Form F-1/A Sancai Holding Group


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As filed with the Securities and Exchange
Commission on May 3, 2022

Registration
No. 333-248636

 

UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549

 

AMENDMENT
NO. 6 TO

FORM
F-1

REGISTRATION
STATEMENT UNDER

THE
SECURITIES ACT OF 1933

 

SANCAI
HOLDING GROUP LTD

(Exact
name of registrant as specified in its charter)

 

Cayman
Islands
  7372   Not
Applicable

(State
or other jurisdiction of

incorporation
or organization)

 

(Primary
Standard Industrial

Classification
Code Number)

 

(I.R.S.
Employer

Identification
Number)

 

No.
6 Fengcheng Second Road, Room 401

Xi’an
Economic and Technological Development Zone

Xi’an,
Shaanxi Province, People’s Republic of China 710000

+86-029-62331099

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

 

Cogency
Global Inc.

122
E 42nd St., 18th Floor

New
York, NY 10168
(212) 947-7200
(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.

Yarona
L. Yieh, Esq.

Ortoli
Rosenstadt LLP

366
Madison Avenue, 3rd Floor

New
York, NY 10017

T:
212-588-0022

F:
212-826-9307

Ross
Carmel, Esq.

Philip
Magri, Esq.

Carmel,
Milazzo & Feil LLP

55
W 38th Street, 18th Floor

New
York, NY 10018

T:
212-658-0458

F:
646-838-1314

 

Approximate
date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement.

 

If
any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, 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 462(c) 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
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 the 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.

 

SUBJECT
TO COMPLETION

 

PRELIMINARY PROSPECTUS DATED                                 ,
2022

 

 

SANCAI
HOLDING GROUP LTD.

 

[●] Class
A Ordinary Shares

 

This is an initial public offering of the
Class A ordinary shares, par value $0.0001 (the “Class A Ordinary Shares”) of Sancai Holding Group Ltd., or Sancai Holding.
Prior to this offering, there has been no public market for the Class A Ordinary Shares. We expect the offering price to be $ [●]
per Class A Ordinary Share (the “Offering Price”). We have applied to list the Class A Ordinary Shares on the Nasdaq
Capital Market under the symbol “SCIT.” This offering is contingent upon us listing the Class A Ordinary Shares on
Nasdaq or another national exchange. There is no guarantee or assurance that the Class A Ordinary Shares will be approved for
listing on the Nasdaq Capital Market or another national exchange.

 

This offering is being made on a firm commitment
underwritten basis. We have agreed to grant the Underwriter an option exercisable for a period of 45 days after the closing of this offering
to purchase up to 15% of the total number of the shares offered in this offering for the purpose of covering over-allotments, if any,
at the Offering Price less the underwriting discounts (the “Over-Allotment Option”). The Underwriter expects to deliver the
Class A Ordinary Shares against payment as set forth under “Underwriting” on page 144.

 

The issued and outstanding share capital of
Sancai Holding is a dual class structure consisting of Class A Ordinary Shares and Class B ordinary shares, par value $0.0001
(the “Class B Ordinary Shares”). Holders of Class A Ordinary Shares and Class B Ordinary Shares vote together as one class
on all matters submitted to a vote by the shareholders at any general meeting of Sancai Holding and have the same rights except each
Class A Ordinary Share is entitled to one (1) vote and each Class B Ordinary Share is entitled to ten (10) votes. Also, each
Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time at the option of the holder thereof but Class A
Ordinary Shares are not convertible into Class B Ordinary Shares.

 

Sancai Holding is and will continue to be
a “controlled company” within the meaning of the Nasdaq Stock Market Rules due to the fact Mr. Ning Wen, the Chairman
of the Board of Directors and the Chief Executive Officer of Sancai Holding, will beneficially own shares representing approximately
[●]% of the total voting power of the outstanding Class A Ordinary Shares and Class B Ordinary Shares, or [●]% of the
total voting power of the outstanding Class A Ordinary Shares and Class B Ordinary Shares if the Underwriter exercises the Over-Allotment
Option in full. In addition, as a “controlled company” as defined under the Nasdaq Stock Market Rules, Sancai Holding is
permitted to elect to rely on certain exemptions from corporate governance rules. We do not plan to rely on these exemptions, but we
may elect to do so after we complete this offering.

 

 

Investing
in our Class A Ordinary Shares involves a high degree of risk. See “Risk Factors” beginning on page 25.

 

Sancai Holding is an “emerging growth
company” and a “smaller reporting company” as defined under the applicable Securities and Exchange Commission (the
“Commission” or the “SEC”) rules and, as such, have elected to comply with certain reduced public company disclosure
requirements in this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth
Company.”

 

Sancai Holding is a Cayman Islands Holding
Company with no material operations. Investors are cautioned that you are not buying shares of a China-based operating company but instead
are buying shares of a holding company issuer that maintains contractual arrangements with the associated operating company. The associated
operating company is a variable interest entity (VIE) in China that conducts the operations in China. Neither the holding company nor
its PRC subsidiary own any equity interests in the VIE operating company and its subsidiaries under the VIE arrangements and, as such,
the contractual arrangements involve unique risks to investors. The VIE agreements have not been tested in a court of law.

 

In February 2020, Sancai WFOE, which is our
PRC subsidiary, Sancaijia and shareholders of Sancaijia entered into a series of contractual agreements (the “VIE Agreements”)
that established the VIE structure. Sancaijia is referred to as the “VIE”. We have evaluated the guidance in FASB ASC 810
and determined that Sancai WFOE is the primary beneficiary of Sancaijia and its subsidiaries, for accounting purposes, because, pursuant
to the VIE Agreements, the VIE shall pay service fees equal to all of its net income to Sancai WFOE, while Sancai WFOE has the power
to direct the activities of the VIE that can significantly impact the VIE’s economic performance and is obligated to absorb all
of losses of the VIE. Such contractual arrangements are designed so that the operations of the VIE are solely for the benefit of Sancai
WFOE and, ultimately, Sancai Holding. Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. Accordingly, under
U.S. GAAP, we treat the VIE and its subsidiaries as consolidated affiliated entities and have consolidated their financial results in
our financial statements. Sancaijia and its subsidiaries are based in China and are engaged in value-added telecommunication services.
Due to PRC legal restrictions on foreign ownership in the value-added telecommunication services, we do not own any equity interest in
the VIE. The Class A Ordinary Shares offered in this prospectus are shares of Sancai Holding Group Ltd, the Cayman Islands holding company.
As a result, you are not directly investing in and may never hold equity interests in the VIE in China. The VIE structure involves unique
risks to investors. The VIE Agreements have not been tested in a court of law and may not be effective in providing control over the
VIE, and we are subject to risks due to the uncertainty of the interpretation and application of the laws and regulations of the PRC,
regarding the VIE and the VIE structure, including, but not limited to, regulatory review of overseas listing of PRC companies through
a special purpose vehicle, and the validity and enforcement of the contractual arrangements with the VIE. We are also subject to the
risk that the Chinese regulatory authorities could disallow the VIE structure, which could result in a material change in our operations
and the value of our securities could decline or become worthless. For a description of our corporate structure and VIE Agreements, see
“Corporate History and Structure” starting on page 67. See “Risk Factors—Risks Related to Our Corporate
Structure” starting on page 25 for certain risks related to the contractual arrangements.

 

Additionally, as the VIE and the VIE’s
subsidiaries conduct substantially all of the operations in China, the VIE and the VIE’s subsidiaries are subject to certain legal
and operational risks associated with the operations in China. PRC laws and regulations governing the current business operations are
sometimes vague and uncertain, and therefore, these risks may result in a material change in our PRC subsidiary’s, the VIE’s
and the VIE’s subsidiaries’ operations, significant depreciation of the value of our Class A ordinary shares, or a complete
hinderance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly
decline or be worthless. 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. For a description of recent statements and regulatory actions by China’s
government, see “Prospectus Summary— Recent Regulatory Developments in China” on page 6. As of the date of this prospectus,
no relevant laws or regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory Commission (the
“CSRC”) or any other PRC governmental authorities for this offering, nor has Sancai Holding, any of our subsidiaries or the
VIE or the VIE’s subsidiaries received any inquiry, notice, warning or sanctions regarding our planned offering from the CSRC or
any other PRC governmental authorities. However, since these statements and regulatory actions are new, it is highly uncertain how soon
legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations
and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will
have on the daily business operation, the ability to accept foreign investments and list on an U.S. or other foreign exchange. The Standing
Committee of the National People’s Congress (the “SCNPC”) or other PRC regulatory authorities may in the future promulgate
laws, regulations or implementing rules that requires Sancai Holding, any of our subsidiaries or the VIE or the VIE’s subsidiaries
to obtain regulatory approval from Chinese authorities before listing in the U.S. See “Risk Factors” beginning on page 25
for a discussion of these legal and operational risks and other information that should be considered before making a decision to purchase
our Class A Ordinary Shares.

 

Cash is transferred through our organization
in the manner as follows: (i) Sancai Holding may transfer funds to Xi’an Minglan Management Co., Ltd. (“Sancai WFOE”),
through our Seychelles subsidiary and Hong Kong subsidiary, by additional capital contributions or loans, as the case may be; (ii) Sancai
WFOE may provide loans to the VIE and the VIE’s subsidiaries, subject to statutory limits and restrictions; (iii) in addition,
the VIE and the VIE’s subsidiaries may sell products to third party customers and receive funds generated from these sales; and
(iv) funds from Sancaijia to Sancai Holding can be made as service fees to Sancai WFOE pursuant to the Exclusive Technical Consultation
and Service Agreement, and Sancai WFOE may make distributions pay dividends or repay the shareholder loans to Sancai HK, which in turn
distributes or otherwise transfers such funds to Sancai Seychelles and finally to Sancai Holding. See “Prospectus Summary—Transfer
of Cash Through our Organization” beginning on page 11.

 

 

As a holding company, we may rely on dividends
and other distributions on equity paid by Sancai WFOE for our cash and financing requirements. Sancai WFOE’s ability to distribute
dividends is based upon its distributable earnings. Current applicable PRC law permits Sancai WFOE to pay dividends to its shareholder
only out of its net income, if any, determined in accordance with PRC accounting standards and regulations. In addition, under PRC law,
Sancai WFOE is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds
until such reserve funds reach 50% of its registered capital. These reserves are not distributable as cash dividends. In addition, registered
share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each
PRC company. If Sancai WFOE incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability
to pay dividends to us, and any limitation on the ability of our subsidiaries to pay dividends to us, or any tax implications of making
dividend payments to us, could have a material adverse effect on our ability to pay dividends to holders of our Class A Ordinary Shares.
As of the date of this prospectus, there have not been any such dividends or other distributions from Sancai WFOE to our Hong Kong subsidiary.
In addition, as of the date of this prospectus, none of our subsidiaries have ever issued any dividends or distributions to Sancai Holding.
Furthermore, as of the date of this prospectus, neither Sancai Holding nor any of its subsidiaries have paid dividends or made distributions
to their shareholders. Sancai Holding is permitted under PRC laws and regulations as an offshore holding company to provide funding to
its PRC subsidiary in China through shareholder loans or capital contributions, subject to satisfaction of applicable government registration,
approval and filing requirements. As of the date of this prospectus, Sancai Holding has not transferred funds to any of its subsidiaries.
In the future, however, cash proceeds raised from overseas financing activities, including this offering, may be transferred by Sancai
Holding to Sancai WFOE via capital contribution or loans, as the case may be. As of the date of this prospectus, Sancaijia has not remitted
any services fees to Sancai WFOE. We rely on the VIE Agreements with Sancaijia and its shareholders for a large portion of our business
operations, which may not be as effective as direct ownership in providing operational control. Any failure by Sancaijia or its shareholders
to perform their obligations under the VIE Agreements with them would have a material adverse effect on our business. We intend to distribute
earnings or settle amounts owed under the VIE Agreements. We anticipate that, to the extent that the VIE and the VIE’s subsidiaries
require funds from us for its operations, Sancai Holding will provide funds in the manner described above, and to the extent that Sancaijia
generates positive cash flow from its operations in excess of its requirements for its operations, it will transfer such excess funds
to Sancai Holding, through payments to Sancai WFOE.

 

For more details of how cash and other assets
are transferred among Sancai Holding, our subsidiaries, the VIE, and the VIE’s subsidiaries, see “Prospectus Summary—Transfer
of Cash Through our Organization” beginning on page 11 “Prospectus Summary—Selected Financial information,” beginning
on page 19 and the audited consolidated financial statements for the fiscal years ended September 30, 2021 and 2020. See also “Risk
Factors” beginning on page 25 of this prospectus for a discussion of information that should be considered before making a decision
to purchase our ordinary shares.

 

As used in this prospectus, “Sancai
Holding” refers to Sancai Holding Group Ltd., the ultimate holding company, “we,” “us,” “our Company,”
or “our,” refers to Sancai Holding and its subsidiaries, and “Sancaijia” or “VIE” refers to Sancaijia
Co., Ltd

 

  Per Share     Total
Without
Over-Allotment
Option
    Total
With Full
Over-Allotment
Option
 
Public
Offering Price
$    [●]     $            [●]     $                 [●]  
Underwriting
Discounts and Commissions(1)
$ [●]     $ [●]     $ [●]  
Proceeds
to Us, Before Expenses(2)
$ [●]     $ [●]     $ [●]  

 

(1) We
have agreed to give our underwriter, Univest Securities, LLC (the “Underwriter”),
a discount equal to eight percent (8%) of the first $10 million in gross proceeds, four
percent (4%) of the second $10 million in gross proceeds and three and one-half percent (3.5%)
of the remaining gross proceeds from the sales of securities in this Offering as well as
warrants equal to six percent (6%) of the Class A Ordinary Shares issued in the Offering
(the “Underwriter Warrants”). The Underwriter Warrants will be exercisable at
any time, and from time to time, in whole or in part, during the period commencing 180
days from commencement of sales of the shares pursuant to an effective Registration
Statement on Form F-1 of which this prospectus is a part, until the fifth anniversary of
such date in compliance with FINRA Rule 5110(g)(6)(A). The Underwriter Warrants are exercisable
at a per share price of $[●], which is equal to 110% of the Offering Price. The Underwriter
Warrants are also exercisable on a cashless basis. We also have agreed to reimburse the Underwriter
for certain of their out-of-pocket expenses subject to FINRA Rule 5110(g)(5)(A). See “Underwriting”
for a description of these arrangements.

 

(2) The
total estimated expenses related to this offering are set forth in the section entitled “Expenses
Related to This Offering.”

 

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

 

 

Univest
Securities, LLC

 

The
date of this prospectus is                  ,
2022.

 

 

TABLE
OF CONTENTS

 

 

 

About
this Prospectus

 

This
prospectus is part of a registration statement we filed with the U.S. Securities and Exchange Commission (the “Commission”
or the “SEC”). We and the Underwriter have not authorized anyone to provide any information or to make any representations
other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf or to which we have
referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others
may give you. This prospectus is an offer to sell only the Class A Ordinary Shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. We are not making an offer to sell these securities in any jurisdiction where the offer or
sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted
to make such offer or sale. The information contained in this prospectus is current only as of the date on the front cover of the prospectus.
Our business, financial condition, results of operations and prospects may have changed since that date.

 

All
dealers that buy, sell or trade our Class A Ordinary Shares, whether or not participating in this offering, may be required to deliver
a prospectus 25 days after this registration agreement is declared effective by the Commission. This delivery requirement is in addition
to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

For
investors outside of the United States: We have not done anything that would permit this Offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United
States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the Offering
and the distribution of this prospectus outside of the United States.

 

This
prospectus contains translations of certain RMB (renminbi which is the official currency in China) 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. All reference to “HKD” is to Hong Kong dollars. The relevant exchange rates
are listed below: 

 

 

    As of and for
the years ended

September 30,
 
    2021     2020  
Period-end RMB: US$ exchange rate     6.4567       6.8013  
Period- average RMB: US$ exchange rate     6.4989       6.9941  

 

All
references to the “PRC” or “China” in this prospectus refer to the People’s Republic of China. All references
to “Hong Kong” or “H.K.” in this prospectus refer to Hong Kong Special Administrative Region of the People’s
Republic of China. All references to the “United States,” “U.S.” or “US” refer to the United States
of America.

 

 

Other
Pertinent Information

 

Except where the context otherwise requires
and for purposes of this prospectus only, references in this prospectus to: 

 

  “Sancai Holding” are to Sancai Holding
Group Ltd, a Cayman Islands exempted company;

 

  “Sancai Seychelles” are to Sancai Limited,
a Seychelles company and a wholly-owned subsidiary of Sancai Holding;

 

“Sancai
HK” are to Sancai International Holding Limited, a Hong Kong company and a wholly-owned
subsidiary of Sancai Seychelles;

 

“Sancai
WFOE” are to Xi’an Minglan Management Co., Ltd., a PRC company and a wholly-owned
subsidiary of Sancai HK;

 

“Sancaijia”
or “VIE” are to Sancaijia Co., Ltd., a PRC company and a variable interest entity
that has entered into a series of VIE agreements with Sancai WFOE;

 

“Sancaijia
Technology” are to Sancaijia Technology Co., Ltd., a PRC company and a wholly-owned
subsidiary of Sancaijia;

 

“Xi’an
Dacai” are to Xi’an Dacai Management Consulting Co., Ltd., a PRC company and
a wholly-owned subsidiary of Sancaijia;

 

“Shanghai
Wenxu” are to Shanghai Wenxu Information Technology Co., Ltd., a PRC company and a
wholly-owned subsidiary of Sancaijia;

 

“Caibaoyun”
are to Caibaoyun Settlement Technology (Xi’an) Co., Ltd., a PRC company and a wholly-owned
subsidiary of Sancaijia;

 

“Xi’an
Miaobijia” are to Xi’an Miaobijia Internet Co., Ltd.formerly known as Sancaijia
Property Industry Service Co., Ltd., a PRC company and a wholly-owned subsidiary of Sancaijia
Technology; and

 

  “we,” “us,” “our
Company,” or “our” are to Sancai Holding and its subsidiaries.

 

 

“VATS License” refers to two
types of telecom operating licenses for operators in China, namely, licenses for basic telecommunications services and licenses for
value-added telecommunications services.

 

  “ICP License” refers to a VATS License
with the business scope of internet information service that commercial Internet information services operators are required to obtain.;
and

 

  “EDI License” refers to a VATS License
with the business scope of online data processing and transaction processing services that commercial Internet information services
operators are required to obtain.

 

Sancai Holding is a holding company incorporated
under the laws of the Cayman Islands as an exempted company with limited liability and a majority of our outstanding securities
are owned by non-U.S. residents. Under the rules of the SEC, Sancai Holding currently qualifies for treatment as a “foreign private
issuer.” As a foreign private issuer, Sancai Holding will not be required to file periodic reports and financial statements with
the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”).

 

Sancai Holding does not have any material
operation. Sancaijia and its subsidiaries and branch offices conduct business in China using RMB, the currency of China. Our consolidated
financial statements are presented in United States dollars. In this prospectus, we refer to assets, obligations, commitments and liabilities
in our consolidated financial statements in United States dollars. These dollar references are based on the exchange rate of RMB to United
States dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our
obligations and the value of our assets in terms of United States dollars which may result in an increase or decrease in the amount of
our obligations and the value of our assets, including accounts receivable.

 

Industry and Market Data

 

This prospectus includes information with
respect to market and industry conditions and market share from third-party sources or based upon estimates using such sources when
available. We have not, directly or indirectly, sponsored or participated in the publication of any of such materials. We believe
that such information and estimates are reasonable and reliable. We also assume the information extracted from publications of
third-party sources has been accurately reproduced.  We understand that we would be liable for the information included in this
prospectus if any part of the information was incorrect, misleading or imprecise to a material extent. 

 

PROSPECTUS
SUMMARY

 

This
summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider
in making your investment decision. Before investing in our securities, you should carefully read the entire prospectus, including our
financial statements and the related notes and management’s discussion and analysis incorporated herein by reference. You should
also consider, among other things, the matters described under “Risk Factors” in each case appearing elsewhere in this prospectus.

 

Overview

 

Sancai Holding is an exempted company with
limited liabilities incorporated on July 9, 2019 in the Cayman Islands. Sancai Holding is a holding company and does not have any significant
assets or operation.

 

Sancai WFOE was incorporated on December 18,
2019 under the laws of PRC and is an indirect subsidiary of Sancai Holding.

 

Sancaijia was incorporated on November 6, 2018
under the laws of PRC. Sancaijia provides digitalization solutions through standard software-as-a-service (“SaaS”) platform
for small businesses. Mr. Ning Wen, the Chairman of the Board of Directors and Chief Executive Officer of Sancai Holding, owns 63.0%
equity of Sancaijia. The remaining equity of Sancaijia is beneficially owned by Lizhi He (20.0%), Lizhen Tang (13.0%) and Zhijie Zhang
(4.0%).

 

Due to PRC legal restrictions on foreign ownership
in the value-added telecommunication services, which is included in the registered business scopes of Sancaijia and it’s subsidiary
Xi’an Miaobijia, Sancai Holding is not eligibility to hold direct or indirect equity interest in Sancaijia. Sancaijia and Xi’an
Miaobijia have obtained specific governmental licenses for operation in the value-added telecommunication business, which is subject
to the restriction that foreign ownership shall not exceed 50% of the equity of the PRC company engaging in such business according to
the latest version of the Negative List (Edition 2021) that took effect on January 1, 2022. Xi’an Dacai, Shanghai Wenxu, Sansaijia
Technology and Caibaoyun currently operate in businesses that are not within the categories in which foreign investment is currently
restricted or prohibited. Xi’an Dacai, Shanghai Wenxu, Sansaijia Technology and Caibaoyun collectively account for about 36.9%
and 0.14% of our total revenue for the fiscal years ended September 2021 and 2020, respectively. However, it is uncertain whether, in
the future, Sancaijia and its subsidiaries’ current operations or any future business will be deemed to be restricted or prohibited
in the “negative list”, which may be amended from time to time by MOFCOM, NDRC or other PRC governmental agencies. To illustrate,
Sancaijia currently operates the value-added telecommunications services in China, which provides standard SaaS platform application
services. Xi’an Miaobijia is registered to operate the value-added telecommunications services. However, Xi’an Miaobijia
does not have any assets and has not begun operating as of the date of this prospectus. We plan to promote the SaaS platform through
Xi’an Miaobijia in the agriculture industry and consumer services in the future. Xi’an Dacai, Shanghai Wenxu, Sancaijia Techonolgy
or Caibaoyun currently do not operate in any businesses that are deem as value-added telecommunications services, either by themselves
or through Sancaijia or Xi’an Miaobijia, but may decide to engage in value-added telecommunication services, which are subject
to strict business licensing requirements and certain restrictions or prohibitions on foreign ownership. The VIE structure would afford
Sancai Holding greater flexibility in expanding its business scope and implementing its business strategies in compliance with PRC laws
and regulations in the future as its business continues to expand.

 

Therefore, in February 2020, Sancai WFOE entered
into a series of contractual arrangements with Sancaijia and its shareholders. The contractual arrangements consist of the business operation
agreement, shareholder voting proxy agreement, equity pledge agreement, exclusive technical consultation and service agreement, exclusive
call option agreement and spousal consent letters (the “VIE Agreements”). We have evaluated the guidance in FASB ASC 810
and determined that Sancai WFOE is considered the primary beneficiary of Sancaijia and its subsidiaries for accounting purposes, based
on the VIE Agreements. Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. Accordingly, under U.S. GAAP, we treat
them as consolidated affiliated entities and have consolidated the assets, liabilities, revenues, expenses and cash flows that are directly
attributable to Sancaijia and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP. Some subsidiaries
of Sancaijia currently operate certain businesses which are not within the categories in which foreign investment is currently restricted
or prohibited. We believe that the VIE structure affords us great flexibility in carrying out our business and implementing our business
strategies in compliance with PRC laws and regulations in the future as our business continues to expand. However, the VIE structure
involves unique risks to investors. Uncertainties exist as to our ability to enforce the VIE Agreements. The VIE Agreements have not
been tested in a court of law and may not be effective in providing control over the VIE, and we are subject to risks due to the uncertainty
of the interpretation and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but
not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement
of the contractual arrangements with the VIE. The Chinese regulatory authorities could disallow the VIE structure, which could result
in a material change in our operations and the value of our securities could decline or become worthless. For a description of our corporate
structure and VIE Agreements, see “Corporate History and Structure” starting on page 67. For certain risks related to
the contractual arrangements, see “Risk Factors—Risks Related to Our Corporate Structure” starting on page 25.

 

Discussions of our business in this prospectus
relates to the business and operations of the VIE and the VIE’s subsidiaries. However, investors in our Class A Ordinary Shares
should be aware that they are purchasing equity in Sancai Holding, the Caymans Islands holding company, which does not own any equity
interest in the VIE.

 

Prior to December 2020, Sancai Real Estate
Management Co., Ltd., a then fully owned subsidiary of Sancaijia, engaged in the distribution of smart locks for residential properties
and offices as an added value for our corporate clients that subscribe to our SaaS platform application. Sancai Real Estate Management
Co., Ltd. also leased residential properties from individual property owners on a long-term basis, renovated and furnished such
properties in a clean and modern manner, and rented them out to individual tenants.

 

 

On December 10, 2020, Sancaijia entered into
an equity transfer agreement, which was closed on December 28, 2020, to sell 100% of the equity interest it held in Sancai Real Estate
Management Co., Ltd. to Sancai Group Co., Ltd., a former related party of Sancai Holding, for a total of approximately $3.42 million
(RMB 22.33 million). Mr. Ning Wen, the Chairman of the Board of Directors and Chief Executive Officer of Sancai Holding, was the legal
representative and a majority shareholder of Sancai Group Co., Ltd. As the VIE shifted its operating strategy to focus on SaaS platform
development and related technical service, on December 8, 2020, Mr. Ning Wen sold his all of his ownership interest of Sancai Group Co.,
Ltd. to a non-related party and resigned as legal representative. Since then, Sancai Group Co., Ltd. has been controlled by a non-related
party. As of December 28, 2020, the net book value of Sancai Real Estate Management Co., Ltd. was $3.12 million. We recorded a gain from
the disposal of discontinued operation of $0.30 million for the fiscal year ended September 30, 2021.

 

As a result, the rental property subleasing business and distribution
of smart locks were discontinued as of December 28, 2020.

 

Products and Services

 

The VIE and the VIE’s subsidiaries provide
two services: standard SaaS platform application services and SaaS platform customization and development, which are collectively referred
to as SaaS solutions. The SaaS solutions have a limited operating history. We had $7.89 million and $3.65 million (restated) in revenue
for the fiscal year ended September 30, 2021 and 2020, 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. See “Risk Factors –
Risks Related to Our Business and Industry – The VIE and the VIE’s subsidiaries 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.” 

 

SaaS
Solutions – Standard SaaS Platform Application Services

 

The standard SaaS platform application services
provide digitalization solutions for small businesses. Sancaijia built a mobile management solution system that enables business owners
to manage and monitor their operations via mobile phones. The standard SaaS platform application services currently offer the following
functions: customer acquisition, transaction, settlement, customer management, employee management, data analysis and supply chain services
for the duration of the contract period, which is usually a year. As the business develops and the application industries grows, Sancaijia
will develop more functions to meet the needs of business owners. Sancaijia typically charges a 3% to 5% fee on the transaction settlement
amount, between the businesses Sancaijia serves and its customers, which are completed on the SaaS platform.

 

SaaS Solutions – SaaS Platform Customization
and Development

 

Sancaijia, Sancaijia Technology and Caibaoyun
also provide customization and development services according to the requirements of their customers. During fiscal year 2021, revenue
from customization and development services were mainly from Caibaoyun. Customers are charged a one-time customization fee. Certain customers
can request warranty services to be performed for certain customization & development services. The warranty fee is typically at
an amount equal to less than 10% of the customization fee. These services are mainly considered as a separate performance obligation.
The customization fee and warranty fee are based on the services to be provided and are negotiated on a case-by-case basis. The revenue
for the one-time customization fee is recognized on delivery and customer acceptance. The warranty is amortized over the contract period.

 

The customers are involved in a wide variety
of industries, including construction, labor management, entertainment, property management and so on. These companies from different
industries are moving towards digitalization with the help of the system customization and development services. We are proud to achieve
their goal and fulfill our mission step by step.

 

 

Discontinued Business – Rental Property Subleasing
and Smart Locks Distribution

 

Prior to December 2020, Sancai Real Estate
Management Co., Ltd., a then subsidiary of Sancaijia, leased residential properties from individual property owners on a long-term
basis, renovated and furnished such properties in a clean and modern manner, and rented them out to individual tenants. As of June 30,
2019, Sancai Real Estate Management Co., Ltd. leased an aggregate 11,434 properties from property owners. On July 1, 2019, Sancai Real
Estate Management Co., Ltd. sold and transferred leases for 10,167 of these properties to City Community Service Group Co. Ltd. of Xian
for a total of $18.93 million. The price was determined based on the valuation provided by Guangzhou Taizhi Asset Appraisal Firm, a national
registered and licensed appraisal firm, in its rental property assessment report, using a 10% compounding rate to discount the future
cash flow of each of the rental properties.

 

For a period from late 2019 to December 2020,
Sancai Real Estate Management Co., Ltd. also engaged in the distribution of smart locks for residential properties and offices as an
added value for the corporate customers that subscribe to the SaaS platform application. The large amount of smart locks Sancai Real
Estate Management Co., Ltd. purchased allowed it to negotiate a lower price for the corporate customers. The smart locks were connected
to the SaaS platform so that the corporate customers can control the locks. 

 

On December 10, 2020, Sancaijia entered into
an equity transfer agreement, to sell 100% of the equity interest it held in Sancai Real Estate Management Co., Ltd., which operated
subleasing business, to Sancai Group Co., Ltd., a former related party of Sancai Holding, for a total of approximately $3.42 million
(RMB 22.33 million ). The transaction was closed on December 28, 2020. Mr. Ning Wen, the Chairman of the Board of Directors and Chief
Executive Officer of Sancai Holding, was the legal representative and a majority shareholder of Sancai Group Co., Ltd. As Sancaijia shifted
its operating strategy to focus on SaaS platform development and related technical service, on December 8, 2020, Mr. Ning Wen sold his
all of his ownership interest of Sancai Group Co., Ltd. to a non-related party and resigned as legal representative. Since then, Sancai
Group Co., Ltd. has been controlled by a non-related party.

 

As a result of the disposal of Sancai Real
Estate Management Co., Ltd.,the smart lock business and the rental property subleasing business were discontinued in December 2020. Historical
results are not necessarily indicative of the results that may be expected for any future period.

 

Impact of COVID-19

 

On January 30, 2020, the World Health Organization
declared the outbreak of the corona-virus disease (COVID-19) a “Public Health Emergency of International Concern,” and on
March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic.”

 

In the first quarter of fiscal year 2021,
we witnessed a recovery in China’s overall economy, benefiting from the COVID-19 control measures and the resumption of production
and business. However, the frequent outbreak of the pandemic in many areas of China has caused the authorities to implement numerous
measures to try to contain the disease and slow its spread. These include travel bans and restrictions, quarantines, shelter-in-place
orders, shutdowns and temporary lockdown of cities. Most of the customers of SaaS platform is landlords, who rent their properties to
tenants through the SaaS platform. Based on the research conducted by rental agency in China, the rental demand of migrant population
usually accounts for more than 50% of the rental market, which is the mainstream of market demand.
The restrictions on travel and lockdowns have reduced the travel and migration of people, which reduced the market demand of house
rental in China. During fiscal year 2021 the number of transactions settled though SaaS platform decreased by $204.34 million, from $212.36
million for the fiscal year 2020 to $8.02 million for the fiscal year 2021. As there were no contract liabilities as of September 30,
2021, revenue from unrealized SaaS platform standard services will decrease in fiscal year 2022.

 

Recently, there were many Covid-19 outbreaks
cross the mainland of China. China’s “Zero-Covid” strategy has caused millions of people endured lockdowns. COVID-19,
any variants thereof, or any new pandemics could continue to have an adverse effect on our future business and financial performance.

 

Corporate
Information and Structure

 

Our principal executive office is located
No. 6 Fengcheng Second Road, Room 401, Xi’an Economic and Technological Development Zone, Xi’an, Shaanxi Province, People’s
Republic of China 710000. The telephone number of our principal executive offices is +86-029-62331099. Our registered office is at Sertus
Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite # 5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman,
KY1-1104, Cayman Islands. Our agent of service in the United States is Cogency Global Inc., 122 E 42nd St 18th Fl, New York, NY 10168.
Sancaijia maintains a website at www.sancaijia.com. We do not incorporate the information on the website into this prospectus and
you should not consider any information on, or that can be accessed through, the website as part of this prospectus.

 

 

 

Sancai Holding does not have any material
operation. The VIE and the VIE’s subsidiaries conduct business in China. The following diagram illustrates our corporate structure
as of the date of this prospectus and upon completion of this offering based on [●] Class A Ordinary Shares being offered.
The Pre-Offering percentages are calculated based on the 11,500,000 Ordinary Shares issued and outstanding, consisting of 10,000,000
Class A Ordinary Shares having an aggregate of 10,000,000 votes and 1,500,000 Class B Ordinary Shares having an aggregate of 15,000,000
votes. Ordinary Shares outstanding as of the date of this prospectus, and the Post-Offering percentages are calculated based on the [●]
Ordinary Shares outstanding immediately upon the completion of the offering, including [●] Class A Ordinary Shares and
1,500,000 Class B Ordinary Shares. For more detail on our corporate history please refer to “Corporate History and Structure”
and “Security Ownership of Certain Beneficial Owners and Management.”

 

 

 

In July 2019, we incorporated Sancai Holding,
an exempted company under the laws of the Cayman Islands, as our offshore holding company to facilitate financing and offshore listing.
Sancai Holding does not have any material operation. Sancaijia and its subsidiaries conduct business in China. The financial information
of Sancaijia and its subsidiaries are consolidated into our financial statements for accounting purposes. Mr. Ning Wen, the Chairman
of our Board of Directors and Chief Executive Officer, owns 63% of Sancaijia. The remaining equity of Sancaijia is beneficially owned
by Lizhi He (20%), Lizhen Tang (13%) and Zhijie Zhang (4%). Mr. Wen also beneficially owns 6,300,000 (63.0%) and 1,000,000 (66.7%) of
our outstanding Class A Ordinary Shares and Class B Ordinary Shares, respectively, indirectly through Fancy Dream Limited. Mr. Lizhi
He beneficially owns 2,000,000 (20.0%) of our outstanding Class A Ordinary Shares and none of our outstanding Class B Ordinary Shares,
respectively, indirectly through Lucky Bunny Limited. Mr. Lizhen Tang beneficially owns 1,300,000 (13.0%) and 500,000 (33.3%) of our
outstanding Class A Ordinary Shares and Class B Ordinary Shares, respectively, indirectly through Superexcellence Limited. Mr. Zhang
beneficially owns 400,000 (4%) of our outstanding Class A Ordinary and none of our outstanding Class B Ordinary Shares, respectively,
indirectly through indirectly through Hippogriff Limited. Messrs. Wen, He, Tang and Zhang collectively hold 100% of the voting power
of our current outstanding Ordinary Shares as of the date of this prospectus. Mr. Lizhen Tang is an employee of Sancaijia. Messrs. Lizhi
He and Zhijie Zhang have no relationship with Sancai Holding, its subsidiaries, Sancaijia or Sancaijia’s subsidiaries, or any affiliates
thereof. See “Security Ownership of Certain Beneficial Owners and Management.”

 

The Class A Ordinary Shares offered in this
prospectus are those of Sancai Holding, instead of shares of the VIE or its subsidiaries in China. You are not directly investing in
and may never hold equity interests in the VIE in China. 

Contractual Arrangements between Sancai WFOE, Sancaijia
and its Shareholders

 

Current PRC laws and regulations impose certain
restrictions or prohibitions on foreign ownership of companies that engage in value-added telecommunication services and certain other
businesses. Sancai Holding is a company incorporated in the Cayman Islands. Sancai WFOE, an indirect subsidiary of Sancai Holding established
under the laws of the PRC, is considered a foreign-invested enterprise. To comply with PRC laws and regulations, in February 2020, Sancai
WFOE entered into a series of contractual arrangements with Sancaijia and its shareholders. We have evaluated the guidance in FASB ASC
810 and determined that Sancai WFOE is the primary beneficiary of Sancaijia, for accounting purposes, based upon such contractual arrangements.
Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. As a result, we treat Sancaijia and its subsidiaries as consolidated
affiliated entities under the U.S. GAAP and have consolidated the financial results of these entities in our consolidated financial statements
in accordance with U.S. GAAP. For a description of our corporate structure and VIE contractual arrangements, see “Corporate History
and Structure – Contractual Arrangements between Sancai WFOE, Sancaijia and its Shareholders” starting on page 69, which
consist of (i) Exclusive Technical Consultation and Service Agreement, (ii) Exclusive Call Option Agreements, (iii) Business Operation
Agreement, (iv) Equity Pledge Agreement, (v) Shareholder Voting Proxy Agreement, and (vi) Spousal Consent Letter. See “Risk Factors—Risks
Related to Our Corporate Structure” for certain risks related to the contractual arrangements.

