement, and remains effective for 10 years, extendable upon Yi Po WFOE or its designee’s discretion.

 

Exclusive Business Cooperation Agreement

 

Pursuant to the Exclusive Business Cooperation Agreement between Jiangsu Easy Parking and Yi Po WFOE, Yi Po WFOE provides Jiangsu Easy Parking with technical support, consulting services and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, business management and information. For services rendered to Jiangsu Easy Parking by Yi Po WFOE under this agreement, Yi Po WFOE is entitled to collect a service fee that shall be calculated based upon service hours and multiple hourly rates provided by Yi Po WFOE. The service fee should be approximately equal to Jiangsu Easy Parking’s net profit.

 

The Exclusive Business Cooperation Agreement shall remain in effect for ten years unless earlier terminated upon written confirmation from both Yi Po WFOE and Jiangsu Easy Parking before expiration. Otherwise, this agreement can only be extended by Yi Po WFOE and Jiangsu Easy Parking does not have the right to terminate the agreement unilaterally.

 

Share Pledge Agreement

 

Under the Share Pledge Agreement between Yi Po WFOE and certain shareholders of Jiangsu Easy Parking together holding 100% of the equity interests, of Jiangsu Easy Parking (“Jiangsu Easy Parking Shareholders”), the Jiangsu Easy Parking Shareholders pledged all of their equity interests in Jiangsu Easy Parking to Yi Po WFOE to guarantee the performance of Jiangsu Easy Parking’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the Share Pledge Agreement, in the event that Jiangsu Easy Parking breaches its contractual obligations under the Exclusive Business Cooperation Agreement, Yi Po WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to dispose of dividends generated by the pledged equity interests. The Jiangsu Easy Parking Shareholders also agreed that upon occurrence of any event of default, as set forth in the Share Pledge Agreement, Yi Po WFOE is entitled to dispose of the pledged equity interest in accordance with applicable PRC laws. The Jiangsu Easy Parking Shareholders further agree not to dispose of the pledged equity interests or take any actions that would prejudice Yi Po WFOE’s interest.

 

The Share Pledge Agreement shall be effective until the full payment of the service fees under the Business Cooperation Agreement has been made and upon termination of Jiangsu Easy Parking’s obligations under the Business Cooperation Agreement.

 

The purposes of the Share Pledge Agreement are to (1) guarantee the performance of Jiangsu Easy Parking’s obligations under the Exclusive Business Cooperation Agreement, (2) ensure the Jiangsu Easy Parking Shareholders do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice Yi Po WFOE’s interests without Yi Po WFOE’s prior written consent and (3) provide Yi Po WFOE control over Jiangsu Easy Parking.

 

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Although we took every precaution available to effectively enforce the contractual and corporate relationship above, these contractual arrangements may still be less effective than direct ownership and that the Company may incur substantial costs to enforce the terms of the arrangements. For example, our VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current VIE Agreements, we rely on the performance by our VIE and Jiangsu Easy Parking Shareholders   of their obligations under the contracts to exercise control over our VIE. Jiangsu Easy Parking Shareholders may not act in the best interests of our company or may not perform their obligations under these contracts. In addition, failure of our VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.

 

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our VIE and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. For a detailed description of the certainties of the VIE arrangements, see “Risk Factors – Risks Relating to Our Corporate Structure.”

 

Transfers of Cash to and from Our VIE

 

Yi Po Holdings is a holding company with no operations of its own. We conduct our operations in China primarily through our subsidiaries established in the PRC and our VIE. We may rely on dividends to be paid by our VIE to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our PRC VIE incur debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

 

Yi Po Holdings is permitted under the laws of Cayman Islands to provide funding to our subsidiaries in Hong Kong and PRC through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Yi Po HK is also permitted under the laws of Hong Kong to provide funding to Yi Po Holdings through dividend distribution without restrictions on the amount of the funds.

 

As of the date of this prospectus, there has been no distribution of dividends or assets between our Company and our subsidiary, and the VIE has not distributed any earnings or settled any amounts owed under the VIE Agreements.   If the Company, our subsidiaries and the our VIE plan to transfer cash in the future, we expect such transfer to be through cash deposit or wire transfer.

 

We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.

 

Subject to the Companies Act (As Revised) of Cayman Islands, which we refer to as the “Companies Act” below, and our memorandum and articles of association, as amended and restated from time to time, our board of directors has discretion as to whether to distribute dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.

 

Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from Yi Po Holdings to Yi PO HK or from Yi Po HK to Yi Po Holdings. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of HK dollar into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S investors.

 

Current PRC regulations permit Yi Po WFOE to pay dividends to Yi Po HK only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, Yi Po WFOE is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Yi Po WFOE is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

 

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if Yi Po WFOE incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations through the current VIE Agreements, we may be unable to pay dividends on our Ordinary Shares.

 

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.

 

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In order for us to pay dividends to our shareholders, we will rely on payments made from Jiangsu Easy Parking to Yi Po WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to Yi Po HK as dividends from Yi Po WFOE. Certain payments from Jiangsu Easy Parking to Yi Po WFOE are subject to PRC taxes, including business taxes and VAT. As of the date of this prospectus, our PRC subsidiary   has not made any transfers or distributions.

 

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding company, Yi Po HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Yi Po HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to Yi Po HK. See “Risk Factors – Risks Relating to Our Corporate Structure – We are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our Ordinary Shares.” “Risk Factors – Risks Relating to Doing Business in China – We are a holding company and we rely on our subsidiaries for funding dividend payments, which are subject to restrictions under PRC laws.”

 

Regulatory Permissions

 

Our PRC subsidiaries currently have obtained all material permissions and approvals required for our operations in compliance with the relevant PRC laws and regulations in the PRC, including the business license. The business license is a permit issued by Market Supervision and Administration that allows the company to conduct specific business within the government’s geographical jurisdiction. Our VIE in China does not need specific licenses for our parking lot management business. However, applicable laws and regulations may be tightened, and new laws or regulations may be introduced to impose additional government approval, license and permit requirements. If we inadvertently conclude that such approval is not required, fail to obtain and maintain such approvals, licenses or permits required for our business or respond to changes in the regulatory environment, we could be subject to liabilities, penalties and operational disruption, which may materially and adversely affect our business, operating results, financial condition and the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

 

As of the date of this prospectus, none of our Company, subsidiaries or VIE has applied for, received or been denied approval from any Chinese authorities to list on the Nasdaq Stock Market, nor has our Company, our subsidiaries or VIE received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the China Securities Regulatory Commission, or the CSRC, or any other PRC governmental authorities. We believe that we, our subsidiaries and VIE are not required to obtain permission from Chinese authorities to issue these securities to foreign investors based on the PRC laws, regulations and rules currently in effect. However, if we are subsequently advised by any Chinese authorities that permission for this offering and/or listing on the Nasdaq Stock Market was required, we may not be able to obtain such permission in a timely manner, if at all. If this risk occurs, our ability to offer securities to investors could be significantly limited or completely hindered and the securities currently being offered may substantially decline in value and be worthless.

 

On August 8, 2006, six PRC regulatory agencies jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules requires that an offshore special purpose vehicle formed for overseas listing purposes and controlled directly or indirectly by the PRC Citizens shall obtain the approval of the CSRC prior to overseas listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. Based on our understanding of the Chinese laws and regulations in effect at the time of this prospectus, we will not be required to submit an application to the CSRC for its approval of this offering and the listing and trading of our Ordinary Shares on the Nasdaq under the M&A Rules. However, there remains some uncertainty as to how the M&A Rules will be interpreted or implemented, and the opinions of our PRC counsel summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant Chinese government agencies, including the CSRC, would reach the same conclusion.

 

Recently, 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 Strictly Cracking Down on Illegal Securities Activities, which were made available to the public on July 6, 2021. The Opinions on Strictly Cracking Down on Illegal Securities Activities emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-based overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. It is still uncertain how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals. Furthermore, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering and any follow-on offering, we may be unable to obtain such approvals which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors.

 

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On December 24, 2021, the CSRC, together with other relevant government authorities in China issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (“Draft Overseas Listing Regulations”). The Draft Overseas Listing Regulations requires that a PRC domestic enterprise seeking to issue and list its shares overseas (“Overseas Issuance and Listing”) shall complete the filing procedures of and submit the relevant information to CSRC. The Overseas Issuance and Listing includes direct and indirect issuance and listing. Where an enterprise whose principal business activities are conducted in PRC seeks to issue and list its shares in the name of an overseas enterprise (“Overseas Issuer”)on the basis of the equity, assets, income or other similar rights and interests of the relevant PRC domestic enterprise, such activities shall be deemed an indirect overseas issuance and listing (” Indirect Overseas Issuance and Listing”) under the Draft Overseas Listing Regulations. Therefore, the proposed offering would be deemed an Indirect Overseas Issuance and Listing under the Draft Overseas Listing Regulations. As such, the Company would be required to complete the filing procedures of and submit the relevant information to CSRC after the Draft Overseas Listing Regulations become effective.

 

On December 28, 2021, the Cyberspace Administration of China jointly with the relevant authorities formally published Measures for Cybersecurity Review (2021) which will take effect on February 15, 2022 and replace the former Measures for Cybersecurity Review (2020). Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services, and online platform operator (together with the operators of critical information infrastructure, the “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, any online platform operator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country. Since we are not an Operator, nor do we control more than one million users’ personal information, we would not be required to apply for a cybersecurity review under the Measures for Cybersecurity Review (2021).

 

Our PRC counsel has advised us that neither the holding company, our subsidiaries nor our VIE are currently required to obtain approval from Chinese authorities, including the CSRC, or the CAC, to list on U.S exchanges or issue securities to foreign investors, given that: (i) our PRC subsidiary was incorporated as a wholly foreign-owned enterprise by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are our beneficial owners; (ii) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to the M&A Rules; and (iii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules.

 

However, there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and the opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel does, and hence we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China, restrict or prohibit the payments or remittance of dividends by our PRC subsidiaries, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of the shares. 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 PRC government may intervene or influence our operations at any time, which could result in a material change in our operations. For example, the PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding any industry that could adversely affect the business, financial condition and results of operations of our company. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As confirmed by our PRC counsel, we currently are not subject to cybersecurity review with the CAC, to conduct business operations in China, given that: (i) we do not possess a large amount of personal information in our business operations; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities. In addition, as confirmed by our PRC counsel, we are not subject to merger control review by China’s anti-monopoly enforcement agency due to the level of our revenues which provided from us and audited by our auditor WWC, P.C., and the fact that we currently do not expect to propose or implement any acquisition of control of, or decisive influence over, any company with revenues within China of more than RMB 400 million.

 

Although we are currently not required to obtain permission from any of the PRC governmental agencies to obtain such permission and has not received any denial to list on the U.S. exchange or conduct our daily business operation, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange. For more detailed information, see “Risk Factors – Risks Relating to Doing Business in China – The approval of the China Securities Regulatory Commission may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.” and “We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers.”

 

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Risk Factors Summary

 

Investing in our Ordinary Shares involves a high degree of risk. Below is a summary of material factors that make an investment in our Ordinary Shares speculative or risky. Importantly, this summary does not address all of the risks that we face. Please refer to the information contained in and incorporated by reference under the heading “Risk Factors” of this prospectus for additional discussion of the risks summarized in this risk factor summary as well as other risks that we face. These risks include, but are not limited to, the following:

 

Risks Relating to Our Business and Industry

 

Risks and uncertainties relating to our business and industry, beginning on page 8 of this prospectus, include but not limited to the following:

 

We have a limited operating history in a competitive and rapidly evolving industry; it may be difficult to evaluate our prospects, and we may not be able to effectively manage our growth.

 

If the market for our products develop more slowly than we expect, our operating results would be adversely affected.

 

If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.

 

  Our results of operations may be affected by the number of vehicle ownership in China.

 

Our licensing agreements obligate us to make future commissions to the dealers, and if we do not have the funds necessary to make such payments, our business and operations may be affected.

 

Our business is substantially dependent on our collaboration with our major suppliers. Changes or difficulties in our relationships with our suppliers may harm our business and financial results.

 

Our business is dependent on certain major customers and changes or difficulties in our relationships with our major customers may harm our business and financial results.

 

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

 

If we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.

 

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Risks Relating to Our Corporate Structure

 

Risks and uncertainties relating to our corporate structure, beginning on page 9 of this prospectus, include but not limited to the following:

 

  We are a holding company with no material operations of our own, we conduct a substantial majority of our operations through our subsidiaries established and the VIE in the PRC. We do not have direct ownership of our VIE. We control and receive the economic benefits of our VIE’s business operations through certain contractual arrangements. Our Ordinary Shares offered in this offering are shares of our offshore holding company instead of shares of our VIE in China.

 

  If the PRC government deems that the VIE Agreements in relation to our VIE do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we may have difficulty in enforcing any rights we may have under the VIE Agreements in PRC, we could be subject to severe penalties or be forced to relinquish our interests in those operations, and our Ordinary Shares may decline in value dramatically or even become worthless.

 

  Any failure by our consolidated variable interest entity, or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business and our Ordinary Shares may decline in value dramatically or even become worthless.

 

Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.

 

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

 

Risks Relating to Doing Business in the PRC

 

Risks and uncertainties relating to doing business in PRC, beginning on page 9 of this prospectus, include but not limited to the following:

 

  Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China with little advance notice could adversely affect us and limit the legal protections available to you and us.

 

The PRC government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and foreign investment in China-based issuers, which could result in a material change in our operations and the value of our Ordinary Shares.

 

Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our Ordinary Shares to significantly decline or be worthless.

 

  You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our management named in the prospectus based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.

 

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

 

  The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if our VIE or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our Ordinary Shares may significantly decline or become worthless, which would materially affect the interest of the investors.

 

Recent joint statements by the SEC and the Public Company Accounting Oversight Board (United States), or the “PCAOB,” proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.

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  We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers.
     
  The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

 

The approval of the China Securities Regulatory Commission may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.

 

Risks Relating to this Offering

 

Risks and uncertainties relating to this offering, beginning on page 10 of this prospectus, include but not limited to the following:

 

The trading price may be volatile, and you may incur losses.

 

You may experience immediate and substantial dilution in the net tangible book value of shares of common stock purchased.

 

You may not be able to receive dividends for the foreseeable future.

 

Holding Foreign Company Accountable Act

 

U.S. laws and regulations, including the Holding Foreign Companies Accountable Act, or HFCAA, may restrict or eliminate our ability to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in China.

 

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. An identified issuer will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. In June 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act, 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. If our auditor cannot be inspected by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the trading of our securities on any U.S. national securities exchanges, as well as any over-the-counter trading in the U.S., will be prohibited. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.

 

As of the date of the prospectus, WWC, P.C., our auditor, is not subject to the determinations as to inability to inspect or investigate registered firms completely announced by the PCAOB on December 16, 2021. It is based in San Mateo, California and has been inspected by the PCAOB on a regular basis, with the last inspection in 2020, and therefore not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our ordinary shares is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, Nasdaq may determine to delist our ordinary shares and trading in our ordinary shares could be prohibited. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would reduce the period of time for foreign companies to comply with PCAOB audits to two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading.

 

However, these recent developments would add uncertainties to our offering, and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. See “Risk Factors — Risks Related to Doing Business in China The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering” on page 37.

 

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Implications of Being an “Emerging Growth Company”

 

As a company with less than US$1.07 billion in revenues during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to larger public companies. In particular, as an emerging growth company, we:

 

  may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or “MD&A”;

  

  are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis”;

 

  are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

 

  are not required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes);

  

  are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure;

 

  are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and

 

  will not be required to conduct an evaluation of our internal control over financial reporting.

 

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

 

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our Ordinary Shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

 

Implications of Being a Foreign Private Issuer

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Implications of Being a Controlled Company

 

Controlled companies are exempt from the majority of independent director requirements. Controlled companies are subject to an exemption from Nasdaq standards requiring that the board of a listed company consist of a majority of independent directors within one year of the listing date.