 

In the opinion of B&D Law Firm, our PRC
legal counsel, the contractual arrangements among Sancai WFOE, Sancaijia and its shareholders governed by PRC law are valid, binding
and enforceable, and will not result in any violation of applicable PRC laws and regulations currently in effect. However, the VIE structure
involves unique risks to investors. We have been advised by our PRC legal counsel that there are substantial uncertainties regarding
the interpretation and application of current and future PRC laws, regulations and rules. The VIE Agreements have not been tested in
a court of law. The PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC counsel.
It is uncertain whether any new PRC laws or regulations relating to the VIE structures will be adopted or if adopted, what they would
provide. If we or Sancaijia is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain
any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing
with such violations or failures. In the event we are unable to enforce these VIE Agreements or if the PRC regulatory authorities disallow
the VIE structure, we may be precluded from consolidating the financial information of Sancaijia and its subsidiaries into our financial
statements for accounting purposes, which would have a material adverse effect on our financial condition and results of operations and
significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our
securities to significantly decline or be worthless.

 

Additionally, these VIE Agreements are less
effective than direct ownership and that we may incur substantial costs to enforce the VIE Agreements. For example, Sancaijia and its
shareholders could breach the VIE Agreements 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 Sancaijia, we would be able to exercise
our rights as a shareholder to effect changes in the board of directors of Sancaijia, 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 Sancaijia and its shareholders to perform their obligations under the contracts. The shareholders of Sancaijia may not act in the
best interests of our Company or may not perform their obligations under these contracts. In addition, failure of Sancaijia’s shareholders
to perform certain obligations could compel us to rely on legal remedies available under PRC laws, including seeking specific performance
or injunctive relief, and claiming damages, which may not be effective.

 

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 Sancai Holding or such persons
predicated upon the civil liability provisions of the securities laws of the United States or any state.

  

See “Risk Factors—Risks Related to
Our Corporate Structure—Sancai Holding is a holding company with no material operation. Sancai WFOE entered into the VIE Agreements
with Sancaijia, the consolidated variable interest entity, and its shareholders that established the VIE structure. Sancaijia and its
subsidiaries conduct business in China. If the PRC government deems that the VIE structure 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 would not be able to enforce the VIE Agreements and could be subject to severe penalties or be forced to relinquish our interests
in those operations” and “Risk Factors — Risks Related to Doing Business in China — The rules and regulations
and the enforcement thereof in China can change quickly with little advance notice. The Chinese government recently promulgated a number
of laws, regulations and policies that focus on tightening oversight of data security and overseas equity fundraising and listing by
Chinese companies. Such 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 could adversely affect us and limit the legal protections available
to you and us. The Chinese government may intervene or influence the operations of the VIE or the VIE’s subsidiaries at any time,
or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a
material change in our operations and in the value of our Class A Ordinary Shares or 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 be worthless.”

 

The following is a summary of the currently
effective contractual arrangements by and among Sancai WFOE, Sancaijia and the shareholders of the VIE and their spouses, as applicable.

 

Business Operation Agreement. Pursuant
to the Business Operation Agreement entered into among Sancai WFOE, Sancaijia and the shareholders of Sancaijia (hereinafter referred
to individually as a “Shareholder” and collectively as the “Shareholders”), the Shareholders agreed that without
the prior written consent of Sancai WFOE or any party designated by Sancai WFOE, Sancaijia shall not engage in any transaction which
may have a material or adverse effect on any of its assets, businesses, employees, obligations, rights or operations (except for those
occurring in the due course of business or in day-to-day business operations, or those already disclosed to Sancai WFOE and with the
explicit prior written consent of Sancai WFOE). In addition, Sancaijia and the Shareholders jointly agreed to accept and strictly implement
any proposal made by Sancai WFOE from time to time regarding the employment and removal of Sancaijia’s employees, its day-to-day
business management and the financial management system of Sancaijia. This Business Operation Agreement shall become effective upon execution
by Sancai WFOE, Sancaijia and the Shareholders, and shall remain valid until it is terminated by written agreement of the Parties. During
the term of the Business Operation Agreement, neither Sancaijia nor the Shareholders may terminate the Business Operation Agreement.
Sancai WFOE shall have the sole right to terminate the Business Operation Agreement at any time, provided that Sancai WFOE gives prior
written notice of thirty (30) days to Sancaijia and the Shareholders. In addition, Sancai WFOE, Sancaijia and the Shareholders may terminate
the Business Operation Agreement as they unanimously agree through negotiation.

Shareholder
Voting Proxy Agreement
. Pursuant to the Shareholders Voting Rights Proxy Agreement among Sancai WFOE, Sancaijia and the
Shareholders (collectively as the “Parties”), each Shareholder irrevocably authorizes Sancai WFOE or any person(s) designated
by Sancai WFOE to act as its attorney-in-fact to exercise all of its rights as a shareholder of Sancaijia, including, but not limited
to, the right to convene shareholders’ meetings, vote and sign any resolution as a shareholder, appoint directors and other senior
executives to be appointed and removed by the shareholder, the right to sell, transfer, pledge and dispose of all or a portion of the
shares held by such shareholder, and other shareholders voting rights permitted by the articles of association of Sancaijia. Unless terminated
early by the Parties by written agreement, this agreement shall remain valid for ten (10) years. During the term of the Shareholders
Voting Rights Proxy Agreement, unless otherwise stipulated by law, the Shareholders or Sancaijia shall not early terminate this Agreement.
Sancai WFOE may at any time terminate this agreement with a written notice being given to other Parties thirty (30) days in advance.
In addition, in the case that a Shareholder becomes the defaulting party who materially breaches any provision or materially fails to
perform any obligation under this agreement, Sancai WFOE shall be entitled to terminate this agreement. Upon the expiration of this agreement,
unless Sancai WFOE gives a non-renewal written notice to Sancaijia and the Shareholders thirty (30) days prior to the expiration, this
agreement shall be renewed automatically for successive ten (10)-year terms. 

 

Equity Pledge Agreement. Pursuant
to the Equity Pledge Agreement entered into among Sancai WFOE, Sancaijia and the Shareholders (collectively as the “Parties”),
the Shareholders agreed to pledge their 100% equity interests in Sancaijia to Sancai WFOE to secure the performance of Sancaijia’s
obligations under the existing exclusive call option agreement, shareholder voting proxy agreements, exclusive technical consultation
and service agreement, business operation agreement and also the equity pledge agreement. If events of default defined therein occur,
upon giving written notice to the Shareholders, Sancai WFOE may exercise the right to enforce the pledge to the extent permitted by PRC
laws. This agreement shall come into effect upon execution by each of the Parties and the term of this agreement shall end upon the full
performance of the Contractual Obligations or the full discharge of the Secured Liabilities defined under this agreement.

 

As of the date of this prospectus, all the
Shareholders have completed the equity pledge registration with the competent Administration for Market Regulation in accordance with
the PRC Property Rights Law.

 

Spousal Consent Letter. Pursuant
to a series of Spousal Consent Letters, executed by the spouses of the Shareholders, Mr. Ning Wen, Mr. Lizhi He and Mr. Zhijie Zhang,
the signing spouses confirmed and agreed that the equity interests of Sancaijia are the own property of their spouses and shall not constitute
the community property of the couples. The spouses also irrevocably waived any potential right or interest that may be granted by operation
of applicable law in connection with the equity interests of Sancaijia held by their spouses.

 

Exclusive Technical Consultation and
Service Agreement.
 Pursuant to the Exclusive Technical Consultation and Service Agreement entered into between Sancai WFOE
and Sancaijia, Sancai WFOE has the exclusive right to provide or designate any entity to provide with Sancaijia business support, technical
and consulting services. Sancaijia agrees to pay Sancai WFOE (i) the service fees equal to the sum of 100% of the net income of Sancaijia
of that year or such other amount otherwise agreed by Sancai WFOE and Sancaijia; and (ii) service fee otherwise confirmed by Sancai WFOE
and Sancaijia for specific technical services and consulting services provided by Sancai WFOE in accordance with Sancaijia’s requirement
from time to time. The Exclusive Consultation and Service Agreement will continue to be valid unless the written agreement is signed
by all parties to terminate it or a mandatory termination is requested in accordance with applicable PRC laws and regulations. Sancai
WFOE is entitled to unilaterally exercise immediate early termination of the Exclusive Technical Consultation and Service Agreement by
sending a written notice to Sancaijia if any of the following events were to occur: (i) Sancaijia breaches this agreement, and within
thirty (30) days after Sancai WFOE sends out a written notice of breach to Sancaijia, Sancaijia fails to rectify its breach, take sufficient,
effective and timely measures to eliminate the effects of breach and compensate Sancai WFOE for any losses incurred by the breach; (ii)
Sancaijia is bankrupt or is subject to any liquidation procedure and such procedure is not revoked within seven (7) days; and (iii) due
to any event of force majeure, Sancaijia’s failure to perform this agreement lasts for more than twenty (20) days.

 

Exclusive Call Option Agreements. Pursuant
to the Exclusive Call Option Agreement entered into among Sancai WFOE, Sancaijia and the Shareholders, each Shareholder has irrevocably
granted Sancai WFOE an exclusive option to purchase all or part of its equity interests in Sancaijia, and Sancaijia has irrevocably granted
Sancai WFOE an exclusive option to purchase all or part of its assets. With regard to the equity transfer option, the total transfer
price to be paid by Sancai WFOE or any other entity or individual designated by Sancai WFOE for exercising such option shall be the capital
contribution mirrored by the corresponding transferred equity in the registered capital of Sancaijia. But if the lowest price permitted
by the then-effective PRC law is lower than the above capital contribution, the transfer price shall be the lowest price permitted by
the PRC law. With regard to the asset purchase option, the transfer price to be paid by Sancai WFOE or any other entity or individual
designated by Sancai WFOE for exercising such option shall be the lowest price permitted by the then-effective PRC law. The Exclusive
Call Option Agreement shall terminate after all the Shareholder Equity and the Company Assets, which are defined under this agreement,
are lawfully transferred to Sancai WFOE and/or any other entity or individual designated by Sancai WFOE pursuant to the provisions of
this agreement. In addition, in the case that a Shareholder or Sancaijia becomes the defaulting party who substantially violates any
agreement or substantially fails to perform or delays performance of any of the obligations under this agreement, Sancai WFOE shall be
entitled to terminate this agreement.

 

Recent Regulatory Developments in China

 

Recently, the PRC government initiated a series
of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice,
including: taking significant, immediate regulatory action against what it determined were illegal activities in the securities market,
enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews,
and expanding efforts in anti-monopoly enforcement.

Among
other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”)
and Anti-Monopoly Law of the People’s Republic of China promulgated by the SCNPC which became effective in 2008 (“Anti-Monopoly
Law”), established additional procedures and requirements that could make merger and acquisition activities by foreign investors
more time-consuming and complex. Such regulation requires, among other things, that State Administration for Market Regulation (“SAMR”)
be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise
or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on the Standard
for Declaration of Concentration of Business Operators, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly
Law requires that transactions which involve the national security, the examination on the national security shall also be conducted
according to the relevant provisions of the State. In addition, the PRC Measures for the Security Review of Foreign Investment which
became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military-related or certain
other industries that are crucial to national security be subject to security review before consummation of any such acquisition.

 

On July 6, 2021, the relevant PRC government
authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions
emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based
companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the
risks and incidents faced by China-based overseas-listed companies. As these opinions are recently issued, official guidance and related
implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. See “Risk
Factors — Risks Related to Doing Business in China — The approval of the CSRC may be required in connection with this offering,
and, if required, we cannot predict whether we or the VIE or the VIE’s subsidiaries will be able to obtain such approval. Any requirement
to obtain prior approval under the M&A Rules and/or any other regulations promulgated by relevant PRC regulatory agencies in the
future could delay this offering and failure to obtain any such approvals, if required, could have a material adverse effect on our business,
operating results and reputation as well as the trading price of our ordinary shares, and could also create uncertainties for this offering.”

 

In addition, on July 10, 2021, the Cyberspace
Administration of China (“CAC”) issued the Measures for Cybersecurity Review for public comments (“Draft Measures”),
which propose to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or
may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million
users. The Draft Measures are subject to change. As the VIE and the VIE’s subsidiaries are neither an “operator of critical
information infrastructure,” nor a “data processor” carrying out data processing activities that affect or may affect
national security, we believe that the Draft Measures are not applicable to us even after they take effect in current form. On January
4, 2022, thirteen PRC regulatory agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology, the Ministry
of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People’s Bank of China, the
National Radio and Television Administration, National Administration of State Secrets Protection and the National Cryptography Administration,
jointly adopted and published the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022. The Measures
for Cybersecurity Review (2021) required that, among others, in addition to “operator of critical information infrastructure”
any “operator of network platform” holding personal information of more than one million users which seeks to list in a foreign
stock exchange should also be subject to cybersecurity review. In addition, on November 14, 2021, the CAC released the Regulations on
Network Data Security (draft for public comments), or the draft Regulations on Network Data Security, and will accept public comments
until December 13, 2021. According to the draft Regulations on Network Data Security, if a data processor that processes personal data
of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that
process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security
services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs
administration department before January 31 of each year.

 

The PRC government is increasingly focused
on data security, recently launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies
and prohibiting these apps from registering new users during the review period. There are great uncertainties regarding the interpretation
and enforcement of PRC laws, rules and regulations regarding data and privacy security. The VIE and the VIE’s subsidiaries may
be required to change the data and other business practices and be subject to regulatory investigations, penalties, and increased cost
of operations as a result of these laws and policies.

 

On December 24, 2021, the CSRC released the
Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft
for Comments) (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing
Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures,” collectively with the Draft Administrative
Provisions, the “Draft Rules Regarding Overseas Listing”), both of which are currently published for public comments only.
The Draft Rules Regarding Overseas Listing lay out the filing regulation arrangement for both direct and indirect overseas listing, and
clarify the determination criteria for indirect overseas listing in overseas markets. Among other things, if a domestic enterprise intends
to indirectly offer and list securities in an overseas market, the record-filing obligation is with a major operating entity incorporated
in the PRC and such filing obligation shall be completed within three working days after the overseas listing application is submitted.
The required filing materials for an initial public offering and listing shall include but not limited to: regulatory opinions, record-filing,
approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment
opinion issued by relevant regulatory authorities (if applicable).

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 or the VIE
and the VIE’s subsidiaries may be unable to obtain such approvals and we or the VIE
and the VIE’s subsidiaries may face sanctions by the CSRC or other PRC regulatory agencies
for failure to seek such approvals 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. See “Risk Factors—Risks
Related to Doing Business in China—The rules and regulations and the enforcement thereof
in China can change quickly with little advance notice. The Chinese government recently promulgated
a number of laws, regulations and policies that focus on tightening oversight of data security
and overseas equity fundraising and listing by Chinese companies. Such 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 could adversely affect
us and limit the legal protections available to you and us. The Chinese government may intervene
or influence the operations of the VIE or the VIE’s subsidiaries at any time, or may
exert more control over offerings conducted overseas and/or foreign investment in China-based
issuers, which could result in a material change in our operations and in the value of the
Class A Ordinary Shares or 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 be worthless.”

 

Regulatory Permissions

 

As of the date of this prospectus, each
of Sancaijia, our subsidiaries and the VIE and the VIE’s subsidiaries has obtained all permissions and approvals to operate their
respective business, including business license, permit for opening bank account, labor and employment recordation, social insurance
registration, internet content provide registration record and such other permissions and approval as required by the PRC regulatory
authorities. Besides, the registered business scopes of Sancaijia and Xi’an Miaobijia both currently include the second category
of value-added telecommunications services (VATS) as defined in the PRC Regulations on Telecommunications and the Classified Catalog
of Telecommunications Services. According to PRC regulations relating to VATS, any commercial internet information services operators
with the business scope of internet information services shall obtain a ICP License, and any commercial internet information services
operators with the business scope of online data processing and transaction processing services shall obtain a EDI License, from the
relevant government authorities before actually providing any commercial internet information services or online data processing and
transaction processing services within the PRC. To comply with the relevant laws and regulations, Sancaijia has obtained the ICP and
EDI Licenses on August 10, 2020, and Xi’an Miaobijia has obtained the ICP and EDI Licenses on August 30, 2021. Neither have we
nor our subsidiaries or the VIE or the VIE’s subsidiaries received any denial of permissions for their operation.

 

On August 8, 2006, six Chinese regulatory agencies,
including the Ministry of Commerce of China (“MOFCOM”), jointly issued the Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8, 2006 and amended on June 22,
2009. The M&A Rules contains provisions that require that an offshore special purpose vehicle (“SPV”) formed for listing
purposes and controlled directly or indirectly by Chinese companies or individuals shall obtain the approval of the CSRC prior to the
listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published procedures
specifying documents and materials required to be submitted to it by an SPV seeking CSRC approval of overseas listings. However, the
application of the M&A Rule remains unclear with no consensus currently existing among leading Chinese law firms regarding the scope
and applicability of the CSRC approval requirement. Based on the understanding of the current PRC law, rules and regulations, we believe
the CSRC’s approval is not required for the listing and trading of our Class A Ordinary Shares on Nasdaq in the context of this
offering, given that: (i) Sancai 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. In addition, none of CSRC, CAC, or other authorities
have set forth approval procedures specifically for the VIE and the VIE’s subsidiaries, so we believe that we or the VIE and the
VIE’s subsidiaries do not need to apply to Chinese authorities for approving the VIE structure. However, we have been further advised
by our PRC legal counsel that the enforceability of the VIE agreements has not been tested in a court of law, and that the PRC regulatory
authorities could disallow this VIE structure, which could significantly limit or completely hinder our ability to continue to offer
securities to investors outside China and cause the value of our securities to significantly decline or become worthless.

 

 

In the future, we may grow our business by acquiring
complementary businesses. It is unclear whether our business would be deemed to be in an industry that raises “national defense
and security” or “national security” concerns. However, the MOFCOM or other government agencies may publish explanations
in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in
the PRC, including those by way of entering into contractual arrangements with target entities, may be closely scrutinized or prohibited.
Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and
adversely affected. Furthermore, according to the M&A Rules, if a PRC entity or individual plans to merge or acquire its related
PRC entity through an overseas company legitimately incorporated or controlled by such entity or individual, such a merger and acquisition
will be subject to examination and approval by the MOFCOM. There is a possibility that the PRC regulators may promulgate new rules or
explanations requiring that we obtain the approval of the MOFCOM or other PRC governmental authorities for our completed or ongoing mergers
and acquisitions. There is no assurance that, if we plan to make an acquisition, we can obtain such approval from the MOFCOM or any other
relevant PRC governmental authorities for our mergers and acquisitions, and if we fail to obtain those approvals, we may be required
to suspend our acquisition and be subject to penalties. Any uncertainties regarding such approval requirements could have a material
adverse effect on our business, results of operations and corporate structure.

 

In addition, we do not expect to be subject to
the cybersecurity review by the CAC for this offering, given that: (i) using the products and services does not require users to provide
any personal information; (ii) the VIE and the VIE’s subsidiaries do not possess any personal information of users in their business
operations; and (iii) data processed in the VIE’s and the VIE’s subsidiaries’ business does not have a bearing on national
security and thus may not be classified as core or important data by the authorities. We do not believe the VIE and the VIE’s subsidiaries
are among the “operator of critical information infrastructure,” “data processor” carrying out data processing
activities that affect or may affect national security, or “operator of network platform” holding personal information of
more than one million users as mentioned above. However, if the draft
Regulations on Network Data Security is adopted into law and we become listed on Nasdaq, Sancai WFOE, the VIE and the VIE’s subsidiaries
likely will be required to perform annual data security assessment either by itself or retaining a third-party data security service
provider and submit such data security assessment report to the local agency every year. Furthermore, the revised draft Regulations on
Network Data Security is in the process of being formulated and subject to further changes, and inherent uncertainty exists in relying
on an opinion of our PRC counsel as to the enactment, interpretation and implementation of regulations related to overseas securities
offerings and cybersecurity compliance requirements. The PRC regulators, including the CSRC or the CAC, may not arrive at the same conclusion
as our PRC counsel.

 

Neither the CAC nor any other PRC regulatory agency
or administration has contacted Sancai Holding, our PRC subsidiary, the VIE or the VIE’s subsidiaries in connection with the operations
of our PRC subsidiary, the VIE and VIE’s subsidiaries. However, there remains uncertainty as to how the Measures for Cybersecurity
Review (2021) will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations,
rules, or detailed implementation and interpretation related to the Measures for Cybersecurity Review (2021). 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 or the VIE or the VIE’s
subsidiaries can fully or timely comply with such laws. In the event that the applicable laws, regulations, or interpretations change
such that we or the VIE or the VIE’s subsidiaries are subject to any mandatory cybersecurity review and other specific actions
required by the CAC, we cannot guarantee whether we or the VIE or the VIE’s subsidiaries can complete the registration process
in a timely manner, or at all. Given such uncertainty, we or the VIE or the VIE’s subsidiaries may be further required to suspend
the relevant business, shut down the website, or face other penalties, which could materially and adversely affect our business, financial
condition, results of operations 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.

 

Furthermore, On December 24, 2021, the CSRC released
the Draft Rules Regarding Overseas Listing, which are currently published for public comments only. The Draft Rules Regarding Overseas
Listing lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria
for indirect overseas listing in overseas markets. Among other things, if a domestic enterprise intends to indirectly offer and list
securities in an overseas market, the record-filing obligation is with a major operating entity incorporated in the PRC and such filing
obligation shall be completed within three working days after the overseas listing application is submitted. The required filing materials
for an initial public offering and listing shall include but not limited to: regulatory opinions, record-filing, approval and other documents
issued by competent regulatory authorities of relevant industries (if applicable); and security assessment opinion issued by relevant
regulatory authorities (if applicable). In addition, overseas offerings and listings may be prohibited for such domestic enterprise when
any of the following applies: (1) if the intended securities offerings and listings are specifically prohibited by the laws, regulations
or provision of the PRC; (2) if the intended securities offerings and listings may constitute a threat to, or endanger national security
as reviewed and determined by competent authorities under the State Council in accordance with laws; (3) if there are material ownership
disputes over applicants’ equity interests, major assets, core technologies, or the others; (4) if, in the past three years, applicants’
domestic enterprises or controlling shareholders, de facto controllers have committed corruption, bribery, embezzlement, misappropriation
of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation
for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in the past three years, any
directors, supervisors, or senior executives of applicants have been subject to administrative punishments for severe violations, or
are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations;
(6) other circumstances as prescribed by the State Council. We do not believe any of the six prohibited situations aforementioned applies
to us. The Draft Administrative Provisions further stipulate that a fine between RMB 1 million and RMB 10 million may be imposed if an
applicant fails to fulfil the filing requirements with the CSRC or conducts an overseas offering or listing in violation of the Draft
Rules Regarding Overseas Listings, and in cases of severe violations, a parallel order to suspend relevant businesses or halt operations
for rectification may be issued, and relevant business permits or operational license revoked.

 

 

As of the date of this prospectus, the Draft Rules
Regarding Overseas Listings have not been promulgated, and we or the VIE or the VIE’s subsidiaries have not been required to obtain
permission from the government of China for any offering pursuant to this prospectus. While the final version of the Draft Rules Regarding
Overseas Listings are expected to be adopted in 2022, we believe that we or the VIE or the VIE’s subsidiaries will be required
to comply with the filing requirements or procedures set forth in the Draft Rules Regarding Overseas Listings and that none of the situations
that would clearly prohibit overseas offering and listing applies to us. It should be noted however, that there is uncertainty in relying
on an opinion of counsel in connection with draft legislation as the final version may be materially different and/or that the implementing
regulations have yet to be promulgated. We cannot assure you that we or the VIE or the VIE’s subsidiaries will be able to get the
clearance of filing procedures under the Draft Rules Regarding Overseas List on a timely basis, or at all. There is also the possibility
that we or the VIE or the VIE’s subsidiaries may not be able to obtain or maintain such approval or that we inadvertently concluded
that such approval was not required. If the CSRC requires that we or the VIE or the VIE’s subsidiaries obtain its approval prior
to the completion of this offering, the offering will be delayed until we or the VIE and the VIE’s subsidiaries have obtained CSRC
approval, which may take several months. Any failure of us to fully comply with new regulatory requirements may significantly limit or
completely hinder our ability to continue to offer our Class A Ordinary Shares, cause significant disruption to our business operations,
and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and
cause our Class A Ordinary Shares to significantly decline in value or become worthless.

 

As of the date of this prospectus, no relevant
laws or regulations in the PRC explicitly require us to seek approval from the CSRC or the CAC or any other PRC governmental authorities
for this offering and/or list on the Nasdaq Stock Market, nor has we or the VIE or the VIE’s subsidiaries received any inquiry,
notice, warning or sanctions regarding our planned offering from the CSRC or any other PRC governmental authorities. Except as disclosed
in this prospectus, based on our understanding of the current PRC laws, regulations and rules, we believe that we and the VIE and the
VIE’s subsidiaries are not required to obtain permission from Chinese authorities to operate and issue these securities to foreign
investors or list on the Nasdaq Stock Market based on the PRC laws, regulations and rules currently in effect. However, since these statements
and regulatory actions are newly published, however, official guidance and related implementation rules have not been issued, we are
subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently
conclude that the permissions or approvals discussed here are not required, that applicable laws, regulations or interpretations change
such that we or the VIE or the VIE’s subsidiaries are required to obtain approvals in the future, or that the PRC government could
disallow our structure, which would likely result in a material change in our operations, including our ability to continue our existing
structure, carry on the daily business operations of the VIE and the VIE’s subsidiaries, our ability to accept foreign investments,
and our listing on an U.S. exchange. These adverse actions could cause the value of our Class A Ordinary Shares to significantly decline
or become worthless. We or the VIE or the VIE’s subsidiaries may also be subject to penalties and sanctions imposed by the PRC
regulatory authorities, including the CSRC, if we or the VIE or the VIE’s subsidiaries fail to comply with such rules and regulations,
which would likely adversely affect the ability of our securities to be listed on a U.S. exchange, which would likely cause the value
of our securities to significantly decline or become worthless.

 

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 or the VIE or the VIE’s subsidiaries to obtain regulatory approval from Chinese authorities before listing in the
U.S. If we or the VIE or the VIE’s subsidiaries do not receive or maintain the approval, or inadvertently conclude that such approval
is not required, or applicable laws, regulations, or interpretations change such that we or the VIE or the VIE’s subsidiaries are
required to obtain approval in the future, we or the VIE or the VIE’s subsidiaries may be subject to regulatory actions or other
sanctions from the CSRC or other Chinese regulatory authorities. These authorities may impose fines and penalties upon the operations
and the operating privileges of the VIE or the VIE’s subsidiaries in China, delay or restrict the repatriation of the proceeds
from this offering into China, or take other actions that could have a material adverse effect upon our business, financial condition,
results of operations, reputation and prospects, as well as the trading price of our Class A Ordinary Shares. The CSRC or other Chinese
regulatory agencies may also take actions requiring us, or making it advisable for us, to terminate this offering prior to closing. These
risks could result in a material adverse change in our operations and the value of our Class A 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. For more detailed information, see “Risk Factors—Risks Related to Doing Business in China—
ner, the securities currently being offered may substantially decline in value and become worthless. The CSRC has released for public
consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules
have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas
and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue
to offer our Class A Ordinary Shares to investors and could cause the value of our Class A Ordinary Shares to significantly decline or
become worthless. We have not applied for, received or been denied approval from Chinese authorities to list on the Nasdaq Stock Market.”
on page 34 of this prospectus, and “Risk Factors—Risks Related to Doing Business in China—The approval of the CSRC
may be required in connection with this offering, and, if required, we cannot predict whether we or the VIE or the VIE’s subsidiaries
will be able to obtain such approval. Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated
by relevant PRC regulatory agencies in the future could delay this offering and failure to obtain any such approvals, if required, could
have a material adverse effect on our business, operating results and reputation as well as the trading price of our Class A Ordinary
Shares, and could also create uncertainties for this offering.” on page 39 of this prospectus.

 

 

Transfer of Cash Through our Organization

 

Our Hong Kong subsidiary, or Sancai
HK, may transfer funds to Sancai WFOE through an increase in the registered capital or loans to Sancai WFOE. However, the receipt of
funds by Sancai WFOE through an increase in registered capital or loans requires Sancai WFOE to seek approval from or registration with
the relevant PRC authorities and this process may be time consuming. Sancai WFOE has the exclusive right to provide or designate any
entity to provide Sancaijia with business support, technical and consulting services in exchange for service fees from Sancaijia. Sancai
WFOE may rely on service fees paid by Sancaijia for its cash needs, and any limitation on the ability of Sancaijia to pay service fees
to Sancai WFOE, or any tax implications of making service fees payments to Sancai WFOE, could have a material adverse effect on Sancai
WFOE’s financial condition and results of operations. Sancai WFOE may provide loans to Sancaijia, subject to statutory limits and
restrictions.

 

To make capital contributions to our PRC subsidiary,
Sancai WFOE, the amount of capital contribution shall be limited to the registered capital of Sancai WFOE. However, Sancai WFOE may apply
for increase of its registered capital with the local Administration for Market Regulation (AMR) at any time. In practice, under the
condition that Sancai WFOE is prepared with complete materials including the application form, resolution of shareholders’ meeting, resolution
of the board of directors, newly revised articles of association and documents may be required as the case may be, the local AMR will
generally approve the application within several business days. And after the approval of the local AMR, the local bank’s approval
for the inward remittances of registered capital can be also completed within a few business days.

 

To make loans to Sancai WFOE or
Sancaijia, according to the Circular of the People’s Bank of China on Matters relating to the Macro-prudential Management of Comprehensive
Cross-border Financing, or PBOC Circular 9, the total cross-border financing of a company shall be calculated using a risk-weighted approach
and shall not exceed an upper limit. The upper limit shall be calculated as capital or assets (for enterprises, net assets shall apply)
multiplied by a cross-border financing leverage ratio and multiplied by a macro-prudential regulation parameter. The macro-prudential
regulation parameter is currently one, which may be adjusted by the People’s Bank of China and the State Administration of Foreign
Exchange in the future, and the cross-border financing leverage ratio is 2 for enterprises. Therefore, the upper limit of the loans that
a PRC company can borrow from foreign companies shall be calculated at two times the borrower’s net assets. When Sancai WFOE and
Sancaijia jointly apply for borrowing foreign debt, the upper limit of borrowing shall be two times of the net assets in the consolidated
financial statement, and Sancaijia shall make a commitment to give up its application for borrowing foreign debt in its own name. Furthermore,
Sancai WFOE, as a foreign-invested enterprise, may also choose to calculate the upper limit of foreign debt borrowing based on the surplus
between the total investment in projects approved by the verifying departments and the registered capital. We can make loans to Sancai
WFOE within the range of the surplus.

 

Sancai Holding, as holding companies,
does not have material operation. Sancaijia and its subsidiaries conduct business in the PRC. The financial information of Sancaijia
and its subsidiaries are consolidated into our financial statements for accounting purposes. We believe the offering proceeds would be
available for investments in Sancaijia and its subsidiaries’ operation in the PRC after completing the registration as described
above. However, we cannot assure you that we or the VIE and the VIE’s subsidiaries will be able to obtain relevant government registrations
or approvals on a timely basis, or at all. See “Risk Factors — Risks Related to Our Corporate Structure — 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, which could materially and adversely affect our liquidity and
our ability to fund and expand our business.”

 

In addition to funds generated from
sales of SaaS solutions and other products, the Sancaijia’s operations may be financed by loans from Sancai WFOE, which may receive
funds from Sancai Holding, through either capital contributions or loans, directly or indirectly. Funds from Sancaijia to Sancai Holding
are remitted as service fees to Sancai WFOE, which, in turn, makes distributions or pays dividends to Sancai HK, which in turn distributes
or otherwise transfers such funds to the Sancai Seychelles and finally to Sancai Holding. Both investment in Chinese companies, which
are governed by the Foreign Investment Law, and the dividends and distributions from Sancai WFOE are subject to regulations and restrictions
on dividends and other payment to parties outside of China. Applicable PRC law permits payment of dividends to Sancai Holding by our
PRC subsidiary only out of its net income, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiary
and Sancaijia and its subsidiaries in China are required to set aside a portion of their net income, if any, each year to fund general
reserves for appropriations until such reserves have reached 50% of such company’s registered capital. These reserves are not distributable
as cash dividends. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC,
up to the amount of net assets held in each PRC company. In contrast, presently, there is no foreign exchange control or restrictions
on capital flows out of Hong Kong or out of Seychelles. Hence, Sancai HK, our Hong Kong subsidiary, is able to transfer cash by loans
without any limitation or by cash dividends to its direct parent company, Sancai Seychelles, out of profits available for distribution.
Sancai Seychelles may transfer cash by loans without any limitation or by cash dividends to its direct parent company Sancai Holding
if, immediately after the distribution, Sancai Seychelles will be able to pay its debts as they become due and the value of its assets
will be greater than the value of its liabilities.

 

The
PRC laws governing dividend distribution by foreign-invested enterprises in the PRC are primarily the Company Law of the PRC, as amended.
Under such laws, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance
with PRC accounting standards and regulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to set
aside as general reserves at least 10% of their after-tax profit, until the cumulative amount of such reserves reaches 50% of their registered
capital. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits
retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. As a Cayman Islands
holding company, Sancai Holding may receive dividends from our PRC subsidiary through our intermediary holding companies in Hong Kong
and Seychelles. The PRC Enterprise Income Tax Law (“EIT Law”) and its implementing rules provide that dividends paid by a
PRC entity to a non-resident enterprise for income tax purposes are subject to PRC withholding tax at a rate of 10%, subject to reduction
by an applicable tax treaty with China. According to the Arrangement between China and the Hong Kong Special Administrative Region on
the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and relevant implanting
notice, if our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant
tax authority, the dividends paid to our Hong Kong subsidiary would be subject to withholding tax at a reduced rate of 5%. See “Risk
Factors—Risks Related to Doing Business in China—We may not be able to obtain certain benefits under relevant tax treaty
on dividends paid by our PRC subsidiary to us through our Hong Kong subsidiary”.

 

As of the date of this prospectus,
Sancai Holding has not transferred funds to any of its subsidiaries. In the future, however, cash proceeds raised from overseas financing
activities, including this offering, may be transferred by Sancai Holding to Sancai WFOE via capital contribution or loans. As of the
date of this prospectus, there have not been any such dividends or other distributions from Sancai WFOE to our Hong Kong subsidiary.
In addition, none of our subsidiaries have ever issued any dividends or distributions to Sancai Holding. As of the date of this prospectus,
Sancaijia has not remitted any services fees to Sancai WFOE. Sancaijia intends to distribute earnings or settle amounts owed under the
VIE Agreements. We anticipate that, to the extent that Sancaijia requires funds from us for its operations, Sancai Holding will provide
funds in the manner described above, and to the extent that Sancaijia generates positive cash flow from its operations in excess of its
requirements for its operations, it will transfer such excess funds to Sancai Holding, through payments to Sancai WFOE.

 

The following table shows the nature
of the flow of funds from Sancai Holding to its subsidiaries and to Sancaijia and from Sancaijia to the Sancai Holding’s subsidiaries
and to Sancai Holding.

 

 

(1) Capital Contribution
/ Shareholder Loans
(4) Dividends / Distributions

 

Holding
Foreign Companies Accountable Act (the “HFCA Act”)

 

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 our Class A Ordianry
Shares from being traded on a national securities exchange or in the over the counter trading market in the United States.

 

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

 

On June 22, 2021, the U.S. Senate passed
a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years
required for triggering the prohibitions under the HFCA Act from three years to two years.

 

On December 2, 2021, the SEC issued amendments
to finalize rules implementing the submission and disclosure requirements in the HFCA Act, which became effective on January 10, 2022.
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, PCAOB announced the
PCAOB HFCA Act determinations (the “PCAOB determinations”) relating to the PCAOB’s inability to inspect or investigate
completely registered public accounting firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region
and dependency of the PRC, because of a position taken by one or more authorities in the PRC or Hong Kong.

 

Our auditor, BF Borgers CPA PC, the independent
registered public accounting firm that issues the audit report included in this prospectus, is registered with the PCAOB and is subject
to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess BF Borgers CPA PC’s compliance
with applicable professional standards. BF Borgers CPA PC is headquartered in Lakewood, Colorado and has been inspected by the PCAOB
on a regular basis, with the last inspection in 2021. Therefore, we believe that, as of the date of this prospectus, our auditor is not
subject to the PCAOB determinations. See “Risk Factors — Risks Relating to Our Ordinary Shares and this Offering — Trading
of our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect
or fully investigate our auditor in the future and as a result Nasdaq may determine not to list our securities” on page 57. We
cannot assure you whether Nasdaq or other regulatory authorities will apply additional or more stringent criteria to us. Such uncertainty
could cause the market price of our Ordinary Shares to be materially and adversely affected.