  

Public Companies that qualify as a “Controlled Company” with securities listed on the Nasdaq Stock Market (Nasdaq), must comply with the exchange’s continued listing standards to maintain their listings. Nasdaq has adopted qualitative listing standards.  Companies that do not comply with these corporate governance requirements may lose their listing status. Under the Nasdaq rules, a “controlled company” is a company with more than 50% of its voting power held by a single person, entity or group. Under Nasdaq rules, a controlled company is exempt from certain corporate governance requirements including:

 

  the requirement that a majority of the board of directors consist of independent directors;

 

  the requirement that a listed company have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

  the requirement that a listed company have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

  the requirement for an annual performance evaluation of the nominating and governance committee and compensation committee.

 

Controlled companies must still comply with the exchange’s other corporate governance standards. These include having an audit committee and the special meetings of independent or non-management directors.

 

Upon the completion of this offering, our Controlling Shareholder will beneficially own of our total issued and outstanding Ordinary Shares, representing % of the total voting power, assuming that the underwriters do not exercise their over-allotment option, or of our total issued and outstanding Ordinary Shares, representing % of the total voting power, assuming that the over-allotment option is exercised in full. As a result, we will be a “controlled company” as defined under Nasdaq Listing Rule 5615(c) because our Controlling Shareholder will hold more than 50% of the voting power for the election of directors. As a “controlled company,” we are permitted to elect not to comply with certain corporate governance requirements. We do not plan to rely on these exemptions, but we may elect to do so after we complete this offering.

 

Corporate Information

 

Our principal executive offices are located at 320~324, Building C4, No. 5 Jinxiu Street, Yuhuatai District, Nanjing City, Jiangsu Province, People’s Republic of China. Our telephone number at this address is +86-4008280910. Our registered office in the Cayman Islands is located at the offices of Harneys Fiduciary (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman KY1-1002, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc. located at 122 East 42nd Street, 18th Floor New York, NY 10168. Investors should contact us for any inquiries through the address and telephone number of our principal executive offices.

 

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THE OFFERING

 

Below is a summary of the terms of the offering:

 

Issuer   Yi Po International Holdings Limited
     
Securities offered by us  

         Ordinary Shares, par value US$0.000156 per share.

 

Offering price   We currently estimate that the initial public offering price will be         per Ordinary Share.
     
Ordinary Shares outstanding prior to the offering   320,000,000 Ordinary Shares.
     
Over-allotment option  

We have granted the underwriter an option for a period of 45 days to purchase up to additional Ordinary Shares, if any.

     
Ordinary Shares to be outstanding after this offering  

shares (or shares if the underwriters exercise their option to purchase additional Ordinary Shares in full).

     

Representative’s Warrants

 

Warrants to purchase    of our Ordinary Shares (or     Ordinary Shares if the Representative exercises its option to purchase such additional Warrants in full). The warrants will be exercised at any time, and from time to time, in whole or in part, commencing from the closing of the offering and expiring five (5) years from the effectiveness of the offering. The warrants are exercisable at a per share price of the offering price of the Ordinary Shares offered hereby. The warrants shall not be callable or cancellable.

     
Use of proceeds  

We estimate that the net proceeds to us from this offering will be approximately US$ or approximately US$ if the underwriters exercise their over-allotment option to purchase additional Ordinary Shares in full, assuming an offering price of US$ per share, after deducting underwriting discounts and estimated offering expenses payable by us.

 

We intend to use the net proceeds of this offering primarily for general corporate purposes, including working capital. See “Use of Proceeds” for additional information.

     
Proposed Nasdaq Trading Symbol and Listing  

We plan to apply to list our Ordinary Shares on the Nasdaq Capital Market under the symbol “YBZN.” This offering is contingent upon us listing our Ordinary Shares on Nasdaq Capital Market or another national exchange. No assurance can be given that such listing will be approved or that a liquid trading market will develop for our Ordinary Shares.

     
Lock-up  

Our directors, executive officers, and shareholder who own 5% or more of the outstanding Ordinary Shares have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our Ordinary Shares or securities convertible into Ordinary Shares for a period of 6 months  commencing on the date of this prospectus. The Company is also prohibited from conducting offerings during this period and from re-pricing or changing the terms of existing options and warrants. See “Underwriting” for additional information.

     
Transfer Agent     
     
Risk factors   See “Risk Factors” for a discussion of risks you should carefully consider before investing in our Ordinary Shares.

 

Unless we specifically state otherwise, the information in this prospectus assumes no exercise by the underwriters of the over-allotment option.

  

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SUMMARY OF FINANCIAL POSITION AND CASH FLOWS OF YI PO INTERNATIONAL HOLDINGS LIMITED, SUBSIDIARIES, AND THE VIE

 

The consolidated financial statements included in this prospectus reflect financial position and cash flows of the registrant, Cayman Islands incorporated parent company, Yi Po International Holdings Limited, together with those of its subsidiaries, on a consolidated basis. The tables below are condensed consolidating schedules summarizing separately the financial position and cash flows of the registrant, Cayman Islands incorporated parent company, Yi Po International Holdings Limited (“Parent Company” in the tables below), and its subsidiaries (“Non-VIE subsidiaries” in the tables below), together with eliminating adjustments:

 

Consolidated Statements of Operations Information

 

   For the six months ended June 30, 2021 
   Parent   Non-VIE
subsidiaries
   VIE   Elimination   Consolidated 
Revenues  $   $   $2,795,500   $   $2,795,500 
Share of loss from non- VIE subsidiaries  $   $   $   $   $ 
Share of loss from VIEs  $   $   $   $   $ 
Net Income  $   $   $880,438   $   $880,438 
Comprehensive income  $   $   $891,662   $   $891,662 

 

   For the six months ended June 30, 2020 
   Parent   Non-VIE
subsidiaries
   VIE   Elimination   Consolidated 
Revenues  $   $   $1,619,245   $   $1,619,245 
Share of loss from non-VIE subsidiaries  $       $   $   $ 
Share of loss from VIEs  $       $   $   $ 
Net Income  $       $702,543   $   $702,543 
Comprehensive income  $   $   $698,658   $   $698,658 

 

Consolidated Balance Sheets Information

 

       As of June 30, 2021 
   Parent  

Non-VIE

subsidiaries

   VIE   Elimination   Consolidated 
Current assets  $   $   $10,676,367   $   $10,676,367 
Investments in non-VIE subsidiaries  $   $   $   $   $ 
Equity in VIEs through VIE agreements  $   $   $   $   $ 
Non-current assets  $   $   $3,009,742   $   $3,009,742 
Total liabilities  $   $   $11,636,154   $   $11,636,154 
Shareholders’ equity  $-   $   $1,755,860   $(-)  $1,755,860 

 

   As of December  31, 2020 
   Parent   Non-VIE
subsidiaries
   VIE   Elimination   Consolidated 
Current assets  $   $   $6,946,935   $   $6,946,935 
Investments in non-VIE subsidiaries  $   $   $   $   $ 
Equity in VIEs through VIE agreements  $   $   $   $   $ 
Non-current assets  $   $   $3,780,078   $   $3,780,078 
Total liabilities  $   $   $9,862,815   $   $9,862,815 
Shareholders’ equity  $-   $   $864,198   $   $864,198 

 

Consolidated Cash Flows Information

 

   For the six months ended June 30, 2021 
   Parent   Non-VIE
subsidiaries
   VIE   Elimination   Consolidated 
Net cash provided by operating activities  $   $   $2,876,950   $   $2,876,950 
Net cash used in investing activities  $   $   $(10,537)      $(10,537)
Net cash used in financing activities  $   $   $69,612   $   $69,612 

 

   For the six months ended June 30, 2020 
   Parent   Non-VIE
subsidiaries
   VIE   Elimination   Consolidated 
Net cash used in operating activities  $   $   $764,060   $   $764,060 
Net cash used in investing activities  $   $   $(124,924)  $   $(124,924)
Net cash provided by financing activities  $   $   $(25,330)  $   $(25,330)

 

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RISK FACTORS

 

An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment.

 

Risks Relating to Our Business and Industry

 

We have a limited operating history in a competitive and rapidly evolving industry; it may be difficult to evaluate our prospects, and we may not be able to effectively manage our growth.

 

Founded in August 2018, we have a limited operating history in the intellectual parking industry, which is competitive and rapidly evolving. We may have limited insight into trends that may develop and affect our business, and we may make errors in predicting and reacting to industry trends and evolving needs of our customers.

 

100% and 97% of our revenues are derived from the dealer licensing fee during the fiscal year ended December 31, 2020 and 2019, respectively.

 

Our historical results and growth may not be indicative of our future performance, and we may fail to continue our growth or maintain our historical growth rates. If our products and services   such as intellectual parking system does not develop as we expect, or if we fail to continue to address the needs of our users, our business and financial conditions may be materially adversely affected.

 

In addition, we may not be able to effectively manage our growth. Our business expansion may increase the complexity of our operations and place a significant strain on our managerial, operational, financial and human resources. Our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. If we are not able to manage our growth effectively, our business and prospects may be materially and adversely affected.

 

If the market for our products develop more slowly than we expect, our operating results would be adversely affected.

 

Our success will depend to a substantial extent on the widespread adoption of intelligent parking system in general, but we cannot be certain that the trend of adoption of intellectual parking system will continue in the future. It is difficult to predict customer adoption rates and demand for our products, the future growth rate and size of intellectual parking system market. If our products do not continue to achieve market acceptance, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions, data security or privacy concerns, governmental regulation, competing technologies and solutions or decreases in information technology spending, it would result in decreased revenues and our business would be adversely affected.

 

If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.

 

The increasing development of high-tech products in the intelligent parking system industry echoes the ever-changing customers’ demands.    Similarly, our competitors are also constantly innovating to enhance user experience. We continue to invest significant resources in developing and enhancing our existing products as well as to introduce new services that will attract more participants to our services. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan. Our failure to innovate and adapt to these changes would have a material adverse effect on our business, financial condition, and results of operations.

 

Our results of operations may be affected by the number of vehicle ownership in China.

 

The important function of our intelligent parking system, national network parking platform, and parking lot gates products is to control and manage the flow of vehicles. Only when the vehicle ownership in a town or a specific area reaches a certain level and in order to control and manage vehicles or traffic flow, the market will have demand for our products and services. With the increasing number of cars in the market, the demand for our products has also increased. If Chinese government’s policy on development of the automobile industry or encouragement of household vehicle ownership changes, it will affect the number of cars, especially the increase or decrease in the number of private cars, which will affect the market’s demand for our products and/or services.

 

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We may require substantial additional funding in the future. There is no assurance that additional financing will be available to us.

 

We have been dependent upon proceeds received from shareholders’ equity contributions to meet our capital requirements in the past. We cannot assure you that we will be able to obtain capital in the future to meet our capital requirements to maintain operations and improve financial performance. If we were unable to meet our future funding requirements for working capital and for general business purposes, we could experience operating losses and limit our marketing efforts as well as decrease or eliminate capital expenditures. If so, our operating results, our business results and our financial position would be adversely affected. If adequate additional financing is not available on reasonable terms, we may not be able to undertake our expansion plan or purchase additional equipment for our operations, and we would have to modify our business plans accordingly.

 

Our licensing agreements obligate us to make future commissions to the dealers, and if we do not have the funds necessary to make such payments, our business and operations may be affected.

 

Through our VIE in China, we signed separate dealer licensing agreements with each dealer. The term of a dealer licensing agreement is usually 3 years. The agreement will be renewed automatically unless either party gives written notice to the other party prior to the expiration of the current agreement. We received income based on these agreements, and in return, the dealer will receive commissions from us. The commissions for the dealer are calculated based on 20% of the five-year net income of all referred parking lot projects in the dealer’s exclusive region, payable on a yearly basis. We will first pay the commissions to our dealers in April 2022. We are obligated to pay such commissions to dealers under the dealer licensing agreements and these future obligations may add risks to our business and operations. There can be no assurance that we will have the funds necessary to make such payments, or be able to raise such funds when needed. If we are unable to raise additional funds or maintain sufficient liquidity to make our payment obligations if and when they become due, we may be in material breach of our dealers licensing agreements and our counterparties may seek legal action or remedies against us, which would harm our business, financial condition, results of operations and prospects. As of the date of this prospectus, the amount of commissions we are obligated to pay based on the income received is 0.

 

Our business is substantially dependent on our collaboration with our major suppliers. Changes or difficulties in our relationships with our suppliers may harm our business and financial results.

 

Our business is substantially dependent on our collaboration with our major suppliers. We consider major suppliers in each period to be those suppliers that accounted for more than 10% of overall purchases in such period. For the year ended December 31, 2020, Jiangsu Easy Parking had one major supplier whose purchases represented approximately 25% of the Company’s total purchases. For the year ended December 31, 2019, Jiangsu Easy Parking had one major supplier whose purchases represented approximately 100% of the Company’s total purchases. As of December 31, 2020, the supplier accounted for 20% of the Company’s accounts payable. As of December 31, 2019, the supplier accounted for 100% of the Company’s accounts payable. For the six months ended June 30, 2021, Jiangsu Easy Parking had one supplier accounted for over 10% of the Company’s accounts payable. For the six months ended June 30, 2020, Jiangsu Easy Parking had no supplier accounted for over 10% of the Company’s accounts payable.

 

Our suppliers may fail to meet their contractual obligations, which may adversely affect our business. Jiangsu Easy Parking generally enters into cooperation agreements with them without imposing any contractual obligations requiring them to maintain their relationships with us. Accordingly, there is no assurance that Jiangsu Easy Parking can maintain stable and long-term business relationships with any supplier. Failure to maintain existing relationships with the suppliers or to establish new relationships in the future could negatively affect the Company’s ability to obtain goods sold to customers in a price advantage and timely manner. If the Company is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect our business, results of operations and financial condition.

 

Our business is dependent on certain major customers and changes or difficulties in our relationships with our major customers may harm our business and financial results.

 

Jiangsu Easy Parking had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows: For the year ended December 31, 2020, one customer accounted for 46% of the Company’s revenues. For the year ended December 31, 2019, one customer accounted for 97% of the Company’s revenues. As of December 31, 2020, no customer accounted for more than 10% of the Company’s accounts receivable. As of December 31, 2019, one customer accounted for 100% of the Company’s accounts receivable.

 

For the six months ended June 30, 2021, Jiangsu Easy Parking had two customers each accounted for 60% and 15% of the Company’s revenues, respectively. For the six months ended June 30, 2020, Jiangsu Easy Parking had no customer accounted for more than 10% of the Company’s revenues. For the six months ended June 30, 2021, Jiangsu Easy Parking had 1 customer, Changzhou Railway Station Parking Lot, which accounted for 60% of the Company’s accounts receivable. For the six months ended June 30, 2020, we had 3 customers, Nanjing Anhuai East Road parking lot, Changzhou Guanghua Road parking lot, and Changsha hunan parking lot, each accounting for 29%, 30%, 39%, of the Company’s accounts receivable, respectively. If Jiangsu Easy Parking cannot maintain long-term relationships with major customers or replace major customers from period to period with equivalent customers, the loss of such sales could have an adverse effect on our business, financial condition and results of operations.

 

Rapid expansion could significantly strain our resources, management and operational infrastructure, which could impair our ability to meet increased demand for our products and hurt our business results.

 

To accommodate our anticipated growth, we will need to expend capital resources and dedicate personnel to implement and upgrade our accounting, operational and internal management systems and enhance our record keeping and contract tracking system. Such measures will require us to dedicate additional financial resources and personnel to optimize our operational infrastructure and to recruit more personnel to train and manage our growing employee base. If we cannot successfully implement these measures efficiently and cost-effectively, we will be unable to satisfy the demand for our products and/or services, which will impair our revenue growth and hurt our overall financial performance.

 

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We cannot assure you that our growth strategy will be successful, which may result in a negative impact on our growth, financial condition, results of operations and cash flow.

 

Our growth strategies may encounter many obstacles, including, but not limited to, increased competition from similar businesses, unexpected costs, and costs associated with marketing efforts and government regulation. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products and/or services in any additional markets. Our inability to implement this internal growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.