 

Risk Factors Summary

 

Investing in our Class A ordinary shares
involves a high degree of risk. Below is a summary of material factors that make an investment in our common stock 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” on page 25 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 Related to Our Corporate Structure 

 

Sancai Holding is a holding company with no material operation. Our
Subsidiary entered into the VIE Agreements with Sancaijia, the consolidated variable interest entity, and its shareholders that established
the VIE structure.  Sancaijia and its subsidiaries conduct business in China. If the PRC government deems that the VIE structure
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 would not be able to enforce the VIE Agreements and could be subject to severe penalties
or be forced to relinquish our interests in those operations. See page 25 of this prospectus.

 

  We do not hold direct equity interest in Sancaijia, the consolidated variable interest entity.
We rely on the VIE Agreements with Sancaijia and its shareholders for a large portion of our business operations, which may not be
as effective as direct ownership in providing operational control. See page 26 of this prospectus.

 

  Any failure by Sancaijia, the 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. See page 27 of this prospectus.

 

  The shareholders of Sancaijia, the consolidated variable interest
entity, may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
See page 28 of this prospectus.

 

 

Contractual arrangements in relation
to Sancaijia, the consolidated variable interest entity, may be subject to scrutiny by the PRC tax
authorities and they may determine that Sancai WFOE or the VIE or the VIE’s subsidiaries owe
additional taxes, which could negatively affect our financial condition and the value of your investment.
See page 28 of this prospectus.

 

 

Sancai Holding is a holding
company, and the investors will have ownership in a holding company that does not directly own any
of the business operations of Sancaijia and its subsidiaries in China. We may rely on dividends paid
by our subsidiaries for our cash needs, and any limitation on the ability of our subsidiaries to
pay dividends to us, or any tax implications of making dividend payments to us, could have a material
adverse effect on our ability to pay dividends to holders of our Class A Ordinary Shares. See page
29 of this prospectus.

 

 

Risks
Related to Doing Business in China

 

 

If the VIE
or the VIE’s subsidiaries fail to obtain or keep licenses, permits or approvals required
for conducting business in China, the VIE and the VIE’s subsidiaries may incur significant
financial penalties and other government sanctions. See page 30 of this prospectus.

 

  The rules and regulations and the enforcement thereof
in China can change quickly with little advance notice. The Chinese government recently promulgated a number of laws, regulations
and policies that focus on tightening oversight of data security and overseas equity fundraising and listing by Chinese companies.
Such 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 could adversely affect us and limit the legal protections available to you and
us. The Chinese government may intervene or influence the operations of the VIE or the VIE’s subsidiaries at any time, or may
exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material
change in our operations and in the value of our Class A Ordinary Shares or 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 be worthless.
See page 32 of this prospectus.

 

  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 and 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 be worthless. See page 33 of this prospectus.

 

  We may be required to obtain permission from Chinese authorities
to operate and issue securities to foreign investors in this offering and/or listing on the Nasdaq Stock Market, and if required
and we or the VIE or the VIE’s subsidiaries are not able to obtain such permission in a timely manner, the securities currently
being offered may substantially decline in value and become worthless. The CSRC has released for public consultation the draft rules
for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into
effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment
in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our Class
A Ordinary Shares to investors and could cause the value of our Class A Ordinary Shares to significantly decline or become worthless.
We have not applied for, received or been denied approval from Chinese authorities to list on the Nasdaq Stock Market. See page 34
of this prospectus.

 

 

The PRC government
exerts substantial influence over the manner in which the VIE and the VIE’s subsidiaries
conduct business. The PRC government may also intervene or influence their operations at
any time with little or no advance notice, which could result in a material change in their
operations and our Class A Ordinary Shares could decline in value or become worthless. See
page 35 of this prospectus.

 

  Regulation and censorship of information disseminated over the internet
in China may adversely affect the VIE’s and the VIE’s subsidiaries’ business, and the VIE and the VIE’s subsidiaries
may be liable for information displayed on, retrieved from or linked to the website and mobile application. See page 36 of this prospectus.

 

 

We must remit the offering proceeds
to PRC before they may be used to benefit the VIE’s and the VIE’s subsidiaries’
business in the PRC, and this process may take a number of months. See page 37 of this prospectus.

 

  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. See page 38 of this prospectus.

 

  The approval of the CSRC may be required in connection with this
offering, and, if required, we cannot predict whether we or the VIE or the VIE’s subsidiaries will be able to obtain such approval.
Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated by relevant PRC regulatory
agencies in the future could delay this offering and failure to obtain any such approvals, if required, could have a material adverse
effect on our business, operating results and reputation as well as the trading price of our Class A Ordinary Shares, and could also
create uncertainties for this offering. See page 39 of this prospectus.

 

  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.
See page 42 of this prospectus.

 

Risks Related to Our Public Offering and
Ownership of Our Class A Ordinary Shares

 

  The dual class structure of our Class A Ordinary Shares and Class
B Ordinary Shares has the effect of concentrating voting control with our CEO, directors and their affiliates. See page 55 of this
prospectus.

 

  Trading of our securities may be prohibited under the Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate our auditor in the future and as a
result Nasdaq may determine not to list our securities. See page 57 of this prospectus.

 

  Prior to this offering, there has been no public market for our
securities. The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance,
and you may not be able to resell your shares at or above the public offering price. See page 59 of this prospectus.

 

  We do not intend to pay dividends for the foreseeable future. See
page 60 of this prospectus.

 

Risks Related to Our Business and Industry

 

  The VIE and the VIE’s subsidiaries 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. See page 47 of this prospectus.

 

  If the market for the SaaS solutions develops more slowly than we
expect, our operating results would be adversely affected. See page 48 of this prospectus.

 

  The business of the VIE and the VIE’s subsidiaries is susceptible
to changes in China’s national economic conditions. See page 48 of this prospectus.

 

  The VIE and the VIE’s subsidiaries 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.
See page 51 of this prospectus.

 

  The financial and operating performance of the VIE and the VIE’s
subsidiaries may be adversely affected by epidemics, natural disasters and other catastrophes. See page 53 of this prospectus.

 

  We have identified material weaknesses in our internal control over
financial reporting. If we fail to implement and maintain an effective system of internal control, we may be unable to accurately
report our operating results, meet our reporting obligations or prevent fraud. See page 54 of this prospectus.

 

 

 

Caibaoyun relies on a third-party supplier for
the SaaS platform customization and development services. Any interruption in operations at the third-party supplier could prevent
or limit their ability to meet demand for or fulfill orders of the services of the VIE and the VIE’s subsidiaries. See page
54 of this prospectus.

 

 

 

Implications
of Being an Emerging Growth Company

 

As
a company with less than $1.07 billion in revenue during our last fiscal year, Sancai Holding qualifies 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 generally applicable to 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;

 

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 CEO 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
until our second annual report on Form 20-F following the effectiveness of our initial public
offering.

 

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.

 

Under the JOBS Act, we may take advantage
of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant
to a prospectus declared effective under the Securities Act of 1933, as amended (the “Securities Act”), or such earlier time
that Sancai Holding no longer meets the definition of an emerging growth company. The JOBS Act provides that Sancai Holding would cease
to be an “emerging growth company” if we have more than $1.07 billion in annual revenue, have more than $700 million in market
value of our Ordinary Share held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a
three-year period.

 

 

 

Foreign
Private Issuer Status

 

Sancai Holding is a foreign private issuer within
the meaning of the rules under 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;

 

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.

 

We may take advantage of these exemptions until
such time as Sancai Holding is no longer a foreign private issuer. Sancai Holding would cease to be a foreign private issuer at such
time when more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances
applies: (1) the majority of our executive officers or directors are U.S. citizens or residents; (2) more than 50% of our assets are
located in the United States; or (3) our business is administered principally in the United States.

 

We
have taken advantage of certain reduced reporting and other requirements in this prospectus. Accordingly, the information contained herein
may be different than the information you receive from other public companies in which you hold equity securities.

 

 

 

 

Implication
of Being a Controlled Company

 

Sancai Holding is and will be a “controlled
company” as defined under the Nasdaq Stock Market Rules as our Chief Executive Officer and Chairman of the Board, Mr. Ning Wen
indirectly owns and holds more than 50% of the voting right represented by our outstanding Class A Ordinary Shares and Class B Ordinary
Shares. For so long as Sancai Holding is a controlled company under that definition, Sancai Holding is permitted to elect to rely, and
may 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.

 

As
a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance
requirements.

 

Although we do not intend to rely on the “controlled
company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption after we complete this offering. If
we elected to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be
independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent
directors after we complete this offering. (See “Risk Factors – Risks Related to Our Corporate Structure – As
a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt Sancai Holding from certain
corporate governance requirements that could have an adverse effect on our public shareholders.”)

 

Additionally,
pursuant to Nasdaq’s phase-in rules for newly listed companies, we have one year from the date on which we are first listed
on Nasdaq to comply fully with the Nasdaq listing standards. We do not plan to rely on the phase-in rules for newly listed companies
and will comply fully with the Nasdaq listing standards at the time of listing.

 

 

 

 

Selected Financial Information

 

In the table below, we provide you with historical
selected financial data for the years ended September 30, 2021 and 2020. This information is derived from our consolidated financial
statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected
for any future period. When you read this historical selected financial data, it is important that you read it along with the historical
financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included elsewhere in this prospectus.

 

    For Fiscal Years Ended September 30,  
    2021     2020  
    (audited)     (restated)  
Statement of operation data:            
Revenue   $ 7,888,791     $ 3,651,817  
Gross profit     4,764,269       3,546,848  
Total operating expenses     3,496,
034
      4,205,806  
Operating income (loss)     1,268,235       (658,958 )
Total other income (expenses)     (10,620 )     157,394  
Income taxes (expenses) benefits     (77,763 )     4,497  
Income (loss) from continuing operations     1,179,852       (497,067 )
Loss from discontinued operations     (253,134 )     (324,205 )
Net (loss) income     926,718       (821,272 )
Total comprehensive income (loss)   $ 1,100,862     $ (666,518 )
Income (loss) per share, basic and diluted, Class A Ordinary Shares   $ 0.09     $ (0.08 )
Income (loss) per share, basic and diluted, Class B Ordinary Shares   $ 0.62     $ (0.55 )
Weighted average ordinary shares outstanding, Class A Ordinary Shares     10,000,000       10,000,000  
Weighted average ordinary shares outstanding, Class B Ordinary Shares     1,500,000       1,500,000  

 

    As of September 30,  
    2021     2020  
    (audited)     (restated)  
Balance sheet data            
Current assets   $ 6,208,963     $ 19,447,887  
Total assets     6,389,008       26,801,999  
Total liabilities     2,353,554       23,869,344  
Total equity   $ 4,035,454     $ 2,932,655  

 

 

The following amounts and balances of VIE
and its subsidaires, Sancai WOFE, Sancai Holding’s subsidiaries (excluding Sancai WFOE) and Sancai Holding that were included in
the consolidated financial statements:

 

    VIE
AND VIE’S
SUBSIDIARIES
    SANCAI
WOFE
    SUBSIDIARIES
(EXCLUDING
SANCAI
WFOE)
    SANCAI

HOLDING
    TOTAL     ELIMINATING
ENTRIES
    CONSOLIDATED
BALANCE
 
    September 30,     September 30,     September
30,
    September 30,     September 30,     September
30,
    September
30,
 
    2021     2021     2021     2021     2021     2021     2021  
Assets                                          
Current assets                                          
Cash and cash equivalents   $ 3,215,239     $ 10     $ 3     $ 15     $ 3,215,267     $     $ 3,215,267  
Accounts
receivable
    58,213                         58,213               58,213  
Prepaid
expenses and other current assets
    2,892,918                         2,892,918             2,892,918  
Other
receivables
    42,565                         42,565             42,565  
Amounts
due from non-VIE subsidiaries of the Company
    130,958       1,290,604                   1,421,562       (1,421,562 )      
Total
current assets
    6,339,893       1,290,614       3       15       7,630,525       (1,421,562 )     6,208,963  
Non-current
assets
                                                       
Long-term
investment
                10,000       1,276       11,276       (11,276 )      
Operating
lease right-of-use assets
    180,045                         180,045             180,045  
Total
non-current assets
    180,045             10,000       1,276       191,321       (11,276 )     180,045  
Total
Assets
    6,519,938       1,290,6140       10,003       1,291       7,821,846       (1,432,838 )     6,389,008  
                                                         
Liabilities
and Shareholders’ Equity
                                                       
Current
liabilities
                                                       
Contracts
liabilities
    753,033                         753,033             753,033  
Other
payable and accruals
    1,366,731       155                   1,366,886             1,366,886  
Income
tax payable
    40,311                         40,311             40,311  
due
to non-VIE subsidiaries of Sancai Holding
    1,290,604             66,029       64,089       1,420,722       (1,420,722 )      
Related
party payable
    7,743             3,924       1,612       13,279             13,279  
Current
portion of operating leases
    166,381                         166,381             166,381  
Total
current liabilities
    3,624,803       155       69,953       65,701       3,760,612       (1,420,722 )     2,339,890  
Non-current
liabilities
                                                       
Operating
leases, net of current portion
    13,664                         13,664             13,664  
Total
non-current liabilities
    13,664                         13,664             13,664  
Total
Liabilities
  $ 3,638,467     $ 155     $ 69,953     $ 65,701     $ 3,774,276     $ (1,420,722 )   $ 2,353,554  

 

 

    VIE
AND VIE’S
SUBSIDIARIES
    SANCAI
WOFE
    SUBSIDIARIES
(EXCLUDING
SANCAI
WFOE)
    SANCAI
HOLDING
    TOTAL     ELIMINATING
ENTRIES
    CONSOLIDATED
BALANCE
 
    September
30,
    September 30,     September
30,
    September
30,
    September 30,     September 30,     September 30,  
    2020
(restated)
    2020
(restated)
    2020

(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
 
Assets                                          
Current
assets
                                         
Cash and cash equivalents   $ 7,360,097     $ 90     $     $     $ 7,366,979     $     $ 7,366,979  
Accounts
receivable
    21,495                         21,495               21,495  
Prepaid
expenses and other current assets
    867,245                         867,245             867,245  
Other
receivables
    110,046                         110,046               110,046  
Amounts
due from non-VIE subsidiaries of Sancai Holding
    16,079                         16,079       (16,079 )      
Contract
cost
    196,737                         196,737             196,737  
Related
party receivable
    142,915                         142,915             142,915  
Discontinue
operations – current assets
    10,742,470                         10,742,470             10,742,470  
Total
current assets
    19,463,876       90                   19,463,966       (16,079 )     19,447,887  
Non-current
assets
                                                       
Long-term
investment
                1,276       10,000       11,276       (11,276 )      
Operating
lease right-of-use assets
    321,652                         321,652             321,652  
Deferred
tax assets
    36,302                               36,302             36,302  
Discontinued
operations – non-current assets
    6,996,158                         6,996,158             6,996,158  
Total
non-current assets
    7,354,112             1,276       10,000       7,365,388       (11,276 )     7,354,112  
Total
Assets
    26,817,988       90       1,276       10,000       26,829,354       (27,355 )     26,801,999  
                                                         
Liabilities
and Shareholders’ Equity
                                                       
Current
liabilities
                                                       
Other
payable and accruals
    605,458       147                   605,605             605,605  
Contract
liabilities
    3,420,009                         3,420,009             3,420,009  
Intercompany
payable
                700       15,379       16,079       (16,079 )      
Related
party payable
    1,463,866             1,612       3,923       1,469,401             1,469,401  
Current
portion of operating leases
    150,729     $                   150,729             150,729  
Discontinued
operations – current liabilities
    14,681,605                               14,681,605               14,681,605  
Total
current liabilities
    20,321,667       147       2,312       19,302       20,343,428       (16,079 )     20,327,349  
Non-current
liabilities
                                                       
Operating
leases, net of current portion
    170,924                         170,924             170,924  
Discontinued
operations  – non-current liabilities
    3,371,071                         3,371,071             3,371,071  
Total
non-current liabilities
    3,541,995                         3,541,995               3,541,995  
Total
Liabilities
  $ 23,863,662     $ 147     $ 2,312     $ 19,302     $ 23,885,423     $ (16,079 )   $ 23,869,344  

 

 

The summarized operating results of the VIE
and the VIE’s subsidiaries, Sancai WOFE, Sancai Holding’s subsidiaries (excluding Sancai WFOE) and Sancai Holding are as
follows:

 

    VIE
AND VIE’S
SUBSIDIARIES
    SANCAI
WFOE
    SUBSIDIARIES
(EXCLUDING
SANCAI
WFOE)
    SANCAI
HOLDING
    TOTAL     ELIMINATING
ENTRIES
    CONSOLIDATED
BALANCE
 
    September 
30,
    September 30,     September 30,     September 30,     September 30,     September 30,     September 30,  
    2021     2021     2021     2021     2021     2021     2021  
Operating revenues     7,888,791       1,282,224                   9,171,015       (1,282,224 )     7,888,791  
Gross
profit
    4,764,269       1,282,224                   6,046,493       (1,282,224 )     4,776,995  
Income
(loss) from operations
  $ 100,032     $ 1,282,224     $ (63,374 )   $ (50,647 )   $ 1,268,235     $     $ 1,268,235  
Net
income (loss)
    (241,400 )     1,282,139       (63,374 )   $ (50,647 )     926,718             926,718  

 

    VIE
AND VIE’S
SUBSIDIARIES
    SANCAI
WFOE
    SUBSIDIARIES
(EXCLUDING
SANCAI
WFOE)
    SANCAI
HOLDING
    TOTAL     ELIMINATING
ENTRIES
    CONSOLIDATED
BALANCE
 
    September 30,     September 30,     September
30,
    September 30,     September 30,     September 30,     September
30,
 
    2020

(restated)
    2020
(restated)
    2020

(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
    2020

(restated)
 
Operating revenues   $ 3,651,817           $     $     $ 3,651,817           $ 3,651,817  
Gross
profit
    3,546,848                         3,546,848             3,546,848  
Income
(loss) from operations
  $ (642,824 )     (55 )   $ (700 )   $ (15,379 )   $ (658,958 )         (658,958 )
Net
loss
  $ (805,138 )   $ (55 )   $ (700 )   $ (15,379 )   $ (821,272 )   $                             $ (821,272 )

   

 

The summarized cash flows results of the VIE
and the VIE’s subsidiaries, Sancai WOFE, Sancai Holding’s subsidiaries (excluding Sancai WFOE) and Sancai Holding are as
follows:

 

    VIE
AND VIE’S
SUBSIDIARIES
    SANCAI
WFOE
    SUBSIDIARIES
(EXCLUDING
SANCAI
WFOE)
    SANCAI
HOLDING
    TOTAL     ELIMINATING
ENTRIES
    CONSOLIDATED
BALANCE
 
    September 30,     September 30,     September
30,
    September 30,     September 30,     September
30,
    September
30,
 
    2021     2021     2021     2021     2021     2021     2021  
Net cash provided
by (used in) operating activities
  $ (3,038,225 )   $ (80 )   $ (63,374 )   $ (50,647 )   $ (3,152,326 )   $     $ (3,152,326 )
Net
cash provided by investing activities
    153,872                         153,872             153,872  
Net
cash provided by (used in) financing activities
    (1,428,698 )           48,710       50,650       (1,329,338 )           (1,329,338 )
Effect
of foreign currency translation on cash and cash equivalents
    161,401             14,679     $       176,080             176,080  
Net
increase (decrease) of cash and cash equivalents
  $ (4,151,650 )   $ (80 )   $ 15     $ 3     $ (4,151,712 )                       $ (4,151,712 )

 

    VIE
AND VIE’S
SUBSIDIARIES
    SANCAI
WFOE
    SUBSIDIARIES
(EXCLUDING
SANCAI
WFOE)
    SANCAI
HOLDING
    TOTAL     ELIMINATING
ENTRIES
    CONSOLIDATED
BALANCE
 
    September
30,
    September
30,
    September
30,
    September 30,     September 30,     September
30,
    September
30,
 
    2020
(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
    2020
(restated)
 
Net cash provided
by (used in) operating activities
  $ (1,928,135 )   $ 92     $ (700 )   $ (15,379 )   $ (1,944,122 )   $     $ (1,944,122 )
Net
cash provided by investing activities
                                         
Net
cash provided by financing activities
  $ 8,500,316             700       15,379       8,516,395             8,516,395  
Effect
of foreign currency translation on cash and cash equivalents
    794,522       (2 )                 794,520             794,520  
Net
increase of cash and cash equivalents
  $ 7,366,703     $ 90     $     $     $ 7,366,793                            $ 7,366,793  

 

The VIE and the VIE’s subsidiaries contributed
100% of the consolidated net revenues for the years ended September 30, 2021 and September 30, 2020, respectively. As of September 30,
2021 and 2020, the VIE and the VIE’s subsidiaries accounted for almost 100% of the consolidated total assets respectively.

 

 

 

The
Offering

 

Issuer:   Sancai Holding Group Ltd, a Cayman Islands exempt holding company
     
Securities Offered:   [●] Class A Ordinary Shares (excluding the Over-Allotment Option discussed below)
     
Price per Security:   $ [●]
     
Over-Allotment Option:   We have granted to the Underwriter the option,
exercisable for 45 days from the date this registration statement is declared effective by the SEC, to purchase up to an additional
15% of the total number of Class A Ordinary Shares to be offered by Sancai Holding in this offering.  
     
Capitalization:   As of the date of this prospectus, the authorized share
capital of Sancai Holding is $50,000 divided into (i) 400,000,000 Class A Ordinary Shares, par value $0.0001 per share; and (ii)
100,000,000 Class B Ordinary Shares, par value $0.0001 per share, of which 10,000,000 Class A Ordinary Shares and 1,500,000 Class
B Ordinary Shares are issued and outstanding. See “Description of Share Capital.
     
Class A Ordinary Shares to be Outstanding after the Offering:  

Class A Ordinary Shares  or [●] Class
A Ordinary Shares if the Underwriter exercises the Over-Allotment Option in full.   The numbers do not include
any of the up to [●] Class A Ordinary Shares underlying the Underwriter Warrants.

 

         
Voting Rights:     Class A Ordinary Shares are entitled to one (1) vote per share.
         
      Class B Ordinary Shares are entitled to ten (10) votes per share.
         
      Class A and Class B Shareholders will vote together as a single class, unless otherwise required by law or our amended and restated memorandum and articles of association.
         
      Mr. Ning Wen, the Chairman of our Board of Directors and Chief Executive Officer, will hold approximately [●]% to [●]% of the total votes, depending on whether the Underwriter exercises its Over-Allotment Option or not, for our issued and outstanding share capital following the completion of this offering and will have the ability to control the outcome of matters submitted to our shareholders for approval, including the election of our directors and the approval of any change in control transaction. See the sections titled “Security Ownership of Certain Beneficial Owners and Management” and “Description of Share Capital” for additional information.
         
Gross Proceeds:   $[●] or $ [●] if the Underwriter exercises
the Over-Allotment Option in full, less   Underwriter discounts, non-expense allowance and estimated offering expenses.  See
“Underwriting.”
     
Risk Factors:   Investing in these securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section of this prospectus starting on page 25 before deciding to invest in our Class A Ordinary Shares.
     
Use of Proceeds:   We intend to use the proceeds from this offering for technology research and development and business expansion. See “Use of Proceeds” for more information.
     
Dividend Policy:   We have no present plans to declare dividends and plan to retain our earnings to continue to grow our business.
     
Transfer Agent:   Vstock Transfer, LLC
     
Exchange:   We have applied to list our Class A Ordinary Shares on the Nasdaq Capital Market (Nasdaq-CM). We will not complete this offering unless our application to list on the Nasdaq Capital Market is approved. We cannot guarantee that we will be successful in listing on Nasdaq.
     
Trading Symbol:   SCIT (reserved)

 

 

RISK
FACTORS

 

Before
you decide to purchase our Class A Ordinary Shares, you should understand the high degree of risk involved. You should consider carefully
the following risks and other information in this prospectus, including our consolidated financial statements and related notes. If any
of the following risks actually occur, our business, financial condition and operating results could be adversely affected. As a result,
the trading price of our Class A Ordinary Shares could decline, perhaps significantly.

 

Risks Related to Our Corporate Structure

 

We do not hold direct equity interest in
Sancaijia. In February, Sancai WFOE, our subsidiary, Sancaijia and shareholders of Sancaijia entered into a series of contractual agreements
(the “VIE Agreements”) that established the VIE structure. Sancaijia is referred to as the “VIE”. We have evaluated
the guidance in FASB ASC 810 and determined that Sancai WFOE is the primary beneficiary of Sancaijia and its subsidiaries, for accounting
purposes, based upon such contractual arrangements. Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. Accordingly,
we consolidate the financial results of the VIE and its subsidiaries into our consolidated financial statements under U.S. GAAP. See
“Corporate History and Structure” for further details. The VIE Agreements have not been tested in a court of law. The VIE
structure involves unique risks to investors, as set forth in the following risk factors.

 

Scancai Holding is a holding company
with no material operation. Sancai WFOE entered into the VIE Agreements with Sancaijia, the consolidated variable interest entity, and
its shareholders that established the VIE structure. Sancaijia and its subsidiaries conduct business in China. If the PRC government
deems that the VIE structure 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 would not be able to enforce the VIE Agreements and
could be subject to severe penalties or be forced to relinquish our interests in those operations.

 

Investors are cautioned that you are not buying
shares of a China-based operating company but instead are buying shares of a holding company that does not have material operations.
Sancai Holding and our PRC subsidiary has nominal operations or assets.

 

Sancaijia and its subsidiaries conduct telecommunications-related
businesses in China. The PRC government regulates telecommunications-related businesses through strict business licensing requirements
and other government regulations. These laws and regulations also include limitations on foreign ownership of PRC companies that engage
in telecommunications-related businesses. Specifically, foreign investors are not allowed to own more than 50% of the equity interests
in a value-added telecommunications service provider (except for e-commerce, domestic multi-party communication, storage and forwarding
classes and call centers) under the Special Administrative Measures for Access of Foreign Investment (Negative List) (Edition 2021),
which was promulgated on December 27, 2021 and became effective on January 1, 2022, and such major foreign investor in a Foreign-Invested
Telecommunications Enterprise must have the funds and professionals commensurate with its business operation in accordance with the Administrative
Provisions on Foreign-Invested Telecommunications Enterprises (revised in 2022), and other applicable laws and regulations.

 

Sancai Holding is an exempted company incorporated
under the laws of the Cayman Islands, which is classified as a foreign enterprise under PRC laws and regulations, and Sancai WFOE, our
wholly foreign-owned enterprise in the PRC, is considered as a foreign-invested enterprise. Accordingly, Sancai WFOE is not eligible
to operate VATS business in China. To comply with PRC laws and regulations, in February 2020, Sancai WFOE entered into a series of contractual
arrangements with Sancaijia and its shareholders. We have evaluated the guidance in FASB ASC 810 and determined that Sancai WFOE is the
primary beneficiary of Sancaijia and its subsidiaries, for accounting purposes, based upon such contractual arrangements. Sancai Holding
has indirect ownership in 100% of the equity in Sancai WFOE. Accordingly, we consolidate the financial results of the VIE and the VIE’s
subsidiaries into our consolidated financial statements under U.S. GAAP. For a description of our corporate structure and VIE Agreements,
see “Corporate History and Structure” for further details.

 

The VIE and the VIE’s subsidiaries contributed
substantially all of the consolidated results of operations and cash flows for the years ended September 30, 2021 and 2020, respectively.
As of September 30, 2021 and 2020, the VIE and the VIE’s subsidiaries accounted for substantially all of the consolidated total
assets and total liabilities.

 

In the opinion of B&D Law Firm, our PRC
legal counsel, each of the VIE Agreements among Sancai WFOE, Sancaijia and its shareholders governed by PRC laws are valid, binding and
enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However, 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. The VIE Agreements have not been tested in a court of law. 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 the VIE’s shareholding structure.

 

As there are substantial uncertainties regarding
the interpretation and application of PRC laws and regulations, including the Foreign Investment Law of the PRC and the Regulations on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors and the relevant regulatory measures, there can be no assurance
that the PRC government authorities would ultimately agree that our corporate structure or any of the above contractual arrangements
comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that
may be adopted in the future.

 

 

If our corporate structure and contractual
arrangements are deemed by the MIIT or the Ministry of Commerce of the PRC (the “MOFCOM”) or other regulators having competent
authority to be illegal, either in whole or in part, we may 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 the VIE is
found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits
or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures,
including, without limitation:

 

  revoking the business license and/or operating
licenses of Sancai WFOE or the VIE or the VIE’s subsidiaries;

 

  discontinuing or placing restrictions or onerous conditions on our
operations through any transactions among Sancai WFOE and the VIE and the VIE’s subsidiaries;

 

  imposing fines, confiscating the income from Sancai WFOE and the
VIE and the VIE’s subsidiaries, or imposing other requirements with which we or the VIE or the VIE’s subsidiaries 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 Sancaijia and deregistering the equity pledges of Sancaijia,
which in turn would affect our ability to consolidate or derive economic interests from Sancaijia; 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.

 

Furthermore, new PRC laws, rules and regulations
may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. See
“Risks Related to Our Corporate Structure—Substantial uncertainties exist with respect to the interpretation and implementation
of the newly enacted PRC Foreign Investment Law and its Implementation Regulations and how they may impact the viability of our current
corporate structure, corporate governance, business operations and financial results.” Occurrence of any of these events could
materially and adversely affect our business and financial condition and results of operations.

 

The imposition of any of these penalties would
result in a material and adverse effect on our ability to conduct our business. 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 the 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 or if these regulations change or are interpreted differently in the future. If the imposition of any of these government
actions causes us to lose our right to direct the activities of the VIE or our right to receive substantially all the economic benefits
and residual returns from the VIE and we are not able to restructure our ownership structure and operations in a satisfactory manner,
we would no longer be able to consolidate the financial results of the VIE in our consolidated financial statements. Either of these
results, or any other significant penalties that might be imposed on us in this event, would have a material change in our operation
and a material adverse effect on our financial condition and results of operations, could significantly limit or completely hinder our
ability to offer securities to investors and could cause the value of our securities to significantly decline or be worthless.

 

We do not hold direct equity interest
in Sancaijia, the consolidated variable interest entity. We rely on the VIE Agreements with Sancaijia and its shareholders for a large
portion of our business operations, which may not be as effective as direct ownership in providing operational control.

 

Sancai Holding is a Cayman Islands holding
company and does not hold direct equity interest in Sancaijia. We have relied and expect to continue to rely on the VIE Agreements with
Sancaijia and its shareholders to operate our business. For a description of these VIE Agreements, see “Corporate History and Structure.”
These VIE Agreements may not be as effective as direct ownership in providing us with control over Sancaijia. For example, Sancaijia
and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations,
including maintaining the website and using the domain names and trademarks, in an acceptable manner or taking other actions that are
detrimental to our interests.

 

All of the VIE Agreements 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 the 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.

 

 

If we had direct ownership of Sancaijia, we
would be able to exercise our rights as a shareholder to effect changes in the board of directors of Sancaijia, 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 Sancaijia, and its shareholders of their obligations under the contracts. The shareholders
of Sancaijia 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 our business through the contractual arrangements with Sancaijia. Although
we have the right to replace any shareholder of Sancaijia under their respective contractual arrangements, if any shareholder of Sancaijia
is uncooperative or any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts
through the operations of PRC laws and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties
in the PRC legal system. See “— Any failure by Sancaijia, the 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”
below. Therefore, our contractual arrangements with Sancaijia may not be as effective in ensuring our control over the relevant portion
of Sancaijia’s business operations as direct ownership would be. If we are unable to assert our contractual rights over the assets
of the consolidated variable interest entity that conduct all of our operations, our securities may decline in value or become worthless.

 

We
may not be able to consolidate the financial results of some of our affiliated companies or such consolidation could materially adversely
affect our operating results and financial condition.

 

Sancai Holding is a holding company with no
material operation. In February 2020, Sancai WFOE, Sancaijia and shareholders of Sancaijia entered into the VIE Agreements that established
the VIE structure. We have evaluated the guidance in FASB ASC 810 and determined that Sancai WFOE is the primary beneficiary of Sancaijia
and its subsidiaries, for accounting purposes, based upon such contractual arrangements. Sancai Holding has indirect ownership in 100%
of the equity in Sancai WFOE. Accordingly, under U.S. GAAP, we treat Sancaijia and its subsidiaries as consolidated affiliated entities
and have consolidated the results of the VIE in our financial statements.  In the event that in the future Sancaijia would no longer
meet the definition of a VIE, or Sancai WFOE is deemed not to be the primary beneficiary, we would not be able to consolidate line by
line that the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements for PRC purposes.
Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary, we would be required to consolidate
that entity’s financial results in our consolidated financial statements for PRC purposes. If such entity’s financial results
were negative, this could have a corresponding negative impact on our operating results for PRC purposes. However, any material variations
in the accounting principles, practices, and methods used in preparing financial statements for PRC purposes from the principles, practices,
and methods generally accepted in the United States and in the SEC accounting regulations must be discussed, quantified, and reconciled
in financial statements for the United States and SEC purposes.

 

Any failure by Sancaijia, the 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.

 

We refer to the shareholders of Sancaijia
as its nominee shareholders because although they remain the holders of equity interests on record in Sancaijia, pursuant to the terms
of the relevant power of attorney, such shareholders have irrevocably authorized the individual appointed by Sancai WFOE to exercise
their rights as a shareholder of Sancaijia. If Sancaijia, or its shareholders fail to perform their respective obligations under the
contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may
also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages,
which we cannot assure you will be effective under PRC laws. For example, if the shareholders of Sancaijia were to refuse to transfer
their equity interest in Sancaijia to us or our designee if we exercise the purchase option pursuant to these contractual arrangements,
or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual
obligations.

 

All the agreements under our contractual arrangements
are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would
be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system
in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal
system could limit our ability to enforce these contractual arrangements. See “Risks Related to Doing Business in China—
The rules and regulations and the enforcement thereof in China can change quickly with little advance notice. The Chinese government
recently promulgated a number of laws, regulations and policies that focus on tightening oversight of data security and overseas equity
fundraising and listing by Chinese companies. Such 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 could adversely affect us and limit the legal
protections available to you and us. The Chinese government may intervene or influence the operations of the VIE or the VIE’s subsidiaries
at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could
result in a material change in our operations and in the value of our Class A Ordinary Shares or 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
be worthless.” Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context
of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding
the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are
final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent
court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only
enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses
and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles
in the process of enforcing these contractual arrangements, we may not be able to exert effective control over the VIE, and if we are
unable to assert our contractual rights over the assets of the VIE, our securities may decline in value or become worthless.

 

 

The shareholders of Sancaijia, the consolidated
variable interest entity, may have potential conflicts of interest with us, which may materially and adversely affect our business and
financial condition.

 

The shareholders of Sancaijia may have potential
conflicts of interest with us. The interests of shareholders of Sancaijia may differ from the interests of our Company as a whole, as
what is in the best interests of Sancaijia, including matters such as whether to distribute dividends or to make other distributions
to fund our offshore requirement, may not be in the best interests of our Company. These shareholders may breach, or cause Sancaijia
to breach, the existing contractual arrangements we have with them and Sancaijia, which would have a material adverse effect on our ability
to receive economic benefits from it. For example, the shareholders may be able to cause our agreements with Sancaijia 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.

 

Currently, we do not have any arrangements
to address potential conflicts of interest between these shareholders and our Company. We, however, could, at all times, exercise our
call options under the exclusive call option agreement to cause them to transfer all of their equity interest in Sancaijia to Sancai
WFOE and/or any other entity or individual so designated by Sancai WFOE as permitted by the then applicable PRC laws. In addition, if
such conflicts of interest arise, Sancai WFOE could also, in the capacity of attorney-in-fact of the then existing shareholders of Sancaijia
as provided under the shareholder voting proxy agreement, directly appoint new directors of Sancaijia. We rely on the shareholders of
Sancaijia 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.
If we cannot resolve any conflict of interest or dispute between us and the shareholders of Sancaijia, we would have to rely on legal
proceedings, which could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any
such legal proceedings.