 

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

 

Our business operations depend on the continued services of our senior management, particularly the executive officers named in this prospectus. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives is/are unable or unwilling to continue in his/their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel.

 

Our directors, management and shareholders have been and may from time to time be subject to negative publicity or claims, controversies, lawsuits, other legal and administrative proceedings and fines, which could have a material adverse effect on our business, results of operations, financial condition and reputation.

 

Our directors, management and shareholders have been and may from time to time be subject to litigation, regulatory investigations, proceedings and/or negative publicity or otherwise face potential liability and expense in relation to commercial, securities or other matters.

 

Moreover, we cannot guarantee that additional enforcement measures relating to or arising out of lawsuits would not be threatened or brought against us, other shareholders, directors and officers in the future. We do not have control or have limited control over the actions of these parties, and any misbehavior or misconduct by these parties could bring us negative publicity, which would harm our brand and reputation. In addition, the claims and lawsuits may require us to incur additional resources, which could in turn harm our business.

 

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

 

Our intellectual property rights are important to our business. As of the date of this prospectus, we have 16 registered software copyrights in China.

 

We enter into confidentiality agreements with some of our employees and consultants, and control access to and distribution of our documentation and other licensed information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization, or to develop similar technology independently. Since the Chinese legal system in general, and the intellectual property regime in particular, is relatively weak, it is often difficult to enforce intellectual property rights in China. In addition, confidentiality agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China or elsewhere. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

 

If we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.

 

We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing clients. Successful promotion of our brand and our ability to attract clients depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our products. Currently, we promote our brand through word of mouth, dealers, and internet promotions. It is likely that our future marketing efforts will require us to incur significant additional expenses to include print media and video advertising. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.

 

We have been and may continue to be subject to complaints, claims, controversies, regulatory actions, arbitrations and legal proceedings from time to time. If the outcome of these complaints, claims, controversies, regulatory actions, arbitrations and legal proceedings is adverse to us, it could have a material adverse effect on our business, results of operations, financial condition, liquidity, cash flows and reputation.

 

We have been and may from time to time continue to be subject to or involved in various complaints, claims, controversies, regulatory actions, arbitration, and legal proceedings. Such allegations, claims and proceedings may be asserted against us by third parties, including vehicle owners, suppliers, employees, business partners, governmental or regulatory bodies, competitors or other third parties, in administrative, civil or criminal investigations and proceedings.

 

As we entered into contractual relationship with various dealers and parking lots’ owners, we may be involved in legal proceedings arising from contract disputes. In addition, we have been and may from time to time be involved in labor and employment related disputes with and subject to such claims by employees. Complaints, claims, arbitration, lawsuits, and litigations are subject to inherent uncertainties, and we are uncertain whether the foregoing claims would develop into lawsuits or regulatory penalties and other disciplinary actions.

 

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There may also be negative publicity associated with litigation that could decrease clients’ acceptance of our services offerings, regardless of whether the allegations are valid or whether we are ultimately found liable. Lawsuits, litigations, arbitration and regulatory actions may cause us to incur substantial costs or fines, freezing of our assets, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, or materially modify or suspend our business operations, any of which could materially and adversely affect our financial condition, results of operations and business prospects.

 

After we become a publicly listed company, we may face additional exposure to claims and lawsuits. These claims could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merits of the claims. In some instances, we may elect or be forced to pay substantial damages if we are unsuccessful in our efforts to defend against these claims, which could harm our business, financial condition and results of operations.

 

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

 

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

 

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

 

 

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

 

 

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

 

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

 

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

 

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

  

 

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

 

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

 

 

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

oversight over an acquired business;

 

 

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

 

  failure to successfully further develop the acquired technology;

 

 

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

 

  potential disruptions to our ongoing businesses.

 

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

 

A lack of insurance could expose us to significant costs and business disruption.

 

None of the holding company, our subsidiary, or VIE maintains any insurance to cover assets, property and potential liability of our business. The lack of insurance could leave our business inadequately protected from loss. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected.

 

Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes.

 

Our business and financial and operating performance could be materially and adversely affected by the outbreak of epidemics including but not limited to the novel coronavirus (COVID-19), swine influenza, avian influenza, middle east respiratory syndrome (MERS-CoV) and severe acute respiratory syndrome (SARS-CoV).  As a result of the on-going COVID-19 pandemic, we have experienced and may continue to experience slowdown and temporary suspension in operations. Our business could be materially and adversely affected in the event that the slowdown or suspension carries for a long period of time. During such epidemic outbreak, China may adopt certain hygiene measures, including quarantining visitors from places where any of the contagious diseases are rampant. Those restrictive measures may adversely affect and slow down the national economic development during that period. Any prolonged restrictive measures in order to control the contagious disease or other adverse public health developments in China or our targeted markets may have a material and adverse effect on our business operations.

 

Similarly, natural disasters, wars (including the potential of war), terrorist activity (including threats of terrorist activity), social unrest and heightened travel security measures instituted in response, and travel-related accidents, as well as geopolitical uncertainty and international conflict, will affect overall economic environment and may in turn have a material adverse effect on our business and results of operations. In addition, we may not be adequately prepared in contingency planning or recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely and materially affected, which in turn may harm our reputation.

 

Risks Relating to Our Corporate Structure

 

If the PRC government deems that the VIE Agreements in relation to Jiangsu Easy Parking, our consolidated variable interest entity, do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations and our Ordinary Shares may decline in value dramatically or even become worthless.

 

We are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we conduct all of our operations through our subsidiary and VIE established in PRC. We control and receive the economic benefits of our VIE’s business operations through the VIE Agreements. Our Ordinary Shares offered in this offering are shares of our offshore holding company instead of shares of our VIE in China. For a description of the VIE contractual arrangements, see “Corporate Structure—Contractual Arrangements.”

 

The VIE accounts for 100% of the Company’s consolidated results of operations and cash flows for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, the VIE accounted for 100% of the consolidated total assets and total liabilities of the Company.

 

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We rely on and expect to continue to rely on Yi Po WFOE’s contractual arrangements with Jiangsu Easy Parking and Jiangsu Easy Parking Shareholders to operate our business. These contractual arrangements may not be as effective in providing us with control over Jiangsu Easy Parking as ownership of controlling equity interests would be in providing us with control over, or enabling us to derive economic benefits from the operations of Jiangsu Easy Parking. Under the current contractual arrangements, as a legal matter, if Jiangsu Easy Parking or any of its shareholders executing the VIE Agreements fails to perform its, his or her respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if shareholders of a variable interest entity were to refuse to transfer their equity interests in such variable interest entity to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to take a legal action to compel them to fulfill their contractual obligations.

  

If (i) the applicable PRC authorities invalidate the VIE Agreements for violation of PRC laws, rules and regulations, (ii) any variable interest entity or its shareholders terminate the contractual arrangements (iii) any variable interest entity or its shareholders fail to perform its/his/her obligations under these contractual arrangements, or (iv) if these regulations change or are interpreted differently in the future, our business operations in China would be materially and adversely affected, and the value of your shares would substantially decrease or even become worthless. Further, if we fail to renew these contractual arrangements upon their expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China.

  

In addition, if any variable interest entity or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of the variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business and our ability to generate revenues.

 

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our operating entities and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations. Additionally, our Ordinary Shares may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the assets of our VIE that conducts all or substantially our operations.

 

These contractual arrangements may not be as effective as direct ownership in providing us with control over our VIE. For example, our VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our VIE and its shareholders of their obligations under the contracts to exercise control over our VIE. The shareholders of our consolidated VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual arrangements with our VIE.

 

If our VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. For example, if the shareholders of our VIE refuse to transfer their equity interest in our VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third parties claim any interest in such shareholders’ equity interests in our VIE, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other disputes between the shareholders of our VIE and third parties were to impair our control over our VIE, our ability to consolidate the financial results of our VIE would be affected, which would in turn result in a material adverse effect on our business, operations and financial condition.

 

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In the opinion our PRC legal counsel, each of VIE Agreements among our Yi Po WFOE, our VIE and Jiangsu Easy Parking Shareholders governed by PRC laws is valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may ultimately take a view that is contrary to the opinion of our PRC legal counsel. In addition, it is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. PRC government authorities may deem that foreign ownership is directly or indirectly involved in our VIE’s shareholding structure. If our corporate structure and contractual arrangements are deemed by the Ministry of Industry and Information Technology (“MIIT”) or the Beijing Ministry of Commerce (“MOFCOM”) or other regulators having competent authority to be illegal, either in whole or in part, we may lose control of our consolidated VIE and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our VATS business. Furthermore, if we or our VIE is/are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including, without limitation:

 

 

revoking the business license and/or operating licenses of Yi Po WFOE or our VIE;

 

 

discontinuing or placing restrictions or onerous conditions on our operations through any transactions among Yi Po WFOE, our VIE and its subsidiaries;

 

 

imposing fines, confiscating the income from Yi Po WFOE, our VIE or its subsidiaries, or imposing other requirements with which we or our VIE may not be able to comply;

 

  placing restrictions on our right to collect revenues;

 

  shutting down our servers or blocking our app/websites;

 

  requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIE and deregistering the equity pledges of our VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over our VIE; or

 

  restricting or prohibiting our use of the proceeds of this offering to finance our business and operations in China.

 

  taking other regulatory or enforcement actions against us that could be harmful to our business.

 

The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business, thus causing the value of our Ordinary Shares to significantly decline or be worthless, which would materially affect the interest of the investors. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of our VIE in our consolidated financial statements, if the PRC government authorities were to find our corporate structure and contractual arrangements to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of our VIE or our right to receive substantially all the economic benefits and residual returns from our VIE and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of our VIE in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of operations.

 

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Our PRC counsel, Guantao Law Firm, has rendered   an opinion that the ownership structure of the PRC entities does not violate PRC laws or regulations currently in effect, and that the contractual arrangements are valid, binding and enforceable, and do not result in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current PRC Laws, and there can be no assurance that the PRC government will ultimately take a view that is consistent with such opinion.

 

If (i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any variable interest entity or its shareholders terminate the contractual arrangements or (iii) any variable interest entity or its shareholders fail to perform its/his/her obligations under these contractual arrangements, our business operations in China would be materially and adversely affected, and the value of your shares would substantially decrease. Further, if we fail to renew these contractual arrangements upon their expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China.

 

In addition, if any variable interest entity or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of the variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business and our ability to generate revenues.

 

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our operating entities and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations. In such case, the value of our ordinary shares may significantly decline or even become worthless, which would materially affect the interest of the investors.

 

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We are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of Yi Po WFOE to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our Ordinary Shares.

 

We are a holding company and conduct substantially all of our business through our PRC subsidiary, which is a limited liability company established in China. We may rely on dividends to be paid by our PRC subsidiary to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Neither any of our subsidiary or the VIE has made any dividends or other distributions to our holding company or any U.S. investors as of the date of this prospectus.

 

Under PRC laws and regulations, our PRC subsidiary, which is a wholly foreign-owned enterprise in China, may pay dividends only out of its 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.

 

Our PRC subsidiary generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiary to use its Renminbi revenues to pay dividends to us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration of Foreign Exchange (the “SAFE”) for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiary to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

 

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

 

Jiangsu Easy Parking Shareholders may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

 

The equity interests of Jiangsu Easy Parking are held by a total of five shareholders. Their interests may differ from the interests of our Company as a whole. They may breach, or cause Jiangsu Easy Parking to breach, or refuse to renew the existing VIE Agreements Yi Po WFOE has with Jiangsu Easy Parking, which would have a material adverse effect on our ability to effectively control Jiangsu Easy Parking and receive economic benefits from them. For example, the shareholders may be able to cause our agreements with Jiangsu Easy Parking to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor.

 

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Currently, we do not have arrangements to address potential conflicts of interest the shareholders of our consolidated VIE may encounter, on one hand, and as a beneficial owner of our Company, on the other hand. We, however, could, at all times, exercise our option under the Exclusive Option Agreement to cause them to transfer all of their equity ownership in the VIE to a PRC entity or individual designated by us as permitted by the then applicable PRC laws. In addition, if such conflicts of interest arise, we could also, in the capacity of attorney-in-fact of the then existing shareholders of our consolidated VIE as provided under the power of attorney, directly appoint new directors of our consolidated VIE. We rely Jiangsu Easy Parking Shareholders to comply with PRC laws and regulations, which protect contracts and provide that directors and executive officers owe a duty of loyalty to our Company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of the Cayman Islands, which provide that the directors have a duty of care and a duty of loyalty to act honestly in good faith with a view to our best interests. However, the legal frameworks of China and the Cayman Islands do not provide guidance on resolving conflicts in the event of a conflict with another corporate governance regime. If we cannot resolve any conflicts of interest or disputes between us and the shareholders of our consolidated VIE, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. As a result, our Ordinary Shares may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the assets of our VIE that conducts all or substantially our operations.

 

Contractual arrangements in relation to our VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or our VIE owe/owes additional taxes, which could negatively affect our results of operations and the value of your investment.

 

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

 

If we exercise the option to acquire equity ownership of Jiangsu Easy Parking, the ownership transfer may subject us to certain limitation and substantial costs.

 

Pursuant to the VIE Agreements, Yi Po WFOE has the exclusive right to purchase all or any part of the equity interests in Jiangsu Easy Parking from Jiangsu Easy Parking Shareholders   for a nominal price, unless the relevant government authorities or then applicable PRC laws request that a minimum price amount be used as the purchase price, in such case the purchase price shall be the lowest amount under such request. The Jiangsu Easy Parking Shareholders will be subject to PRC individual income tax on the difference between the equity transfer price and the then current registered capital of Jiangsu Easy Parking. Additionally, if such a transfer takes place, the competent tax authority may require Yi Po WFOE to pay enterprise income tax for ownership transfer income with reference to the market value, in which case the amount of tax could be substantial.

 

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Risks Relating to Doing Business in China

 

There are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.

 

We conduct substantially all of our business operations in China, and a majority of our directors and senior management are based in China, which is an emerging market. The SEC, U.S. Department of Justice and other authorities often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China. Additionally, our public shareholders may have limited rights and few practical remedies in emerging markets where we operate, as shareholder claims that are common in the United States, including class action securities law and fraud claims, generally are difficult to pursue as a matter of law or practicality in many emerging markets, including China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local 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, the regulatory cooperation with the securities regulatory authorities in the Unities States has not been efficient in the absence of a mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no foreign securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to foreign securities regulators.

 

As a result, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.

 

PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from using proceeds from this offering and/or future financing activities to make loans or additional capital contributions to our PRC operating subsidiaries.

 

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaces the previous SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and PRC corporate entities, to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may make in the future.

 

Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE to reflect any material change. If any PRC resident shareholder of such SPV fails to make the required registration or to update the registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiaries in China. In February, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under SAFE Circular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and accept registrations under the supervision of SAFE. We have used our best efforts to notify PRC residents or entities who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents to complete the foreign exchange registrations. However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. We cannot assure you that all other shareholders or beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain or update any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, and limit our PRC subsidiaries’ ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.

 

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Furthermore, as these foreign exchange and outbound investment related regulations are relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border investments and transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. We cannot assure you that we have complied or will be able to comply with all applicable foreign exchange and outbound investment related regulations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

 

As an offshore holding company with PRC subsidiaries, we may transfer funds to our Affiliate Entities or finance our operating entity by means of loans or capital contributions. Any capital contributions or loans that we, as an offshore entity, make to our Company’s PRC subsidiaries, including from the proceeds of this offering, are subject to the above PRC regulations. We may not be able to obtain necessary government registrations or approvals on a timely basis, if at all. If we fail to obtain such approvals or make such registration, our ability to make equity contributions or provide loans to our Company’s PRC subsidiaries or to fund their operations may be negatively affected, which may adversely affect their liquidity and ability to fund their working capital and expansion projects and meet their obligations and commitments. As a result, our liquidity and our ability to fund and expand our business may be negatively affected.

 

We must remit the offering proceeds to China before they may be used to benefit our business in China, and this process may take several months to complete.

 

The process for sending the proceeds from this offering back to China may take as long as six months after the closing of this offering. In utilizing the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC operating subsidiaries, we may make loans to our Affiliated Entities, or we may make additional capital contributions to our Affiliate Entities. Any loans to our Affiliated Entities are subject to PRC regulations. For example, loans by us to our subsidiaries in China, which are foreign-invested enterprises, to finance their activities cannot exceed statutory limits and must be registered with SAFE.

 

To remit the proceeds of the offering, we must take the following steps:

 

 

First, we will open a special foreign exchange account for capital account transactions. To open this account, we must submit to SAFE certain application forms, identity documents, transaction documents, form of foreign exchange registration of overseas investments of the domestic residents, and foreign exchange registration certificate of the invested company. As of the date of this prospectus, we have already opened a special foreign exchange account for capital account transactions.

 

  Second, we will remit the offering proceeds into this special foreign exchange account.

 

 

Third, we will apply for settlement of the foreign exchange. In order to do so, we must submit to SAFE certain application forms, identity documents, payment order to a designated person, and a tax certificate.

 

The timing of the process is difficult to estimate because the efficiencies of different SAFE branches can vary significantly. Ordinarily the process takes several months but is required by law to be accomplished within 180 days of application.

 

We may also decide to finance our subsidiaries by means of capital contributions. These capital contributions must be approved by MOFCOM or its local counterpart. We cannot assure you that we will be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our subsidiaries. If we fail to receive such approvals, our ability to use the proceeds of this offering and to capitalize our Chinese operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business. If

 

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we fail to receive such approvals, our ability to use the proceeds of this offering and to capitalize our Chinese operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

 

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries.

 

As an offshore holding company of Yi Po WFOE, we may make loans to Yi Po WFOE, our VIE and the VIE’s subsidiaries, or may make additional capital contributions to Yi Po WFOE, subject to satisfaction of applicable governmental registration and approval requirements.

 

Any loans we extend to Yi Po WFOE, which is treated as a foreign-invested enterprise under PRC law, cannot exceed the statutory limit and must be registered with the local counterpart of the SAFE.

 

We may also decide to finance Yi Po WFOE by means of capital contributions. According to the relevant PRC regulations on foreign-invested enterprises in China, these capital contributions are subject to registration with or approval by the MOFCOM or its local counterparts. In addition, the PRC government also restricts the convertibility of foreign currencies into Renminbi and use of the proceeds. On March 30, 2015, SAFE promulgated Circular 19, which took effect and replaced certain previous SAFE regulations from June 1, 2015. SAFE further promulgated Circular 16, effective on June 9, 2016, which, among other things, amend certain provisions of Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. If our VIE requires financial support from us or Yi Po WFOE in the future and we find it necessary to use foreign currency-denominated capital to provide such financial support, our ability to fund our VIE’s operations will be subject to statutory limits and restrictions, including those described above. These circulars may limit our ability to transfer the net proceeds from this offering to our VIE and Yi Po WFOE, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies in China. Despite the restrictions under these SAFE circulars, Yi Po WFOE may use its income in Renminbi generated from their operations to finance the VIE through entrustment loans to the VIE or loans to the VIE’s shareholders for the purpose of making capital contributions to the VIE. In addition, our PRC subsidiary can use Renminbi funds converted from foreign currency registered capital to carry out any activities within their normal course of business and business scope, including to purchase or lease servers and other relevant equipment and fund other operational needs in connection with their provision of services to the relevant VIE under the applicable exclusive technical support agreements.

 

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

 

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and services and materially and adversely affect our competitive position.

 

Substantially all of our business operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects are subject to economic, political and legal developments in China. Although the Chinese economy is no longer a planned economy, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between RMB and foreign currencies, and regulate the growth of the general or specific market.

 

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From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business and results of operations.

 

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Such unpredictability towards our contractual, property (including intellectual property) and procedural rights could adversely affect our business and impede our ability to continue our operations.

 

These government involvements have been instrumental in China’s significant growth in the past 30 years. In response to the recent global and Chinese economic downturn, the PRC government has adopted policy measures aimed at stimulating the economic growth in China. If the PRC government’s current or future policies fail to help the Chinese economy achieve further growth or if any aspect of the PRC government’s policies limits the growth of our industry or otherwise negatively affects our business, our growth rate or strategy, our results of operations could be adversely affected as a result.

 

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

 

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

 

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

 

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

 

Under the Enterprise Income Tax Law, we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

 

China passed the Enterprise Income Tax Law, or the EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

 

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On April 22, 2009, the State Administration of Taxation of China issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or group. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate stamps, board and stockholder minutes are kept in China; and (iv) all of its directors with voting rights or senior management reside in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC stockholders. Because substantially all of our operations and senior management are located within the PRC and are expected to remain so for the foreseeable future, we may be considered a PRC resident enterprise for enterprise income tax purposes and therefore subject to the PRC enterprise income tax at the rate of 25% on its worldwide income. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise controlled by a Chinese natural person. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

 

If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Currently, we do not have any non-China source income, as we conduct our sales in China. However, under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would be deemed as “qualified investment income between resident enterprises” and therefore qualify as “tax-exempt income” pursuant to clause 26 of the EIT Law. Second, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which the dividends we pay with respect to our Ordinary Shares, or the gain our non-PRC shareholders may realize from the transfer of our Ordinary Shares, may be treated as PRC-sourced income and may therefore be subject to a 10% PRC withholding tax. The EIT Law and its implementing regulations are, however, relatively new and ambiguities exist with respect to the interpretation and identification of PRC-sourced income, and the application and assessment of withholding taxes. If we are required under the EIT Law and its implementing regulations to withhold PRC income tax on dividends payable to our non-PRC shareholders, or if non-PRC stockholders are required to pay PRC income tax on gains on the transfer of their Ordinary Shares, our business could be negatively impacted and the value of your investment may be materially reduced. Further, if we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both China and such countries in which we have taxable income, and our PRC tax may not be creditable against such other taxes.

 

We must comply with the Foreign Corrupt Practices Act and Chinese anti-corruption laws.

 

We are required to comply with the United States Foreign Corrupt Practices Act, or FCPA, which prohibits US companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. The PRC also strictly prohibits bribery of government officials. Certain of our suppliers are owned by the PRC government and our dealings with them are likely to be considered to be with government officials for these purposes. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in China. It is our policy to prohibit our employees, and to discourage our agents, representatives and consultants, from engaging in such practices. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Our employees, agents, representatives and consultants may not always be subject to our control. If any of them violates FCPA or other anti-corruption law, we might be held responsible. We could suffer severe penalties in that event. In addition, the US government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or which we acquire.

 

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Uncertainties with respect to the PRC legal system, including those regarding the enforcement of laws, and sudden or unexpected changes, with little advance notice, in laws and regulations in China could adversely affect us and limit the legal protections available to you and us.

 

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement could be unpredictable, with little advance notice. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.

 

We conduct all of our business through our subsidiary and VIE in China. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiary and VIE are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited precedential value.

 

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

 

The PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations. Furthermore, the PRC government has recently indicated an intent to assert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

 

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

 

In utilizing the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC operating subsidiaries, we may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries.

 

Any loans to our PRC subsidiaries are subject to PRC regulations. For example, loans by us to Yi WFOE, which is a foreign invested entity (“FIE”), to finance its activities cannot exceed statutory limits and must be registered with SAFE. On March 30, 2015, SAFE promulgated Hui Fa [2015] No.19, a notice regulating the conversion by a foreign-invested company of foreign currency into RMB. The foreign exchange capital, for which the monetary contribution has been confirmed by the foreign exchange authorities (or for which the monetary contribution has been registered for account entry) in the capital account of a foreign-invested enterprise may be settled at a bank as required by the enterprise’s actual management needs. Foreign-invested enterprises with investment as their main business (including foreign-oriented companies, foreign-invested venture capital enterprises and foreign-invested equity investment enterprises) are allowed to, under the premise of authenticity and compliance of their domestic investment projects, carry out based on their actual investment scales direct settlement of foreign exchange capital or transfer the RMB funds in the foreign exchange settlement account for pending payment to the invested enterprises’ accounts.

 

On May 10, 2013, SAFE released Circular 21, which came into effect on May 13, 2013. According to Circular 21, SAFE has simplified the foreign exchange administration procedures with respect to the registration, account openings and conversions, settlements of FDI-related foreign exchange, as well as fund remittances.

 

Circular 21 may significantly limit our ability to convert, transfer and use the net proceeds from this offering and any offering of additional equity securities in China, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.

 

We may also decide to finance our subsidiaries by means of capital contributions. These capital contributions must be approved by MOFCOM or its local counterpart, which usually takes no more than 30 working days to complete. We may not be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries. If we fail to receive such approvals, we will not be able to capitalize our PRC operations, which could adversely affect our liquidity and our ability to fund and expand our business.

 

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Governmental control of currency conversion may affect the value of your investment.

 

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our income is primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders.

 

Our business may be materially and adversely affected if any of our PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.

 

The Enterprise Bankruptcy Law of the PRC, or the Bankruptcy Law, came into effect on June 1, 2007. The Bankruptcy Law provides that an enterprise will be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise’s assets are, or are demonstrably, insufficient to clear such debts.

 

Our VIE holds certain assets that are important to our business operations. If our PRC subsidiary undergoes a voluntary or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

 

According to SAFE’s Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on 17 December 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch. It is not clear whether “registration” is a mere formality or involves the kind of substantive review process undertaken by SAFE and its relevant branches in the past.

 

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

 

The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015, or the 2015 FIL Draft, which expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the 2015 FIL Draft, VIEs that are controlled via contractual arrangement would also be deemed as foreign invested enterprises, if they are ultimately “controlled” by foreign investors.

 

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the PRC, or the FIL, which will come into effect on January 1, 2020, repealing simultaneously the Law of the PRC on Sino-foreign Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned Enterprises and the Law of the PRC on Sino-foreign Cooperative Joint Ventures, together with their implementation rules and ancillary regulations. Pursuant to the FIL, foreign investment refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises, or other organizations, including investment in new construction project, establishment of foreign funded enterprise or increase of investment, merger and acquisition, and investment in any other way stipulated under laws, administrative regulations, or provisions of the State Council. Although the FIL has deleted the particular reference to the concept of “actual control” and contractual arrangements compared to the 2015 FIL Draft, there is still uncertainty regarding whether our VIE would be identified as a FIE in the future.

 

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Even if our VIE were to be identified as a FIE in the future, we believe that our current business would not be adversely affected. However, if we were to engage in any business conduct involving third parties identified as prohibited or restricted on the Negative List, our VIE as well as its subsidiary may be subject to laws and regulations on foreign investment. In addition, our shareholders would also be prohibited or restricted to invest in certain sectors on the Negative List. However, even if our VIE were to be identified as a FIE, the validity of our contractual arrangements with Jiangsu Easy Parking and its shareholders as well as our corporate structure would not be adversely affected. We would still be able to receive benefits from our VIE in accordance with the contractual agreements. In addition, as the Chinese government has been updating the Negative List in recent years and reducing the sectors prohibited or restricted for foreign investment, it is probable in the future that, even if our VIE is identified as a FIE, it is still allowed to acquire or hold equity of enterprises in sectors currently prohibited or restricted for foreign investment.

 

Furthermore, the PRC 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 PRC Foreign Investment Law.

 

In addition, the PRC Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.

 

Notwithstanding the above, the PRC Foreign Investment Law stipulates that foreign investment includes “foreign investors invest through any other methods under laws, administrative regulations or provisions prescribed by the State Council”. Therefore, there are possibilities that future laws, administrative regulations or provisions prescribed by the State Council may regard contractual arrangements as a form of foreign investment, and then whether our contractual arrangement will be recognized as foreign investment, whether our contractual arrangement will be deemed to be in violation of the foreign investment access requirements and how the above-mentioned contractual arrangement will be handled are uncertain.

 

The Chinese government asserts substantial influence over the manner in which we must conduct our business activitiesWe are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if our VIE or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our Ordinary Shares may significantly decline or become worthless, which would materially affect the interest of the investors.

 

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the United States, with significant policies changes being made from time to time without notice. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory liens, bankruptcy or criminal proceedings. Our ability to operate through our VIE in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

 

Given recent statements by the Chinese government indicating an intent to assert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

 

Recently, 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 was 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. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies. As of the date of this prospectus, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions.

 

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On June 10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

 

In early July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China-based companies that are listed in the United States. The Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the company’s app be removed from smartphone app stores. On July 5, 2021, the Chinese cybersecurity regulator launched the same investigation on two other Internet platforms, China’s Full Truck Alliance of Full Truck Alliance Co. Ltd. (NYSE: YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ). On July 24, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.

 

On August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification of certain critical information infrastructure.

 

On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which took effect on November 1, 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.

 

On December 24, 2021, the CSRC, together with other relevant government authorities in China issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (“Draft Overseas Listing Regulations”). The Draft Overseas Listing Regulations requires that a PRC domestic enterprise seeking to issue and list its shares overseas (“Overseas Issuance and Listing”) shall complete the filing procedures of and submit the relevant information to CSRC. The Overseas Issuance and Listing includes direct and indirect issuance and listing. Where an enterprise whose principal business activities are conducted in PRC seeks to issue and list its shares in the name of an overseas enterprise (“Overseas Issuer”)on the basis of the equity, assets, income or other similar rights and interests of the relevant PRC domestic enterprise, such activities shall be deemed an indirect overseas issuance and listing (” Indirect Overseas Issuance and Listing”) under the Draft Overseas Listing Regulations. Therefore, the proposed offering would be deemed an Indirect Overseas Issuance and Listing under the Draft Overseas Listing Regulations. As such, the Company would be required to complete the filing procedures of and submit the relevant information to CSRC after the Draft Overseas Listing Regulations become effective.

 

As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. The Chinese government may intervene or influence our operations at any time with little advance notice, which could result in a material change in our operations and in the value of our Ordinary Shares. 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 could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

 

Furthermore, 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. Although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry. As a result, our Ordinary Shares may decline in value dramatically or even become worthless should we become subject to new requirement to obtain permission from the PRC government to list on U.S. exchange in the future.

 

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Fluctuations in exchange rates could adversely affect our business and the value of our securities.

 

Changes in the value of the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. For example, to the extent that we need to convert U.S. dollars we receive from our public offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations of the RMB against other currencies may increase or decrease the cost of imports and exports, and thus affect the price-competitiveness of our products against products of foreign manufacturers or products relying on foreign inputs.

 

Since July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

 

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

 

The currently effective PRC Labor Contract Law, or the Labor Contract Law was first adopted on June 29, 2007 and later amended on December 28, 2012. The PRC Labor Contract Law has reinforced the protection of employees who, under the Labor Contract Law, have the right, among others, to have written employment contracts, to enter into employment contracts with no fixed term under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. Furthermore, the Labor Contract Law sets forth additional restrictions and increases the costs involved with dismissing employees. To the extent that we need to significantly reduce our workforce, the Labor Contract Law could adversely affect our ability to do so in a timely and cost-effective manner, and our results of operations could be adversely affected. In addition, for employees whose employment contracts include noncompetition terms, the Labor Contract Law requires us to pay monthly compensation after such employment is terminated, which will increase our operating expenses.

 

We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to our vehicle buyers by increasing the prices of our products and services, our financial condition and results of operations would be materially and adversely affected.

 

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

 

In July 2014, the State Administration of Foreign Exchange promulgated the Circular on Issues Concerning Foreign Exchange Administration over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents via Special Purpose Vehicles, or “Circular 37”. According to Circular 37, prior registration with the local SAFE branch is required for Chinese residents to contribute domestic assets or interests to offshore companies, known as Special Purpose Vehicles (“SPVs”). Circular 37 further requires amendment to a PRC resident’s registration in the event of any significant changes with respect to the SPV, such as an increase or decrease in the capital contributed by PRC individuals, share transfer or exchange, merger, division, or other material event. Further, foreign investment enterprises established by way of round-tripping shall complete the relevant foreign exchange registration formalities pursuant to the prevailing foreign exchange control provisions for direct investments by foreign investors, and disclose the relevant information such as actual controlling party of the shareholders truthfully.