 

Contractual arrangements in relation
to Sancaijia, the consolidated variable interest entity, may be subject to scrutiny by the PRC tax authorities and they may determine
that Sancai WFOE or the VIE or the VIE’s subsidiaries owe additional taxes, which could negatively affect our financial condition
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 his 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 among Sancai
WFOE, our wholly-owned subsidiary in China, Sancaijia, the consolidated variable interest entity in China, and the shareholders of Sancaijia,
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 Sancai WFOE’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 Sancaijia for PRC tax purposes,
which could in turn increase its tax liabilities without reducing the tax expenses of Sancai WFOE. Furthermore, the PRC tax authorities
may impose late payment fees and other penalties on Sancaijia for the adjusted but unpaid taxes according to the applicable regulations.
Our financial position could be materially and adversely affected if the VIE’s or the VIE’s subsidiaries’ tax liabilities
increase or if they are required to pay late payment fees and other penalties.

 

 

We may lose the ability to use and benefit
from assets held by Sancaijia, the consolidated variable interest entity, that are material to the operation of our business if the entity
goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

 

Sancaijia, the consolidated variable interest
entity, holds certain assets that are material to its business operation, including intellectual property. Under the contractual arrangements,
the consolidated variable interest entity may not and its shareholders may not cause it to, in any manner, sell, transfer, mortgage or
dispose of its assets or its legal or beneficial interests in the business without our prior consent. However, in the event Sancaijia’s
shareholders breach these contractual arrangements and voluntarily liquidate Sancaijia, or Sancaijia declares bankruptcy and all or part
of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be
unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition
and results of operations. If Sancaijia undergoes a voluntary or involuntary liquidation proceeding, independent 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.

 

Sancai Holding is a holding company,
and the investors will have ownership in a holding company that does not directly own any of the business operations of Sancaijia and
its subsidiaries in China. We may rely on dividends paid by our subsidiaries for our cash needs, and any limitation on the ability of
our subsidiaries to pay dividends to us, or any tax implications of making dividend payments to us, could have a material adverse effect
on our ability to pay dividends to holders of our Class A Ordinary Shares.

 

Sancai Holding a holding company and the investors
will have ownership in a holding company that does not directly own any of the business operations of Sancaijia and its subsidiaries
in China. We may rely on dividends to be paid by our subsidiaries 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 any of our subsidiaries incur debt in the future, the instruments governing the debt may restrict such subsidiary’s ability
to pay dividends or make other distributions to us.

 

Under PRC laws and regulations, Sancai WFOE,
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.

 

Sancai WFOE primarily holds assets in Renminbi,
which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of Sancai
WFOE to use its Renminbi assets 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 Sancai
WFOE 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 Sancai WFOE 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.

 

 

Substantial
uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its Implementation
Regulations and how they may impact the viability of our current corporate structure, corporate governance, business operations and financial
results.

 

On
March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which came into effect on January 1,
2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise
Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation
rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment
regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements
for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation
and implementation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities
directly or indirectly conducted by foreign individuals, enterprises or other entities in China but it does not explicitly stipulate
the contractual arrangements as a form of foreign investment. On December 26, 2019, the State Council promulgated the Implementation
Regulations on the Foreign Investment Law, which came into effect on January 1, 2020. However, the Implementation Regulations on
the Foreign Investment Law still remains silent on whether contractual arrangements should be deemed as a form of foreign investment.

 

The
“variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain
necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Though these
regulations do not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment
via contractual arrangements would not be interpreted as a type of indirect foreign investment activities under the definition in the
future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through
means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, the Foreign Investment
Law still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual
arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be
deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations.

 

The Foreign Investment Law grants national
treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either “restricted”
or “prohibited” from foreign investment in a “negative list.” The Foreign Investment Law provides that foreign-invested
entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals
from relevant PRC government authorities. On June 30, 2019, the MOFCOM and the National Development and Reform Commission (the “NDRC”)
jointly issued the Negative List (Edition 2019). The latest version of the Negative List (Edition 2021) was issued on December 27, 2021,
which took effect on January 1, 2022 and supersede the previous lists. See “Regulations—Regulations relating to Foreign Investment-The
Guidance Catalogue of Industries for Foreign Investment.” The value-added telecommunications services that we conduct through the
consolidated VIE is subject to foreign investment restrictions/prohibitions set forth in Negative List (Edition 2021). It is unclear
whether any new “negative list” to be promulgated or amended under the PRC Foreign Investment Law will be different from
the foregoing lists that already exist. And it is uncertain whether our corporate structure will be deemed as violating foreign investment
rules as we are currently using the contractual arrangements to operate certain businesses in which foreign investors are currently prohibited
from or restricted to investing. If our contractual arrangements with the VIE are deemed as foreign investment in the future, and any
business of the VIE is “restricted” or “prohibited” from foreign investment under the then-effective “negative
list,” we may be deemed to be in violation of the Foreign Investment Law, the contractual arrangements that allow us to consolidate
the financial results of the VIE may be deemed as invalid and illegal, and we may be required to unwind such contractual arrangements
and/or restructure our business operations, any of which may have a material adverse effect on our business operation.

 

Furthermore,
if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies
with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in
a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance
challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

 

Risks
Related to Doing Business in China

 

If the VIE and the VIE’s subsidiaries
fail to obtain or keep licenses, permits or approvals required for conducting business in China, the VIE and the VIE’s subsidiaries
may incur significant financial penalties and other government sanctions.

 

The
internet information services industries in China are highly regulated by the PRC government. The PRC government extensively regulates
the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet
industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve
significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed
to be in violation of applicable laws and regulations.

 

 

The website is maintained by Sancaijia. We
do not directly own the website due to the restriction of foreign investment in businesses providing value-added telecommunication services
in China, including internet information provision services. This may significantly disrupt our business, subject us to sanctions, compromise
enforceability of related contractual arrangements, or have other harmful effects on us. On September 25, 2000, the State Council issued
the PRC Regulations on Telecommunications, or the Telecom Regulations, as last amended on February 6, 2016, to regulate telecommunications
activities in China. Pursuant to the Telecom Regulations, if operating telecommunications business without authorization or beyond one’s
scope of business, the State Council’s department in charge of the information industry or the telecommunications administration
authority of the province, autonomous region or municipality directly under the central government shall ex officio order rectification
of the matter, confiscate the illegal income and impose a fine of not less than three times and not more than five times the illegal
income; if there is no illegal income or if the illegal income is less than CNY50,000, it shall impose a fine of not less than CNY100,000
and not more than CNY1 million; if the case is serious, it shall order the perpetrator to suspend operations and undergo rectification.

 

The
evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May
2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement
of the State Council Information Office, the MITT, and the Ministry of Public Security). The primary role of this new agency is to facilitate
the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with
online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry.

 

The SaaS platform operated by the consolidated
variable interest entity, Sancaijia, shall be deemed to be providing commercial internet information services, which would require Sancaijia
to obtain value-added telecommunications business operating license. Currently, Sancaijia has obtained valid ICP and EDI License for
provision of internet information services and online data processing and transaction processing services. Before Sancaijia obtained
the above Licenses, Sancaijia had engaged in a small amount of business activities that are value-added telecommunications service (VATS)
as defined in the PRC Regulations on Telecommunications (Telecom Regulations) and the Classified Catalog of Telecommunications Services
(Catalog) since July 2019. However, as of the date of this prospectus, neither Sancaijia nor any of its subsidiaries has received any
punishment from local relevant authorities. The controlling shareholder of Sancaijia, Mr. Ning Wen, through a guarantee letter dated
August 31, 2020, promised to unconditionally and personally bear all the penalties and fines caused by operating without the ICP and
EDI Licenses which may arise in the future. Furthermore, as Sancaijia is providing mobile applications to mobile device users, it is
uncertain if Sancaijia will be required to obtain a separate operating license in addition to the ICP and EDI License. Although we believe
that not obtaining such separate license is in line with the current market practice, there can be no assurance that Sancaijia or any
of its subsidiaries will not be required to apply for an operating license for mobile applications in the future. Due to the uncertainties
of interpretation and implementation of existing and future laws and regulations, the licenses Sancaijia holds may not be sufficient
to meet regulatory requirements, which may restrain the ability to expand the business scope and may subject Sancaijia to fines or other
regulatory actions by relevant regulators if the practice is deemed as violating relevant laws and regulations. As Sancaijia further
develops and expands its business scope, Sancaijia may need to obtain additional qualifications, permits, approvals or licenses. Moreover,
Sancaijia may be required to obtain additional licenses or approvals if the PRC government adopts more stringent policies or regulations
for the industry.

 

The Circular on Strengthening the Administration
of Foreign Investment in and Operation of Value-added Telecommunications Business, issued by the MITT in July 2006, prohibits domestic
telecommunication service providers from leasing, transferring or selling telecommunications business operating licenses to any foreign
investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunications
business in China. According to this circular, either the holder of a value-added telecommunication services operation permit or its
shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunication
services. The circular also requires each license holder to have the necessary facilities, including servers, for its approved business
operations and to maintain such facilities in the regions covered by its license. Sancaijia owns the relevant domain names in connection
with the value-added telecommunications business and has the necessary personnel to operate the website. If, after obtaining its ICP
License, Sancaijia fails to comply with the requirements for ICP License holders as well as fails to remedy such non-compliance within
a specified period of time, the MITT or its local counterparts have the discretion to take administrative measures against Sancaijia,
including revoking its ICP License.

 

The interpretation and application of existing
PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial
uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses
in China, including the business of the VIE and the VIE’s subsidiaries. We cannot assure you that Sancaijia has obtained all the
permits or licenses required for conducting business in China or will be able to maintain the existing licenses or obtain new ones. If
the PRC government considers that Sancaijia operates without the proper approvals, licenses or permits or promulgates new laws and regulations
that require additional approvals or licenses or imposes additional restrictions on the operation of any part of Sancaijia’s business,
it has the power, among other things, to levy fines, confiscate Sancaijia’s income, revoke Sancaijia’s business licenses,
and require Sancaijia to discontinue its relevant business or impose restrictions on the affected portion of its business. Any of these
actions by the PRC government may have a material adverse effect on Sancaijia’s business and our results of operations.

 

 

The rules and regulations and the enforcement
thereof in China can change quickly with little advance notice. The Chinese government recently promulgated a number of laws, regulations
and policies that focus on tightening oversight of data security and overseas equity fundraising and listing by Chinese companies. Such
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 could adversely affect us and limit the legal protections available to you and us. The Chinese
government may intervene or influence the operations of the VIE and the VIE’s subsidiaries at any time, or may exert more control
over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations
and in the value of our Class A Ordinary Shares or 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 be worthless.

 

The operations of the VIE and the VIE’s
subsidiaries in China are governed by PRC laws and regulations. Sancai WFOE and the VIE and the VIE’s subsidiaries are subject
to laws and regulations applicable to foreign-invested enterprises as well as various PRC laws and regulations generally applicable to
companies incorporated in China. The PRC legal system is based on written statutes where prior court decisions have limited value as
precedents. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations
of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.

 

From time to time, we or the VIE or the VIE’s
subsidiaries 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 or the VIE or the VIE’s subsidiaries
have entered into and could materially and adversely affect our business and results of operations.

 

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.

 

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, 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. Pursuant to the Opinions, Chinese regulators are required to accelerate rulemaking related to the overseas
issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and
management of confidential information. As the Opinions was recently
issued, there are great uncertainties with respect to the interpretation and implementation thereof. The Chinese government may promulgate
relevant laws, rules and regulations that may impose additional and significant obligations and liabilities on overseas listed Chinese
companies regarding data security, cross-border data flow, and compliance with China’s securities laws. These laws and regulations
can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, change to our
data and other business practices, regulatory investigations, penalties, increased cost of operations, or declines in user growth or
engagement, or otherwise affect our business. It is uncertain whether or how these new laws, rules and regulations and the interpretation
and implementation thereof may affect us, but among other things, our ability and the ability of our subsidiaries to obtain external
financing through the issuance of equity securities overseas could be negatively affected.

 

Numerous regulations, guidelines and other
measures are expected to be adopted under the umbrella of or in addition to the Cybersecurity Law and Data Security Law. 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, and cybersecurity and data privacy protection requirements and similar matters. On July 10, 2021, the CAC
issued a revised draft of the Measures for Cybersecurity Review for public comments. Further, on January 4, 2022, thirteen PRC regulatory
agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry
of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People’s Bank of China, the National Radio and Television Administration,
National Administration of State Secrets Protection and the National Cryptography Administration, jointly adopted and published the Measures
for Cybersecurity Review (2021), which became effective on February 15, 2022. The Measures for Cybersecurity Review (2021) authorized
the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security,
and required that, among others, in addition to “operator of critical information infrastructure” any “operator of
network platform” holding personal information of more than one million users which seeks to list in a foreign stock exchange should
also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks
of the relevant activities. On November 14, 2021, the CAC released the Regulations on Network Data Security (draft for public comments),
or the draft Regulations on Network Data Security, which reiterates that data processors that process the personal information of more
than one million users listing in a foreign country should apply for a cybersecurity review. The draft Regulations on Network Data Security
will accept public comments until December 13, 2021. We do not believe the VIE or the VIE’s subsidiaries are among the “operator
of critical information infrastructure,” “data processor” carrying out data processing activities that affect or may
affect national security, or “operator of network platform” holding personal information of more than one million users as
mentioned above, however, the revised draft Regulations on Network Data Security is in the process of being formulated and subject to
further changes, and the Opinions remain unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental
authorities.

 

 

On December 24, 2021, the CSRC released the
Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft
for Comments) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for
Comments), both of which have a comment period that expires on January 23, 2022, and if enacted, may subject us to additional compliance
requirement in the future. See “Risk Factors – We may be required to obtain permission from Chinese authorities to operate
and issue securities to foreign investors in this offering and/or listing on the Nasdaq Stock Market, and if required and we or the VIE
or the VIE’s subsidiaries are not able to obtain such permission in a timely manner, the securities currently being offered may
substantially decline in value and become worthless. The CSRC has released for public consultation the draft rules for China-based companies
seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, the Chinese government
may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which
could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors and
could cause the value of our Class A Ordinary Shares to significantly decline or become worthless. We have not applied for, received
or been denied approval from Chinese authorities to list on the Nasdaq Stock Market.” Thus, it is still uncertain as to how PRC
governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals
or to fulfill any record-filing requirements. In addition, if we do not receive any required approvals or record-filing or if we incorrectly
conclude that approvals or record-filing are not required or if the CSRC or other regulatory agencies promulgate new rules, explanations
or interpretations requiring that we obtain their prior approvals or ex-post record-filing for this offering and any follow-on offering,
we or the VIE or the VIE’s subsidiaries may be unable to obtain such approvals and record-filing which could significantly limit
or completely hinder our ability to offer or continue to offer securities to our investors. Furthermore, the PRC government authorities
may strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers like
us. Such actions taken by the PRC government authorities may intervene or influence operations of the VIE or the VIE’s subsidiaries
at any time, which are beyond our control. Therefore, any such actions may adversely affect our operations and significantly limit or
hinder our ability to offer or continue to offer securities to you and reduce the value of such securities.

 

Uncertainties regarding the enforcement of
laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese
government may intervene or influence operations of the VIE or the VIE’s subsidiaries at any time, or may exert more control over
offerings conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial
performance and/or the value of our Class A Ordinary Shares or impair our ability to raise capital on terms acceptable to us, or at all. 

 

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 and 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 be worthless.

 

All of the operations of the VIE and the VIE’s
subsidiaries are located in China. Accordingly, the 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 and the
rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government
or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments
could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive
position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources.
Some of these measures may benefit the overall Chinese economy, but may have a negative effect on 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. 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.

 

Furthermore, rules and regulations in China
can change quickly with little advance notice. The Chinese government may intervene or influence operations of the VIE or the VIE’s
subsidiaries at any time or may exert more control over offerings conducted overseas and/or foreign invest in China-based issuers. We
and the China based operating entities, as well as our investors, face uncertainty about future actions by the Chinese government that
could significantly affect our financial performance and operations, including the enforceability of the VIE contractual arrangements.
If future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing VIE
Agreements, there are substantial uncertainties as to whether Sancai WFOE and Sancaijia can complete such actions in a timely manner,
or at all. Failure to take timely and appropriate measures to adapt to any of these or similar regulatory compliance challenges could
materially and adversely affect our current corporate structure and business operations. Sancaijia may be forced to make material changes
to its operation and the value of our Class A Ordinary Shares could depreciate.

 

 

We may be required to obtain permission
from Chinese authorities to operate and issue securities to foreign investors in this offering and/or listing on the Nasdaq Stock Market,
and if required and we or the VIE or the VIE’s subsidiaries are not able to obtain such permission in a timely manner, the securities
currently being offered may substantially decline in value and become worthless. The CSRC has released for public consultation the draft
rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into
effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment
in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary
Shares to investors and could cause the value of our Class A Ordinary Shares to significantly decline or become worthless. We have not
applied for, received or been denied approval from Chinese authorities to list on the Nasdaq Stock Market.

 

On December 24, 2021, the CSRC released the
Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft
for Comments) (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing
Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures,” collectively with the Draft Administrative
Provisions, the “Draft Rules Regarding Overseas Listing”), both of which have a comment period that expires on January 23,
2022. The Draft Rules Regarding Overseas Listing lay out the filing regulation arrangement for both direct and indirect overseas listing,
and clarify the determination criteria for indirect overseas listing in overseas markets. The Draft Rules Regarding Overseas Listing
stipulate that the Chinese-based companies, or the issuer, shall fulfill the filing procedures within three working days after the issuer
makes an application for initial public offering and listing in an overseas market. The required filing materials for an initial public
offering and listing should include at least the following: record-filing report and related undertakings; regulatory opinions, record-filing,
approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment
opinion issued by relevant regulatory authorities (if applicable); PRC legal opinion; and prospectus.

 

In addition, an overseas offering and listing
is prohibited under any of the following circumstances: (1) if the intended securities offering and listing are specifically prohibited
by the laws, regulations or relevant provisions of the PRC; (2) if the intended securities offering and listing may constitute a threat
to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with law;
(3) if there are material ownership disputes over the equity, major assets, and core technology, etc. of the issuer; (4) if, in the past
three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement,
misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under
judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in past
three years, directors, supervisors, or senior executives have been subject to administrative punishments for severe violations, or are
currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations;
(6) other circumstances as prescribed by the State Council. We do not believe any of the six prohibited situations aforementioned applies
to us. The Draft Administrative Provisions further defines the legal liabilities of breaches such as failure in fulfilling filing obligations
or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and in cases of severe violations, a parallel
order to suspend relevant business or halt operation for rectification, revoke relevant business permits or operational license.

 

As of the date of this prospectus, the Draft
Rules Regarding Overseas Listings have not been promulgated, and we or the VIE or the VIE’s subsidiaries have not been required
to obtain permission from the government of China for any offering pursuant to this prospectus. While the final version of the Draft
Rules Regarding Overseas Listings are expected to be adopted in 2022, we believe that we will be required to comply with the filing requirements
or procedures set forth in the Draft Rules Regarding Overseas Listings and that none of the situations that would clearly prohibit overseas
offering and listing applies to us. It should be noted however, that there is uncertainty in relying on an opinion of counsel in connection
with draft legislation as the final version may be materially different and/or that the implementing regulations have yet to be promulgated.

 

As of the date of this prospectus, no currently
effective laws or regulations in the PRC explicitly require us to seek approval from the CSRC or any other PRC governmental authorities
for this offering and/or list on the Nasdaq Stock Market, nor has we, any of our subsidiaries or the VIE or the VIE’s subsidiaries
received any inquiry, notice, warning or sanctions regarding our planned offering from the CSRC or any other PRC governmental authorities.
We believe that we are not required to obtain permission from Chinese authorities to operate and issue these securities to foreign investors
or list on the Nasdaq Stock Market based on the PRC laws, regulations and rules currently in effect. However, the Draft Rules Regarding
Overseas Listing, if enacted, may subject us to additional compliance requirement in the future, and we cannot assure you that we will
be able to get the clearance of filing procedures under the Draft Rules Regarding Overseas List on a timely basis, or at all. There is
also the possibility that we may not be able to obtain or maintain such approval or that we inadvertently concluded that such approval
was not required. If the CSRC requires that we obtain its approval prior to the completion of this offering, the offering will be delayed
until we have obtained CSRC approval, which may take several months. Any failure of us to fully comply with new regulatory requirements
may significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares, cause significant
disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial
condition and results of operations and cause our Class A Ordinary Shares to significantly decline in value or become worthless.

 

 

Furthermore, if the CSRC or other regulatory
agencies later promulgate any other new rules or explanations requiring that we obtain their approvals for this offering or 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. In the event that we are subsequently advised by any Chinese authorities that the CSRC approval
or any regulatory approval is required for this offering, or if the CSRC or any other PRC government authorities promulgates any new
laws, rules or regulations or any interpretation or implements rules before our listing that would require us to obtain the CSRC or any
other governmental approval for this offering, there is no guarantee that we or our China based operating entities will receive or not
be denied permission from Chinese authorities to list on the Nasdaq Stock Market in the future. 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 we or the VIE or the VIE’s subsidiaries do not receive or maintain the approval,
or inadvertently conclude that such approval is not required, or applicable laws, regulations, or interpretations change such that we
or the VIE or the VIE’s subsidiaries are required to obtain approval in the future, we or the VIE or the VIE’s subsidiaries
may be subject to an investigation by competent regulators, fines or penalties, or an order prohibiting us from conducting an offering,
and these risks could result in a material adverse change in our operations and the value of our Class A 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.

 

The PRC government exerts substantial
influence over the manner in which the VIE and the VIE’s subsidiaries conduct their business activities. The PRC government may
also intervene or influence their operations at any time with little or no advance notice, which could result in a material change in
our operations and our Class A Ordinary Shares could decline in value or become worthless.

 

We are currently not required to obtain approval
from Chinese authorities to list on U.S exchanges nor the execution of VIE Agreements, however, if the VIE, the VIE’s subsidiaries
or Sancai Holding 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, continue to offer securities to investors, or materially affect
the interest of the investors and cause significantly depreciation of our price of Class A Ordinary Shares.

 

The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The ability
of the VIE and the VIE’s subsidiaries to operate in the PRC may be significantly 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 with little or no advance notice
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 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 the VIE and the VIE’s subsidiaries in China.

 

For example, the Chinese cybersecurity regulator
announced on July 2, 2021, that it had begun an investigation of a U.S.-listed company with Chinese operations and two days later ordered
that the company’s app be removed from smartphone app stores. Similarly, our business segments may be subject to various government
and regulatory interference in the regions in which the VIE and the VIE’s subsidiaries operate. We and the VIE and the VIE’s
subsidiaries could be subject to regulation by various political and regulatory entities, including various local and municipal agencies
and government sub-divisions. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or
penalties for any failure to comply.

 

Furthermore, it is uncertain when and whether
we will be required to obtain permission from the PRC government to list on U.S. exchanges or enter into VIE Agreements in the future,
and even when such permission is obtained, whether it will be denied or rescinded. Although we are currently not required to obtain permission
from any of the PRC central or local government to obtain such permission and has not received any denial to list on the U.S. exchange
and or enter into VIE Agreements, our results of operation could be adversely affected, directly or indirectly, by existing or future
laws and regulations relating to our business or industry. Recent statements by the Chinese government indicating an intent, and the
PRC government may take actions to exert more oversight and control over offerings that are conducted overseas and/or foreign investment
in PRC-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors
and cause the value of our securities to significantly decline or become worthless.

 

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, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

 

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

 

Any loans we extend to Sancai WFOE, which
is treated as foreign-invested enterprises 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 Sancai 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 Sancaijia requires financial
support from us or our wholly-owned subsidiary in the future and we find it necessary to use foreign currency-denominated capital to
provide such financial support, our ability to fund the 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 Sancaijia and
Sancai 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, Sancai WFOE may use its income in Renminbi generated from their
operations to finance Sancaijia through entrustment loans to Sancaijia or loans to Sancaijia’s shareholders for the purpose of
making capital contributions to Sancaijia. In addition, Sancai WFOE can use Renminbi funds converted from foreign currency registered
capital to carry out any activities within its 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 its provision of services to Sancaijia under the exclusive
technical support agreement.

 

 

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 Sancai WFOE or Sancaijia or future capital contributions by us to Sancai 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 the
operations of the VIE and the VIE’s subsidiaries in China may be negatively affected, which could materially and adversely affect
the liquidity of the VIE and the VIE’s subsidiaries and their ability to fund and expand their business.

 

Fluctuations
in exchange rates could have a material adverse effect on our results of operations and the price of our Class A Ordinary Shares.

 

The
value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political
and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old
policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over
the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the
U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly
and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year
review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016,
Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S.
dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi has depreciated significantly in
the backdrop of a surging U.S. dollar and persistent capital outflows of China.

 

This
depreciation halted in 2017, and the RMB appreciated approximately 7% against the U.S. dollar during this one-year period. The Renminbi
in 2018 depreciated approximately by 5% against the U.S. dollar. Starting from the beginning of 2019, the Renminbi has depreciated significantly
against the U.S. dollar again. In early August 2019, the PBOC set the Renminbi’s daily reference rate at RMB7.0039 to $1.00, the
first time that the exchange rate of Renminbi to U.S. dollar exceeded 7.0 since 2008. With the development of the foreign exchange market
and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further
changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value
against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the Renminbi and the U.S. dollar in the future.

 

There
remains significant international pressure on the Chinese government to adopt a flexible currency policy to allow the Renminbi to appreciate
against the U.S. dollar. Significant revaluation of the Renminbi may have a material and adverse effect on your investment. Substantially
all of our revenues and costs are denominated in Renminbi. Any significant revaluation of Renminbi may materially and adversely affect
our revenues, earnings and financial position, and the value of, and any dividends payable on, our Class A Ordinary Shares in U.S. dollars.

 

To
the extent that we need to convert U.S. dollars we receive from this offering into Renminbi for capital expenditures and working capital
and other business purposes, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount
we would receive from the conversion. Conversely, a significant depreciation of the Renminbi against the U.S. dollar may significantly
reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our Class A Ordinary Shares, and
if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our Class A Ordinary Shares, strategic
acquisitions or investments or other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect
on the U.S. dollar amount available to us.

 

Very limited hedging options are
available in China to reduce our exposure to exchange rate fluctuations. As of the date of this prospectus, we have not entered into
any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into
hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to
adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control
regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may
have a material adverse effect on your investment.

 

Governmental
control of currency conversion may limit our ability to utilize our net revenues effectively and 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. The VIE and the VIE’s
subsidiaries receive substantially all of our net revenues in RMB. Under our current corporate structure, Sancai Holding in the Cayman
Islands relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC
foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange
transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore,
our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that
the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the
overseas investment registrations by the beneficial owners of Sancai Holding who are PRC residents. But approval from or registration
with 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.

 

In
light of the flood of capital outflows of China in 2016 due to the weakening RMB, the PRC government has imposed more restrictive foreign
exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put
in place by SAFE to regulate cross-border transactions falling under the capital account. 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 currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign
currencies to our shareholders.

 

We
must remit the offering proceeds to PRC before they may be used to benefit our business in the PRC, and this process may take a number
of months.

 

The
proceeds of this offering must be sent back to the PRC, and the process for sending such proceeds back to the PRC may take several months
after the closing of this offering. We may be unable to use these proceeds to grow our business until we receive such proceeds in the
PRC. In order to remit the offering proceeds to the PRC, we will take the following actions:

 

First,
we will open a special foreign exchange account for capital account transactions. To open this account, we must submit to State Administration
for Foreign Exchange (“SAFE”) certain application forms, identity documents, transaction documents, form of foreign exchange
registration of overseas investments by domestic residents, and foreign exchange registration certificate of the invested company.

 

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 materially. Ordinarily, the
process takes several months to complete but is required by law to be accomplished within 180 days of application. Until the abovementioned
approvals, the proceeds of this offering will be maintained in an interest-bearing account maintained by us in the United States.

 

Failure to make adequate contributions
to various employee benefit plans as required by PRC regulations may subject the VIE and the VIE’s subsidiaries to penalties.

 

The VIE and the VIE’s subsidiaries are
required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social
insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages
of salaries, including bonuses and allowances, of their employees up to a maximum amount specified by the local government from time
to time at locations where the VIE and the VIE’s subsidiaries operate businesses. The requirement of employee benefit plans has
not been implemented consistently by the local governments in China given the different levels of economic development in different locations.
The VIE and the VIE’s subsidiaries did not pay, or were not able to pay, certain social insurance or housing fund contributions
for all of their employees and the amount they paid was lower than the requirements of relevant PRC regulations. If the VIE and the VIE’s
subsidiaries are determined by local authorities to fail to make adequate contributions to any employee benefits as required by relevant
PRC regulations, the VIE and the VIE’s subsidiaries may face late fees or fines in relation to the underpaid employee benefits.
As a result, our financial condition and results of operations may be materially and adversely affected.

 

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 Enterprises 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 MOFCOM 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 MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds
are triggered. In addition, the security review rules issued by the MOFCOM 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 MOFCOM, 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 MOFCOM 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.

 

PRC regulations relating to offshore
investment activities by PRC residents may limit Sancai WFOE’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 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, and its implementation guidelines,
which replaced the former circular commonly known as “SAFE Circular 75” promulgated by the SAFE on October 21, 2005. SAFE
Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches
of the SAFE 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 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, will be required to register such investments with SAFE or its local branches. In addition,
any PRC resident who is a direct or indirect shareholder of a SPV, is required to update its filed 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. If any PRC shareholder of such SPV fails to make
the required registration or to update the previously filed 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 subsidiary in China. On February 13, 2015, SAFE promulgated the Circular
on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment, or SAFE Circular 13, which
became effective on June 1, 2015. Under SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments
and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead
of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

 

 

If our shareholders who are PRC residents
or entities do not complete their registration with the local SAFE branches, Sancai WFOE may be prohibited from distributing their profits
and any proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute
additional capital to Sancai WFOE. Moreover, failure to comply with SAFE registration requirements could result in liability under PRC
laws for evasion of applicable foreign exchange restrictions.

 

All of our shareholders who indirectly hold
shares in Sancai Holding and who are known to us as being PRC residents have completed initial SAFE registration in connection with our
financings and will update their registration filings with SAFE under SAFE Circular 37 when any changes should be registered under SAFE
Circular 37.

 

However,
we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to
make or update such registrations, and we cannot compel our shareholders or 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 subsidiary,
could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s
ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

  

The approval of the CSRC may be required
in connection with this offering, and, if required, we cannot predict whether we or the VIE or the VIE’s subsidiaries will be able
to obtain such approval. Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated by
relevant PRC regulatory agencies in the future could delay this offering and failure to obtain any such approvals, if required, could
have a material adverse effect on our business, operating results and reputation as well as the trading price of our Class A Ordinary
Shares, and could also create uncertainties for this offering.

 

The Regulations on Mergers and Acquisitions
of Domestic Enterprises 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, B&D Law Firm, 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 Class A Ordinary Shares on Nasdaq in the context of this offering, given that: (i) Sancai 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 remains 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. 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, 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. 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 Class
A 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 Class A 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 Class A Ordinary
Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

 

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, 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, and cybersecurity and data privacy protection requirements
and similar matters. On July 10, 2021, the CAC issued a revised draft of the Measures for Cybersecurity Review for public comments. Further,
on January 4, 2022, thirteen PRC regulatory agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology,
the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People’s Bank
of China, the National Radio and Television Administration, National Administration of State Secrets Protection and the National Cryptography
Administration, jointly adopted and published the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022.
The Measures for Cybersecurity Review (2021) authorized the relevant government authorities to conduct cybersecurity review on a range
of activities that affect or may affect national security, and required that, among others, in addition to “operator of critical
information infrastructure” any “operator of network platform” holding personal information of more than one million
users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further elaborated the factors
to be considered when assessing the national security risks of the relevant activities. On November 14, 2021, the CAC released the Regulations
on Network Data Security (draft for public comments), or the draft Regulations on Network Data Security, which reiterates that data processors
that process the personal information of more than one million users listing in a foreign country should apply for a cybersecurity review.
We do not believe that the VIE or the VIE’s subsidiaries are among the “operator of critical information infrastructure,”
“data processor” carrying out data processing activities that affect or may affect national security, or “operator
of network platform” holding personal information of more than one million users as mentioned above, however, the revised draft
Regulations on Network Data Security is in the process of being formulated and subject to further changes, and the Opinions remain unclear
on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities.

 

On December 24, 2021, the CSRC released the
Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft
for Comments) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for
Comments), both of which have a comment period that expires on January 23, 2022, and if enacted, may subject us to additional compliance
requirement in the future. See “Risk Factors – We may be required to obtain permission from Chinese authorities to operate
and issue securities to foreign investors in this offering and/or listing on the Nasdaq Stock Market, and if required and we or the VIE
or the VIE’s subsidiaries are not able to obtain such permission in a timely manner, the securities currently being offered may
substantially decline in value and become worthless. The CSRC has released for public consultation the draft rules for China-based companies
seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, the Chinese government
may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which
could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors and
could cause the value of our Class A Ordinary Shares to significantly decline or become worthless. We or the VIE or the VIE’s subsidiaries
have not applied for, received or been denied approval from Chinese authorities to list on the Nasdaq Stock Market.”

 

Thus, it is still uncertain as to how PRC
governmental authorities will regulate overseas listing in general and whether we or the VIE or the VIE’s subsidiaries are required
to obtain any specific regulatory approvals or to fulfill any record-filing requirements. In addition, if we or the VIE or the VIE’s
subsidiaries do not receive any required approvals or record-filing or if we incorrectly conclude that approvals or record-filing are
not required or if the CSRC or other regulatory agencies promulgate new rules, explanations or interpretations requiring that we or the
VIE or the VIE’s subsidiaries obtain their prior approvals or ex-post record-filing for this offering and any follow-on offering,
we or the VIE or the VIE’s subsidiaries may be unable to obtain such approvals and record-filing which could significantly limit
or completely hinder our ability to offer or continue to offer securities to our investors. For instance, in the event that the CSRC
approval or any regulatory approval or record-filing is required for this offering, or if the CSRC or any other PRC government authorities
promulgates any new laws, rules or regulations or any interpretation or implements rules before our listing that would require us to
obtain the CSRC or any other governmental approval or record-filing for this offering, we or the VIE or the VIE’s subsidiaries
may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval or record-filing 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 Class A Ordinary Shares. 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 Class A Ordinary Shares that we are offering. Any uncertainties or negative publicity regarding such approval or
record-filing requirements could have a material adverse effect on our ability to complete this offering or any follow-on offering of
our securities or the market for and market price of our Class A Ordinary Shares.

 

If Sancai Holding, Sancai Seychelles
or Sancai HK are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable
tax consequences to us and our non-PRC shareholders.

 

Under
the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management
body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its
global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises
full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise.
In 2009, the State Administration of Taxation, or SAT, issued the Circular on Issues Concerning the Identification of Chinese-Controlled
Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management, known as
SAT Circular 82, which has been revised by the Decision of the State Council on Cancellation and Delegation of a Batch of Administrative
Examination and Approval Items on November 8, 2013 and by the Decision of the State Administration of Taxation on Issuing the Lists of
Invalid and Abolished Tax Departmental Rules and Taxation Normative Documents on December 29, 2017. Circular 82 has provided certain
specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated
offshore is located in China. Further to SAT Circular 82, the SAT issued the Administrative Measures for Enterprise Income Tax of PRC-Controlled
Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, effective 2011, to provide more guidance on the implementation
of SAT Circular 82. SAT Bulletin 45 clarified certain issues in the areas of resident status determination, post-determination administration
and competent tax authorities’ procedures.

 

According
to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as
a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income
tax on its global income only if all of the following conditions are met: (i) the places where the senior management and senior management
departments responsible for the daily production, operation and management of the enterprise perform their duties are mainly located
within the territory of the PRC; (ii) decisions relating to the enterprise’s financial matters (such as money borrowing, lending,
financing and financial risk management) and human resource matters (such as appointment, dismissal and salary and wages) are made or
are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records,
company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members
or senior executives habitually reside in the PRC. Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises
controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria
set forth therein may reflect the SAT’s general position on how the term “de facto management body” could be applied
in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals
or foreigners. Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises
or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may
reflect the SAT’s general position on how the term “de facto management body” could be applied in determining the tax
resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.

 

 

In
addition, the SAT issued the Announcement of the State Administration of Taxation on Issues concerning the Determination of Resident
Enterprises Based on the Standards of Actual Management Institutions in January 2014 to provide more guidance on the implementation of
SAT Circular 82. This bulletin further provides that, among other things, an entity that is classified as a “resident enterprise”
in accordance with the circular shall file the application for classifying its status of residential enterprise with the local tax authorities
where its main domestic investors are registered. From the year in which the entity is determined to be a “resident enterprise,”
any dividend, profit and other equity investment gain shall be taxed in accordance with the enterprise income tax law and its implementing
rules.