 

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

 

We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers.

 

We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions.

 

We expect to obtain information about various aspects of our operations as well as regarding our employees and third parties. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

 

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The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cyber Security Law of the PRC, or Cyber Security Law, which became effective on June 1, 2017.

 

Pursuant to the Cyber Security Law, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.

 

The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection.

 

The PRC regulatory requirements regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration of China, the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.

 

In November 2016, the Standing Committee of China’s National People’s Congress passed China’s first Cybersecurity Law (“CSL”), which became effective in June 2017. The CSL is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. In April 2020, the Cyberspace Administration of China and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (“Draft Measures”), which required that, in addition to “operator of critical information infrastructure,” any “data processor” carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments,” The cybersecurity review will also investigate the potential national security risks from overseas IPOs. We do not know what regulations will be adopted or how such regulations will affect us and our listing on Nasdaq. In the event that the Cyberspace Administration of China determines that we are subject to these regulations, we may be required to delist from Nasdaq and we may be subject to fines and penalties. On June 10, 2021, the Standing Committee of the NPC promulgated the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits The costs of compliance with, and other burdens imposed by, CSL and any other cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business. Further, if the enacted version of the Measures for Cybersecurity Review mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

 

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On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (the “Review Measures”), and on December 28, 2021, the Cyberspace Administration of China jointly with the relevant authorities published Measures for Cybersecurity Review (2021) which will take effect on February 15, 2022 and replace the Review Measures, which required that, operators of critical information infrastructure purchasing network products and services, and data processors (together with the operators of critical information infrastructure, the “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, any operator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country.

 

Under the Data Security Law enacted on September 1, 2021 and the Measures for Cybersecurity Review (2021) to be implemented on February 15, 2022, since we are not an Operator, nor do we control more than one million users’ personal information, we would not be required to apply for a cybersecurity review by the CAC.  However, if the CSRC, CAC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering and any follow-on offering, we may be unable to obtain such approvals and we may face sanctions by the CSRC, CAC or other PRC regulatory agencies for failure to seek their approval which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors and the securities currently being offered may substantially decline in value and be worthless.

 

On August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification of certain critical information infrastructure.

 

On August 20, 2021, the Standing Committee of the NPC approved the Personal Information Protection Law (“PIPL”), which became effective on November 1, 2021. The PIPL regulates collection of personal identifiable information and seeks to address the issue of algorithmic discrimination. Companies in violation of the PIPL may be subject to warnings and admonishments, forced corrections, confiscation of corresponding income, suspension of related services, and fines. We had not collected identifiable or sensitive personal information of individual end-users, such as ID card numbers and real names, which means our potential access or exposure to customers’ personal information is limited. However, in the event we inadvertently access or become exposed to customers’ personal identifiable information, then we may face heightened exposure to the PIPL.

 

We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws. In the event that we are subject to any mandatory cybersecurity review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all. Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.

 

If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our Ordinary Shares, especially if such matter cannot be addressed and resolved favorably.

 

Recently, U.S. public companies that have substantially all of their operations in China, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company, our business and this offering. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend the Company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our Company and business operations will be severely hampered and your investment in our Ordinary Shares could be rendered worthless.

 

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You may face difficulties in protecting your interests and exercising your rights as a stockholder since we conduct substantially all of our operations in China, and almost all of our officers and directors reside outside the U.S.

 

Although we are incorporated in the Cayman Islands, we conduct substantially all of our operations in China. All of our current officers and almost all of our directors reside outside the U.S. and substantially all of the assets of those persons are located outside of the U.S. It may be difficult for you to conduct due diligence on the Company or such directors in your election of the directors and attend shareholders meeting if the meeting is held in China. We plan to have one shareholder meeting each year at a location to be determined, potentially in China. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders of a corporation doing business entirely or predominantly within the U.S.

  

The impact of COVID-19 on our business, financial condition, and results of operations includes, but are not limited to, the following:

 

According to the requirements of relevant Chinese regulatory authorities, from the end of January 2020 to March 2020, Company’s employees and dealers are temporarily prohibited from going out in accordance with local government policies. Our marketing business reopened in April 2020.

 

In the first half of 2020, we suspended all on-site marketing and advertising activities. We transferred these activities online during the pandemic. As of June 2020, we have resumed on-site marketing and advertising activities.

 

Our business performance was negatively affected in the first half of 2020, however, due to the effective control of the pandemic in China in the second half of 2020, business performance has rebounded. In addition, we have also received increasing interest from investors who are interested in the smart parking industry and want to join us as dealers. 

 

Because of the uncertainty surrounding the COVID-19 outbreak, the business disruption and the related financial impact related to the outbreak of and response to the coronavirus cannot be reasonably estimated at this time.

 

We believe that our current cash and cash equivalents, proceeds from additional equity and debt financing and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We may, however, need additional capital in the future to fund our continuing operations. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. In addition, the COVID-19 outbreak was declared to be a pandemic by the World Health Organization on March 10, 2020. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 and actions taken to mitigate it are expected to continue to have an adverse impact on our planned operations. Such events could result in the complete or partial closure of our offices or the operations of our franchisees which could impact our operations. In addition, it could impact economies and financial markets, resulting in an economic downturn that could impact our ability to raise capital or slow down potential business opportunities. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

 

The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.

 

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

 

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.

 

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national securities exchange or in the over the counter trading market in the U.S. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.

 

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On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

 

On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, 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.

 

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

 

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions (“Commission-Identified Issuer”). The final amendments are effective on January 10, 2022. The SEC will begin to identify and list Commission-Identified Issuers on its website shortly after registrants begin filing their annual reports for 2021.

 

On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.

 

The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

 

Our auditor, WWC, P.C., the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our auditor is headquartered in San Mateo, California and is subject to inspection by the PCAOB on a regular basis with the last inspection in 2020.  If it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, trading in our securities could be prohibited under the Holding Foreign Companies Accountable Act and as a result an exchange may determine to delist your securities.

 

These recent developments could add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.

 

Our shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021 because of a position taken by an authority in a foreign jurisdiction. The delisting of our shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.

 

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over the counter trading market in the U.S.

 

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

 

Despite that we have a U.S. based auditor that is registered with the PCAOB and subject to PCAOB inspection, there are still risks to the company and investors if it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction. Such risks include but not limited to that trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act and as a result an exchange may determine to delist our securities.

 

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

 

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the SCNPC effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB 2 billion, and at least two of these operators each had a turnover of more than RMB 400 million within China) must be cleared by MOFCOM before they can be completed.

 

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

 

The approval of the China Securities Regulatory Commission may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.

 

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

 

Our PRC counsel has advised us based on their understanding of the current PRC laws, rules and regulations that the CSRC’s approval is not required for the listing and trading of our Ordinary Shares on Nasdaq in the context of this offering, given that: (i)   Yi Po WFOE was incorporated as a wholly foreign-owned enterprise by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are our beneficial owners; (ii) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to the M&A Rules; and (iii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules.

 

However, our PRC counsel has further advised us that there remain some uncertainties as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. If it is determined that CSRC approval is required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval for this offering. These sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Ordinary Shares. Furthermore, the CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the Ordinary Shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the Ordinary Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

 

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Risks Relating to this Offering

 

There has been no public market for our Ordinary Shares prior to this offering, and you may not be able to resell our Ordinary Shares at or above the price you pay for them, or at all.

 

Prior to this offering, there has not been a public market for our Ordinary Shares. We have applied to list our Ordinary Shares on the Nasdaq Capital Market. However, an active public market for our Ordinary Shares may not develop or be sustained after the offering, in which case the market price and liquidity of our Ordinary Shares will be materially and adversely affected. Our Ordinary Shares will not be listed on any exchange or quoted for trading on any over-the-counter system.

 

The initial public offering price for our Ordinary Shares may not be indicative of prices that will prevail in the trading market and such market prices may be volatile.

 

The initial public offering price for our Ordinary Shares will be determined by negotiations between us and the underwriters, and does not bear any relationship to our earnings, book value or any other indicia of value. We cannot assure you that the market price of our Ordinary Shares will not decline significantly below the initial public offering price. The financial markets in the United States and other countries have experienced significant price and volume fluctuations in the last few years. Volatility in the price of our Ordinary Shares may be caused by factors outside of our control and may be unrelated or disproportionate to changes in our results of operations.

 

If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to file a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

 

The presence of material weaknesses in internal control over financial reporting could result in financial statement errors which, in turn, could lead to errors in our financial reports and/or delays in our financial reporting, which could require us to restate our operating results. We might not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.

 

If we are unable to conclude that we have effective internal controls over financial reporting, investors may lose confidence in our operating results, the price of the Ordinary Shares could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, the Ordinary Shares may not be able to remain listed on Nasdaq.

 

The requirements of being a public company may strain our resources and divert management’s attention.

 

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal, accounting, and financial compliance costs and investor relations and public relations costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual   and current reports with respect to our business and operating results as well as proxy statements.

 

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As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.

 

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

 

We have not paid dividends to our shareholders.

 

We have never declared or paid any cash dividends on our Ordinary Shares. We have been retaining funds for our business operation and expansion. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Our ability to pay dividends will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the   board may deem relevant. As a result, you may only receive a return on your investment in our Ordinary Shares if we are successfully listed and the market price of our Ordinary Shares increases.

 

The price of the Ordinary Shares and other terms of this offering have been determined by us along with our Underwriter.

 

If you purchase our Ordinary Shares in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay a price that was determined by us along with the Representative.   The offering price for our Ordinary Shares may bear no relationship to our assets, book value, historical results of operations or any other established criterion of value. The trading price, if any, of the Ordinary Shares that may prevail in any market that may develop in the future, for which there can be no assurance, may be higher or lower than the price you paid for our Ordinary Shares.

 

The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.

 

Upon completion of this offering, we will be a public company in the United States. As a public company, we will be required to file periodic reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our Company and shareholders. Although we may be able to attain confidential treatment of some of our developments, in some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our Company. Similarly, as a U.S. public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public company status could affect our results of operations.

 

Shares eligible for future sale may adversely affect the market price of our Ordinary Shares if the shares are successfully listed on NASDAQ or other stock markets, as the future sale of a substantial amount of outstanding Ordinary Shares in the public marketplace could reduce the price of our Ordinary Shares.

 

The market price of our Ordinary Shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our Ordinary Shares. All of the Ordinary Shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining Ordinary Shares will be “restricted securities” as defined in Rule 144. These Ordinary Shares may be sold without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. See “Shares Eligible for Future Sale.”

 

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If you purchase our Ordinary Shares in this offering, you will incur immediate and substantial dilution in the book value of your shares.

 

Investors purchasing our Ordinary Shares in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share. As a result, investors purchasing Ordinary Shares in this offering will incur immediate dilution of $      per share, representing the difference between our initial public offering price of $ per share and our pro forma as adjusted net tangible book value per share as of December 31, 2020. For more information on the dilution you may experience as a result of investing in this offering, see the section of this prospectus entitled “Dilution.”

 

A sale or perceived sale of a substantial number of shares of our Ordinary Shares may cause the price of our Ordinary Shares to decline.

 

All of our executive officers and directors and all of our shareholders have agreed not to sell shares of our Ordinary Shares for a period of six months following this offering, subject to extension under specified circumstances. See “Lock-Up Agreements.” Ordinary Shares subject to these lock-up agreements will become eligible for sale in the public market upon expiration of these lock-up agreements, subject to limitations imposed by Rule 144 under the Securities Act of 1933, as amended. If our shareholders sell substantial amounts of our Ordinary Shares in the public market, the market price of our Ordinary Shares could fall. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their Ordinary Shares and investors to short our Ordinary Shares. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for the Ordinary Shares and trading volume could decline.

 

The trading market for the Ordinary Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades the Ordinary Shares or publishes inaccurate or unfavorable research about our business, the market price for Ordinary Shares would likely decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the Ordinary Shares to decline.

 

Our management will have broad discretion over the use of any net proceeds from this offering and you may not agree with how we use the proceeds, and the proceeds may not be invested successfully.

 

Our management will have broad discretion as to the use of any net proceeds from this offering and could use them for purposes other than those contemplated at the time of this offering and in ways that do not necessarily improve our results of operations or enhance the value of our Ordinary Shares. Accordingly, you will be relying on the judgment of our management with regard to the use of any proceeds from the exercise of warrants on a cash basis in this offering and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The proceeds could be invested in a way that does not yield a favorable, or any, return for you.

 

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

 

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from 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 of 2002 for so long as we remain an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

 

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

 

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, 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 in respect of a security registered under the Exchange Act;

 

 

the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

 

  the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

 

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a half year basis   as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K.

 

However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

 

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

 

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination with respect to our status will be made on June 30, 2022. We would lose our foreign private issuer status if, for example, more than 50% of our Ordinary Shares are directly or indirectly held by residents of the U.S. and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on December 31, 2022, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act.

 

In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the NASDAQ listing rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.

 

There can be no assurance we will not be a passive foreign investment company (“PFIC”), for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our Ordinary Shares or Warrants.

 

In general, a non-U.S. corporation is a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally determined on a quarterly basis) consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% (by value) of the stock.

 

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Based upon the manner in which we currently operate our business through our VIE, the expected composition of our income and assets and the value of our assets, we do not expect to be a PFIC for the current taxable year or in the foreseeable future. However, this is a factual determination that must be made annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. The value of our assets for purposes of the PFIC determination will generally be determined by reference to the market price of our Ordinary Shares, which could fluctuate significantly. In addition, our PFIC status will depend on the manner we operate our workspace business (and the extent to which our income from workspace membership continues to qualify as active for PFIC purposes). Furthermore, it is not entirely clear how the contractual arrangements between us, our VIE and its nominal shareholders will be treated for purposes of the PFIC rules, and we may be or become a PFIC if our VIE is not treated as owned by us. Because of these uncertainties, there can be no assurance we will not be a PFIC for the current taxable year, or will not be a PFIC in the future.

 

If we were a PFIC for any taxable year during which a U.S. investor owns our Ordinary Shares or Warrants, certain adverse U.S. federal income tax consequences could apply to such U.S. investor. See “Taxation — Material U.S. Federal Income Tax Considerations — Passive Foreign Investment Company.”

 

We are a “controlled company” within the meaning of the Nasdaq listing requirements and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

 

We are a “controlled company” as defined under the rules of the Nasdaq since our directors and officers beneficially own, when combined, more than 50% of our total voting power. For so long as we remain a controlled company under this definition, we are permitted to elect to rely on certain exemptions from corporate governance rules, including:

 

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

 

 

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

 

 

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

 

Although we currently do not intend to rely on the “controlled company” exemptions under the Nasdaq listing rules, we could elect to rely on those exemptions in the future. As a result, you may not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

 

The Financial Action Task Force’s Increased Monitoring of the Cayman Islands.

 

In February 2021, the Cayman Islands was added to the Financial Action Task Force (“FATF”) list of jurisdictions whose anti-money laundering practices are under increased monitoring, commonly referred to as the “FATF grey list.” When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring during that timeframe. It is unclear how long this designation will remain in place and what ramifications, if any, the designation will have for the Company.

 

Compensation of Directors and Officers.

 

Under Cayman Islands law, the Company is not required to disclose compensation paid to our senior management on an individual basis and the Company has not otherwise publicly disclosed this information elsewhere. The executive officers, directors and management of the Company receive fixed and variable compensation. They also receive benefits in line with market practice. The fixed component of their compensation is set on market terms and adjusted annually. The variable component consists of cash bonuses and awards of shares (or the cash equivalent). Cash bonuses are paid to executive officers and members of management based on previously agreed targets for the business. Shares (or the cash equivalent) are awarded under share options.

 

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USE OF PROCEEDS

 

Based upon an assumed initial public offering price of US$ per Ordinary Shares, we estimate that we will receive net proceeds from this offering, after deducting the underwriting discounts and the estimated offering expenses payable by us, of approximately US$ assuming the underwriters do not exercise its over-allotment option.

 

We plan to use the net proceeds we receive from this offering for the following purposes:

 

Description of Use   Estimated
Amount of
Net Proceeds
(US $)
  % 
Development and upgrade of parking lot intelligent system  $   15%
Increase and acquire parking lots  $   45%
Place more parking lot gates with advertisements  $   20%
Working capital and general corporate matters  $   20%
Total $  100%

 

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have some flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that the net proceeds we receive from this offering are not imminently used for the above purposes, we intend to invest in short-term, interest-bearing bank deposits or debt instruments.

 

The net proceeds from this offering must be remitted to China before we will be able to use the funds to grow our business. The procedure to remit funds may take several months after completion of this offering, and we will be unable to use the offering proceeds in China until remittance is completed. See “Risk Factors” for further information. 

 

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DIVIDEND POLICY

  

We intend to keep any future earnings to finance the expansion of our business. We do not anticipate that any cash dividends will be paid in the foreseeable future.

 

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business.

 

If we determine to pay dividends on any of our ordinary shares in the future, as a holding company, we will depend on receipt of funds from our Hong Kong subsidiary, Yi Po HK.

 

Current PRC regulations permit Yi Po WFOE to pay dividends to Yi Po HK only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, Yi Po WFOE is   required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

 

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries and affiliates in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations through the current contractual arrangements, we may be unable to pay dividends on our ordinary shares.

 

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. Yi Po HK may be considered a non-resident enterprise for tax purposes, so that any dividends Yi Po WFOE pays to Yi Po HK may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%. See “Taxation—People’s Republic of China Enterprise Taxation.”

 

In order for us to pay dividends to our shareholders, we will rely on payments made from Jiangsu Easy Parking to Yi Po WFOE, pursuant to the VIE Agreements between them, and the distribution of such payments to Yi Po HK as dividends from WFOE. Certain payments from Jiangsu Easy Parking to Yi Po WFOE are subject to PRC taxes, including VAT, urban maintenance and construction tax, educational surcharges. In addition, if Jiangsu Easy Parking incurs debt on their own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

 

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends.

 

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CAPITALIZATION

 

The following table sets forth our capitalization as of December 31, 2020

 

  on an actual basis; and

 

 

on an as adjusted basis to reflect the issuance and sale of the Ordinary Shares by us in this offering at the initial public offering price of US$ per Ordinary Share, after deducting the estimated discounts and the estimated offering expenses payable by us.

 

You should read this capitalization table in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.

 

    As of
December 31,
2020
 
    Actual
(Audited)
    Pro forma(1)  
Short term bank loans   $                 
Shareholder’s Equity:                
Ordinary shares, US$0.000156 par value per share                
Additional paid-in capital(2)                  
Subscription receivable       )       )
Statutory reserve                
Retained earnings                
Accumulated other comprehensive loss       )       )
Total shareholders’ equity                
Total capitalization   $            

 

(1) Gives effect to the sale of            Ordinary Shares in this offering at an assumed initial public offering price of $       per share and reflects the application of the proceeds after deducting the underwriting discounts, non-accountable expense allowance and our estimated offering expenses.
   
(2) Pro forma adjusted additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting discounts and non-accountable expense allowance, and other expenses. We expect to receive net proceeds of approximately $           ($       offering, less underwriting discounts of $      , non-accountable expense allowance of $        , accountable expenses of $          and offering expenses of $       ).

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per Ordinary Share would increase (decrease) the pro forma as adjusted amount of total capitalization by $ million, assuming that the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of one million in the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of total capitalization by $ million, assuming no change in the assumed initial public offering price per Ordinary Share as set forth on the cover page of this prospectus.

 

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DILUTION

 

If you invest in our Ordinary Shares, your interest will be diluted to the extent of the difference between the initial public offering price per Ordinary Share and the pro forma net tangible book value per Ordinary Share after the offering. Dilution results from the fact that the offering price per Ordinary Share is substantially in excess of the book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares. Our net tangible book value attributable to shareholders on December 31, 2020 was $ or approximately $ per Ordinary Share. Net tangible book value per Ordinary Share as of December 31, 2020 represents the amount of total assets less intangible assets and total liabilities, divided by the number of Ordinary Shares outstanding.

 

We will have Ordinary Shares issued and outstanding upon completion of the offering or Ordinary Shares assuming the full exercise of over-allotment option. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after December 31, 2020, will be $ or approximately $ per Ordinary Share. This would result in dilution to investors in this offering of approximately $ per Ordinary Share or approximately % from the assumed offering price of $ per Ordinary Share. Net tangible book value per Ordinary Share would increase to the benefit of present shareholders by $ per share attributable to the purchase of the Ordinary Shares by investors in this offering.

 

The following table sets forth the estimated net tangible book value per Ordinary Share after the offering and the dilution to persons purchasing Ordinary Shares based on the foregoing firm commitment offering assumptions. The number of our Ordinary Shares had been adjusted retrospectively to reflect the increasing of share capital. See “Description of Share Capital” for more details.

   

    Offering
Without
Over-
Allotment
    Offering
With
Over-
Allotment
 
Assumed offering price per Ordinary Share  $   $             
Net tangible book value per Ordinary Share before the offering  $       $ 
Increase per Ordinary Share attributable to payments by new investors  $   $ 
Pro forma net tangible book value per Ordinary Share after the offering  $   $ 
Dilution per Ordinary Share to new investors  $   $ 

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per Ordinary Share would increase (decrease) our pro forma as adjusted net tangible book value as of December 31, 2020 after this offering by approximately $ per Ordinary Share, and would increase (decrease) dilution to new investors by $ per Ordinary Share, assuming that the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of 1 million in the number of Ordinary Shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value as of December 31, 2020 after this offering by approximately $ per Ordinary Share, and would decrease (increase) dilution to new investors by approximately $ per ordinary share, assuming the assumed initial public offering price per Ordinary Share, as set forth on the cover page of this prospectus remains the same, and after deducting the estimate underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

 

If the underwriter exercises its over-allotment option in full, the pro forma as adjusted net tangible book value per Ordinary Share after the offering would be $ , the increase in net tangible book value per Ordinary Share to existing shareholders would be $ , and the immediate dilution in net tangible book value per Ordinary Share to new investors in this offering would be $ .

 

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2020, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per Ordinary Share before deducting the estimated discounts to the underwriters, non-accountable expense allowance and the estimated offering expenses payable by us.

 

    Ordinary Shares
purchased
    Total consideration     Average
price per
Ordinary
 
    Number     Percent     Amount     Percent     Share  
Existing shareholders                       %   $           %   $    
New investors (1)               %   $           %   $    
Total             100 %   $         100.00 %   $    

 

  (1) Not including over-allotment shares.

 

The pro forma as adjusted information as discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our Ordinary Shares and other terms of this offering determined at the pricing.

 

48

 

 

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

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. 

 

Overview

 

Yi Po Holdings is a holding company that was incorporated under the laws of the Cayman Islands on March 19, 2020. As a holding company with no material operations of our own, we conduct our operations in China through our VIE. The Company, through its subsidiaries and VIE, specializes in intelligent parking industry, including providing intelligent parking management system and intelligent parking lot gate products in the PRC.

 

We, through our VIE in China, entered into the intelligent parking industry in 2018. At present, we have installed our intelligent parking management system in approximately 42 parking lots across 18 cities in China, including 6 parking lots self-operated by us.

 

Our revenues consist of: (i) dealer licensing fee; (ii) Parking management system fee; (iii) parking space rental fee; and (iv) advertising revenue.

 

Through our VIE in China, our intelligent parking management system is widely-used in the self-operated parking lots business and the cooperatively operated parking lots business, which is an electronic network system with automatic vehicle login, entrance and exit authentication, monitoring, and charging management functionalities. Through our VIE, we launched a national network parking platform that provides vehicle owners with diverse services such as parking space search, navigation guidance, touchless payment, membership discounts, and owner’s car search, to provide convenient parking experiences to vehicle owners. We also provide intelligent parking lot gate products, which combine our intelligent parking software system with electromechanical products (i.e. ordinary parking lot gate). Our vehicle access efficiency is manifested by the intelligent management system installed in the parking lot gate products, which save and store information such as records of vehicles’ entrance and exit, time of entrance and exit.

 

We have a broad marketing network in China, and have established cooperative relationships with 33 regional dealers who provide marketing and promotion services nationwide. The extensive dealer licensing channels reduce our overall operating costs. The dealers facilitate the cooperation between us and our partners to in the operation and management of parking lots and parking spaces. The dealers also promote and publicize our intelligent parking management system and our national network parking platform.

 

With the rapid development of urbanization in China and the improvement of resident awareness of safety precautions, the demand for intelligent parking management system products in commercial and residential buildings has increased. This translates into a huge market for the intelligent parking lots. Based on our grasp of the market and investment in the intelligent parking industry, through our VIE in China, we won the honors of “China’s most influential brand in the intelligent parking industry in 2020” and “China’s most valuable intelligent parking platform for investment and cooperation in 2020.”

 

As we gradually deepen our understanding of different vertical industries such as the transportation industry, property management industry, and urban planning industry, our goal is to combine the digital and intelligent development needs of each vertical industry to develop and provide more comprehensive intelligent parking solutions. We believe that our intelligent parking management system will enhance the sustainability of our business. Through our VIE, we also plan to collaborate with the merchants on our national network parking platform, which may lead to more business cooperation opportunities.

 

Impact of COVID-19

 

The ongoing outbreak of a novel strain of coronavirus (“COVID-19”) has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities globally for the past year. In March 2020, the World Health Organization declared COVID-19 as a pandemic. Given the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of our business operations and our workforce are concentrated in China, we believe there is a risk that our business, results of operations, and financial condition will be adversely affected. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding the duration and severity of COVID-19 and the actions taken by government authorities and other entities to contain COVID-19 or mitigate its impact, almost all of which are beyond our control.

 

The impact of COVID-19 on our business, financial conditions and operating results includes, but is not limited to the following:

 

  According to the requirements of relevant Chinese regulatory authorities, from the end of January 2020 to March 2020, our employees and dealers were temporarily prohibited from going out in accordance with Nanjing local government policies. Our business reopened in April 2020.

 

  In the first half of 2020, we suspended all on-site marketing and advertising activities. We transferred these activities online during the pandemic. As of June 2020, we have resumed on-site marketing and advertising activities.

 

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  Our business performance was negatively affected in the first half of 2020. However, due to the effective control of the pandemic in China in the second half of 2020, business performance has rebounded. In addition, we have also received interest from investors who are interested in the smart parking industry and want to join us as dealers.

 

Because of the uncertainty surrounding the COVID-19 outbreak, business disruption and its related financial impact related to the outbreak of and response to COVID-19 cannot be reasonably estimated at this time. We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We may, however, need additional capital in the future to fund our continuing operations. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. In addition, the COVID-19 outbreak was declared to be a pandemic by the World Health Organization on March 10, 2020. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate it are expected to continue to have an adverse impact on our planned operations. Such events could result in the complete or partial closure of our offices which could impact our operations. In addition, it could impact economies and financial markets, resulting in an economic downturn that could impact our ability to raise capital or slow down potential business opportunities. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

 

Results of Operations

 

For the six months ended June 30, 2021 and 2020

 

The following table sets forth a summary of the Company’s consolidated results of operations For the six months ended June 30, 2021 and 2020. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

 

   For the six months ended         
   June 30,   Changes 
   2021   2020   Amount   % 
Net revenue  $2,795,500   $1,619,245   $1,176,255    72.64%
Cost of revenue   723,056    578,216    144,840    25.05%
Gross profit   2,072,444    1,041,029    1,031,415    99.08%
Selling, general and administrative expenses   920,635    338,861    581,774    171.69%
Income from operations   1,151,809    702,168    449,641    64.04%
Interest income (expense), net   22,110    164    21,946    13,381.71%
Total other income (loss) and expenses   22,110    375    21,735    5,796.00%
Income before income tax provision   1,173,919    702,543    471,376    67.10%
Provision for income taxes   293,480    175,636    117,844    67.10%
Net income   880,438    526,907    353,532    67.10%

 

50

 

 

Net Revenue 

 

The following table lists the calculation methods of gross profit and gross profit margin of each type of revenue: 

 

  

For the six months ended

June 30,

   Changes 
   2021   2020   Amount   % 
Dealer licensing fee                
Net revenue  $1,568,255    1,618,997    (50,742)   (3.13)%
Cost of revenue   308,356    573,291    (264,935)   (46.21)%
Gross profit  $1,259,899    1,045,706    214,193    20.48%
Gross profit margin   80.34%   64.59%   15.75%   24.38%
                     
Parking management system                    
Net revenue  $1,051,716    0    1,051,716    - 
Cost of revenue   211,429    0    211,429    - 
Gross profit  $840,287    0    840,287    - 
Gross profit margin   79.90%   -%   -%   - 
                     
Parking space rental fee                    
Net revenue  $175,268    248    175,020    70572.58%
Cost of revenue   203,271    4,925    198,346    4027.33%
Gross profit  $(28,003)   (4,677)   (23,326)   498.74%
Gross profit margin   (15.98)%   (1885.89)%   1869.91%   (99.15)%
                     
Advertising revenue                    
Net revenue  $261    0    261    - 
Cost of revenue   0    0    0    - 
Gross profit  $261    0    261    - 
Gross profit margin   100.00%   0%   100.00%   - 
                     
Total                    
Net revenue  $2,795,500    1,619,245    1,176,255    72.64%
Cost of revenue   723,056    578,216    144,840    25.05%
Gross profit  $2,072,444    1,041,029    1,031,415    99.08%
Gross profit margin   74.14%   64.29%   9.84%   15.31%

 

Our net revenues were $2,795,500 For the six months ended June 30, 2021 as compared to $1,619,245 for the same period in 2020, an increase of $1,176,255, or 72.64%. The increase was mostly due to the increase in dealer licensing fees and the parking management system fees.

 

Dealer licensing fees

 

Dealer licensing fee revenue slightly decreased by $50,742 or 3.13%, from $1,618,997 for the six months ended June 30, 2020 to $1,568,255 for the six months ended June 30, 2021. This decrease was primarily attributable to our VIE, Jiangsu Easy Parking, focusing more on developing its parking management business and reducing its investment in dealer licensing business, which resulted in a decrease in dealer licensing fees .

 

Cost of revenue was $308,356 for the six months ended June 30, 2021, a decrease of $264,935 or 46.21%, from $573,291 for the six months ended June 30, 2020. The decrease of revenue cost was due to our VIE focusing more on developing its parking management business and reducing its investment in dealer licensing business.

 

Gross profit and gross profit margin were $1,259,899 and 80.34%, respectively, for the six months ended June 30, 2021 as compared to $1,045,706 and 64.59%, for the same period in 2020. Gross margins for license fees are increased because of a corresponding decrease in its costs.

 

51

 

 

Parking management system

 

Parking management system was the new business in 2021.. For the six months ended June 30, 2021, our parking management system’s gross profit was $840,287.

 

Parking space rental fees

 

For the six months ended June 30, 2021, net revenue from parking space rental fees was $175,268 and the cost of revenue was $203,271, compared to $248 and $4,925 for the same period in 2020. Our parking space fee gross loss was $28,003 for the six months ended June 30, 2021. This was because we, through our VIE in China, incurred costs in expanding this segment of our business and our expenses exceeded revenue in 2020. Currently the market has gradually improved, and we expect that most of our parking spaces will achieve profitability by the end of 2021.  

 

Advertising revenue

 

Through our VIE in China, we   lease advertising space on our parking lot gates. For the six months ended June 30, 2021, our advertising gross profit was only $261. There was no advertising revenue in 2020 because we did not lease advertising space in 2020.