 

We believe that none of our entities outside
of China is a PRC resident enterprise for PRC tax purposes. See “Regulation — Regulations on Tax — PRC Enterprise Income
Tax.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties
remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that
our Cayman Islands holding company, the Seychelles subsidiary, or the Hong Kong subsidiary is a PRC resident enterprise for enterprise
income tax purposes, its world-wide income could be subject to PRC tax at a rate of 25%, which could reduce our net income. We will also
be required to comply with PRC enterprise income tax reporting obligations. In addition, we may be required to withhold a 10% withholding
tax from dividends we pay to our shareholders that are non-resident enterprises, and non-resident enterprise shareholders may be subject
to PRC tax on gains realized on the sale or other disposition of Class A Ordinary Shares, if such income is treated as sourced from within
the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders and any gain
realized on the transfer of Class A Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% unless a reduced
rate is available under an applicable tax treaty. Although our holding company is incorporated in the Cayman Islands, it remains unclear
whether dividends received and gains realized by our non-PRC shareholders will be regarded as income from sources within the PRC and
whether non-PRC shareholders of Sancai Holding would be able to claim the benefits of any tax treaties between their country of tax residence
and the PRC, in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in
our Class A Ordinary Shares.

 

Sancai Holding may not be able to obtain
certain benefits under relevant tax treaty on dividends paid by our PRC subsidiary to us through our Hong Kong subsidiary.

 

Sancai Holding a holding company incorporated
in the Cayman Islands and as such rely on dividends and other distributions on equity from our PRC subsidiary to satisfy part of our
liquidity requirements. Pursuant to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid
by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of
incorporation has a tax treaty with China that provides for preferential tax treatment.

 

Pursuant
to the Arrangement between the 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 came into effect on December 8, 2006, and four conventions implemented
as of June 11, 2008, December 20, 2010, December 29, 2015 and December 6, 2019, such withholding tax rate may be lowered to 5% if a Hong
Kong resident enterprise owns no less than 25% of a PRC enterprise. Under the Circular on Certain Issues with Respect to the Enforcement
of Dividend Provisions in Tax Treaties issued in February 2009 by the SAT, the taxpayer needs to satisfy certain conditions to enjoy
the benefits under a tax treaty. These conditions include: (i) the taxpayer must be the beneficial owner of the relevant dividends, and
(ii) the corporate shareholder to receive dividends from the PRC subsidiary must have met the direct ownership thresholds during the
12 consecutive months preceding the receipt of the dividends. However, if the main purpose of an offshore arrangement is to obtain a
preferential tax treatment, the PRC tax authorities have the discretion to adjust the preferential tax rate enjoyed by the relevant offshore
entity. Further, the SAT promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties
in 2009, which limits the “beneficial owner” to individuals, enterprises or other organizations normally engaged in substantive
operations, and sets forth certain detailed factors in determining “beneficial owner” status; and based on the Announcement
on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties, issued on February 3, 2018, and effective on April
1, 2018, that the business activities conducted by the applicant do not constitute substantive business activities is one of the factors
which are not conductive to the determination of an applicant’s status as a “beneficial owner.”

 

In addition, the Administrative Measures for
Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, or SAT Public Notice No.60, which became effective in August 2015, require
non-resident enterprises to determine whether they are qualified to enjoy the preferential tax treatment under the tax treaties and file
relevant report and materials with the tax authorities. In October 2019, the State Administration of Taxation (SAT) issued the Announcement
of the SAT on Issuing the Measures for the Administration of Non-resident Taxpayers’ Enjoyment of Treaty Benefits (SAT Public Notice
No.35), which took effect on January 1, 2020, while SAT Public Notice No.60 will be abolished at the same time. SAT Public Notice No.35
stipulates that non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits,
retaining documents for inspection” mechanism. There are also other conditions for enjoying the reduced withholding tax rate according
to other relevant tax rules and regulations. As of and September 30, 2021 and 2020, we did not record any withholding tax on the
retained earnings of our subsidiary in the PRC as we intended to re-invest all earnings generated from our PRC subsidiary for the operation
and expansion of our business in China, and we intend to continue this practice in the foreseeable future. Should our tax policy change
to allow for offshore distribution of our earnings, we would be subject to a significant withholding tax. We cannot assure you that our
determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant tax authority
or we will be able to complete the necessary filings with the relevant 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 our Hong Kong subsidiary.

 

 

 

We face uncertainties
with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

 

On February 3, 2015, the SAT issued the Announcement
of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax of Transfers of Assets between Non-resident
Enterprises, or SAT Bulletin 7, as amended in 2017, which partially replaced and supplemented previous rules under the Notice on Strengthening
Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the SAT on
December 10, 2009. Pursuant to the SAT Bulletin 7, an “indirect transfer” of assets of a PRC resident enterprise, including
equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer
of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding
payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income
tax. According to the SAT Bulletin 7, “PRC taxable assets” include assets attributed to an establishment in China, immovable
properties located in China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct
holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable
commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of
the equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore
enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore
enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their
actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of
the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties
or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included
with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject
to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or
to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident
enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties
or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payer
fails to withhold any or sufficient tax, the transferor is required to declare and pay such tax to the competent tax authority by itself
within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Currently, SAT Bulletin
7 does not apply to income derived by a non-resident enterprise from indirect transfer of taxable assets in PRC through buying and selling
the equity securities of the same listed overseas enterprise on the open market.

 

On October 17, 2017, SAT promulgated the Announcement
of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source or SAT Bulletin
37, which became effective on December 1, 2017, and SAT Circular 698 then was repealed with effect from December 1, 2017. SAT Bulletin
37, among other things, simplified procedures of withholding and payment of income tax levied on non-resident enterprises. SAT Bulletin
37 further details and clarifies the tax withholding methods in respect of income of non-resident enterprises under SAT Circular 698.
And certain rules stipulated in SAT Bulletin 7 are replaced by SAT Bulletin 37. Where the non-resident enterprise fails to declare the
tax payable pursuant to Article 39 of the Enterprise Income Tax Law, the tax authority may order it to pay the tax due within required
time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority;
however, if the non-resident enterprise voluntarily declares and pays the tax payable before the tax authority orders it to do so within
required time limits, it shall be deemed that such enterprise has paid the tax in time.

 

We face uncertainties as to the reporting
and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring,
sale of the shares in our offshore subsidiaries and investments. Sancai Holding may be subject to withholding obligations if Sancai Holding
is transferee in such transactions, under SAT Bulletin 37 and SAT Bulletin 7. For transfer of shares in Sancai Holding by investors who
are non-PRC resident enterprises, our PRC subsidiary may be required to expend valuable resources to comply with SAT Bulletin 37 and
SAT Bulletin 7 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish
that Sancai Holding should not be taxed under these circulars, which may have an adverse effect on our financial condition and results
of operations.

 

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.

 

Sancai Holding is an exempted company incorporated
under the laws of the Cayman Islands The VIE and the VIE’s subsidiaries conduct all of their operations in China and substantially
all the assets are located in China. In addition, most of our senior executive officers reside within China for a significant portion
of the time and most are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons
inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil
liability provisions of the U.S. federal securities laws against us and our officers and directors who reside and whose assets are located
outside the United States. 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.

 

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

 

 

There are uncertainties
under the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies located in the PRC.

 

According to Article 177 of the newly amended
PRC Securities Law which became effective in March 2020 (the “Article 177”), the securities regulatory authority of the PRC
State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross
border securities activities. Article 177 further provides that overseas securities regulatory authorities are not allowed to carry out
investigation and evidence collection directly within the territory of the PRC, and that any Chinese entities and individuals are not
allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the
securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council.

 

Our PRC counsel has advised us of their understanding
that (i) the Article 177 is applicable in the limited circumstances related to direct investigation or evidence collection conducted
by overseas authorities within the territory of the PRC (in such case, the foregoing activities are required to be conducted through
collaboration with or by obtaining prior consent of competent Chinese authorities); (ii) the Article 177 does not limit or prohibit Sancai
Holding, as a company duly incorporated in Cayman Islands and to be listed on NASDAQ, from providing the required documents or information
to NASDAQ or the SEC pursuant to applicable Listing Rules and U.S. securities laws; and (iii) as the Article 177 is relatively new and
there is no implementing rules or regulations which have been published regarding application of the Article 177, it remains unclear
how the law will be interpreted, implemented or applied by the Chinese Securities Regulatory Commission or other relevant government
authorities. As of the date hereof, we are not aware of any implementing rules or regulations which have been published regarding application
of Article 177. However, we cannot assure you that relevant PRC government agencies, including the securities regulatory authority of
the PRC State Council, would reach the same conclusion as we do. As such, there are uncertainties as to the procedures and time requirement
for the U.S. regulators to bring about investigations and evidence collection within the territory of the PRC.

 

Our principal business operation is conducted
in the PRC. In the event that the U.S. regulators carry out investigation on us and there is a need to conduct investigation or collect
evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection
directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority
of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory
authority of the PRC.

 

If we become directly
subject to the 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, stock price, and reputation.

 

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

 

Increases in labor
costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and our profitability.

 

China’s overall economy and the average
wage in China have increased in recent years and are expected to continue to grow. The average wage level for the employees of the VIE
and the VIE’s subsidiaries has also increased in recent years. We expect that the labor costs of the VIE and the VIE’s subsidiaries,
including wages and employee benefits, will continue to increase. Unless the VIE and the VIE’s subsidiaries are able to pass on
these increased labor costs to those who pay for their services, our profitability and results of operations may be materially and adversely
affected.

 

 

Pursuant to the PRC Labor Contract Law and
its implementation rules, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration,
determining the term of employees’ probation and unilaterally terminating labor contracts. Compliance with the labor contract law
and its implementation rules may increase our operating expenses, in particular our personnel expenses. In the event that the VIE or
the VIE’s subsidiaries decide to terminate some of their employees or otherwise change their employment or labor practices, the
PRC Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner,
which could adversely affect our business and results of operations.

  

On October 28, 2010, the SCNPC promulgated
the Law on Social Insurance of the PRC, effective on July 1, 2011 and was last amended in December 2018. On April 3, 1999, the State
Council promulgated the Regulations on the Administration of Housing Provident Fund, which was amended on March 24, 2002 and March 24,
2019. Companies registered and operating in China are required under the Law on Social Insurance of the PRC and the Regulations on the
Administration of Housing Provident Fund to apply for social insurance registration and housing fund deposit registration within 30 days
of their establishment and to pay for their employees different social insurance including pension insurance, medical insurance, work-related
injury insurance, unemployment insurance and maternity insurance to the extent required by law. The VIE and the VIE’s subsidiaries
could be subject to orders by the competent labor authorities for rectification and failure to comply with the orders may further subject
us to administrative fines. See “—Failure to make adequate contributions to various employee benefit plans as required by
PRC regulations may subject the VIE and the VIE’s subsidiaries to penalties” and “Regulations-Regulations on Labor
Protection”.

 

If the custodians
or authorized users of controlling non-tangible assets of Sancai WFOE and the VIE and the VIE’s subsidiaries, including corporate
chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could
be materially and adversely affected.

 

Under PRC law, legal documents for corporate
transactions are executed using the chops or seal of the signing entity or with the signature of a legal representative whose designation
is registered and filed with the relevant branch of the Administration of Industry and Commerce.

 

Although Sancai WFOE and the VIE and the VIE’s
subsidiaries usually utilize chops to enter into contracts, the designated legal representatives of our PRC subsidiary and the VIE and
the VIE’s subsidiaries have the apparent authority to enter into contracts on behalf of such entities without chops and bind such
entities. All designated legal representatives of our PRC subsidiary and the VIE and the VIE’s subsidiaries are members of our
senior management team who have signed employment agreements with us or our PRC subsidiary or the VIE and the VIE’s subsidiaries
under which they agree to abide by various duties they owe to us. In order to maintain the physical security of our chops and chops of
Sancai WFOE and the VIE and the VIE’s subsidiaries, these items are stored in secured locations accessible only by the authorized
personnel in the legal or finance department of our PRC subsidiary and the VIE and the VIE’s subsidiaries. Although Sancai WFOE
and the VIE and the VIE’s subsidiaries monitor such authorized personnel, there is no assurance such procedures will prevent all
instances of abuse or negligence. To the extent those chops are not kept safe, are stolen or are used by unauthorized persons or for
unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities
may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power
and authority to do so. Accordingly, if any of our authorized personnel misuse or misappropriate the corporate chops or seals of and
the VIE and the VIE’s subsidiaries, Sancai WFOE and the VIE and the VIE’s subsidiaries could encounter difficulties in maintaining
control over the relevant entities and experience significant disruptions in our operations. If a designated legal representative obtains
control of the chops in an effort to obtain control over Sancai WFOE and the VIE and the VIE’s subsidiaries, Sancai WFOE and the
VIE and the VIE’s subsidiaries would need to pass a new shareholder or board resolution to designate a new legal representative
and we would need to take legal action to seek the return of the chops, apply for new chops with the relevant authorities, or otherwise
seek legal redress for the violation of the representative’s fiduciary duties to us, which could involve significant time and resources
and divert management attention away from our regular business. In addition, the affected entity may not be able to recover corporate
assets that are sold or transferred out of our control in the event of such a misappropriation if a transferee relies on the apparent
authority of the representative and acts in good faith.

 

 

The VIE and the VIE’s subsidiaries
may be liable for improper use or appropriation of personal information provided by their customers.

 

The VIE and the VIE’s subsidiaries 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.

 

The VIE and the VIE’s subsidiaries expect
to obtain information about various aspects of their operations as well as regarding their employees and third parties. The integrity
and protection of their customer, employee and company data is critical to their business. The customers and employees of the VIE and
the VIE’s subsidiaries expect that the VIE and the VIE’s subsidiaries will adequately protect their personal information.
The VI VIE and the VIE’s subsidiaries Es are required by applicable laws to keep strictly confidential the personal information
that they collect, and to take adequate security measures to safeguard such information.

 

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 legal basis for privacy and personal information
infringement claims under the Chinese civil laws. PRC regulators, including the CAC, the Ministry of Industry and Information Technology,
and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection. 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.

 

The PRC regulatory requirements regarding
cybersecurity are evolving. For instance, various regulatory bodies in China, including the CAC the Ministry of Public Security and the
State Administration for Market Regulation, have enforced data privacy and protection laws and regulations with varying and evolving
standards and interpretations. On November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cybersecurity
Law of the PRC, or Cybersecurity Law, which became effective on June 1, 2017.The Cybersecurity Law 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 Cybersecurity Law 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. Pursuant to the Cybersecurity 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.

   

In April 2020, the CAC, and certain other
PRC regulatory authorities 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.

  

Further, the revised Measures for Cybersecurity
Review (2021), which is published on January 4, 2022 and became effective on February 15, 2022, inluded the following key changes:

 

l the
CSRC is included as one of the regulatory authorities for purposes of jointly establishing
the state cybersecurity review working mechanism;
     
l the
“operator of network platform” holding personal information of more than one
million users and seeking a listing outside China shall file for cybersecurity review with
the Cybersecurity Review Office; and
     
l the
risks of core data, material data or large amounts of personal information being stolen,
leaked, destroyed, damaged, illegally used or transmitted to overseas parties; the risks
of critical information infrastructure, core data, material data or large amounts of personal
information being influenced, controlled or used maliciously if going public; and the risks
of network information security shall be focused on during the cybersecurity review process.

 

 

On November 14, 2021, the CAC released the
Regulations on Network Data Security (draft for public comments), or the draft Regulations on Network Data Security, which reiterates
that data processors that process the personal information of more than one million users listing in a foreign country should apply for
a cybersecurity review. Currently, the draft Regulations on Network Data Security has been released for public comment only, and its
implementation provisions and anticipated adoption or effective date remains substantially uncertain and may be subject to change. Certain
internet platforms in China have been reportedly subject to heightened regulatory scrutiny in relation to cybersecurity matters. As of
the date of this prospectus, Sancai Holding, its subsidiaries and the VIE and the VIE’s subsidiaries have not been informed by
any PRC governmental authority of any requirement that a cybersecurity review shall be filed. However, if the VIE and the VIE’s
subsidiaries are deemed to be a critical information infrastructure operator or an operator of network platform holds personal information
of more than one million users, the VIE and the VIE’s subsidiaries could be subject to PRC cybersecurity review.

 

On August 20, 2021, the Standing Committee
of the National People’s Congress of China promulgated the Personal Information Protection Law, or the PIPL, which took effect
on November 1, 2021. In addition to other rules and principles of personal information processing, the PIPL specifically provides rules
for processing sensitive personal information. Sensitive personal information refers to personal information that, once leaked or illegally
used, could easily lead to the infringement of human dignity or harm to the personal or property safety of an individual, including biometric
recognition, religious belief, specific identity, medical and health, financial account, personal whereabouts and other information of
an individual, as well as any personal information of a minor under the age of 14. Only where there is a specific purpose and sufficient
necessity, and under circumstances where strict protection measures are taken, may personal information processors process sensitive
personal information. A personal information processor shall inform the individual of the necessity of processing such sensitive personal
information and the impact thereof on the individual’s rights and interests. As uncertainties remain regarding the interpretation
and implementation of the PIPL, we cannot assure you that the VIE and the VIE’s subsidiaries will comply with the PIPL in all respects.
the VIE and the VIE’s subsidiaries may also become subject to fines and/or other penalties which may have material adverse effect
on our business, operations and financial condition.

 

Compliance with the Cybersecurity Law, the
PRC National Security Law, the Data Security Law, the Cybersecurity Review Measures, the Personal Information Protection Law, as well
as additional laws and regulations that PRC regulatory bodies may enact in the future, may result in additional expenses to us and subject
us to negative publicity, which could harm our reputation among users and negatively affect the trading price of our Class A Ordinary
Shares in the future. As of the date of this prospectus, we do not expect that the current PRC laws on cybersecurity or data security
would have a material adverse impact on the business operations of the VIE and the VIE’s subsidiaries and this offering. And we
do not expect to be subject to the cybersecurity review by the CAC for this offering, given that: (i) using our products and services
does not require users to provide any personal information; (ii) the VIE and the VIE’s subsidiaries do not possess any personal
information of users in their business operations; and (iii) data processed in their business does not have a bearing on national security
and thus may not be classified as core or important data by the authorities. We do not believe the VIE or the VIE’s subsidiaries
are among the “operator of critical information infrastructure,” “data processor” carrying out data processing
activities that affect or may affect national security, or “operator of network platform” holding personal information of
more than one million users as mentioned above, however, the revised draft Regulations on Network Data Security is in the process of
being formulated and subject to further changes, and inherent uncertainty exists in relying on an opinion of our PRC counsel as to the
enactment, interpretation and implementation of regulations related to overseas securities offerings and cybersecurity compliance requirements.
The PRC regulators, including the CSRC or the CAC, may not arrive at the same conclusion as our PRC counsel. However, if the draft Regulations
on Network Data Security is adopted into law and we become listed on Nasdaq, the Sancai WFOE and the VIE and the VIE’s subsidiaries
likely will be required to perform annual data security assessment either by itself or retaining a third-party data security service
provider and submit such data security assessment report to the local agency every year.

 

Neither the CAC nor any other PRC regulatory
agency or administration has contacted Sancai Holding, its subsidiaries, the VIE or the VIE’s subsidiaries in connection with the
operations of our PRC subsidiary, the VIE and VIE’s subsidiaries. Sancai Holding, its subsidiaries and the VIE and the VIE’s
subsidiaries have not been involved in any investigations on cybersecurity or data security initiated by related governmental regulatory
authorities, and we or the VIE and the VIE’s subsidiaries have not received any inquiry, notice, warning, or sanction in such respect.
However, there remains uncertainty as to how these laws and regulations will be interpreted or implemented and whether the PRC regulatory
agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the PRC
laws on cybersecurity or data security. We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view
as we do, and we cannot assure you that we or theVIE or the VIE’s subsidiaries will comply with such regulations in all aspects
in a timely manner and we or the VIE and the VIE’s subsidiaries may be ordered to rectify or terminate any actions that are deemed
illegal by regulatory authorities or face other penalties, which could materially and adversely affect our business, financial condition,
and results of operation. If any such new laws, regulations, rules, or implementation and interpretation comes into effect, we will cause
the VIE and the VIE’s subsidiaries to take all reasonable measures and actions to comply with and to minimize the adverse effect
of such laws on us. In the event that the applicable laws, regulations, or interpretations change such that we or the VIE and the VIE’s
subsidiaries are subject to any mandatory cybersecurity review and other specific actions required by the CAC, we cannot guarantee whether
we or the VIE and the VIE’s subsidiaries can complete the registration process in a timely manner, or at all. Given such uncertainty,
the VIE and the VIE’s subsidiaries may be further required to suspend their relevant business, shut down our website, or face other
penalties, which could materially and adversely affect our financial condition, results of operations and the value of our Class A 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.

 

 

Risks
Related to Our Business and Industry

 

The VIE and the VIE’s subsidiaries
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.

 

The VIE and the VIE’s subsidiaries launched
the Software-as-a-Service (SaaS) solutions in July 2019 to help small businesses in China achieve digitalization. The VIE and the VIE’s
subsidiaries have a limited operating history in the SaaS 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.

 

We had $7.89 million and $3.65 million (restated)
in revenue for the fiscal year ended September 30, 2021 and 2020, respectively, all of which was from the VIE’s SaaS platform
solution services.

 

During the fiscal year ended September 30,
2020, the transaction settlement amount from the SaaS platform application service was $212.36 million. The total fees charged on the
transaction settlement amount was $7.07 million. We recognized $3.65 million as revenue, and $3.42 million as contract liabilities. The
contract liabilities were fully recognized as revenue during the fiscal year 2021.

 

During the fiscal year ended September 30,
2021, the COVID-19 pandemic caused disruption to the housing leasing industry in China. As a result, the transaction settlement
amount decreased by $204.34 million, from $212.36 million for the fiscal year 2020 to $8.02 million for the fiscal year 2021. As there
were no contract liabilities as of September 30, 2021, revenue from unrealized SaaS platform standard services will decrease in fiscal
year 2022. The total fees charged on the transaction settlement amount was $0.25 million, which was fully recognized during the fiscal
year 2021. In addition, the contract liabilities of $3.42 million as of September 30, 2020 was fully recognized as revenue as $3.58 million
due to the change in exchange rate.

 

Our historical results and growth may not
be indicative of our future performance, and the VIE and the VIE’s subsidiaries may fail to continue our growth or maintain our
historical growth rates. If the demand for digitalization and our SaaS platform does not develop as we expect, or if the VIE and the
VIE’s subsidiaries fail to continue to address the needs of our customers, our business and financial conditions may be materially
adversely affected.

 

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

 

 

If
the market for the SaaS solutions develops more slowly than we expect, our operating results would be adversely affected.

 

The
market for business solutions that is delivered as software-as-a-service, or SaaS, is less mature than traditional on-premises software
applications, and the adoption rate of SaaS business solutions may be slower among customers in business practices requiring highly customizable
application software. Our success will depend to a substantial extent on the widespread adoption of SaaS business solutions in general,
but we cannot be certain that the trend of adoption of SaaS solutions will continue in the future. In particular, many organizations
have invested substantial personnel and financial resources in integrating legacy software into their businesses over time, and some
have been reluctant or unwilling to migrate to SaaS. It is difficult to predict customer adoption rates and demand for our solutions,
the future growth rate and size of the SaaS business solutions market or the entry of competitive applications. The expansion of the
SaaS business solutions market depends on a number of factors, including the cost, performance and perceived value associated with SaaS,
as well as the ability of SaaS providers to address data security and privacy concerns. If SaaS business solutions does not continue
to achieve market acceptance, or there is a reduction in demand for SaaS business solutions 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.

 

To grow our business, the VIE and the
VIE’s subsidiaries must achieve a high level of customer satisfaction and contract renewals, extend their relationships with existing
customers over time and sell the SaaS solutions to new customers.

 

The VIE and the VIE’s subsidiaries contracts
with their customers are typically for a specified term and renewable at expiration. For the business to succeed The VIE and the VIE’s
subsidiaries must achieve a high level of customer satisfaction so that the customers will renew their contracts with the VIE and the
VIE’s subsidiaries and increase their utilization of our SaaS platform. This requires that the SaaS solutions perform up to customer
expectations and customers achieve the return on investment that they expect. Even if the products perform to specifications, customers
may choose not to renew or to cancel early. Our success also depends on the ability of the VIE and the VIE’s subsidiaries to extend
their relationships with existing customers, both by growing their utilization of the SaaS platform and by selling additional functions
in the SaaS platform. Finally, our ability to achieve significant revenue growth also depends on the ability to attract new customers.

 

The ability to generate customer renewal,
customer expansion and new customer sales depends on many factors, including customer satisfaction with the performance of our solutions,
the prices of our solutions and competing solutions, mergers and acquisitions affecting our customer base, the effects of global economic
conditions and reductions in customer spending levels generally. The success with customers also depends on the ability to maintain a
consistently high level of customer service and technical support to retain existing customers and attract new customers. If the VIE
and the VIE’s subsidiaries are unable to hire and train sufficient support resources to provide adequate and timely support to
our customers, the customers’ satisfaction with the SaaS solutions will be adversely affected. To the extent that the customers
do not renew their contracts, terminate early or renew on less favorable terms or if our efforts to sell additional solutions to existing
customers or new customers are not successful, our revenues may decline and our operating results could be adversely affected. The success
of new solutions and enhancements of existing solutions depends on many factors, including timing, quality, and market acceptance. Any
new solutions that the VIE and the VIE’s subsidiaries develop may contain errors or defects or may not achieve the broad market
acceptance necessary to generate sufficient revenues. If the VIE and the VIE’s subsidiaries are unable to successfully enhance
our existing solutions to meet customer requirements, increase adoption and usage of the SaaS solutions or develop new solutions, our
business and operating results will be adversely affected.

 

The business of the VIE and the VIE’s
subsidiaries is susceptible to changes in China’s national economic conditions.

 

The business of the VIE and the VIE’s
subsidiaries depends substantially on conditions of China’s national economic conditions. Demand for digitalization in China has
grown rapidly in recent years, primarily driven by favorable trends in E-commerce and the necessity to adapt the restrictions imposed
by the governance as a result of the COVID-19 pandemic and a change in consumer behavior. However, there is no assurance that such favorable
trend could sustain. Any severe or prolonged slowdown in China’s economy, any slowdown or discontinuation of urbanization in our
target markets, or any changes in government policies that restrain the development of residential rental market may materially and adversely
affect our business, financial condition and results of operations. Economic conditions in China are sensitive to global economic conditions.
If present Chinese and global economic uncertainties persist, many of our customers may reduce the service they require from us. Adverse
economic conditions could also reduce the number of customers seeking our service, as well as their ability to make payments. Should
any of these situations occur, our net revenues will decline, and our business and financial conditions will be negatively impacted.
Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet
liquidity needs.

 

The VIE and the VIE’s subsidiaries
are subject to evolving regulatory requirements; if they do not comply with these regulations, or fail to adapt to regulatory changes,
their business and prospects may be materially and adversely affected.

 

Many aspects of the business of the VIE and
the VIE’s subsidiaries, including the provision of technology services and the collection and processing of transaction data, are
subject to supervision and regulation by various governmental authorities in China. In addition, as the VIE and the VIE’s subsidiaries
continue to expand the solutions on our SaaS platform, they may be subject to new and more complex regulatory requirements. The VIE and
the VIE’s subsidiaries are also required to comply with applicable laws and regulations to protect the privacy and security of
their customers’ information. Legal and regulatory restrictions may delay, or possibly prevent, some of their solutions or services
from being offered, which may have a material adverse effect on our business, financial condition, and results of operations. Violation
of laws and regulations may also result in severe penalties, confiscation of illegal income, revocation of licenses and, under certain
circumstances, criminal prosecution.

 

  

The PRC regulatory framework governing computer
technology and internet services is unclear and evolving. New laws or regulations may be promulgated, which could impose new requirements
or prohibitions that render our operations or our technologies non-compliant. In addition, due to uncertainties and complexities of the
regulatory environment in PRC, we cannot assure you that regulators will interpret laws and regulations the same way we do, or that we
will always be in full compliance with applicable laws and regulations. To remedy any violations, we may be required to modify our business
models, solutions and technologies in ways that render our solutions less appealing. The VIE and the VIE’s subsidiaries may also
become subject to fines or other penalties, or, if the VIE and the VIE’s subsidiaries determine that the requirements to operate
in compliance are overly burdensome, they may elect to terminate potentially non-compliant operations. In each such case, our business,
financial condition, and results of operations may be materially and adversely affected.

 

A significant portion of our revenue
for the fiscal year ended September 30, 2021 and 2020 was from a former related party. The loss of any of our key customers could reduce
our revenues and our profitability.

 

We consider the major customers in each period
to be those that accounted for more than 10% of our revenue in such period. The VIE had one such major customer, Chengcheng Real Estate
Co., Ltd., who accounted for 39.73% and 79.66% (restated) of our revenue for the fiscal year ended September 30, 2021 and 2020, respectively,
all of which was from its from the SaaS platform application service. Chengcheng Real Estate Co., Ltd. was a related party prior to May
2019, when our CEO and Chairman of the Board, Mr. Ning Wen, was the legal representative of Chengcheng Real Estate Co., Ltd. Chengcheng
Real Estate Co., Ltd. was subsequently bought out by a state-owned entity and Mr. Wen resigned as its legal representative in May 2019,
as a result, upon which Chengcheng Real Estate Co., Ltd. ceased being a related party. Neither Mr. Ning Wen nor any other officers or
directors of Sancai Holding holds any equity interest in Chengcheng. The VIE and the VIE’s subsidiaries did not have any transactions
with Chengcheng Real Estate Co., Ltd. during the period when it was a related party. There can be no assurance that the VIE and the VIE’s
subsidiaries will maintain or improve the relationships with customers who does not have long-term contracts with us. If the VIE and
the VIE’s subsidiaries 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.

 

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.

 

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, which will impair our revenue growth and hurt our overall financial performance.

 

 

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. We cannot, therefore, assure you that we will be able to successfully overcome such
obstacles and establish our products 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 were unable or unwilling to
continue in 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 were unable or unwilling to continue in 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. For example, Mr.
Ning Wen, the major shareholder and legal representative of Sancaijia, was restricted from high consumption in April 2021 by
people’s court due to Xi’an Sancai Internet House Rental Co. Ltd’s failure to fulfill the payment obligation of
RMB22,000 (approximately $3,407) determined in an effective legal instrument. Xi’an Sancai Internet is a wholly-owned
subsidiary of Sancai Real Estate Management Co., Ltd, which is a former subsidiary of Sancaijia. Mr. Ning Wen was the legal
representative of Xi’an Sancai Internet House Rental Co. Ltd at the time of the court ruling. Mr. Wen Ning is no longer the
legal representative of Xi’an Sancai Internet as of October 8, 2020, when Xi’an Sancai Internet completed the change of
its legal representative. In August 2021, the high consumption restriction order was dismissed by the people’s court when the
payment obligation was fulfilled. In addition, Ms. Lizhen Tang, a shareholder of Sancai Holding and Sancaijia, has been restricted
from high consumption since April 2021 by people’s court as the legal representative of several branches of Sancai Real Estate
Management Co., Ltd, a former subsidiary of Sancaijia, due to the failure of these branches of Sancai Real Estate Management Co.,
Ltd.to fulfill the payment obligation under effective legal instruments.

 

Moreover, we cannot guarantee that additional
enforcement measures relating to or arising out of lawsuits would not be threatened or brought against us, Mr. Wen Ning, Ms. Lizhen Tang,
other shareholders, directors and officers in the future. However, 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 and divert attention of Mr. Ning Wen and other management,
which could in turn harm our business.

 

If the VIE fail to protect their intellectual
property rights, it could harm their business and competitive position.

 

The VIE’s intellectual property rights
are important to our business. The VIE relies on a combination of confidentiality procedures and contractual provisions to protect their
intellectual property rights. As of the date of this prospectus, Sancaijia and its subsidiaries has 10 registered trademarks, 2 registered
patents and 28 registered software copyrights in China. Sancaijia is licensed to use 33 trademarks in China.

 

Sancaijia enters 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 the intellectual property rights of the VIE and the VIE’s subsidiaries 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 the VIE and the VIE’s subsidiaries
are not able to continue to innovate or if they fail to adapt to changes in our industry, their business, financial condition and results
of operations would be materially and adversely affected.

 

The SaaS industry has trends of developing
high-end and high-tech products to fulfill the changing customers’ demands. Furthermore, the competitors are constantly developing
innovations in different services to enhance user experience. The VIE and the VIE’s subsidiaries continue to invest significant
resources in developing and enhancing the existing products as well as to introduce new services that will attract more participants
to the SaaS platform. 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. Failure to innovate and adapt to these changes would have
a material adverse effect on our business, financial condition, and results of operations.

 

If the VIE and the VIE’s subsidiaries
fail to promote and maintain their brand in an effective and cost-efficient way, their business and results of operations may be harmed.

 

We believe that developing and maintaining
awareness of the VIE and the VIE’s subsidiaries brand effectively is critical to attracting new and retaining existing customers.
Successful promotion of the brand and the ability to attract customers depend largely on the effectiveness of our marketing efforts and
the success of the channels the VIE and the VIE’s subsidiaries use to promote the products. Currently, the VIE and the VIE’s
subsidiaries promote their brand through word of mouth and internet promotions. It is likely that the future marketing efforts will require
them 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 the
VIE and the VIE’s subsidiaries 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.

 

The VIE and the VIE’s subsidiaries
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.

 

The VIE and the VIE’s subsidiaries 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 the VIE and the VIE’s subsidiaries
by third parties, including customers, suppliers, employees, business partners, governmental or regulatory bodies, competitors or other
third parties, in administrative, civil or criminal investigations and proceedings.

 

As the VIE and the VIE’s
subsidiaries entered into contractual relationship with various real estate management companies and leasing agencies, they have
been and may continue to be involved in legal proceedings and assume joint liability when they provide services to the customers
through the SaaS platform who are named as defendants due to various reasons including contract violations, lack of cash liquidity
and bankruptcy of such business partners. In addition, the VIE and the VIE’s subsidiaries 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.

 

As of the date of this prospectus, there are
some ordinary routine legal proceedings incidental to our business, to which some of the VIE and the VIE’s subsidiaries is a party
or of which any of their’ property is subject. We do not believe the legal proceedings are material to our business or our financial
conditions. Some of the proceedings present the same or similar legal or factual issues. The claims for damages of the proceedings, exclusive
of interest and cost, on an aggregated basis, do not exceed 10 percent of the current assets of Sancai Holding, its subsidiary and the
VIE and the VIE’s subsidiaries on a consolidated basis. We have and will continue to defend ourselves vigorously. Although it is
not feasible to predict the outcome of these matters, as of the date of this prospectus, none of the legal proceedings have resulted,
and we believe that they will not result, given the information currently available, in any material adverse effect on our business,
financial condition or results of operations

 

There may also be negative publicity associated
with litigation that could decrease customers’ 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. 

 

New lines of business or new products
may subject the VIE and the VIE’s subsidiaries to additional risks.

 

From time to time, the VIE and the VIE’s
subsidiaries may implement new lines of business or offer new products within existing lines of business. There are substantial risks
and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and
marketing new lines of business and/or new products, the VIE and the VIE’s subsidiaries may invest significant time and resources.
Initial timetables for the introduction and development of new lines of business and/or new products may not be achieved and price and
profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting
market preferences, may also impact the successful implementation of a new line of business or a new product. Furthermore, any new line
of business and/or new products could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully
manage these risks in the development and implementation of new lines of business or new products could have a material adverse effect
on our business, results of operations and financial condition.

 

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 customers. 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 customers, employees and suppliers of the acquired business;

 

risks
of entering markets in which we have limited or no prior experience;

 

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.

 

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 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 Sancai Holding, our subsidiaries,
or the VIE or the VIE’s subsidiaries maintain any insurance to cover assets, property and potential liability of the business.
The lack of insurance could leave the business inadequately protected from loss. If Sancai Holding, our subsidiaries, or the VIE or the
VIE’s subsidiaries 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.

 

The VIE’s and the VIE’s
subsidiaries’ operations depend on the performance of the internet infrastructure and telecommunications networks in China.

 

Almost all access to the internet in China
is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry
of Industry and Information Technology, or the MIIT. The IT infrastructure is currently deployed, and our data is currently maintained
through a customized cloud computing system. The servers are housed at third-party data centers. Such service provider may have limited
access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure
or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, the VIE
or the VIE’s subsidiaries may be required to upgrade our technology and infrastructure to keep up with the increasing number and
variety of customer’s demands on our SaaS platform. There can be no assurance that the internet infrastructure and the fixed telecommunications
networks in China will be able to support the demands associated with the continued growth in internet usage.

 

The financial and operating performance
of the VIE and the VIE’s subsidiaries may be adversely affected by epidemics, natural disasters and other catastrophes.

 

The business and financial and operating performance
of the VIE or the VIE’s subsidiaries 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, the VIE or the VIE’s subsidiaries
have experienced and may continue to experience slowdown and temporary suspension in operation. Their 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 were rampant.
Those restrictive measures adversely affected and slowed 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 the targeted markets may
have a material and adverse effect on the business operations of the VIE or the VIE’s subsidiaries.