 

Selling, General and Administrative Expenses

 

We, through our VIE in China, incurred selling, general and administrative expenses of $920,635 for the six months ended June 30, 2021, as compared to $338,861 for the six months ended June 30, 2020, an increase of $581,774 or 171.69%. The increase was mainly due to the expansion of parking space rental business. The salary of professionals and related office costs have increased correspondingly. In addition, service costs of counsels and agents for preparation of initial public offering in the US have increased.  

 

Interest Expenses

 

Interest charges and bank charges are mainly from bank transfer charges offset by deposit interest. Interest income as for the six months ended June 30, 2021 and 2020 was approximately $22,110 and $164, respectively. 

 

Provision for Income Taxes

 

Provision for income tax was $293,480 for the six months ended June 30, 2021,as compared to $175,636 for the six months ended June 30, 2020.Under the Income Tax Laws of the PRC, companies are generally subject to income tax at a rate of 25%. The increase in provision for income taxes was mainly due to the increase in the income before income tax provision as of June 30, 2021 and 2020 was approximately $1,173,919 and $702,543, respectively.

 

Net Income

 

Our net income increased by $353,532 or 67.10%, to $526,907 for the six months ended June 30, 2021, from $880,438 for the six months ended June 30, 2020.

 

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For the years ended December 31, 2020 and 2019

 

The following table sets forth a summary of the Company’s consolidated results of operations for the years ended December 31, 2020 and 2019. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

 

   For the years ended         
   December 31,   Changes 
   2020   2019   Amount   % 
Net revenue  $2,786,853   $92,428   $2,694,425    2915.16%
Cost of revenue   689,501    18,307    671,194    3666.32%
Gross profit   2,097,352    74,121    2,023,231    2729.63%
Selling, general and administrative expenses   1,444,469    11,309    1,433,160    12672.74%
Income from operations   652,883    62,812    590,071    939.42%
Interest income (expense), net   6,299    2    6,297    314850%
Total other income (loss) and expenses   (11,207)   290    (11,497)   (3964.48)%
Income before income tax provision   641,676    63,102    578,574    916.89%
Provision for income taxes   161,446    15,776    145,670    923.36%
Net income   480,230    47,326    432,904    914.73%

 

Net Revenue 

 

The following table lists the calculation methods of gross profit and gross profit margin of each type of revenue: 

 

  

For the years ended

December 31,

   Changes 
   2020   2019   Amount   % 
Dealer licensing fee                
Net revenue  $2,700,101    92,428    2,607,673    2821.30%
Cost of revenue   466,145    18,307    447,838    2446.27%
Gross profit  $2,233,956    74,121    2,159,835    2913.93%
Gross profit margin   82.74%   80.19%   2.54%   3.17%
                     
Parking space rental fee                    
Net revenue  $86,697    -    -    -%
Cost of revenue   223,356    -    -    -%
Gross profit  $(136,659)   -    -    -%
Gross profit margin   (157.63%)   -    -    -%
                     
Advertising revenue                    
Net revenue  $55    -    -    - 
Cost of revenue   -    -    -    - 
Gross profit  $55    -    -    - 
Gross profit margin   100.00%   -    -    - 
                     
Total                    
Net revenue  $2,786,853    92,428    2,694,425    2915.16%
Cost of revenue   689,501    18,307    671,194    3666.32%
Gross profit  $2,097,352    74,121    2,023,231    2729.63%
Gross profit margin   75.26%   80.19%   (4.93%)   (6.15%)

 

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Our net revenues were $2,786,853 for the years ended December 31, 2020 as compared to $92,428 for the same period in 2019, an increase of $2,694,425, or 2915.16%. The increase was mostly due to the increase of dealer licensing fees.

 

Dealer licensing fees

 

Dealer licensing fee revenue increased by $2,607,673 or 2821.30%, from $92,428 for the year ended December 31, 2019 to $2,700,101 for the year ended December 31, 2020. This increase was primarily attributable to an increase in the number of dealers that began to adopt our products, and the opportunities afforded to them as our authorized dealers; accordingly, we, through our VIE in China, experienced an increase in dealers entered into licensing agreements and the related recognition of revenue for those license agreements from 2019 to 2020.

 

Cost of revenue was $466,145 for the year ended December 31, 2020, an increase of $447,838 or 2,446.27%, from $18,307 for the year ended December 31, 2019. The increase of revenue cost was a result of the increase in marketing and training expenses from recruiting more dealers during the year. Increases in costs are correlated with the increase in dealer licensing fees.

 

Gross profit and gross profit margin were $2,233,956 and 82.74%, respectively for the year ended December 31, 2020 as compared to $74,121 and 80.19%, respectively for the same period in 2019. Gross margins for license fees are consistent because we make our best efforts to control our costs in accordance to revenues.

 

Parking space rental fees

 

For the year ended December 31, 2020, net revenue from parking space rental fees was $86,697 and the cost of revenue was $223,356, compared to $nil and $nil for the same period in 2019. Our parking space fee gross loss was $136,659. This was because we, through our VIE in China, incurred costs in expanding this segment of our business and our expenses were exceeded revenue in 2020. Currently the market has gradually improved, and we expect that most of our parking spaces will achieve profitability by the end of 2021. As of December 31, 2019, we did not generate any revenue in this segment. 

 

Advertising revenue

 

We, through our VIE in China, lease advertising space on our parking lot gates. For the year ended December 31, 2020, our advertising gross profit was only $55. There was no advertising revenue in 2019 because we did not lease advertising space in 2019.

 

Selling, General and Administrative Expenses

 

We, through our VIE in China, incurred selling, general and administrative expenses of $1,444,469 for the year ended December 31, 2020, as compared to $11,309 for the year ended December 31, 2019, an increase of $1,433,160, or 12,672.74%. The increase was mainly due to increased promoting and advertising expenses. In addition, we recruited more employees. Our selling, general and administrative expenses include advertising expenses, delivery expenses for parking lot gates delivery, employees’ salaries, office expenses, and amortization of long term deferred expenses.

 

Interest Expenses

 

Interest charges and bank charges are mainly from bank transfer charges and deposit interest offset. Interest expense as of December 31, 2020 and 2019 was approximately$3,382 and -$96, respectively. 

 

Provision for Income Taxes

 

Provision for income tax was $161,446 during the year ended December 31, 2020, an increase of $145,670 or 923.36%, as compared to $15,776 for the year ended December 31, 2019. Under the Income Tax Laws of the PRC, companies are generally subject to income tax at a rate of 25%. The increase in provision for income taxes was mainly due to the increase in income before income tax provision, which was $641,676 for the year ended December 31, 2020, as compared to $ 63,102 for the year ended December 31, 2019.

 

Net Income

 

Our net income increased by $432,904 or 914.73%, to $480,230 for the year ended December 31, 2020, from $47,326 for the year ended December 31, 2019.

 

Liquidity and Capital Resources 

 

For the six months ended June 30, 2021 and 2020

 

As of June 30, 2021, we had $3,211,672  in cash. The Company’s working capital and other capital needs mainly come from shareholders’ equity contribution and operating cash flow. Cash is needed to pay for inventory, wages, sales expenses, rent, income taxes, other operating expenses, and purchases to service debts.

 

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Although the Company’s management believes that cash generated from operations will be sufficient to meet the Company’s normal working capital requirements, its ability to service its current debt will depend on its future realization of its current assets for at least the next 12 months. Management took into account historical experience, the economy, trends in the automotive industry, the collectability of accounts receivable as of June 30, 2021, and the realization of inventory. Based on these considerations, the management believes that the Company has sufficient funds to meet its working capital requirements and debt obligations, as they will be due at least 12 months from the date of financial reporting. However, there is no guarantee that management’s plan will succeed. There are a number of factors that can arise and cause the Company’s plans to fall short, such as the overall number of vehicles in China, economic conditions, competitive pricing in the industry, and the continued support of our dealers and suppliers. If future cash flow from operations and other capital resources are insufficient to meet its liquidity needs, the Company may be forced to reduce or delay its anticipated expanding plans, sell assets, acquire additional debt or equity capital, or refinance all or part of its debt.

 

The following table summarizes the company’s cash flow data as of June 30, 2021 and June 30, 2020:

 

  

For the six months ended

June 30,

 
   2021   2020 
Net cash provided by (used in) operating activities  $2,876,951   $764,060 
Net cash used in investing activities   (10,537)   (124,924)
Net cash provided by financing activities   69,612    (25,330)
Effect of exchange rate on cash   9,048    (2,801)
Net decrease in cash and cash equivalents  $2,945,074   $611,005 

 

Operating Activities 

 

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, accounts receivable and contractual liabilities, and is adjusted for the impact of changes in working capital. Net cash generated in operating activities for the year June 30, 2021 was $2,876,950, representing an increase of $2,112,890 or 276.53% compared to net cash used in operating activities of $764,060 For the six months ended June 30, 2020. The increase in net cash provided by operating activities was due to growth in our business.

 

Investing Activities 

 

Net cash used in investing activities was $(10,537) For the six months ended June 30, 2021, an increase of $114,387, or (91.57)%, as compared to net cash provided by $(124,924) For the six months ended June 30, 2020. The increase in cash used was because the Company has purchased more fixed and other long-term assets.

 

Financing Activities

 

Net cash provided by financing activities was $69,612 For the six months ended June 30, 2021, an increase of $94,942 , or (374.82)%, as compared to net cash provided by $(25,330) For the six months ended June 30, 2020. The increase in cash used was due to contributions of capital by shareholders.

 

For the years ended December 31, 2020 and 2019

 

As of December 31, 2020, we had $266,598 in cash. The Company’s working capital and other capital needs mainly come from shareholders’ equity contribution and operating cash flow. Cash is needed to pay for inventory, wages, sales expenses, rent, income taxes, other operating expenses, and purchases to service debts.

 

Although the Company’s management believes that cash generated from operations will be sufficient to meet the Company’s normal working capital requirements, its ability to service its current debt will depend on its future realization of its current assets for at least the next 12 months. Management took into account historical experience, the economy, trends in the automotive industry, the collectability of accounts receivable as of December 31, 2020, and the realization of inventory. Based on these considerations, the management believes that the Company has sufficient funds to meet its working capital requirements and debt obligations, as they will be due at least 12 months from the date of financial reporting. However, there is no guarantee that management’s plan will succeed. There are a number of factors that can arise and cause the Company’s plans to fall short, such as the overall number of vehicles in China, economic conditions, competitive pricing in the industry, and the continued support of our dealers and suppliers. If future cash flow from operations and other capital resources are insufficient to meet its liquidity needs, the Company may be forced to reduce or delay its anticipated expanding plans, sell assets, acquire additional debt or equity capital, or refinance all or part of its debt.

 

The following table summarizes the company’s cash flow data as of December 31, 2020 and December 31, 2019:

 

  

For the years ended

December 31,

 
   2020   2019 

Net cash provided by (used in) operating activities

  $52,592   $(25,724)
Net cash used in investing activities   (252,953)   - 
Net cash provided by financing activities   452,426    25,790 
Effect of exchange rate on cash   14,467    - 
Net decrease in cash and cash equivalents  $252,065   $66 

 

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Operating Activities 

 

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, accounts receivable and contractual liabilities, and is adjusted for the impact of changes in working capital. Net cash generated in operating activities for the year December 31, 2020 was $52,592, representing an increase of $78,316, compared to net cash used in operating activities of $25,724 for the year ended December 31, 2019. The increase in net cash provided by operating activities was due to growth in our business.

 

Investing Activities 

 

Net cash used in investing activities was $252,953 for the year ended December 31, 2020. This was mainly due to the Company purchasing fixed and other long-term assets. We did not have any investments in fixed assets in 2019.

 

Financing Activities

 

Net cash provided by financing activities was approximately $452,426 for the year ended December 31, 2020, an increase of $426,636, or 1654.27%, as compared to net cash provided by $25,790 for the year ended December 31, 2019. The increase in cash used was due to contributions of capital by shareholders.

 

Contractual Obligations

 

For the six months ended June 30, 2021 and 2020

 

The Company has one operating lease for its office space and six operating leases for its parking lots.

 

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term in PRC which is approximately 4.75%.

 

Operating lease expenses were $42,497 and $212,617 for the years ended June 30, 2021 and December 31, 2020, respectively.

 

The undiscounted future minimum lease payment schedule as follows:

 

For the years ending June 30,    
2022   419,839 
2023   357,522 
2024   372,709 
2025   176,704 
2026   56,251 
Total   1,383,025 

 

For the years ended December 31, 2020 and 2019

 

The Company has various operating leases for its office space and parking lots.

 

Operating lease expenses were $212,617 and $15,221 for the years ended December 31, 2020 and 2019, respectively.

 

The undiscounted future minimum lease payment schedule as follows:

 

For the years ending December 31,    
2021   342,742 
2022   366,294 
2023   364,453 
2024   276,389 
2025   55,656 
Total   1,405,533 

  

Off-Balance Sheet Arrangements

 

Other than as disclosed elsewhere in this prospectus, we, through our VIE in China, have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

 

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Critical Accounting Policies

 

The discussion and analysis of the Company’s financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with GAAP. These principles require the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, cash flow and related disclosure of contingent assets and liabilities. The estimates include, but are not limited to, accounts receivable, revenue recognition, inventory realization, impairment of long-lived assets and income taxes. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and the actual results, future financial statements will be affected.

 

The Company’s management believes that among their significant accounting policies, which are described in Note 2 to the audited consolidated financial statements of the Company included in this Registration Statement, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, the Company’s management believes these are the most critical to fully understand and evaluate its financial condition and results of operations.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. In particular, the novel coronavirus (“COVID-19”) pandemic and the resulting adverse impacts to global economic conditions, as well as our operations, may impact future estimates including, but not limited to, our allowance for loan losses, inventory valuations, fair value measurements, asset impairment charges and discount rate assumptions. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Amounts and percentages may not total due to rounding.

 

Accounts Receivable

 

Accounts receivable are recorded at the net value less estimates for expected credit losses. Management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. When collection of the original invoice amounts is no longer probable, the Company will either partially or fully write-off the balance against the allowance for doubtful accounts.

 

Revenue Recognition

 

In 2014, the FASB issued guidance on revenue recognition (“ASC 606”), with final amendments issued in 2016. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes.

 

The Company generate revenues from dealer licensing fee, parking space rental fee, vehicle owners’ membership fees.

 

Dealer licensing fee is recognized as performance obligations are satisfied over time, usually, recognized on an average over the life of dealer licensing as indicated in agreement. Payments received in advance from agents are recorded as “contract liabilities”. Contract liabilities are recognized as revenue over the passage of time. Such advance payment received are non-refundable.

 

Parking space rental fee is recognized as performance obligations are satisfied at a point in time when the Company provides parking space to customers where fees are calculated by the parking management system, or over time on an average over the duration of rental period as indicated in agreement.

 

Vehicle owners’ membership fees is recognized as performance obligations are satisfied over time on an average over the life of membership. Payments received in advance from members are recorded as “accruals and other payables”. Accruals and other payables are recognized as revenue over the passage of time. Such advance payment received are non-refundable.

 

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes.  A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the years of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

A tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that the relevant taxing authority that has full knowledge of all relevant information will examine each uncertain tax position. Although the Company believes the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.

 

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Property and Equipment & Depreciation

 

Property and equipment are stated at historical cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Property and equipment are depreciated on a straight-line basis over the following periods:

 

Building 20 years
Office equipment 5  years

 

Impairment of Long-lived assets

 

The Company accounts for impairment of property and equipment and amortizable intangible assets in accordance with ASC 360, “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

 

New Accounting Pronouncements

 

In July 2021, the FASB issued ASU 2021-5, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The amendments in this Update amend Topic 842, which has different effective dates for public business entities and most entities other than public business entities. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities. The amendments in this Update address stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3; 2) The lessor would have otherwise recognized a day-one loss.

 

In May 2021, the FASB issued ASU 2021-4, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The FASB is issuing this Update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

 

In February of 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.

 

For finance leases, a lessee is required to do the following:

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position

 

  Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income

 

  Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows.

 

For operating leases, a lessee is required to do the following:

 

  Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position

 

  Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis

 

  Classify all cash payments within operating activities in the statement of cash flows.

 

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In July 2018, the FASB issued Accounting Standards Update No. 2018-11 (ASU 2018-11), which amends ASC 842 so that entities may elect not to recast their comparative periods in transition (the “Comparatives Under 840 Option”). ASU 2018-11 allows entities to change their date of initial application to the beginning of the period of adoption. In doing so, entities would:

 

  Apply ASC 840 in the comparative periods.

 

  Provide the disclosures required by ASC 840 for all periods that continue to be presented in accordance with ASC 840.

 

  Recognize the effects of applying ASC 842 as a cumulative-effect adjustment to retained earnings for the period of adoption.

 

In addition, the FASB also issued a series of amendments to ASU 2016-02 that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new lease standard.

 

The management will review the accounting pronouncements and plan to adopt the new standard on November 1, 2019 using the modified retrospective method of adoption. The transition method expedient which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, prior periods will not be restated. The adoption of this ASU will result in the recording of additional lease assets and liabilities each with no effect to opening balance of retained earnings as the Company.

  

The management is currently evaluating the impact of this update to the consolidated financial statements. Management will evaluate if the current design for the allowance for loan loss methodology would comply with these new requirements.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Credit risk 

 

Cash deposits with banks are held in financial institutions in China, which deposits are not federally insured. Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.

 

Risks Related to Doing Business in China

 

The recent state government interference into business activities on U.S. listed Chinese companies may negatively impact our operations.

 

Recently, the Chinese government announced that it would step up supervision of Chinese firms listed offshore. Under the new measures, China will improve regulation of cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation and insider trading, China will also check sources of funding for securities investment and control leverage ratios. The Cyberspace Administration of China (“CAC”) has also opened a cybersecurity probe into several U.S.-listed tech giants focusing on anti-monopoly, financial technology regulation and more recently, with the passage of the Data Security Law, how companies collect, store, process and transfer data. Our operations and business interests are in Taiwan and mainland China. If the Chinese government’s interference expands and by proxy, our business interests are affected, our operations may be negatively impacted although presently, there is no discernible immediate impact.

 

If our public accounting firm does not permit the Public Company Accounting Oversight Board (“PCAOB”) to inspect it within three years pursuant to the Holding Foreign Companies Accountable Act, we may be delisted.

 

The Holding Foreign Companies Accountable Act requires that the Public Company Accounting Oversight Board (“PCAOB”) be permitted to inspect our public accounting firm within three years. If our public accounting firm does not permit or the PCAOB is unable to conduct such an inspection, it may result in our delisting. Our current auditor and previous auditor are both PCAOB-registered. We are not aware of any reasons to believe or conclude that either one would not permit an inspection by PCAOB or that either one may not be subject to such inspection.

 

Risks of variable interest entity structure

 

In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the VIE Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of WFOE and the VIE are in compliance with existing PRC laws and regulations in all material respects.

 

However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the VIE Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the VIE Arrangements is remote based on current facts and circumstances.

 

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Concentration

 

For the six months ended June 30, 2021 and 2020

 

The Company has a concentration risk related to suppliers and customers. Failure to maintain existing relationships with the suppliers or customers to establish new relationships in the future could negatively affect the Company’s ability to obtain goods sold to customers in a price advantage and timely manner. If the Company is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect revenues.

 

The concentration on sales revenues generated by customer type comprised the following:

 

   As of 
   June 30, 2021   June 30, 2020 
Percentage of the Company’s sales        
Customer A   60%   0%
Customer B   15%   0%

 

The table sets above information as to the revenue derived from those customers that accounted for more than 10% of our revenue for the six months ended June 30, 2021. The sales accounted from Customer A and B for the six months ended June 30, 2020 has no more than 10%.

 

   As of 
   June 30, 2021   June 30, 2020 
Percentage of the Company’s accounts receivable        
Customer A   0%   0%

 

The table above shows the account receivable accounted from Customer A for the six months ended June 30, 2021 and 2020 has no more than 10%.

 

   As of 
   June 30, 2021   June 30, 2020 
Percentage of the Company’s Prepayment        
Customer A   46%   50%

 

The following table sets forth a summary of single suppliers who represent 10% or more of the Company’s total Account payables:

 

   As of 
   June 30, 2021   June 30, 2020 
Percentage of the Company’s Account payable        
Supplier A   8%   0%
Supplier B   10%   0%

 

The table above shows the account payable accounted from Supplier A and B for the six months ended June 30, 202 2020 has no more than 10%.

 

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For the years ended December 31, 2020 and 2019

 

The Company has a concentration risk related to suppliers and customers. Failure to maintain existing relationships with the suppliers or customers to establish new relationships in the future could negatively affect the Company’s ability to obtain goods sold to customers in a price advantage and timely manner. If the Company is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect revenues.

 

The concentration on sales revenues generated by customers type comprised of the following:

 

   As of 
   December 31, 
   2020   2019 
Percentage of the Company’s sales        
Customer A   46%   97%

 

   As of 
   December 31, 
   2020   2019 
Percentage of the Company’s accounts receivables        
Customer A   0%   100%

 

   As of 
   December 31, 
   2020   2019 
Percentage of the Company’s prepayments        
Customer A   45%   100%

 

The following table sets forth a summary of single suppliers who represent 10% or more of the Company’s total Account payables:

 

   As of 
   December 31, 
   2020   2019 
Percentage of the Company’s accounts payables        
Supplier A   20%   100%

 

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BUSINESS

 

Overview

 

Yi Po Holdings is a holding company that was incorporated under the laws of the Cayman Islands on March 19, 2020. As a holding company with no material operations of our own, we conduct our operations in China through our VIE. The Company, through its subsidiaries and VIE, specializes in intelligent parking industry, including providing intelligent parking management system and intelligent parking lot gate products in the PRC.

 

We, through our VIE in China, entered into the intelligent parking industry in 2018 and combine our products with technologies. At present, we have installed our intelligent parking management system in approximately 42 parking lots across 18 cities in China, including 6 parking lots self-operated by us.

 

Through our VIE in China, our intelligent parking management system is widely-used in the self-operated parking lots business and the cooperatively operated parking lots business, which is an electronic network system with automatic vehicle login, entrance and exit authentication, monitoring, and charging management functionalities. Through our VIE, we launched a national network parking platform that provides vehicle owners with diverse services such as parking space search, navigation guidance, touchless payment, membership discounts, and owner’s car search, to provide convenient parking experiences to vehicle owners. We also provide intelligent parking lot gate products, which combine our intelligent parking software system with electromechanical products (i.e. ordinary parking lot gate). Our vehicle access efficiency is manifested by the intelligent management system installed in the parking lot gate products, which save and store information such as records of vehicles’ entrance and exit, time of entrance and exit.

 

We have a broad marketing network in China, and have established cooperative relationships with 28 regional dealers who provide marketing and promotion services nationwide. The extensive dealer licensing channels reduce our overall operating costs. The dealers facilitate the cooperation between us and our partners to in the operation and management of parking lots and parking spaces. The dealers also promote and publicize our intelligent parking management system and our national network parking platform.

 

With the rapid development of urbanization in China and the improvement of resident awareness of safety precautions, the demand for intelligent parking management system products in commercial and residential buildings has increased. This translates into a huge market for the intelligent parking lots. Based on our grasp of the market and investment in the intelligent parking industry, we, through our VIE in China, won the honors of “China’s most influential brand in the intelligent parking industry in 2020” and “China’s most valuable intelligent parking platform for investment and cooperation in 2020.”

 

As we gradually deepen our understanding of different vertical industries such as the transportation industry, property management industry, and urban planning industry, our goal is to combine the digital and intelligent development needs of each vertical industry to develop and provide more comprehensive intelligent parking solutions. We believe that our intelligent parking management system will enhance the sustainability of our business. Through our VIE, we also plan to collaborate with the merchants on our national network parking platform, which may lead to more business cooperation opportunities.

 

Corporate Structure

 

The following diagram illustrates the corporate structure of Yi Po International Holdings Limited its subsidiaries, and VIE as of the date of this prospectus:

 

 

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Our Subsidiaries and Business Functions

 

Yi Po Holdings is a Cayman Islands exempted company incorporated on March 19, 2020. We conduct our business in China through our Affiliated Entities. The consolidation of our Company and our Affiliated Entities has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.

 

Yi Po HK was incorporated on April 28, 2020 under the law of Hong Kong SAR. Yi Po HK is our wholly-owned subsidiary and is currently not engaging in any active business and merely acting as a holding company.

 

Yi Po WFOE was incorporated on March 16, 2021 under the laws of the People’s Republic of China. It is a wholly-owned subsidiary of Yi Po HK and a wholly foreign-owned entity under the PRC laws. Yi Po WFOE had entered into VIE Agreements with Jiangsu Easy Parking and Jiangsu Easy Parking Shareholders.

 

Jiangsu Easy Parking was incorporated on August 22, 2018 under the laws of the People’s Republic of China. Its registered business scope includes intelligent technology, smart parking technology research and development, computer software development, technical services and consulting, parking lot management service, etc. Jiangsu Easy Parking is our operating company.

 

VIE Agreements between Yi Po WFOE and Jiangsu Easy Parking

 

Due to PRC legal restrictions on foreign ownership, neither we nor our subsidiaries own any direct equity interest in Jiangsu Easy Parking. Instead, we control and receive the economic benefits of Jiangsu Easy Parking’s business operation through a series of contractual arrangements. Yi Po WFOE, Jiangsu Easy Parking and Jiangsu Easy Parking Shareholders entered into a series of contractual arrangements, also known as VIE Agreements, on August 24, 2021. Weiming Jin and Xin Jin are the shareholders of Jiangsu Easy Parking, our VIE. Weiming Jin owns 51% of the shares and Xin Jin owns 49% of the shares.

 

The VIE agreements are designed to provide Yi Po WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Jiangsu Easy Parking, including absolute control rights and the rights to the assets, property and revenue of Jiangsu Easy Parking. If Jiangsu Easy Parking or the Jiangsu Easy Parking Shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over Jiangsu Easy Parking. Furthermore, if we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of our variable interest entity in our financial statements. 

 

Each of the VIE Agreements is described in detail below:

 

Exclusive Option Agreement

 

Under the Exclusive Option Agreement, the Jiangsu Easy Parking Shareholders irrevocably granted Yi Po WFOE (or its designee) an exclusive right to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, a portion or whole of the equity interests or assets in Jiangsu Easy Parking held by the Jiangsu Easy Parking Shareholders. The purchase price is RMB 10 and subject to any appraisal or restrictions required by applicable PRC laws and regulations.

 

The agreement takes effect upon parties signing the agreement, and remains effective for 10 years, extendable upon Yi Po WFOE or its designee’s discretion.

 

Exclusive Business Cooperation Agreement

 

Pursuant to the Exclusive Business Cooperation Agreement between Jiangsu Easy Parking and Yi Po WFOE, Yi Po WFOE provides Jiangsu Easy Parking with technical support, consulting services and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, business management and information. For services rendered to Jiangsu Easy Parking by Yi Po WFOE under this agreement, Yi Po WFOE is entitled to collect a service fee that shall be calculated based upon service hours and multiple hourly rates provided by Yi Po WFOE. The service fee should approximately equal to Jiangsu Easy Parking’s net profit.

 

The Exclusive Business Cooperation Agreement shall remain in effect for ten years unless earlier terminated upon written confirmation from both Yi Po WFOE and Jiangsu Easy Parking before expiration. Otherwise, this agreement can only be extended by Yi Po WFOE and Jiangsu Easy Parking does not have the right to terminate the agreement unilaterally.

 

Share Pledge Agreement

 

Under the Share Pledge Agreement between Yi Po WFOE and certain shareholders of Jiangsu Easy Parking together holding 100% of the equity interests, of Jiangsu Easy Parking (“Jiangsu Easy Parking Shareholders”), the Jiangsu Easy Parking Shareholders pledged all of their equity interests in Jiangsu Easy Parking to Yi Po WFOE to guarantee the performance of Jiangsu Easy Parking’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the Share Pledge Agreement, in the event that Jiangsu Easy Parking breaches its contractual obligations under the Exclusive Business Cooperation Agreement, Yi Po WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to dispose of dividends generated by the pledged equity interests. The Jiangsu Easy Parking Shareholders also agreed that upon occurrence of any event of default, as set forth in the Share Pledge Agreement, Yi Po WFOE is entitled to dispose of the pledged equity interest in accordance with applicable PRC laws. The Jiangsu Easy Parking Shareholders further agree not to dispose of the pledged equity interests or take any actions that would prejudice Yi Po WFOE’s interest.

 

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The Share Pledge Agreement shall be effective until the full payment of the service fees under the Business Cooperation Agreement has been made and upon termination of Jiangsu Easy Parking’s obligations under the Business Cooperation Agreement.

 

The purposes of the Share Pledge Agreement are to (1) guarantee the performance of Jiangsu Easy Parking’s obligations under the Exclusive Business Cooperation Agreement, (2) ensure the shareholders of Jiangsu Easy Parking do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice Yi Po WFOE’s interests without Yi Po WFOE’s prior written consent and (3) provide Yi Po WFOE control over Jiangsu Easy Parking.

 

Although we took every precaution available to effectively enforce the contractual and corporate relationship above, these contractual arrangements may still be less effective than direct ownership and that the Company may incur substantial costs to enforce the terms of the arrangements. For example, our VIE and Jiangsu Easy Parking Shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our VIE and Jiangsu Easy Parking Shareholders of their obligations under the contracts to exercise control over our VIE. Jiangsu Easy Parking Shareholders may not act in the best interests of our company or may not perform their obligations under these contracts. In addition, failure of our VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.

 

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our operating entities and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. For a detailed description of the certainties of the VIE arrangements, see “Risk Factors – Risks Relating to Our Corporate Structure.”

 

Our Products and Services

 

Through our VIE in China, we mainly provide the following four types of products and services: (1) the parking lots service, (2) the intelligent parking management system, (3) parking lot gates, and (4) national network parking platform. A vehicle’s entering and exiting the parking lot will be identified in high-definition quality and monitored by the intelligent parking management system. The information of parking management, operation, maintenance, and charging will be digitally and electronically recorded within the national network parking platform.

 

1.Parking lots service

 

We, through our VIE, provide parking lots for vehicle owners through our six (6) self-operated parking lots. Through our VIE, we lease the parking lots, independently operate the parking lots, and provide the public with short-term and long-term parking services. The size of the parking lots ranges from 20,000 sq ft to 160,000 sq ft. We operate the parking lots through our intelligent parking management system (as described below), which is installed and maintained by us. Our revenue from self-operated parking lots is derived mainly from parking space rental fees from short-term parking vehicles and long-term parking vehicles.

 

Through our VIE in China, we also work with third-party operated parking lots, where we install our intelligent parking management system and parking lot gates (as described below). We refer to these parking lots as cooperatively operated parking lots. We look for suitable partners who provide us with the right to install intelligent parking management system, parking lot gates, and other parking equipment in their parking lots. We can solicit advertisers to publish their commercial advertisements on the parking lot gates. Our revenue from cooperatively operated parking lots is derived mainly from the advertisement fees on parking lot gates and intelligent parking management system maintenance fees. All parking space rental fees from vehicle owners are allocated to the cooperative partners.

 

  2. Intelligent parking management system  

 

The intelligent parking management system is an automated electronic network system with automatic vehicle login, entrance and exit authentication, monitoring, and billing functionalities, which entail scanning, information transmission, monitoring, central management unit, data management unit, and command execution. Such system adopts the technologies of computer control, information identification, data storage and processing, and communication transmission, to realize automatic control to entrance and exit management, site safety management, and implements automatic charging based on the pre-set charging standards.

 

The intelligent parking management system is used for both our self-operated parking lots and cooperatively operated parking lots. For self-operated parking lots, our revenue is derived mainly from parking space rental fees while for cooperatively operated parking lots, our revenue is derived from intelligent parking management system maintenance fees. The system maintenance fee is usually charged from 1% to 25% of the total parking space rental fees depending on the parking lot vehicle flow.