 

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, the VIE or
the VIE’s subsidiaries may not be adequately prepared in contingency planning or recovery capability in relation to a major incident
or crisis, and as a result, their operational continuity may be adversely and materially affected, which in turn may harm our reputation.

 

We
relied substantially on external accounting firm prior to the appointment of our CFO.

 

We engaged a third-party accounting firm to
prepare our financial statements for the fiscal years ended September 30, 2021 and 2020. We did not have any internal personnel with
substantial U.S. GAAP experience until the appointment of Ms. Yuxiu Wang as our CFO in October 2020. We will continue to rely
on Ms. Wang’s expertise and knowledge in our financial reporting going forward. We have also hired some consultant and accounting
staff who have U.S. GAAP experience and knowledge in October 2021 to improve our finical reporting. In the meantime, we will train our
full-time accounting staff and identify and resolve complex accounting issues using U.S. GAAP, as well as provide segregation of duties
within our internal control procedures to support the accurate reporting of our financial results. We may continue to recruit
qualified accounting staff with sufficient U.S. GAAP experience and knowledge to join the financial reporting team. The loss
of CFO and our inability to find a suitable candidate to replace the CFO may have a material adverse effect on our financial reporting.

 

 

We
have identified material weaknesses in our internal control over financial reporting. If we fail to implement and maintain
an effective system of internal control, we may be unable to accurately report our operating results, meet our reporting obligations
or prevent fraud.

 

In preparing our consolidated financial statements
for the years ended September 30, 2021 and 2020, our management identified material weaknesses in our internal control over
financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, and
other significant deficiencies. A “material weakness” is a deficiency, or a combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely basis. The material weaknesses identified are as follows: (i) no sufficient
personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare
and review financial statements and related disclosures under U.S. GAAP; (ii) ineffective oversight of our financial reporting and internal
control by those charged with governance; and (iii) inadequate design of internal control over the preparation of the
financial statements being audited. These material weaknesses remained as of September 30, 2021. As a result of inherent limitations,
our internal control over financial reporting may not prevent or detect misstatements, errors or omissions.

 

To remedy our previously identified material
weakness, we and the VIE have undertaken and will continue to undertake steps to strengthen our internal control over financial
reporting. These measures include the following:

 

  (i) The VIE has hired new accounting staff and consultant
with appropriate U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to
set up a financial and system control framework.

 

  (ii) We and the VIE have implemented, and plan to continue
to develop, an ongoing program in the form of online courses to provide sufficient and appropriate training for financial reporting
and accounting personnel, especially training related to U.S. GAAP and SEC financial reporting requirements. We have also organized
and will continue to organize monthly seminars to provide the team an opportunity to communicate and discuss the courses to enhance
their understanding. In addition, we have developed internal policy to encourage our accounting staff to obtain U.S. CPA certification.

 

  (iii) We and the VIE have assigned, and plan to continue
to improve, clear oversight roles and responsibilities for accounting and financial reporting staff to address accounting and financial
reporting issues, especially for non-recurring and complex transactions, to ensure consolidated financial statements and related
disclosures are accurate, complete and in compliance with SEC reporting requirements. Entries are made by accounting staff, approve
by accounting managers and reviewed by our Chief Financial Officers.

 

  (iv) We and the VIE have taken steps to build and enhance
an internal control function. Particularly, each department within the VIE and the VIE’s subsidiaries has built, and plan to
continue improve, rules for daily operations to ensure critical risks are managed and mitigated. We have also established control
matrix, narrative and flow chart to facilitate self-testing and external audit. We are in the process of standardization and documentation
of our daily control activities and expect this to complete by the end of 2021. In addition, we plan to build an internal team to
assess our compliance readiness under rule 13a-15 of the Exchange Act and improve overall internal control on
a quarterly and annual basis.

 

However, such measures have not been fully
implemented and we concluded that the material weakness in our internal control over financial reporting had not been remediated
as of September 30, 2021. Due to the nature of the remediation process and the need to allow adequate time after implementation to evaluate
and test the effectiveness of the controls, management expects the material weaknesses will be fully remediated in approximately six
to nine months, and expected the cost to be approximately $160,000 annually.

 

In
addition, once we cease to be an “emerging growth company” as such term is defined under the Jumpstart Our Business Startups
Act, or JOBS Act, Section 404 of the Sarbanes-Oxley Act of 2002 and related rules promulgated by the Securities and Exchange Commission,
we will be subject to Section 404 of the Sarbanes-Oxley Act of 2002, pursuant to which our independent registered public accounting firm
must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude
that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal
control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent
testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are
documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting
obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future.
We may be unable to timely complete our evaluation testing and any required remediation.

 

Caibaoyun relies on a third-party supplier
for the SaaS platform customization and development services. Any interruption in operations at the third-party supplier could prevent
or limit their ability to meet demand for or fulfill orders of the services of the VIE and the VIE’s subsidiaries.

 

Caibaoyun relies on a third-party supplier
for the SaaS platform customization and development services. During the fiscal year ended September 30, 2021, such supplier accounted
for 100% of the purchases on a consolidated basis. Any significant disruption at the supplier for any reason, including regulatory requirements,
the loss of certifications or approvals, technical difficulties, loss of key personnel, labor disputes, power interruptions or other
infrastructure failures, fires, earthquakes, or other force of nature, or terrorist attacks, could disrupt the supply and support of
the SaaS platform customization and development services and significantly harm the results of operations and financial performance.

 

In addition, the software development agreement
between Caibaoyun and such supplier expired in October 2021. Caibaoyun and such supplier have agreed to extend the agreement until October
2022 with the same terms and are working to enter into an extension agreement. Caibaoyun may be unable to renew this agreement or find
a new supplier on commercially reasonable terms. If Caibaoyun was unable or unwilling to renew at the proposed rates, finding a new supplier
may involve significant expenses. Such a change may also delay the delivery of the SaaS platform customization and development services
and adversely affect our operating results.

 

 

Risks Related to Our Public Offering and Ownership
of Our Class A Ordinary Shares

 

The dual class
structure of our Class A Ordinary Shares and Class B Ordinary Shares has the effect of concentrating voting control with our CEO, directors
and their affiliates.

 

As of the date of this prospectus, the authorized
share capital of Sancai Holding is $50,000 divided into 400,000,000 Class A Ordinary Shares with a par value of $0.0001 per share and
100,000,000 Class B Ordinary Shares with a par value of $0.0001 per share, of which 10,000,000 Class A Ordinary Shares and 1,500,000
Class B Ordinary Shares are outstanding. Holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together
as one class on all matters submitted to a vote by the shareholders. Each Class A Ordinary Share has one (1) vote and each Class B Ordinary
Share has ten (10) votes. Each Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time at the option of
the holder thereof. Class A Ordinary Shares are not convertible into Class B Ordinary Shares under any circumstances. Each
Class B Ordinary Share may only be issued to Mr. Ning Wen, Mr. Lizhi He, Lizhen Tang, Mr. Zhijie Zhang and Sancai Holding’s or
its subsidiaries employees or those entities of which any of its principal shareholders is an employee of Sancai Holding or its subsidiaries.
Termination of such employment with Sancai Holding or its subsidiaries shall immediately result in the conversion of any and all issued
and outstanding Class B Ordinary Shares held by such shareholder into the equivalent number of Class A Ordinary Shares. Upon any
sale, transfer, assignment or disposition of any Class B Ordinary Share by the holder to any person or entity which is not a qualified
holder of Class B Ordinary Shares, such Class B Ordinary Shares shall be automatically and immediately converted into the equivalent
number of Class A Ordinary Shares. The currently Class B Ordinary Shares outstanding are beneficially owned by our Chief Executive
Officer, Mr. Ning Wen, and by Mr. Lizhen Tang, a principal stockholder, and collectively represent 60% of the aggregate voting power
of our currently outstanding Ordinary Shares as of the date hereof. Because of the ten-to-one voting ratio between our Class B and Class
A Ordinary Shares, the holders of our Class B Ordinary Shares collectively will continue to control a majority of the combined voting
power of our Ordinary Shares and therefore be able to control all matters submitted to our shareholders for approval so long as the shares
of Class B Ordinary Shares represent at least 52% of the voting power of all outstanding Ordinary Shares. This concentrated control will
limit the ability of holders of Class A Ordinary Shares to influence corporate matters for the foreseeable future. Future transfers by
holders of Class B Ordinary Shares will generally result in those shares converting to Class A Ordinary Shares. The conversion of Class
B Ordinary Shares to Class A Ordinary Shares will have the effect, over time, of increasing the relative voting power of those holders
of Class B Ordinary Shares who retain their shares in the long term. If, for example, Mr. Wen retains a significant portion of his holdings
of Class B Ordinary Shares for an extended period of time, he could, in the future, continue to control a majority of the combined voting
power of our outstanding Class A Ordinary Shares and Class B Ordinary Shares. 

 

Our CEO has control
over key decision making as a result of his control of a majority of our voting shares.

 

Our Founder, CEO, and our Chairman of the
Board, Mr. Ning Wen, has voting rights with respect to an aggregate of 7,300,000 Ordinary Shares, on an as converted basis (6,300,000
Class A Ordinary Shares and 1,000,000 Class B Ordinary Shares), representing 65.2% of the voting power of the outstanding Class A Ordinary
Shares and Class B Ordinary Shares of Sancai Holding as of the date hereof. As a result, Mr. Wen has the ability to control the outcome
of matters submitted to our shareholders for approval, including the election of directors and any merger, consolidation, or sale of
all or substantially all of our assets. In addition, Mr. Wen has the ability to control the management and affairs of Sancai Holding
as a result of his position as our CEO and his ability to control the election of our directors. Additionally, in the event that Mr.
Wen controls Sancai Holding at the time of his death, control may be transferred to a person or entity that he designates as his successor.
As a board member and officer, Mr. Wen owes a fiduciary duty to Sancai Holding and must act in good faith in a manner he reasonably believes
to be in the best interests of Sancai Holding. As a beneficial shareholder, even a controlling beneficial shareholder, Mr. Wen is entitled
to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not
always be in the interests of our shareholders generally.

 

As a “controlled
company” under the rules of the Nasdaq Capital Market, we may choose to exempt Sancai Holding from certain corporate governance
requirements that could have an adverse effect on our public shareholders.

 

Our directors and officers beneficially own
a majority of the voting power of our outstanding Class A Ordinary Shares and Class B Ordinary Shares. Under the Rule 4350I of the Nasdaq
Capital Market, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled
company” and may elect not to comply with certain corporate governance requirements, including the requirement that a majority
of our directors be independent, as defined in the Nasdaq Capital Market Rules, and the requirement that our compensation and nominating
and corporate governance committees consist entirely of independent directors. Although we do not intend to rely on the “controlled
company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If we elect to rely
on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors
and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Accordingly,
during any time while we remain a controlled company relying on the exemption and during any transition period following a time when
we are no longer a controlled company, you would not have the same protections afforded to shareholders of companies that are subject
to all of the Nasdaq Capital Market corporate governance requirements. Our status as a controlled company could cause our Class A Ordinary
Share to look less attractive to certain investors or otherwise harm our trading price.

 

 

Sancai Holding
is an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth
companies will make our Class A Ordinary Shares less attractive to investors.

 

Sancai Holding is an “emerging growth
company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and we are eligible to take advantage of certain
exemptions from various reporting and financial disclosure requirements that are applicable to other public companies that are not emerging
growth companies, including, but not limited to, (1) presenting 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 in this prospectus, (2) not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley
Act, (3) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (4) exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.

 

In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act, for complying with new or revised accounting standards. As a result, an emerging growth company can
delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected
to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and
may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to
our shareholders may be different than you might receive from other public reporting companies in which you hold equity interests and,
investors may find investing in our Class A Ordinary Shares less attractive.

 

Sancai Holding
is a “foreign private issuer.” Our disclosure obligations differ from those of U.S. domestic reporting companies and are
exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers. As a result, you will have less protection than
you would have if we were a domestic issuer.

 

Sancai Holding is a foreign private issuer,
though we follow Generally Accepted Accounting Principles (the “GAAP), we are not subject to the same requirements as U.S. domestic
issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent
than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements.
We will not be required to disclose detailed compensation of directors and executive officers. Furthermore, our directors and executive
officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing
profit disclosure and recovery regime.  As a foreign private issuer, we will also be exempt from the requirements of Regulation
FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about
an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as
Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those
imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as
the information provided by U.S. domestic reporting companies.

 

Nasdaq Listing Rule
requires listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however,
we are permitted to, and we may follow home country practice in lieu of the above requirements, or we may choose to comply with the above
requirement within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does not require a
majority of our board to consist of independent directors. Thus, although a director must act in the best interests of Sancai Holding,
it is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of
Sancai Holding may decrease as a result. In addition, the Nasdaq Listing Rules also require U.S. domestic issuers to have a compensation
committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum
of three members. We, as a foreign private issuer, are not subject to these requirements. The Nasdaq Listing Rules may require shareholder
approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote prior to issuance (or potential
issuance) of securities (i) equaling 20% or more of the company’s common stock or voting power for less than the greater of market
or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase
plan to be established or materially amended or other equity compensation arrangement made or materially amended. We intend to comply
with the requirements of Nasdaq Listing Rules to have a board with a majority of independent directors, to appoint a nominating and corporate
governance committee, and in determining whether shareholder approval is required on such matters. However, we may consider following
home country practice in lieu of the requirements under Nasdaq Listing Rules with respect to certain corporate governance standards which
may afford less protection to investors

 

 

Trading of our securities may be prohibited
under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate our auditor in
the future and as a result Nasdaq may determine not to list our securities.

 

In May 2013, the PCAOB announced that
it had entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission,
or the CSRC, and the PRC Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange
of audit documents relevant to investigations undertaken by the PCAOB, the CSRC or the PRC Ministry of Finance in the United States
and the PRC, respectively. The PCAOB continues to be in discussions with the CSRC, and the PRC Ministry of Finance to permit
joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.

 

On December 7, 2018, the SEC and the PCAOB issued
a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of
U.S.-listed companies with significant operations in China. The joint statement reflects a heightened interest in an issue that
has vexed U.S. regulators in recent years.

 

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
national securities exchange or in the over the counter trading market in the U.S.

 

On June 4, 2020, the U.S. President issued
a memorandum ordering the President’s Working Group on Financial Markets, or the PWG, to submit a report to the President within
60 days of the memorandum that includes recommendations for actions that can be taken by the executive branch and by the SEC or PCAOB on
Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the U.S.

 

On August 6, 2020, the PWG released a
report recommending that the SEC take steps to implement the five recommendations outlined in the report. In particular, to address companies
from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutory mandate, or NCJs, the PWG
recommends enhanced listing standards on U.S. stock exchanges. This would require, as a condition to initial and continued exchange listing, PCAOB access
to work papers of the principal audit firm for the audit of the listed company. Companies unable to satisfy this standard as a result
of governmental restrictions on access to audit work papers and practices in NCJs may satisfy this standard by providing a co-audit from
an audit firm with comparable resources and experience where the PCAOB determines it has sufficient access to audit work papers
and practices to conduct an appropriate inspection of the co-audit firm. There is currently no legal process under which such
a co-audit may be performed in China. The report permits the new listing standards to provide for a transition period until January 1,
2022 for listed companies, but would apply immediately to new listings once the necessary rulemakings and/or standard-setting are effective.
The measures in the PWG Report are presumably subject to the standard SEC rulemaking process before becoming effective. On August 10,
2020, the SEC announced that SEC Chairman had directed the SEC staff to prepare proposals in response to the PWG Report, and that the
SEC was soliciting public comments and information with respect to these proposals. After we are listed on the Nasdaq Capital Market,
if we fail to meet the new listing standards before the deadline specified thereunder due to factors beyond our control, we could face
possible de-listing from the Nasdaq Stock Market, deregistration from the SEC and/or other risks, which may materially and
adversely affect, or effectively terminate, our Class A Ordinary Shares trading in the United States.

 

 

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.

 

On
March 24, 2021, SEC announced it has 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 a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number
of consecutive non-inspection years required for triggering the prohibitions under the Act from three years to two years.

 

On December 2, 2021, the SEC issued amendments
to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. The rules
apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken
by an authority in foreign jurisdictions.

 

On December 16, 2021, PCAOB announced the
PCAOB Holding Foreign Companies Accountable Act determinations (the “PCAOB determinations”) relating to the PCAOB’s
inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong
Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in the PRC or
Hong Kong.

 

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, 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 its compliance with the applicable professional standards. Our auditor, BF Borgers CPA PC, the independent
registered public accounting firm that issues the audit report included in this prospectus, is registered with the PCAOB and is subject
to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess BF Borgers CPA PC’s compliance
with applicable professional standards. BF Borgers CPA PC is headquartered in Lakewood, Colorado with additional staff located in China
and has been inspected by the PCAOB on a regular basis, with the last inspection in 2021. Therefore, we believe that, as of the date
of this prospectus, our auditor is not subject to the PCAOB determinations. However, if it were determined that the PCAOB is unable
to inspect or investigate our auditor completely, the trading in our Class A Ordinary Shares would be prohibited, and as a result, Nasdaq
might determine to delist our Class A Ordinary Shares. If our Class A Ordinary Shares are unable to be listed on another securities exchange
by then, such a delisting would substantially impair your ability to sell or purchase our Class A Ordinary Shares when you wish to do
so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our Class A Ordinary
Shares. Additionally, the recent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or other
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 our audit.   Any additional actions, proceedings, or new rules resulting from these efforts to increase
U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our Class A Ordinary Shares
could be adversely affected.

 

If
we cannot satisfy, or continue to satisfy, the initial listing requirements and other rules of Nasdaq Capital Market, although we exempt
from certain corporate governance standards applicable to US issuers as a Foreign Private Issuer, our securities may not be listed or
may be delisted, which could negatively impact the price of our securities and your ability to sell them.

 

We
have applied to have our securities approved for listing on the Nasdaq Capital Market upon consummation of this offering. We cannot assure
you that we will be able to meet those initial listing requirements at that time. Even if our securities are listed on the Nasdaq Capital
Market, we cannot assure you that our securities will continue to be listed on the Nasdaq Capital Market.

 

In
addition, following this offering, in order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with
certain rules of Nasdaq Capital Market, including those regarding minimum shareholders’ equity, minimum share price and certain
corporate governance requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital
Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital
Market criteria for maintaining our listing, our securities could be subject to delisting.

 

 

If
the Nasdaq Capital Market does not list our securities, or subsequently delists our securities from trading, we could face significant
consequences, including:

 

a
limited availability for market quotations for our securities;

 

reduced
liquidity with respect to our securities;

 

a
determination that our Class A Ordinary Share is a “penny stock,” which will
require brokers trading in our Class A Ordinary Share to adhere to more stringent rules and
possibly result in a reduced level of trading activity in the secondary trading market for
our Class A Ordinary Share;

 

limited
amount of news and analyst coverage; and

 

a
decreased ability to issue additional securities or obtain additional financing in the future.

 

Prior
to this offering, there has been no public market for our securities. The market price of our Class A Ordinary Shares may be volatile
or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering
price.

 

Prior
to this offering, there has been no public market for our securities. The public offering price for our Class A Ordinary Shares will
be determined through negotiations between the Underwriter and us and may vary from the market price of our Class A Ordinary Shares following
our public offering. If you purchase our Class A Ordinary Shares in our public offering, you may not be able to resell those shares at
or above the public offering price. We cannot assure you that the public offering price of our Class A Ordinary Shares, or the market
price following our public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred
from time to time prior to our public offering. The market price of our Class A Ordinary Shares may fluctuate significantly in response
to numerous factors, many of which are beyond our control, including:

 

actual
or anticipated fluctuations in our revenue and other operating results;

 

the
financial projections we may provide to the public, any changes in these projections or our
failure to meet these projections;

 

actions
of securities analysts who initiate or maintain coverage of us, changes in financial estimates
by any securities analysts who follow our Company, or our failure to meet these estimates
or the expectations of investors;

  

announcements
by us or our competitors of significant services or features, technical innovations, acquisitions,
strategic partnerships, joint ventures, or capital commitments;

 

price
and volume fluctuations in the overall stock market, including as a result of trends in the
economy as a whole;

 

lawsuits
threatened or filed against us; and

 

other
events or factors, including those resulting from war or incidents of terrorism, or responses
to these events.

 

In
addition, the stock markets have experienced extreme price and volume fluctuations that have
affected and continue to affect the market prices of equity securities of many companies.
Stock prices of many companies have fluctuated in a manner unrelated or disproportionate
to the operating performance of those companies. In the past, shareholders have filed securities
class action litigation following periods of market volatility. If we were to become involved
in securities litigation, it could subject us to substantial costs, divert resources and
the attention of management from our business, and adversely affect our business.

 

 

We
have broad discretion in the use of the net proceeds from our public offering and may not use them effectively.

 

To
the extent (i) we raise more money than required for the purposes explained in the section titled “Use of Proceeds” or (ii)
we determine that the proposed uses set forth in that section are no longer in the best interests of our Company, we cannot specify with
any certainty the particular uses of such net proceeds that we will receive from our public offering. Our management will have broad
discretion in the application of such net proceeds, including working capital, possible acquisitions, and other general corporate purposes,
and we may spend or invest these proceeds in a way with which our shareholders disagree. The failure by our management to apply these
funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from our public
offering in a manner that does not produce income or that loses value.

 

We
do not intend to pay dividends for the foreseeable future.

 

We
currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare
or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Class A Ordinary
Shares if the market price of our Class A Ordinary Shares increases.

 

Shares
eligible for future sale may adversely affect the market price of our Class A Ordinary Shares, as the future sale of a substantial amount
of outstanding Class A Ordinary Shares in the public marketplace could reduce the price of our Class A Ordinary Shares.

 

The
market price of our 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 Class A Ordinary Shares. [●] Class A Ordinary Shares will be outstanding immediately after this offering, if the firm commitment
is completed. All of the shares sold in the offering will be freely transferable without restriction or further registration under the
Securities Act. The remaining shares will be “restricted securities” as defined in Rule 144. These shares may be sold in
the future 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.”

 

You
will experience immediate and substantial dilution.

 

The
public offering price of our shares is substantially higher than the pro forma net tangible book value per share of our Class A Ordinary
Shares. Assuming the completion of the firm commitment offering, if you purchase shares in this offering, you will incur immediate dilution
of approximately $[●] or approximately [●]% in the pro forma net tangible book value per share from the price per share that
you pay for the shares. Assuming the completion of the firm commitment offering, if you purchase Class A Ordinary Shares in this offering,
you will incur immediate dilution of approximately $[●] or approximately [●]% in the pro forma net tangible book value per
share from the price per share that you pay for the Class A Ordinary Shares. Accordingly, if you purchase Class A Ordinary Shares in
this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”

 

We
will incur additional costs as a result of becoming a public company, which could negatively impact our net income and liquidity.

 

Upon
completion of this offering, we will become a public company in the United States. As a public company, we will incur significant legal,
accounting and other expenses that we did not incur as a private company. In addition, Sarbanes-Oxley and rules and regulations implemented
by the SEC and the Nasdaq Capital Market require significantly heightened corporate governance practices for public companies. We expect
that these rules and regulations will increase our legal, accounting and financial compliance costs and will make many corporate activities
more time-consuming and costly.

 

We
do not expect to incur materially greater costs as a result of becoming a public company than those incurred by similarly sized U.S.
public companies. If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action,
investors may lose confidence in us and the market price of our Class A Ordinary Shares could decline.

 

 

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 publicly listed company in the United States. As a publicly listed company, we will be required
to file interim reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our Company and
shareholders. 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.-listed 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 listing could affect our results of operations.

 

Since
Sancai Holding is a Cayman Islands exempted company, the rights of our shareholders may be more limited than those of shareholders of
a company organized in the United States.

 

Sancai Holding is an exempted company incorporated
under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies
Act and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders
and the fiduciary duties of our directors to us under the Cayman Islands law are to a large extent governed by the common law of the
Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands
as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of
our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under
statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands have a less developed body
of securities laws than the United States. Under the laws of some jurisdictions in the United States, majority and controlling shareholders
generally have certain fiduciary responsibilities to the minority shareholders. Shareholder action must be taken in good faith, and actions
by controlling shareholders which are obviously unreasonable may be declared null and void. In addition, Cayman Islands companies may
not have standing to initiate a shareholder derivative action in a federal court of the United States action in a federal court of the
United States.

 

Shareholders of Cayman Islands exempted companies,
such as Sancai Holding, have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of
shareholders of these companies. Our directors will have discretion under the second amended and restated memorandum and articles of
association expected to be effective immediately prior to the completion of this offering to determine whether or not, and under what
conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders.
This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution
or to solicit proxies from other shareholders in connection with a proxy contest.

 

As a result of all of the above, public shareholders
of Sancai Holding 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 have as public shareholders of a public U.S. company. For a discussion of significant
differences between the provisions of the Companies Act of the Cayman Islands and the laws applicable to companies incorporated in the
United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”

 

You
may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited
because Sancai Holdings was incorporated under Cayman Islands law, the VIE and the VIE’s subsidiaries currently conduct substantially
all of our operations outside the United States and some of our directors and executive officers reside outside the United States.

 

Sancai Holding was incorporated in the Cayman
Islands and the VIE and the VIE’s subsidiaries currently conduct substantially all of our operations outside the United States
through our subsidiaries. Some of our directors and executive officers reside outside the United States and a substantial portion of
their assets are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against
us or against these individuals in the Cayman Islands, PRC or in Hong Kong, in the event that you believe that your rights have been
infringed under the securities laws of the United States or otherwise. Even if you are successful in bringing an action of this kind,
the laws of the Cayman Islands, PRC and Hong Kong may render you unable to enforce a judgment against our assets or the assets of our
directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see “Enforceability of
Civil Liabilities.”

 

 

SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This
prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact,
including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives
for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to
identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections
about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term
and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive
and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor
can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties
and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and
adversely from those anticipated or implied in the forward-looking statements.

 

You
should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking
statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, we undertake
no duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual
results or revised expectations.

 

 

USE
OF PROCEEDS

 

Assuming
we receive gross proceeds of $15,000,000 in this offering and assuming that the Underwriter does not exercise its over-allotment option,
after deducting the underwriting discount and estimated offering expenses payable by us, we expect to receive net proceeds of approximately
$11,862,535 from this offering.

 

    Offering  
Gross proceeds   $ 15,000,000  
Underwriting discounts and commissions*   $ 1,000,000  
Underwriting non-accountable expenses (1%
of gross proceeds)
  $ 1,500,000  
Miscellaneous underwriting expenses   $ 150,000  
Other offering expenses   $ 487,465  
Net proceeds   $ 11,862,535  

 

* 8%
of the public offering price on the first $10 million in gross proceeds, 4% on the second
$10 million in gross proceeds and 3.5% on the remaining gross proceeds from the sale of securities
in this offering.

 

The
net proceeds from this offering will be remitted to China so that we are able to use the funds to grow our business. We intend to use
the net proceeds of this offering as follows after we complete the remittance process, and we have identified the order of priorities.

 

Description
of Use
  Estimated
Amount of
Net Proceeds
 
Technology research and development   $ 4,000,000  
Market expansion     7,000,000  
Working capital     862,535  
Total   $ 11,862,535  

 

If
the Underwriter exercise its over-allotment option in full, after deducting the underwriting discount and estimated offering expenses
payable by us, we expect to receive an additional net proceeds of approximately $2,160,000. We will use the additional proceeds for working
capital purposes.

 

In using the proceeds of this offering, we are
permitted under PRC laws and regulations as an offshore holding company to provide funding to our PRC subsidiary only through loans or
capital contributions and to the VIE and its subsidiaries only through loans, subject to satisfaction of applicable government registration
and approval requirements.

 

To
make capital contributions to our PRC subsidiary, Sancai WFOE, the amount of capital contribution shall be limited to the registered
capital of our PRC subsidiary. However, our PRC subsidiary may increase its registered capital with the local Administration for Market
Regulation (AMR) at any time. In practice, under the condition that our PRC subsidiary is prepared with complete materials, the local
AMR will generally approve the application within several business days, and the local bank’s approval for the inward remittances
of registered capital can be also completed within a few business days.

 

To
make loans to our PRC subsidiary or the VIE, according to the PBOC Circular 9, the total cross-border financing of a company shall be
calculated using a risk-weighted approach and shall not exceed an upper limit. The upper limit shall be calculated as capital or assets
(for enterprises, net assets shall apply) multiplied by a cross-border financing leverage ratio and multiplied by a macro-prudential
regulation parameter. The macro-prudential regulation parameter is currently 1, which may be adjusted by the People’s Bank of China
and the State Administration of Foreign Exchange in the future, and the cross-border financing leverage ratio is 2 for enterprises. Therefore,
the upper limit of the loans that a PRC company can borrow from foreign companies shall be calculated at 2 times the borrower’s
net assets. When our PRC subsidiary and the VIE jointly apply for borrowing foreign debt, the upper limit of borrowing shall be 2 times
of the net assets in the consolidated financial statement, and the VIE shall make a commitment to give up its application for borrowing
foreign debt in its own name.

 

Furthermore,
our PRC subsidiary, as a foreign-invested enterprise, may also choose to calculate the upper limit of foreign debt borrowing based on
the surplus between the total investment in projects approved by the verifying departments and the registered capital. We can make loans
to our PRC subsidiary within the range of the surplus.

 

We believe the offering proceeds would be available
for investments in our PRC operation after completing the registration as described above. For example, if we decide to make loans to
our PRC subsidiary and the VIE jointly, the loan can be in an amount of up to 2 times of the net assets in the consolidated financial
statement. As of September 30, 2021, we had $4.00 million in shareholder’s equity in the consolidated financial statement. Therefore,
we can make loans to our PRC subsidiary and the VIE in an amount of up to $8.00 million. However, we cannot assure you that we will be
able to obtain relevant government registrations or approvals on a timely basis, or at all. See “Risk Factors—Risks Related
to Doing Business in China—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, which could
materially and adversely affect our liquidity and our ability to fund and expand our business” and “Regulations – Regulations
Relating to Foreign Exchange.”

 

 

DIVIDEND
POLICY

 

We
have never declared or paid any cash dividends on our Class A Ordinary Shares or Class B Ordinary Shares. 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. Any future determination relating to our dividend policy will be made at the discretion of
our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions
and future prospects and other factors the Board of Directors may deem relevant.

 

Under
the Companies Act (as amended) of the Cayman Islands (the “Companies Act”), we may pay dividends out of profits 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 immediately following the dividend payment. For further information, see “Taxation
— Cayman Islands Taxation.”

 

If
we determine to pay dividends on any of our Class A Ordinary Shares or Class B Ordinary Shares in the future, as a holding company, we
will be dependent on receipt of funds from our Sancai WFOE, our indirect subsidiary in China. Dividend distributions from our PRC subsidiary
to us are subject to PRC taxes, such as withholding tax. In addition, regulations in the PRC currently permit payment of dividends of
a PRC company only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and
the accounting standards and regulations in China.

 

Current PRC regulations permit Sancai WFOE to
pay dividends to Sancai HK only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards
and regulations. In addition, Sancai WFOE in China is required to set aside at least 10% of its after-tax profits each year, if any,
to fund a statutory reserve until such reserve reaches 50% of its registered capital. 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 Sancai WFOE incurs debt on their own in the future, the instruments governing the debt may restrict their ability
to pay dividends or make other payments. If Sancai WFOE is unable to receive all of the revenues from the operations of Sancaijia, the
VIE, through the current contractual arrangements, we may be unable to pay dividends on our Class A Ordinary Shares or Class B Ordinary
Shares.

 

Cash dividends, if any, on our Class A Ordinary
Shares or Class B Ordinary Shares will be paid in U.S. dollars. Sancai HK may be considered a non-resident enterprise for tax purposes,
so that any dividends Sancai WFOE pays to Sancai 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—PRC Taxation.” In order for us to pay dividends to our shareholders, we will
rely on payments made from Sancaijia to Sancai WFOE, pursuant to contractual arrangements between them, and the distribution of such
payments to Sancai HK as dividends from Sancaijia. Certain payments from Sancaijia to Sancai WFOE are subject to PRC taxes, including
business taxes and VAT. In addition, if Sancaijia or its subsidiaries or branches incur debt on their own behalves 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. 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, Sancai HK. As of the date of this prospectus, we have not applied for the tax resident certificate
from the relevant Hong Kong tax authority. Sancai HK intends to apply for the tax resident certificate when WFOE plans to declare and
pay dividends to Sancai HK.

 

See “Risk Factors — Risks Related
to Doing Business in China — Sancai Holding is a holding company, and the investors will have ownership in a holding company that
does not directly own any of the business operations of Sancaijia and its subsidiaries in China. We may rely on dividends paid by our
subsidiaries for our cash needs, and any limitation on the ability of our subsidiaries to pay dividends to us, or any tax implications
of making dividend payments to us, could have a material adverse effect on our ability to pay dividends to holders of our Class A Ordinary
Shares.” See “Regulation—Regulations on Dividend Distributions.”

 

 

CAPITALIZATION

 

The following table sets forth our capitalization
as of September 30, 2021 on a pro forma as adjusted basis giving effect to the completion of the firm commitment offering at an assumed
public offering price of $[●] per share and to reflect the application of the proceeds after deducting the estimated placement
fees. You should read this table in conjunction with our financial statements and related notes appearing elsewhere in this prospectus
and “Use of Proceeds” and “Description of Share Capital.”

 

    As of September
30,
2021
 
     

Actual

(Unaudited)

  (Over-allotment

not exercised) (1)
(Unaudited)
   

Pro Forma
as Adjusted
(Over-allotment
exercised in
full) (1)

(Unaudited)

 
Shareholders’ Equity                  
Class A Ordinary Shares,
$[●] par value, [●] shares authorized, [●] shares issued and outstanding
                  [● ]              [  ]           [● ]
Class B Ordinary Shares,
$[●] par value, [●] shares authorized, [●] shares issued and outstanding
                 
Additional paid-in capital     [● ]  [  ]     [● ]
Statutory reserve     [● ] [  ]     [● ]
Retained earnings     [● ] [  ]     [● ]
Accumulated other comprehensive
loss
    [● ] [  ]     [● ]
Total shareholders’
equity
    [● ] [  ]     [● ]
Total Capitalization     [● ] [  ]     [● ]
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
    [● ]     $ [● ]

 

(1) Reflects
the sale of Class A Ordinary Shares in this offering at an assumed initial public offering price
of $[●] per share, and after deducting the estimated underwriting discounts 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. Additional paid-in capital
reflects the net proceeds we expect to receive, after deducting the underwriting discounts,
estimated offering expenses payable by us and advisory fees. We estimate that such net
proceeds will be approximately $[●].

 

 

DILUTION

 

If you invest in our Class A Ordinary Shares,
your interest will be diluted to the extent of the difference between the initial public offering price per Class A Ordinary Shares and
the pro forma as adjusted net tangible book value per Class A Ordinary Share after the offering. Dilution results from the fact that
the per ordinary share offering price is substantially in excess of the book value per Class A Ordinary Share attributable to the existing
shareholders for our presently outstanding Class A Ordinary Shares. Our net tangible book value attributable to shareholders on September
30, 2021 was $[●] or approximately $[●] per Class A Ordinary Share. Net tangible book value per Class A Ordinary Share as
of September 30, 2021represents the amount of total assets less intangible assets and total liabilities, divided by the number of Class
A Ordinary Shares outstanding.

 

After giving effect to the sale of
[●] Class A Ordinary Shares in this offering at the assumed initial public offering price of $[●] per
Class A Ordinary Share and after deducting the underwriting discounts and estimated offering expenses payable by us, our pro
forma as adjusted net tangible book value on September 30, 2021 would have been $[●], or $[●] per Class A Ordinary Share.
This represents an immediate increase in pro forma as adjusted net tangible book value of $[●] per Class A Ordinary Share to existing
investors and immediate dilution of $[●] per Class A Ordinary Share to new investors. The following table illustrates this dilution
to new investors purchasing Class A Ordinary Shares 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
Class A Ordinary Shares based on the foregoing firm commitment offering assumptions.

 

    Offering

Without
Over-Allotment
    Offering

With
Over-Allotment
 
Assumed offering
price per Class A Ordinary Share
  $             [● ]   $                [● ]
Net tangible book value
per Class A Ordinary Share as of September 30, 2021
  $ [● ]   $ [● ]
Increase
in pro forma as adjusted net tangible book value per Class A Ordinary Share attributable to new investors purchasing Class A Ordinary
Share in this offering
  $ [● ]   $ [● ]
Pro forma as adjusted net
tangible book value per Class A Ordinary Share after this offering
  $ [● ]   $ [● ]
Dilution per Class A Ordinary
Share to new investors in this offering
  $ [● ]   $ [● ]

  

Each $1.00 increase (decrease) in the assumed
initial public offering price of $[●] per Class A Ordinary Share would increase (decrease) our pro forma as adjusted
net tangible book value as of September 30, 2021 after this offering by approximately $[●] per Class A Ordinary Share,
and would increase (decrease) dilution to new investors by $[●] per ordinary share, assuming that the number of Class A Ordinary
Shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting
discounts 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 exercise the Over-Allotment Option in full, the pro forma as adjusted net tangible book value per Class A Ordinary
Share after the offering would be $[●], the increase in net tangible book value per Class A Ordinary Share to existing
shareholders would be $[●], and the immediate dilution in net tangible book value per Class A Ordinary Share to new investors
in this offering would be $[●].

 

The following table summarizes, on a pro forma
as adjusted basis as of September 30, 2021, the differences between existing shareholders and the new investors with respect to the number
of Class A Ordinary Shares purchased from us, the total consideration paid and the average price per Class A Ordinary Share before deducting
the estimated commissions to the Underwriter and the estimated offering expenses payable by us.

 

    Shares Purchased     Total Consideration     Average Price  
    Amount     Percent     Amount     Percent     Per Share  
FIRM COMMITMENT
OFFERING
                                       
Existing shareholders (1)           [● ]           [● ]%   $       [● ]           [● ]%   $        [● ]
New
investors
     [● ]     [● ]%   $ [● ]     [● ]%   $ [● ]
Total      [● ]     [● ]%   $ [● ]     [● ]%   $ [● ]

 

(1) Not
including shares underly the Over-Allotment Option.

  

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 Class A Ordinary Shares and other terms of
this offering determined at the pricing.

 

 

CORPORATE
HISTORY AND STRUCTURE

 

The VIE commenced our operations in China in
2018. In July 2019, Sancai Holding Group Ltd. was established under the laws of Cayman Islands, which became the ultimate holding company
through a series of transactions. We operate our business through our consolidated VIE and its subsidiaries in China.

 

The following diagram illustrates our corporate
structure, including our principal subsidiaries, our consolidated VIE, and our consolidated VIE’s subsidiaries as of the date of
this prospectus:

 

 

Sancai Holding was incorporated on July 9, 2019
under the laws of Cayman Islands. We completed a share capital restructure in July and August 2020. As of the date of this prospectus,
the authorized share capital of Sancai Holding is $50,000 divided into (i) 400,000,000 Class A Ordinary Shares and (ii) 100,000,000 Class
B Ordinary Shares of which 10,000,000 Class A Ordinary Shares and 1,500,000 Class B Ordinary Shares are issued and outstanding. Sancai
Holding is a holding company and is currently not actively engaging in any business. Sancai Holding’s registered office is at the
Office of Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite # 5-204, 23 Lime Tree Bay Avenue, P.O. Box
2547, Grand Cayman, KY1-1104, Cayman Islands. 

 

Sancai
Seychelles was incorporated on December 2, 2019 under the laws of Seychelles. Sancai Seychelles is a wholly-owned subsidiary of Sancai
Holding. It is a holding company and is currently not actively engaging in any business.

 

Sancai
HK was incorporated on April 26, 2019 under the laws of Hong Kong. On December 19, 2019, Sancai Seychelles acquired 10,000 ordinary shares
of Sancai HK from Mr. Ning Wen with a consideration of 10,000HKD (equivalent to approximately $1,276). Sancai HK is a wholly-owned subsidiary
of Sancai Seychelles. It is a holding company and is not actively engaging in any business.

 

Sancai WFOE was incorporated on December 18,
2019 under the laws of PRC. Sancai WFOE is a wholly-owned subsidiary of Sancai HK. It is a holding company and is not actively engaging
in any business.

 

 

Sancaijia was incorporated on November 6,
2018 under the laws of PRC, which is our variable interest entity (hereinafter referred to as “VIE”). Sancaijia mainly focuses
on providing SaaS platform application services. In February 2020, Sancai WFOE entered into the VIE Agreements with Sancaijia and its
shareholders that established the VIE structure. We have evaluated the guidance in FASB ASC 810 and determined that Sancai WFOE is the
primary beneficiary of Sancaijia, for accounting purposes, based upon such contractual arrangements. Sancai Holding has indirect ownership
in 100% of the equity in Sancai WFOE. Accordingly, under U.S. GAAP, we treat Sancaijia and its subsidiaries as consolidated affiliated
entities and have consolidated their financial results in our financial statements. Sancaijia currently engages in the value-added telecommunication
business, which requires specific governmental licenses and is subject to the restriction that foreign ownership shall not exceed 50%
of the equity of the PRC company engaging in such business according to the latest version of the Negative List (Edition 2021) that took
effect on January 1, 2022. Xi’an Dacai, Shanghai Wenxu, and Caibaoyun currently operate in businesses that are not within the categories
in which foreign investment is currently restricted or prohibited. However, it is uncertain whether, in the future, Sancaijia and its
subsidiaries’ current operations or any future business will be deemed to be restricted or prohibited in the “negative list”,
which may be amended from time to time by MOFCOM, NDRC or other PRC governmental agencies. To illustrate, Sancaijia currently operates
the value-added telecommunications services in China, which is the standard SaaS platform application services. Xi’an Miaobijia
is registered to operate the value-added telecommunications services. However, Xi’an Miaobijia does not have any assets and has
not begun operating as of the date of this prospectus. We plan to promote the SaaS platform through Xi’an Miaobijia in the
agriculture industry and consumer services in the future. Xi’an Dacai, Shanghai Wenxu, or Caibaoyun may decide to engage in value-added
telecommunication services, which are subject to strict business licensing requirements and certain restrictions or prohibitions on foreign
ownership. The VIE structure would afford Sancai Holding greater flexibility in expanding its business scope and implementing its business
strategies in compliance with PRC laws and regulations in the future as its business continues to expand.

 

Mr. Ning Wen, the Chairman of our Board of Directors
and Chief Executive Officer, owns 63.0% of Sancaijia. The remaining equity ownership of the VIE is held by Lizhi He (20.0%), Lizhen Tang
(13.0%) and Zhijie Zhang (4.0%). Mr. Wen also beneficially owns 6,300,000 (63.0%) and 1,000,000 (66.7%) of our outstanding Class A Ordinary
Shares and Class B Ordinary Shares, respectfully, indirectly through Fancy Dream Limited. Mr. Lizhi He beneficially owns 2,000,000 (20.0%)
of our outstanding Class A Ordinary Shares and none of our outstanding Class B Ordinary Shares, respectively, indirectly through Lucky
Bunny Limited. Mr. Lizhen Tang beneficially owns 1,300,000 (13.0%) and 500,000 (33.3%) of our outstanding Class A Ordinary Shares and
Class B Ordinary Shares, respectively, indirectly through Superexcellence Limited. Mr. Zhang beneficially owns 400,000 (4%) of our outstanding
Class A Ordinary and none of our outstanding Class B Ordinary Shares, respectively, indirectly through Hippogriff Limited. Messrs. Wen,
He, Tang and Zhang together collectively hold 100% of the voting power of our outstanding Ordinary Shares as of the date of this prospectus.
See “Security Ownership of Certain Beneficial Owners and Management.” Mr. Lizhen Tang is an employee of Sancaijia. Messrs.
Lizhi He and Zhijie Zhang have no relationship with Sancai Holding, its subsidiaries, Sancaijia or Sancaijia’s subsidiaries, or
any affiliates thereof.

 

Sancaijia Technology was incorporated on July
11, 2019 under the laws of PRC, which is 100% owned by Sancaijia, and it promotes the SaaS platform.

 

Xi’an Dacai was incorporated on October
9, 2019 under the laws of PRC, which is 100% owned by Sancaijia, and it plans to provide consulting services related with products promotion
to small businesses.

  

Shanghai Wenxu was incorporated on October
25, 2019 under the laws of PRC, which is 100% owned by Sancaijia, and it mainly focuses on providing technology support to the other
subsidiaries.

 

Caibaoyun was incorporated on August 31, 2020
under the laws of PRC, which is 100% owned by Sancaijia, and it mainly focuses on SaaS platform customization and development services.

 

Xi’an Miaobijia, formerly known as Sancaijia
Property Industry Service Co., Ltd., was incorporated on August 28, 2020 under the laws of PRC, which is 100% owned by Sancaijia Technology.
It does not have any assets and hasn’t began operating as of the date of this prospectus. We plan to promote the SaaS platform
through Xi’an Miaobijia in the agriculture industry and consumer services in the future.

 

 

Contractual Arrangements between Sancai WFOE, Sancaijia
and its Shareholders

 

Current PRC laws and regulations impose certain
restrictions or prohibitions on foreign ownership of companies that engage in value-added telecommunication services and certain other
businesses. Sancai Holding is a company incorporated in the Cayman Islands. Our PRC subsidiary, Sancai WFOE, is considered a foreign-invested
enterprise. To comply with PRC laws and regulations, we primarily conduct our business in PRC through the VIE, Sancaijia, and its subsidiaries,
based on a series of contractual arrangements Sancai WFOE entered into with Sancaijia and its shareholders. We have evaluated the guidance
in FASB ASC 810 and determined that Sancai WFOE is regarded as the primary beneficiary of Sancaijia and its subsidiaries for accounting
purposes, based upon such contractual arrangements. Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. As a
result, we treat them as consolidated affiliated entities under U.S. GAAP and have consolidated the financial results of these entities
in our consolidated financial statements in accordance with U.S. GAAP. For certain risks related to the contractual arrangements, see
“Risk Factors—Risks Related to Our Corporate Structure” starting on page 25.

 

The
following is a summary of the currently effective contractual arrangements by and among Sancai WFOE, the VIE and the shareholders of
the VIE and their spouses, as applicable.

 

Business Operation Agreement. Pursuant
to the Business Operation Agreement entered into among Sancai WFOE, Sancaijia and the shareholders of Sancaijia (hereinafter referred
to individually as a “Shareholder” and collectively as the “Shareholders”), the Shareholders agreed that without
the prior written consent of Sancai WFOE or any party designated by Sancai WFOE, Sancaijia shall not engage in any transaction which
may have a material or adverse effect on any of its assets, businesses, employees, obligations, rights or operations (except for those
occurring in the due course of business or in day-to-day business operations, or those already disclosed to Sancai WFOE and with the
explicit prior written consent of Sancai WFOE). In addition, Sancaijia and the Shareholders jointly agreed to accept and strictly implement
any proposal made by Sancai WFOE from time to time regarding the employment and removal of Sancaijia’s employees, its day-to-day
business management and the financial management system of Sancaijia. This Business Operation Agreement shall become effective upon execution
by Sancai WFOE, Sancaijia and the Shareholders, and shall remain valid until it is terminated by written agreement of the Parties. During
the term of the Business Operation Agreement, neither Sancaijia nor the Shareholders may terminate the Business Operation Agreement.
Sancai WFOE shall have the sole right to terminate the Business Operation Agreement at any time, provided that Sancai WFOE gives prior
written notice of thirty (30) days to Sancaijia and the Shareholders. In addition, Sancai WFOE, Sancaijia and the Shareholders may terminate
the Business Operation Agreement as they unanimously agree through negotiation.

 

Shareholder Voting Proxy Agreement. Pursuant
to the Shareholders Voting Rights Proxy Agreement among Sancai WFOE, Sancaijia and the Shareholders (collectively as the “Parties”),
each Shareholder irrevocably authorizes Sancai WFOE or any person(s) designated by Sancai WFOE to act as its attorney-in-fact to exercise
all of its rights as a shareholder of Sancaijia, including, but not limited to, the right to convene shareholders’ meetings, vote
and sign any resolution as a shareholder, appoint directors and other senior executives to be appointed and removed by the shareholder,
the right to sell, transfer, pledge and dispose of all or a portion of the shares held by such shareholder, and other shareholders voting
rights permitted by the articles of association of Sancaijia. Unless terminated early by the Parties by written agreement, this agreement
shall remain valid for ten (10) years. During the term of the Shareholders Voting Rights Proxy Agreement, unless otherwise stipulated
by law, the Shareholders or Sancaijia shall not early terminate this Agreement. Sancai WFOE may at any time terminate this agreement
with a written notice being given to other Parties thirty (30) days in advance. In addition, in the case that a Shareholder becomes the
defaulting party who materially breaches any provision or materially fails to perform any obligation under this agreement, Sancai WFOE
shall be entitled to terminate this agreement. Upon the expiration of this agreement, unless Sancai WFOE gives a non-renewal written
notice to Sancaijia and the Shareholders thirty (30) days prior to the expiration, this agreement shall be renewed automatically for
successive ten (10)-year terms. 

 

 

Equity Pledge Agreement. Pursuant
to the Equity Pledge Agreement entered into among Sancai WFOE, Sancaijia and the Shareholders (collectively as the “Parties”),
the Shareholders agreed to pledge their 100% equity interests in Sancaijia to Sancai WFOE to secure the performance of Sancaijia’s
obligations under the existing exclusive call option agreement, shareholder voting proxy agreements, exclusive technical consultation
and service agreement, business operation agreement and also the equity pledge agreement. If events of default defined therein occur,
upon giving written notice to the Shareholders, Sancai WFOE may exercise the right to enforce the pledge to the extent permitted by PRC
laws. This agreement shall come into effect upon execution by each of the Parties and the term of this agreement shall end upon the full
performance of the Contractual Obligations or the full discharge of the Secured Liabilities defined under this agreement.

 

As of the date of this prospectus, all the Shareholders
have completed the equity pledge registration with the competent Administration for Market Regulation in accordance with the PRC Property
Rights Law.

 

Spousal
Consent Letter.
Pursuant to a series of Spousal Consent Letters, executed by the spouses of the Shareholders, Mr. Ning Wen, Mr.
Lizhi He and Mr. Zhijie Zhang, the signing spouses confirmed and agreed that the equity interests of Sancaijia are the own property of
their spouses and shall not constitute the community property of the couples. The spouses also irrevocably waived any potential right
or interest that may be granted by operation of applicable law in connection with the equity interests of Sancaijia held by their spouses.

 

Exclusive Technical Consultation and
Service Agreement.
 Pursuant to the Exclusive Technical Consultation and Service Agreement entered into between Sancai WFOE
and Sancaijia, Sancai WFOE has the exclusive right to provide or designate any entity to provide with Sancaijia business support, technical
and consulting services. Sancaijia agrees to pay Sancai WFOE (i) the service fees equal to the sum of 100% of the net income of Sancaijia
of that year or such other amount otherwise agreed by Sancai WFOE and Sancaijia; and (ii) service fee otherwise confirmed by Sancai WFOE
and Sancaijia for specific technical services and consulting services provided by Sancai WFOE in accordance with Sancaijia’s requirement
from time to time. The Exclusive Consultation and Service Agreement will continue to be valid unless the written agreement is signed
by all parties to terminate it or a mandatory termination is requested in accordance with applicable PRC laws and regulations. Sancai
WFOE is entitled to unilaterally exercise immediate early termination of the Exclusive Technical Consultation and Service Agreement by
sending a written notice to Sancaijia if any of the following events were to occur: (i) Sancaijia breaches this agreement, and within
thirty (30) days after Sancai WFOE sends out a written notice of breach to Sancaijia, Sancaijia fails to rectify its breach, take sufficient,
effective and timely measures to eliminate the effects of breach and compensate Sancai WFOE for any losses incurred by the breach; (ii)
Sancaijia is bankrupt or is subject to any liquidation procedure and such procedure is not revoked within seven (7) days; and (iii) due
to any event of force majeure, Sancaijia’s failure to perform this agreement lasts for more than twenty (20) days.

 

 

Exclusive Call Option Agreements.
Pursuant to the Exclusive Call Option Agreement entered into among Sancai WFOE, Sancaijia and the Shareholders, each Shareholder has
irrevocably granted Sancai WFOE an exclusive option to purchase all or part of its equity interests in Sancaijia, and Sancaijia has irrevocably
granted Sancai WFOE an exclusive option to purchase all or part of its assets. With regard to the equity transfer option, the total transfer
price to be paid by Sancai WFOE or any other entity or individual designated by Sancai WFOE for exercising such option shall be the capital
contribution mirrored by the corresponding transferred equity in the registered capital of Sancaijia. But if the lowest price permitted
by the then-effective PRC law is lower than the above capital contribution, the transfer price shall be the lowest price permitted by
the PRC law. With regard to the asset purchase option, the transfer price to be paid by Sancai WFOE or any other entity or individual
designated by Sancai WFOE for exercising such option shall be the lowest price permitted by the then-effective PRC law. The Exclusive
Call Option Agreement shall terminate after all the Shareholder Equity and the Company Assets, which are defined under this agreement,
are lawfully transferred to Sancai WFOE and/or any other entity or individual designated by Sancai WFOE pursuant to the provisions of
this agreement. In addition, in the case that a Shareholder or Sancaijia becomes the defaulting party who substantially violates any
agreement or substantially fails to perform or delays performance of any of the obligations under this agreement, Sancai WFOE shall be
entitled to terminate this agreement.

 

Ricks Associated with the VIE Structure

 

In the opinion of B&D Law Firm, our PRC
legal counsel, the contractual arrangements among Sancai WFOE, Sancaijia and its shareholders governed by PRC law are valid, binding
and enforceable, and will not result in any violation of applicable PRC laws and regulations currently in effect. However, the VIE structure
involves unique risks to investors. We have been advised by our PRC legal counsel that there are substantial uncertainties regarding
the interpretation and application of current and future PRC laws, regulations and rules. The VIE Agreements have not been tested in
a court of law. The PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC counsel.
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. If Sancai WFOE or the VIE 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. In the event we are unable to enforce these VIE Agreements or if the PRC
regulatory authorities disallow the VIE structure, we may be precluded from consolidating the financial information of Sancaijia and
its subsidiaries into our financial statements for accounting purposes, which would have a material adverse effect on our financial condition
and results of operations and significantly limit or completely hinder our ability to offer or continue to offer securities to investors
and cause the value of our securities to significantly decline or be worthless.

 

Additionally, these VIE Agreements are less
effective than direct ownership and that we may incur substantial costs to enforce the VIE Agreements. For example, Sancaijia and its
shareholders could breach the VIE Agreements 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 Sancaijia, we would be able to exercise
our rights as a shareholder to effect changes in the board of directors of Sancaijia, 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 Sancaijia and its shareholders to perform their obligations under the contracts. The shareholders of Sancaijia may not act in the
best interests of our Company or may not perform their obligations under these contracts. In addition, failure of Sancaijia’s shareholders
to perform certain obligations could compel us to rely on legal remedies available under PRC laws, including seeking specific performance
or injunctive relief, and claiming damages, which may not be effective.

 

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 Sancai Holding or such persons
predicated upon the civil liability provisions of the securities laws of the United States or any state.

 

See “Risk Factors—Risks Related
to Our Corporate Structure—Sancai Holding is a holding company with no material operation. Sancai WFOE entered into the VIE Agreements
with Sancaijia, the consolidated variable interest entity, and its shareholders that established the VIE structure. Sancaijia and its
subsidiaries conduct business in China. If the PRC government deems that the VIE structure 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 would not be able to enforce the VIE Agreements and could be subject to severe penalties or be forced to relinquish our interests
in those operations” and “Risk Factors — Risks Related to Doing Business in China — The rules and regulations
and the enforcement thereof in China can change quickly with little advance notice. The Chinese government recently promulgated a number
of laws, regulations and policies that focus on tightening oversight of data security and overseas equity fundraising and listing by
Chinese companies. Such 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 could adversely affect us and limit the legal protections available
to you and us. The Chinese government may intervene or influence the operations of the VIE or the VIE’s subsidiaries at any time,
or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a
material change in our operations and in the value of our Class A Ordinary Shares or 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 be worthless.
Uncertainties with respect to the PRC legal system and changes in laws and regulations in China could adversely affect us.”

 

 

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 consolidated financial statements and related notes
that appear in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking
statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus,
particularly in “Risk Factors.” All amounts included herein with respect to the fiscal years ended September 30, 2021
and 2020 are derived from our audited consolidated financial statements (“Annual Financial Statements”) included elsewhere
in this prospectus. The Annual Financial Statements has been prepared in accordance with U.S. Generally Accepted Accounting Principles,
or US GAAP.

 

Overview

 

Sancai Holding is an exempted company with limited
liabilities incorporated on July 9, 2019 in the Cayman Islands. Sancai Holding is a holding company and does not have any significant
assets or operation.

 

Sancaijia and Sancaijia’s subsidiaries
are the operating entities. Sancaijia was established in Xi’an, Shaanxi Province, China. Sancaijia was incorporated on November
6, 2018 under the laws of PRC. Sancaijia provides digitalization solutions through standard software-as-a-service (“SaaS”)
platform for small businesses. Mr. Ning Wen, the Chairman of the Board of Directors and Chief Executive Officer of Sancai Holding, owns
63.0% equity of Sancaijia. The remaining equity of Sancaijia is beneficially owned by Lizhi He (20.0%), Lizhen Tang (13.0%) and Zhijie
Zhang (4.0%).

 

Due to PRC legal restrictions on foreign ownership
in the value-added telecommunication services, which is included in the registered business scopes of Sanjiacai and it’s subsidiary
Xi’an Miaobijia, Sancai Holding is not eligibility to hold direct or indirect equity interest in Sancaijia. Therefore, Sancai Holding,
through Sancai WFOE, an indirect subsidiary of Sancai Holding, receives the economic benefits of the VIE’s and its subsidiaries’
business operations through certain contractual arrangements by and among Sancai WFOE, Sancaijia and the shareholders of Sancaijia. Some
subsidiaries of the VIE currently operate certain businesses which are not within the categories in which foreign investment is currently
restricted or prohibited. The VIE structure affords us great flexibility in carrying out our business and implementing our business strategies
in compliance with PRC laws and regulations in the future as our business continues to expand.

 

In February 2020, Sancai WFOE entered into
a series of contractual arrangements with Sancaijia and its shareholders. The contractual arrangements consist of the business operation
agreement, shareholder voting proxy agreement, equity pledge agreement, exclusive technical consultation and service agreement, exclusive
call option agreement and spousal consent letters (the “VIE Agreements”). We have evaluated the guidance in FASB ASC 810
and determined that Sancai WFOE is considered the primary beneficiary of Sancaijia and its subsidiaries, for accounting purposes, based
upon such contractual arrangements. Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. Accordingly, under U.S.
GAAP, we treat Sancaijia and its subsidiaries as our consolidated affiliated entities and we have consolidated the assets, liabilities,
revenues, expenses and cash flows that are directly attributable to Sancaijia and its subsidiaries in our consolidated financial statements
in accordance with U.S. GAAP. The VIE structure involves unique risks to investors. Uncertainties exist as to our ability to enforce
the VIE Agreements. The VIE Agreements have not been tested in a court of law. The Chinese regulatory authorities could disallow our
structure, which could result in a material change in our operations and the value of our securities could decline or become worthless.
For a description of our corporate structure and VIE Agreements, see “Corporate History and Structure” starting on page 67.
For certain risks related to the contractual arrangements, see “Risk Factors—Risks Related to Our Corporate Structure”
starting on page 25.

 

Discussions of our business in this prospectus
relates to the business and operations of Sancaijia, the VIE. However, investors in our Class A Ordinary Shares should be aware that
they are purchasing equity in Sancai Holding, the Caymans Islands holding company, which does not own any equity interest in Sancaijia.

 

Prior to December 2020, Sancai Real Estate
Management Co., Ltd., a then fully owned subsidiary of Sanciajia, engaged in the distribution of smart locks for residential properties
and offices as an added value for our corporate clients that subscribe to our SaaS platform application. Sancai Real Estate Management
Co., Ltd. also leased residential properties from individual property owners on a long-term basis, renovated and furnished such
properties in a clean and modern manner, and rented them out to individual tenants.

 

On December 10, 2020, Sancaijia entered into
an equity transfer agreement, which was closed on December 28, 2020, to sell 100% of the equity interest it held in Sancai Real Estate
Management Co., Ltd. to Sancai Group Co., Ltd., a former related party of Sancai Holding, for a total of approximately $3.42 million
(RMB 22.33 million). Mr. Ning Wen, the Chairman of the Board of Directors and Chief Executive Officer of Sancai Holding, was the legal
representative and a majority shareholder of Sancai Group Co., Ltd. As the VIE shifted its operating strategy to focus on SaaS platform
development and related technical service, on December 8, 2020, Mr. Ning Wen sold his all of his ownership interest of Sancai Group Co.,
Ltd. to a non-related party and resigned as legal representative. Since then, Sancai Group Co., Ltd. has been controlled by a non-related
party. As of December 28, 2020, the net book value of Sancai Real Estate Management Co., Ltd. was $3.12 million. We recorded a gain from
the disposal of discontinued operation of $0.30 million for the fiscal year ended September 30, 2021.

 

As a result, the rental property subleasing
business and distribution of smart locks were discontinued as of December 2020.  In accordance with ASC Topic 205, Presentation
of Financial Statement Discontinued Operations (“ASC Topic 205”), we presented the operating results from the rental property
subleasing business and distribution of smart locks as a discontinued operation. Revenue from discontinued operation was $0.87 million
and $9.14 million (restated) for the fiscal year ended September 30, 2021 and September 30, 2020, respectively.

 

 

Sancaijia and its subsidiaries provide the followings
two services to its customers:

 

Standard SaaS Platform Application Service

 

The standard SaaS platform application services
provide digitalization solutions for small businesses. Sancaijia built a mobile and computer management solution system that enables
business owners to manage and monitor their operations via mobile phones. The standard SaaS platform application services currently offer
the following functions: customer acquisition, transaction, settlement, customer management, employee management, data analysis and supply
chain services for the duration of the contract period, which is usually a year. As the business develops and the application industries
grows, Sancaijia will develop more functions to meet the needs of business owners. Sancaijia typically charges a 3% to 5% fee on the
transaction settlement amount, between the businesses Sancaijia serve and their customers, which are completed on the SaaS platform.

 

The transaction settlement amount completed
through the SaaS platform is an indicator that we use to monitor the operating results because the revenue from standard SaaS platform
application services is based on the transaction settlement amount completed through the SaaS platform. Transaction settlement amount
is defined as the funds that are transferred to the customers, who use SaaS platform to sell services or goods. These funds are received
from its clients for the specific amount of the sales from the acceptance of the transactions. Sancaijia typically charge a 3% to 5%
fee on the transaction settlement amounts completed through the SaaS platform. The fee is recorded as revenue. Sancaijia’s obligation
for the SaaS Platform Application services is to provide the SaaS platform and related technical support to our customers during the
contract period. The contract period with the customers is usually 12 months, and it will be automatically renewed for another 12 months
once a transaction is processed on the SaaS platform, therefore we recognize the revenue during the 12 moths period.

 

Transaction settlement amount is used internally
by management as an indicator of and to monitor operating performance, including sales performance of particular industries, salesmen
performance, industry growth or decline and is useful to investors in evaluating overall Company performance. The use of the transaction
settlement amount is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is
determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales.

 

During the fiscal year 2020, the transaction
settlement amount from the SaaS platform application service was $212.36 million. The total fees charged on the transaction settlement
amount was $7.07 million. We recognized $3.65 million as revenue, and $3.42 million as contract liabilities. The contract liabilities
were fully recognized as revenue during the fiscal year 2021.

 

During the fiscal year 2021, the COVID-19
pandemic caused disruption to the housing leasing industry in China. As a result, the transaction settlement amount decreased by
$204.34 million, from $212.36 million for the fiscal year 2020 to $8.02 million for the fiscal year 2021. As there were no contract liabilities
as of September 30, 2021, revenue from unrealized SaaS platform standard services will decrease in fiscal year 2022. The total fees charged
on the transaction settlement amount was $0.25 million, which was fully recognized during the fiscal year 2021. In addition, the contract
liabilities of $3.42 million as of September 30, 2020 was fully recognized as revenue as $3.58 million due to the change in exchange
rate.

 

We amortize the SaaS Platform service revenue
throughout the contract period from the date of the transaction. Revenue from standard SaaS Platform Application service was $3.83 million
and $3.65 million (restated) for the fiscal year ended September 30, 2021 and September 30, 2020, respectively.

 

SaaS Platform Customization and Development

 

Sancaijia, Sancaijia Technology and Caibaoyun
also provide customization and development services according to the requirements of the customers. During fiscal year 2021, revenue
from customization and development services were mainly from Caibaiyun. The design team listens to a customers’ needs and designs
the software that best fits the customer’s business. Caibaoyun works with a third-party service provider, Xi’an RenLieRen Information
Technology Service Co., Ltd., for the coding of such software. Caibaoyun has entered into a software development agreement with such
service provider, pursuant to which Caibaoyun will own all rights to the intellectual property in all products developed by the service
provider and the service provider shall not re-develop, sell, lease, pledge, license or otherwise copy, disclose or authorize any other
parties without Caibaoyun’s authorization. Caibaoyun will negotiate the price with the supplier and provide the requirements for
the projects. Upon delivery of the software, Caibaoyun or its customers shall decide whether to accept the delivery, and once accepted,
Caibaoyun or its customers cannot request a refund. The supplier shall resolve any problem through software updates and is not responsible
for problems caused by unintentional software error. The supplier is responsible, however, for Caibaoyun’s loss if caused by the
supplier’s malicious behavior. If the software provided by the supplier is accused of an infringement by a third party, the supplier
shall be responsible and shall bear all expenses in the process. If Caibaoyun fails to make payments at agreed time, Caibaoyun shall
pay damages to the supplier at 0.1% of the total amount of such late payment. If the payment is late for more than 15 days or if Caibaoyun
fails to perform its obligation under the agreement without reasons, the supplier has the right to unilaterally terminate the agreement
and any loss caused by such termination shall be borne by Caibaoyun. If the supplier fails to perform its obligation under the agreement
without reasons, the supplier shall pay damages to Caibaoyun at 0.1% of the total amount of such project(s), and if such damages payment
is late for more than 15 days, Caibaoyun has the right to unilaterally terminate the agreement and any loss caused by such termination
shall be borne by the supplier. Either party can terminate the agreement if the other party engages in illegal activities. The software
development agreement expired in October 2021. Caibaoyun and the service provider have agreed to extend the agreement until October 2022
with the same terms and are working to enter into an extension agreement. During the fiscal year ended September 30, 2021, the service
provider accounted for 100% of our purchases. See “Risk Factor – Risk Related to Our Business and Industry – Caibaoyun
relies on a third-party supplier for the SaaS platform customization and development services. Any interruption in operations at the
third-party supplier could prevent or limit their ability to meet demand for or fulfill orders of the service of the VIE and the VIE’s
subsidiaries.”

 

Customers are charged a one-time customization
fee. Certain customers can request warranty services to be performed for certain customization & development services the VIE and
the VIE’s subsidiaries provide. The warranty services fee is typically at an amount equal to less than 10% of the customization
fee. These services are mainly considered as a separate performance obligation. The customization fee and warranty services fee are based
on the services provided and are negotiated on a case-by-case basis. The revenue for the one-time customization fee is recognized on
delivery and customer acceptance. The warranty services fee amortized over the contract period.

  

 

For the SaaS platform customization and development
services, the number of customers which the VIE and the VIE’s subsidiaries provide customization services to is an indicator of
our operating results. Since Sancaijia started this service in October 2020, the VIE and the VIE’s subsidiaries had 69 customers
as of September 30, 2021.

 

Revenue from SaaS platform customization and
development services was $4.06 million and $nil for the fiscal year ended September 30, 2021 and September 30, 2020, respectively.

 

Sancaijia and its subsidiaries incurs research
and development expenses to update the SaaS platform. As Caibaoyun outsourced part of the research and development activities for the
SAAS customization & development services, Sancaijia and its subsidiaries expect that research and development expenses remains stable.

 

Key
Factors Affecting Our Results of Operation

 

We believe that our operating and business
performance is driven by various factors that affect the SaaS industries, including trends affecting the industries that the VIE and
the VIE’s subsidiaries serve and trends affecting the development of our SaaS platform as well as general macroeconomic factors.
Key factors that may affect our future performance include:

 

  Investments in technology advancement. The
results of operations are affected by investment in technology. The VIE and the VIE’s subsidiaries has utilized big data, artificial
intelligence (AI), mobile internet and location based services (LBS) in our SaaS platform. In recent years, we witnessed many technological
advancements in China which may help us improve our existing functions in the SaaS platform further and create new services which
further allows us to expand our market segments. The VIE and the VIE’s subsidiaries will continue to invest in technology,
which will improve our ability to respond to changing market demands and control our costs, and in turn significantly affect our
results of operations.

 

  Ability to compete effectively and execute our strategies
successfully.
The SaaS industry in China is very competitive. The customers of the VIE and the VIE’s subsidiaries are
involved in a wide variety of industries, including construction, labor management, entertainment, property management and so on.
etc. Results of operations are affected by the ability to maintain the competitive advantages and execute the strategies successfully.

 

  General and regional economic conditions. Our business
depends substantially on the financial performance of the customers of the VIE and the VIE’s subsidiaries, most of whom in
turn depend on the general and regional economic conditions in China.

 

Impact
of COVID-19

 

On January 30, 2020, the World Health Organization
declared the outbreak of the corona-virus disease (COVID-19) a “Public Health Emergency of International Concern,” and on
March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic.”

 

In the first quarter of fiscal year 2021,
we witnessed a recovery in China’s overall economy, benefiting from the COVID-19 control measures and the resumption of production
and business. However, the frequent outbreak of the pandemic in many areas of China has caused the authorities to implement numerous
measures to try to contain the disease and slow its spread. These include travel bans and restrictions, quarantines, shelter-in-place
orders, shutdowns and temporary lockdown of cities. Most of our customers of SaaS platform are landlords, who rent their properties to
tenants through the SaaS platform. Based on the research conducted by rental agency in China, the rental demand of migrant population
usually accounts for more than 50% of the rental market, which is the mainstream of market demand.
The restrictions on travel and lockdowns have reduced the travel and migration of people, which reduced the market demand of house
rental in China. During fiscal year 2021, the number of transactions settled though SaaS platform decreased by $204.34 million, from
$212.36 million for the fiscal year 2020 to $8.02 million for the fiscal year 2021. As there were no contract liabilities as of September
30, 2021, revenue from unrealized SaaS platform standard services will decrease in fiscal year 2022.

 

Recently, there were many Covid-19 outbreaks
cross the mainland of China. China’s “Zero-Covid” strategy has caused millions of people endured lockdowns. Our business
operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook, the slowdown
in regional and national economic growth, weakened liquidity and financial conditions of our customers or other factors that we cannot
foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment,
cause uncertainties in the regions where the VIE and the VIE’s subsidiaries conduct business, cause our business to suffer in ways
that we cannot predict and materially and adversely impact our business, financial condition and results of operations. The extent to
which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain or treat its impact,
among others.

 

 

Results
of Operations

 

Revenue

 

The following table presents our consolidated revenues for our main
services for the fiscal year ended September 30, 2021 and September 30, 2020, respectively:

 

    Fiscal Year ended
September
30,
    % of  
    2021    

2020

(Restated) 

    Change  
SaaS Platform standard service   $ 3,830,022     $ 3,651,817       4.88 %
SaaS Customization & Development service     4,058,769             N/A  
Total   $ 7,888,791     $ 3,651,817       116.02 %

  

Our total revenue increased by approximately
$4.24 million, or 116.02%, to approximately $7.89 million for the year ended September 30, 2021 from approximately $3.65 million (restated)
for last fiscal year. The improvement in our revenue was mainly due to an increase in revenue from our SAAS customization & development
services, which is a new service that the VIE and the VIE’s subsidiaries started to provide to the customers in October 2020. In
fiscal year 2021, the VIE and the VIE’s subsidiaries developed new products and extended our expertise in other industries to leverage
our existing SAAS knowledge and grow our customer base.

 

Revenue from SaaS Platform standard service
increased slightly by $0.18 million, or 4.88%, to $3.83 million for fiscal year 2021, from $3.65 million (restated) for last fiscal year.
The revenue from SaaS Platform for fiscal year 2021 was mainly from contract liabilities recorded in fiscal year 2020 for unrealized
revenue. Revenue from SaaS platform standard service was mainly from rental property leasing transactions.  During the fiscal year
2021, the COVID-19 pandemic caused disruption to the housing leasing industry in China. As a result, the transaction settlement
amount decreased by $204.34 million, from $212.36 million for the fiscal year 2020 to $8.02 million for the fiscal year 2021. As there
were no contract liabilities as of September 30, 2021, revenue from unrealized SaaS platform standard services will decrease in fiscal
year 2022. However, Xi’an Miaobijia plans to promote the SaaS platform in different industries, especially in the agriculture industry
and consumer services to diversify the source of revenue and reduce the risk.

 

 

We consider the major customers in each period
to be those that accounted for more than 10% of total revenue in such period. The VIE and the VIE’s subsidiaries had one such major
customer, who accounted for 39.73% and 79.66% (restated) of total revenue for the fiscal year 2021 and 2020, respectively, all of which
were from the transaction fees generated from our SaaS platform.

 

Overall Gross Margin

 

Overall gross margin as a percentage of revenue
was 60.39% in fiscal year 2021, a decrease of 36.74% compared to 97.13% (restated) in fiscal year 2020. The decrease in gross margin
as a percentage of revenue was mainly attributable to the decrease in revenue from SaaS Platform standard service, which has a higher
gross margin. In terms of dollar value, the overall gross profit for fiscal year 2021 was $4.76 million, an increase of $1.21 million,
or 34.08%, compared to $3.55 million (restated) for fiscal year 2020.

 

Overall gross margin as a percentage of revenue
for the SaaS Platform standard service was 93.79% in fiscal year 2021, representing a slight decrease of 3.34% compared to 97.13% (restated)
in fiscal year 2020. This is mainly due to an increase in the transaction processing fees charged by the third-party payment processing
service provider during fiscal year 2021. We do not expect any big fluctuations in the server rental fees and transaction processing
fees, so the gross margin of SaaS Platform standard service will not vary significantly.

 

Overall gross margin as a percentage of revenue
for the SaaS Customization & Development service was 28.88% in fiscal year 2021. We did not have revenue from the SaaS Customization&
Development service during fiscal year 2020. The cost of revenue for the customization and service is consisted of the fees that the
VIE and the VIE’s subsidiaries paid to the outsourced R&D service provider, which is negotiated on a case-to-case basis. The
gross margin varies based on the job obligation and our negotiation.

 

Operating
Expenses

 

Operating expenses for the fiscal years ended September 30, 2021 and
2020 were as follows:

 

    For the Year Ended
September
30,
 
    2021     2020 (Restated)  
Operating expenses:            
Selling and marketing expenses   $ 1,144,283     $  
General and administrative expenses     1,273,466       1,061,294  
Research and development     1,078,285       3,144,512  
Total operating expenses   $ 3,496,034     $ 4,205,806  

 

 

Selling and marketing expenses increased to $1.14
million in fiscal year 2021, compared to $nil in fiscal year 2020. The selling and marketing expenses were primarily promotion expenses
related with SAAS customization and development services.

 

General and administrative expenses increased
by $0.21 million, or 19.81%, from $1.06 million (restated) in fiscal year 2020, to $1.27 million in fiscal year 2021, which was primarily
due to an increase in wages for administrative personnel as an result of an increase in employee headcount.

 

We expect the selling and marketing expenses
to continue to increase as we continue our business expansion, we expect these expenses to remain relatively steady as a percentage of
t revenue to support our business growth in the future.

 

Research and development expenses primarily
consisted of compensation and benefit expenses relating to our research and development personnel as well as server upgrading fees, and
other expenses relating to our R&D activities. Our research and development expenses were $1.08 million in fiscal year 2021, a decrease
of $2.06 million, or 65.61%, compared to $3.14 million (restated) to fiscal year 2020. The decrease in research and development expenses
in fiscal year 2021 was mainly because Caibaoyun outsourced part of the research and development activities for the SAAS customization
& development services.

 

Income/loss from Operations

 

Income from operations was $1.27 million in fiscal
year 2021, an increase of $1.93 million, as compared to loss from operations of $0.66 million (restated) in fiscal year 2020, which was
mainly due to an increase in revenue as discussed previously.

 

Other Expenses (income), Net

 

Other expenses increased by $0.15 million to
$0.01 million for fiscal year 2021 as compared to other income of $0.16 million for fiscal year 2020. The increase in other income in
fiscal year 2021 was mainly due to a decrease of $0.16 million in interest income.

 

Income/loss from
Continuing Operations
 

 

Income from continuing operations was $1.26 million,
an increase of 1.76 million, compared to a net loss of $0.50 million (restated) in fiscal year 2020.

 

Income tax

 

Our income tax expenses increased in fiscal year
2021 mainly due to the increase of Company’s net income before tax.

 

Loss from Discontinued Operations

 

Loss from discontinued operations was $0.25 million
and $0.33 million (restated) in fiscal years 2021 and 2020, respectively.

 

Net Income

 

Net income attributable for fiscal year 2021
was $0.93 million, an increase of $1.80 million, as compared to a net loss of $0.87 million (restated) for fiscal year 2020.

 

 

Liquidity
and Capital Resources

 

Our total assets decreased by $20.41 million
to $6.39 million compared to $26.80 million (restated) as of September 30, 2020. The decrease in total assets was primarily due to a
decrease in assets from discontinued operations. We sold 100% of the equity interest it held in Sancai Real Estate Management Co., Ltd.,
which operated subleasing business and the distribution of smart locks in December 2020, in accordance with ASC205, we presented the
operating results from Sancai Real Estate Management Co., Ltd. as a discontinued operation.

 

The VIE and its subsidiaries suffered operating
loss from discontinued operation in previous years and the operating cash flow and working capital was mainly provided by the loans from
our shareholders. The VIE and its subsidiaries became profitable in the fiscal year 2021 and we expect we will continue to be profitable
for the next three years based on the current market condition. Although the revenue from the standard SaaS platform application service
generated from rental property leasing transactions decreased in fiscal year 2021 due to the negative impact of Covid-19, Xi’an
Miaobijia plans to promote the SaaS platform in different industries, including agriculture industry and consumer services. Sancaijia,
Sancaijia Technology and Caibaoyun are also actively expanding the customization and system development services. Pursuant to our forecast,
the cashflow provided by the operating activities will be sufficient to fund the operations for the next three years. We do not think
that absence of cash flows associated with the discontinued operations has a significant impact on our liquidity.

 

Cash and cash equivalents were $3.22 million as at September 30, 2021,
reflecting a decrease of $4.15 million from $7.37 million as at September 30, 2020, primarily because of the use of working capital
for operating activities for fiscal year 2021.

 

Substantially all of our operations are conducted
in China and all of our revenue, expenses, cash and cash equivalents are denominated in RMB. RMB is subject to the exchange control regulation
in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations
that restrict our ability to convert RMB into U.S. dollars. We would need to accrue and pay withholding taxes if we were to distribute
funds from our subsidiaries in China to our offshore subsidiaries. We do not intend to repatriate such funds in the foreseeable future,
as we plan to use existing cash balance in PRC for general corporate purposes.

 

In assessing our liquidity, we monitor and
analyze our cash on hand, our ability to generate sufficient revenue sources in the future and our operating and capital expenditure
commitments. The VIE plans to fund working capital through its operations, bank borrowings and additional capital contribution from shareholders.
Our working capital was $3.87 million as of September 30, 2021, an increase of $4.75 million, as compared to working capital deficit
of $0.88 million (restated) as of September 30, 2020, mainly due to a decrease in current liability during fiscal year 2021. We have
historically funded our working capital needs primarily from operations, advance payments from customers and loans from shareholders.
Our working capital requirements are affected by the efficiency of our operations, the numerical volume and dollar value of our sales
contracts, the progress or execution on our customer contracts, and the timing of accounts receivable collections.

 

We believe that the minimum period of time
that we will be able to continue operating using currently available capital resources is about three years.

 

On October 8, 2021, Sancaijia Technology entered
into a short-term loan agreement with Houlaicun Commercial Operation Management (Xi’an) Co., Ltd. (“Houlaicun”),a non-related
third party. Pursuant to the loan agreement, Sancaijia Technology lent approximately RMB20 million, $3.10 million, to Houlaicun, with
an annual interest rate of 3% for 84 days (from October 8, 2021 to December 31,2021). On the same date, Sancaijia Technology entered
into a loan guarantee agreement with Houlaicun and Shaanxi Xiaoying Financing Guarantee Co., Ltd. (“Xiaoying”), a licensed
guarantee company. Pursuant to the agreement, Xiaoying agreed to guarantee all the property it owns to Sancaijia Technology and provide
an unlimited joint and several liability guarantee for this loan. The guarantee period of Xiaoying shall expire two years after the expiration
of the loan term. On December 30, 2021, Sancaijia Technology signed a supplementary agreement with Houlaicun, which extend the repayment
date to March 31, 2021, with the same terms and conditions as the previous agreement. Sancaijia Technology intended to generate interest
income from the loan. A licensed guarantee company provides an unlimited joint and several liability guarantee for this loan. The loan
was due on December 31, 2021.  However, due to increased Covid-19 cases in Xi’an, where Sancaijia Technology’s headquarter
is located, on December 23, 2021, the city of Xi’an was locked down and all businesses, except essential services, were forced
to close. On December 30, 2021, Sancaijia Technology signed a supplementary agreement with the borrower, which extend the maturity date
to March 31, 2022, with the same terms and conditions as the loan agreement. The Company had received the repayment of this loan on March
31, 2022. This loan did not a material impact on our working capital needs.

 

Net cash used by operating activities increased
by $1.20 to $3.15 million for fiscal year 2021, from $1.95 million (restated) for last fiscal year. The increase in net cash used by
operating activities was primarily due to an increase in cash outflow from other payables and accruals and contract liabilities, which
was partially offset by a decrease in cash outflow from discontinued operations.

 

Investing Activities

 

Net cash provided by investing activities was
$0.15 million for fiscal year 2021, which was from the sale of the discontinued operations. There were no investing activities for fiscal
year 2020.

 

 

Financing
Activities

 

Net cash used in fiscal year 2021 was $1.33
million, which was mainly for the repayment of loans to related parties, as compared to a cash inflow of $8.52 million (restated), which
was mainly from the cash inflow from discontinued operations for fiscal 2020.

 

Off-Balance
Sheet Arrangements

 

We
do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital
resources that is material to an investor in our securities. 

 

Critical
Accounting Policies

 

Basis
of Presentation

 

The consolidated financial statements were prepared
in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Principles of Consolidation

 

The consolidated financial statements include
the financial statements of Sancai Holding, its subsidiaries, the VIE and VIE’s subsidiaries for which Sancai Holding is the ultimate
primary beneficiary. All transactions and balances among Sancai Holding, its subsidiaries, the VIE and VIE’s subsidiaries have
been eliminated upon consolidation.

 

U.S. GAAP provides guidance on the identification
of VIE and financial reporting for entities over which control is achieved through means other than voting interests. Sancai Holding
evaluates each of its investments to determine whether or not the investee is a VIE and, if so, whether the Group is the primary beneficiary
of such VIE. In determining whether the Group is the primary beneficiary, the Group considers if the Group (1) has power to direct
the activities that most significantly affects the economic performance of the VIE, and (2) receives the economic benefits of the
VIE that could be significant to the VIE. If deemed the primary beneficiary, the Group consolidates the VIE.

 

On February 25, 2020, Sancai WFOE entered
into a series of contractual arrangements with Sancaijia and the shareholders of the VIE. The contractual arrangements consisted of the
business operation agreement, shareholder voting proxy agreement, equity pledge agreement, exclusive technical consultation and service
agreement, exclusive call option agreement and spousal consent letters (the “VIE Agreements”).

 

i. Shareholder Voting Proxy Agreement

 

Pursuant to the Shareholders Voting Rights Proxy
Agreement among Xi’an Minglan Management Co., Ltd. (“Sancai WFOE” when individually referenced, a PRC company and a
wholly-owned subsidiary of Sancai HK), the VIE and the Shareholders, each Shareholder irrevocably authorizes Sancai WFOE or any person(s)
designated by Sancai WFOE to act as its attorney-in-fact to exercise all of its rights as a shareholder of the VIE, including, but not
limited to, the right to convene shareholders’ meetings, vote and sign any resolution as a shareholder, appoint directors and other
senior executives to be appointed and removed by the shareholder, the right to sell, transfer, pledge and dispose of all or a portion
of the shares held by such shareholder, and other shareholders voting rights permitted by the articles of association of the VIE. The
term of this agreement is for ten years. Unless Sancai WFOE gives a non- renewal notice 30 days prior to the expiration, this agreement
will be renewed automatically for successive ten years. During the term of the Shareholders Voting Rights Proxy Agreement, unless otherwise
stipulated by law, the shareholders or the VIE shall not early terminate this agreement. Sancai WFOE may at any time terminate this agreement
with a written notice being given to other Parties thirty (30) days in advance. In addition, in the case that a shareholder becomes the
defaulting party who materially breaches any provision or materially fails to perform any obligation under this agreement, Sancai WFOE
shall be entitled to terminate this agreement.

 

ii. Equity Pledge Agreements

 

Pursuant to the Equity Pledge Agreement entered
into among Sancai WFOE, the VIE and the Shareholders, the Shareholders agreed to pledge their 100% equity interests in the VIE to Sancai
WFOE to secure the performance of the VIE’s obligations under the existing exclusive call option agreement, shareholder voting
proxy agreements, exclusive technical consultation and service agreement, business operation agreement and also the equity pledge agreement.
If events of default defined therein occur, upon giving written notice to the Shareholders, Sancai WFOE may exercise the right to enforce
the pledge to the extent permitted by PRC laws. This agreement shall come into effect upon execution by each of the Parties and the term
of this agreement shall end upon the full performance of the contractual obligations or the full discharge of the Secured Liabilities
defined under this agreement.

 

As of the date of this prospectus, the shareholders
have completed the equity pledge registration with the relevant office of Administration for Market Regulation in accordance with the
PRC Property Rights Law.

 

iii. Spousal Consent Letter

 

Pursuant to a series of Spousal Consent Letters,
executed by the spouses of the Shareholders, Mr. Ning Wen, Mr. Lizhi He and Mr. Zhijie Zhang, the signing spouses confirmed and agreed
that the equity interests of the VIE are the own property of their spouses and shall not constitute the community property of the couples.
The spouses also irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection
with the equity interests of the VIE held by their spouses.

 

 

iv. Exclusive Technical Consultation
and Service Agreement

 

Pursuant to the Exclusive Technical Consultation
and Service Agreement entered into between Sancai WFOE and the VIE, Sancai WFOE has the exclusive right to provide or designate any entity
to provide the VIE with business support, technical and consulting services. The VIE agrees to pay Sancai WFOE (i) the service fees equal
to the sum of 100% of the net income of the VIE of that year or such other amount otherwise agreed by Sancai WFOE and the VIE; and (ii)
service fee otherwise confirmed by Sancai WFOE and the VIE for specific technical services and consulting services provided by Sancai
WFOE in accordance with the VIE’s requirement from time to time. The exclusive consultation and service agreement will continue
to be valid unless the written agreement is signed by all parties to terminate it or a mandatory termination is requested in accordance
with applicable PRC laws and regulations. Sancai WFOE is entitled to unilaterally exercise immediate early termination of the Exclusive
Technical Consultation and Service Agreement by sending a written notice to the VIE if any of the following events were to occur: (i)
the VIE breaches this agreement, and within thirty (30) days after Sancai WFOE sends out a written notice of breach to the VIE, the VIE
fails to rectify its breach, take sufficient, effective and timely measures to eliminate the effects of breach and compensate Sancai
WFOE for any losses incurred by the breach; (ii) VIE is bankrupt or is subject to any liquidation procedure and such procedure is not
revoked within seven (7) days; and (iii) due to any event of force majeure, the VIE’s failure to perform this agreement lasts for
more than twenty (20) days.

 

v. Exclusive Call Option Agreements

 

Pursuant to the Exclusive Call Option Agreement
entered into among Sancai WFOE, the VIE and the Shareholders, each Shareholder has irrevocably granted Sancai WFOE an exclusive option
to purchase all or part of its equity interests in the VIE, and the VIE has irrevocably granted Sancai WFOE an exclusive option to purchase
all or part of its assets. With regard to the equity transfer option, the total transfer price to be paid by Sancai WFOE or any other
entity or individual designated by Sancai WFOE for exercising such option shall be the capital contribution mirrored by the corresponding
transferred equity in the registered capital of the VIE. But if the lowest price permitted by the then-effective PRC law is lower than
the above capital contribution, the transfer price shall be the lowest price permitted by the PRC law. With regard to the asset purchase
option, the transfer price to be paid by Sancai WFOE or any other entity or individual designated by Sancai WFOE for exercising such
option shall be the lowest price permitted by the then-effective PRC law. The Exclusive Call Option Agreement shall terminate after all
the Shareholder Equity and the Company Assets, which are defined under this agreement, are lawfully transferred to Sancai WFOE and/or
any other entity or individual designated by Sancai WFOE pursuant to the provisions of this agreement. In addition, in the case that
a Shareholder or the VIE becomes the defaulting party who substantially violates any agreement or substantially fails to perform or delays
performance of any of the obligations under this agreement, Sancai WFOE shall be entitled to terminate this agreement.

 

We believe that the contractual arrangements with
the VIE are in compliance with PRC law and are legally enforceable. However, there are substantial uncertainties regarding the interpretation
and application of current and future PRC laws, regulations and rules, and there can be of no assurance that the PRC government will
ultimately take a view that is consistent with the above opinions of our PRC legal counsel. In particular, On March 15, 2019, the National
People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020. Among other things, under the
Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign
individuals, enterprises or other entities in China but it does not explicitly stipulate the contractual arrangements as a form of foreign
investment. On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law, which came
into effect on January 1, 2020. However, the Implementation Regulations on the Foreign Investment Law still remains silent on whether
contractual arrangements should be deemed as a form of foreign investment. Though these regulations do not explicitly classify contractual
arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangements would not be
interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains
a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations
or other methods prescribed by the State Council. Therefore, the Foreign Investment Law still leaves leeway for future laws, administrative
regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In
any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access
requirements for foreign investment under the PRC laws and regulations.

  

The VIE and the VIE’s subsidiaries contributed
100% of the consolidated net revenues for the years ended September 30, 2021 and September 30, 2020, respectively. As of September 30,
2021 and 2020, the VIE and the VIE’s subsidiaries accounted for almost 100% of the consolidated total assets respectively.

 

There are no consolidated assets of the VIE
and the VIE’s subsidiaries that are collateral for the obligations of the VIE and the VIE’s subsidiaries and can only be
used to settle the obligations of the VIE and the VIE’s subsidiaries. There are no terms in any arrangements, considering both
explicit arrangements and implicit variable interests that require Sancai Holding or its subsidiaries to provide financial support to
the VIE and the VIE’s subsidiaries. However, if the VIE and the VIE’s subsidiaries ever need financial support, Sancai Holding
or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE and the
VIE’s subsidiaries through loans to the shareholder of the VIE and the VIE’s subsidiaries or entrustment loans to the VIE
and the VIE’s subsidiaries.

 

Relevant PRC laws and regulations restrict the
VIE and the VIE’s subsidiaries from transferring a portion of their net assets, equivalent to the balance of their statutory reserve
and their share capital, to Sancai Holding in the form of loans and advances or cash dividends.

 

Use of estimates

 

The preparation of the financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes
these estimates using the best information available at the time the estimates are made; however, actual results could differ materially
from those estimates.

 

 

Revenue
Recognition

 

We adopted ASC 606 “Revenue Recognition,”
and we apply the following five steps model in applying ASC 606:

 

  identify the contract with a customer;

 

  identify the performance obligations in the contract;

 

  determine the transaction price;

 

  allocate the transaction price to performance obligations in the contract;
and

 

  recognize revenue as the performance obligation is satisfied.

 

Revenue was generated from the continuing
operations:

 

Revenues generated from SaaS Platform

 

Sancaijia generates revenue through its software-as-a-service
(“SaaS”) platform (“the platform”). Sancaijia has entered into platform contracts with property management agents
or value-added service providers (“Customers”) for using the platform. The platform contracts establish a contractual relationship
between Sancaijia and the Customers, which sets out the Sancaijia’s roles and responsibilities for providing platform services
and a fee allocation structure for the various operating models of platform services.

 

 

  i. Revenues generated from
rental property leasing transactions

 

Property management agents (“the agents”)
enter into leasing contracts with landlords to lease the landlord’s rental properties and sublease the rental properties to tenants
through the SaaS Platform. After the tenant signs rental contracts with the agents using the platform, the tenant will settle their rental
payments through the platform’s settlement system. These payments are withheld at a third-party payment processing service provider
and distributed to the agents and Sancaijia within a few days based on the agreed percentage. The leasing term for the rental contract
is usually 12 months, and the payment are made through SaaS platform either at a monthly or quarterly basis.. Once a transaction is processed
at the SaaS platform, Sancaijia’s contact with the management agents is automatedly renewed for the next 12 months. Sancaijia’s
obligations regarding such transactions are to maintain the SaaS platform during the contract periods with the agents.

 

When the agent signs the rental contract with
the tenants through the platform and Sancaijia charges transaction fees in accordance with the platform contracts, for providing platform
services in completing the rental transactions, Sancaijia is considered as a participating agent who provides platform services to the
principal agents as Sancaijia is not the primary obligor for the rental contracts and does not have the right to determine the service
price. Accordingly, Sancaijia account for the transaction fees from these rental contracts on a net basis.

 

ii.

Revenues
generated from value-added service transactions

 

Value-added service providers use the platforms
functionality to advertise and market their services, which may include janitorial, maintenance and repairs among others, to either landlords
or tenants (“the users”). After the users sign service contracts with the value-added service providers using the platform,
and upon completion of service, the users will settle their payments through the platform’s settlement system. These payments are
withheld at a third-party payment processing service provider and distributed to the value-added service providers and Sancaijia within
a few days based on the agreed percentage. Sancaijia’s obligation regarding such transactions are fulfilled when the service contracts
are executed using the platform, the service is completed, and the service payments are distributed to the value-added service providers.

 

When the value-added service providers sign
the service contracts with the users through the platform and Sancaijia charges the transaction fees in accordance with platform contracts
for providing platform services for completing the services, Sancaijia is considered as a participating agent who provides platform services
to the principal agents as Sancaijia is not the primary obligor for the services and does not have the right to determine the service
price. Accordingly, Sancaijia accounts for the transaction fees from these services on a net basis.

 

Customization
and Service Fee Income

 

Sancaijia, Sancaijia Technology and Caibaoyun
provide customization and software development services according to the requirements of our customers. Revenue was recognized upon completion
of this customization work. Such contracts are typically short term in nature; accordingly, we do not use accounting that would generate
contract assets or contract liabilities except for funds received in advance as prepayments for work to be performed, which will be recognized
to revenue at the time that the customization has been completed and the customer has accepted the customized functionality.

 

Certain customization service contracts may have
multiple deliverable arrangements, mainly warranty of the customization work. As set forth above, customization service fee income has
its own distinct performance obligations that are considered complete upon customer acceptance; warranty income ensures that the customized
functions are serviced and maintained for a period of no less than one year, usually six months; accordingly, the performance obligation
for the warranty fee income is time; therefore, warranty fee income is amortized over the contract period.

 

 

Contracts which have specific line items for
billing purposes to the customers typically assign ninety percent of the value to customization with the ten percent assigned to warranty
fee income; the customization fee income that requires the use of direct labor typically generates profit margins in the thirty to forty
percent range which is comparable to other SaaS businesses that sell professional services such as customization; the warranty fee income
which requires continued hosting and maintenance costs, the profit margins for warranty fee income is in the range of sixty to seventy
percent, management believes is comparable to other SaaS businesses that sell scalable warranty and support services.

 

Recent
Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06: Debt
– Debt with Conversion and Other Options (Subtopic 470-20) and Derivative and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40)
. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock
as well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based
accounting conclusion. In addition, this ASU improves and amends the related EPS guidance. These amendments are effective for fiscal
years beginning after December 15, 2023, including interim periods within those fiscal years.

 

Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Adoption is either a modified
retrospective method or a fully retrospective method of transition. We have completed its assessment and concluded that this update has
no significant impact to the consolidated financial statements.

 

We have adopted ASU 2020-06 at the beginning of
October 1, 2021.

 

Management does not believe that any other recently issued, but not
yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying consolidated financial statements.

 

 

Quantitative
and Qualitative Disclosures about Market Risk

 

Foreign
Exchange Risk

 

While
our reporting currency is the U.S. dollar, all of our revenues and substantially all of our expenses are denominated in RMB. In our consolidated
financial statements, our financial information that uses RMB as the functional currency has been translated into U.S. dollars. We do
not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments
to hedge exposure to such risk.

 

The
value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political
and economic conditions. The PRC government allowed the RMB to appreciate by more than 20% against the U.S. dollar between July 2005
and July 2008. Between July 2008 and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within
a narrow band. Since June 2010, the PRC government has allowed the RMB to appreciate slowly against the U.S. dollar, though there have
been periods when the RMB has depreciated against the U.S. dollar. In particular, on August 11, 2015, the PBOC allowed the RMB to depreciate
by approximately 2% against the U.S. dollar. It is difficult to predict how long the current situation may last and when and how the
relationship between the RMB and the U.S. dollar may change again.

 

To
the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have
an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars, appreciation
of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amounts available to us.

 

Market
Risk

 

Market
risk is the risk of loss arising from adverse changes in market rates and prices. Our market risk exposure is generally limited to those
risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we
utilize financial instruments or derivative instruments for trading purposes.

 

Liquidity
Risk

 

We
are also exposed to liquidity risk which is risk that it we will be unable to provide sufficient capital resources and liquidity to meet
our commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures.
When necessary, we will turn to other financial institutions and related parties to obtain short-term funding to cover any liquidity
shortage.

 

Internal
control over financial reporting

 

In preparing our consolidated financial statements
for the years ended September 30, 2021 and 2020, our management identified material weaknesses in our internal control over
financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, and
other significant deficiencies.

 

 

The
material weaknesses identified are as follows: (i) no sufficient personnel with appropriate levels of accounting knowledge and experience
to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP;
(ii) ineffective oversight of our financial reporting and internal control by those charged with governance; and (iii) inadequate
design of internal control over the preparation of the financial statements being audited. These material weaknesses remained
as of September 30, 2020. As a result of inherent limitations, our internal control over financial reporting may not prevent
or detect misstatements, errors or omissions.

 

To
remedy our previously identified material weakness, we and the VIE have undertaken and will continue to undertake steps to strengthen
our internal control over financial reporting. These measures include the following:

 

  (i) The VIE has hired new accounting staff and consultant
with appropriate U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to
set up a financial and system control framework.

 

  (ii) We and the VIE have implemented, and plan to continue
to develop, an ongoing program in the form of online courses to provide sufficient and appropriate training for financial reporting
and accounting personnel, especially training related to U.S. GAAP and SEC financial reporting requirements. We have also organized
and will continue to organize monthly seminars to provide the team an opportunity to communicate and discuss the courses to enhance
their understanding. In addition, we have developed internal policy to encourage our accounting staff to obtain U.S. CPA certification.

 

  (iii) We and the VIE have assigned, and plan to continue
to improve, clear oversight roles and responsibilities for accounting and financial reporting staff to address accounting and financial
reporting issues, especially for non-recurring and complex transactions, to ensure consolidated financial statements and related
disclosures are accurate, complete and in compliance with SEC reporting requirements. Entries are made by accounting staff, approve
by accounting managers and reviewed by our Chief Financial Officers.

 

  (iv) We and the VIE have taken steps to build and enhance
an internal control function. Particularly, each department within the VIE and the VIE’s subsidiaries has built, and plan to
continue improve, rules for daily operations to ensure critical risks are managed and mitigated. We have also established control
matrix, narrative and flow chart to facilitate self-testing and external audit. We are in the process of standardization and documentation
of our daily control activities and expect this to complete by the end of 2021. In addition, we plan to build an internal team to
assess our compliance readiness under rule 13a-15 of the Exchange Act and improve overall internal control on
a quarterly and annual basis.

 

However, such measures have not been fully implemented and we concluded
that the material weakness in our internal control over financial reporting had not been remediated as of September 30, 2021
and 2020. See “Risk Factors—Risks Relating to Our Business and Industry – We have identified material weaknesses in
our internal control over financial reporting. If we fail to implement and maintain an effective system of internal control,
we may be unable to accurately report our operating results, meet our reporting obligations or prevent fraud.”

 

 

DESCRIPTION
OF BUSINESS

 

Overview

 

Sancai Holding is an exempted company with limited
liabilities incorporated on July 9, 2019 in the Cayman Islands. Sancai Holding is a holding company and does not have any significant
assets or operation.

 

Sancaijia, and Sancaijia’s subsidiaries
are the operating entities. Sancaijia was established in Xi’an, Shaanxi Province, China. Sancaijia was incorporated on November
6, 2018 under the laws of PRC. Sancaijia provides digitalization solutions through standard software-as-a-service (“SaaS”)
platform (“the platform”) for small businesses. Mr. Ning Wen, the Chairman of the Board of Directors and Chief Executive
Officer of Sancai Holding, owns 63.0% equity of Sancaijia. The remaining equity of Sancaijia is beneficially owned by Lizhi He (20.0%),
Lizhen Tang (13.0%) and Zhijie Zhang (4.0%).

 

Xi’an Minglan Management Co., Ltd. (“Sancai
WFOE”) was incorporated on December 18, 2019 under the laws of PRC. Sancai WFOE is a wholly-owned subsidiary of Sancai HK.

 

Due to PRC legal restrictions on foreign ownership
in the value-added telecommunication services, which is included in the registered business scopes of Sancaijia and it’s subsidiary
Xi’an Miaobijia,Sancai Holding is not eligibility to hold direct or indirect equity interest in Sancaijia. Therefore, Sancai Holding,
through Sancai WFOE, receives the economic benefits of the VIE’s and its subsidiaries’ business operations through certain
contractual arrangements by and among Sancai WFOE, Sancaijia and the shareholders of Sancaijia. Some subsidiaries of the VIE currently
operate certain businesses which are not within the categories in which foreign investment is currently restricted or prohibited. The
VIE structure affords us great flexibility in carrying out our business and implementing our business strategies in compliance with PRC
laws and regulations in the future as our business continues to expand.

 

In February 2020, Sancai WFOE entered into
a series of contractual arrangements with Sancaijia and its shareholders. The contractual arrangements consist of the business operation
agreement, shareholder voting proxy agreement, equity pledge agreement, exclusive technical consultation and service agreement, exclusive
call option agreement and spousal consent letters (the “VIE Agreements”). We have evaluated the guidance in FASB ASC 810
and determined that Sancai WFOE is the primary beneficiary of Sancaijia and its subsidiaries, for accounting purposes, based upon such
contractual arrangements. Sancai Holding has indirect ownership in 100% of the equity in Sancai WFOE. Accordingly, under U.S. GAAP, we
treat Sancaijia and its subsidiaries as consolidated affiliated entities and we have consolidated the assets, liabilities, revenues,
expenses and cash flows that are directly attributable to Sancaijia and its subsidiaries in our consolidated financial statements in
accordance with U.S. GAAP. The VIE structure involves unique risks to investors. Uncertainties exist as to our ability to enforce the
VIE Agreements. The VIE Agreements have not been tested in a court of law. The Chinese regulatory authorities could disallow our structure,
which could result in a material change in our operations and the value of our securities could decline or become worthless. For a description
of our corporate structure and VIE Agreements, see “Corporate History and Structure” starting on page 67. For certain
risks related to the contractual arrangements, see “Risk Factors—Risks Related to Our Corporate Structure” starting
on page 25.

 

Discussions of our business in this prospectus
relates to the business and operations of Sancaijia, the VIE. However, investors in our Class A Ordinary Shares should be aware that
they are purchasing equity in Sancai Holding, the Caymans Islands holding company, which does not own any equity interest in Sancaijia.

 

Prior to December 2020, Sancai Real Estate
Management Co., Ltd., a then fully owned subsidiary of Sanciajia, engaged in the distribution of smart locks for residential properties
and offices as an added value for our corporate clients that subscribe to our SaaS platform application. Sancai Real Estate Management
Co., Ltd. also leased residential properties from individual property owners on a long-term basis, renovated and furnished such
properties in a clean and modern manner, and rented them out to individual tenants.

 

On December 10, 2020, Sancaijia entered into
an equity transfer agreement, which was closed on December 28, 2020, to sell 100% of the equity interest it held in Sancai Real Estate
Management Co., Ltd. to Sancai Group Co., Ltd., a former related party of Sancai Holding, for a total of approximately $3.42 million
(RMB 22.33 million ). Mr. Ning Wen, the Chairman of the Board of Directors and Chief Executive Officer of Sancai Holding, was the legal
representative and a majority shareholder of Sancai Group Co., Ltd. As the VIE shifted its operating strategy to focus on SaaS platform
development and related technical service, on December 8, 2020, Mr. Ning Wen sold his all of his ownership interest of Sancai Group Co.,
Ltd. to a non-related party and resigned as legal representative. Since then, Sancai Group Co., Ltd. has been controlled by a non-related
party. As of December 28, 2020, the net book value of Sancai Real Estate Management Co., Ltd. was $3.12 million. As a result, the rental
property subleasing business and distribution of smart locks were discontinued as of December 2020.

 

 

Industry
Overview

 

Certain
information, including statistics and estimates, set forth in this section and elsewhere in this prospectus involves a number of assumptions
and limitations, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information.
Therefore, investors are cautioned not to place any undue reliance on the information, including statistics and estimates, set forth
in this section or similar information included elsewhere in this prospectus. Forecasts and other forward-looking information obtained
from the sources of such information are subject to the same qualifications and uncertainties as the other forward-looking statements
in this prospectus, as well as risks due to a variety of factors, including those described under “Risk factors” and elsewhere
in this prospectus.

 

Rise
of SaaS in China

 

The
SaaS industry in China started around 2004-2005 and is still a relatively new concept to most traditional enterprises, especially small
and medium-sized enterprises. China’s SaaS industry is in a rapid growth stage. With the explosive growth in recent years, according
to the iMedia Research Group’s and IDC China’s industry report, the market size is expected to grow to RMB25.34 billion in
2020 and more than RMB 32 billion in 2021. With the changes in the macro environment, business models of enterprises are constantly changing,
such as the rapid emergence such as short video and live streaming e-commerce. Various industries see the need to realize digital transformation
through more professional services, which promotes the continuous expansion of SaaS industry.

 

Rise
of Mobile Internet Users

 

According
to data released by the China Internet Network Information Center (CNNIC), as of December 2020, the number of mobile Internet users in
China has reached 986 million, an increase of 88.85 million from March 2020. The proportion of Internet users using mobile phones to
access the Internet has reached 99.7. Based on the huge number of mobile Internet users in China, SaaS can be quickly popularized on
the mobile terminal.

 

Rapid
Development of SaaS

 

The
SaaS market in China has entered a stage of rapid development, and the enterprise-level SaaS market has grown rapidly. According to data
released by iResearch, the size of my country’s enterprise-level SaaS market reached RMB 36.21 billion in 2019, a year-on-year
increase of 48.7%. It is expected that Chinese enterprises in 2020 The high-level SaaS market will continue to maintain rapid growth,
reaching RMB 53.3 billion.

 

Digital
Economy in China

 

According
to the “White Paper on China’s Digital Economy Development (2020)” issued by the China Academy of Information and Communications
Technology, China’s digital economy has expanded from RMB2.6 trillion in 2005 to RMB35.8 trillion in 2019, and the proportion of
the digital economy in GDP has increased to 36.2%. In the six years from 2014 to 2019, China’s digital economy has maintained a
contribution rate of more than 50% to GDP growth. The contribution rate of the digital economy to economic growth in 2019 is 67.7%. Digital
economy has become the core key force driving China’s economic growth.

 

Potential
in Digitalization of Small Businesses

 

Facing
the increasingly complex and ever-changing market environment and growing business needs, it has been an obstacle to the continued growth
for a business to rely on traditional management methods. With the continuous development of technology, informatization has become the
key to business management and business development. Digitalization applies and brings value to all industries. For example, app-based
transportation services for taxi hailing and ride sharing is changing the transportation industry. E-commerce is challenging traditional
retail. Fintech companies are taking up market shares of traditional financial institutes. In agriculture, companies are using digitalization
to customize and streamline production.

 

 

The
small businesses in China have a low degree of informatization and digitalization. According to the “Survey Report on Informatization
of Small and Medium-sized Enterprises”, or the “Survey, issued by the Ministry of Industry and Information Technology on
March 19, 2020, the informatization in small businesses in China only has a penetration rate of over 40% in areas such as financial management,
business management, publicity, and inventory management, and in supporting decision-making and supply chain management. Penetration
rates are low, especially in human resource management and distribution systems. Therefore, there is huge room for improvement in the
informatization penetration rate of SMEs in my country.

 

The Survey mentioned
that, among other things, it is a goal and a task to guide small businesses to use SaaS to achieve digitalization, to meet the needs
in research and development, design, manufacturing, operation management, marketing and other business systems of small businesses.

 

As
supported by the government, technology and the needs of small businesses themselves, in the future, the small businesses in China will
increase SaaS expenditures to improve the operating efficiency. Small businesses will also become the main driving force for the growth
of SaaS applications.

 

COVID-19
Accelerate Digitalization

 

The COVID-19 pandemic has accelerated digitalization
in China and has results in an increase of digitalization initiative. Digitalization and the implementation of 5G network help relieve
certain problem cause by the restrictions as a result of the COVID-19 pandemic. For example, Digitalization facilitated public safety
monitoring, online office and online school, COVID-19 data analysis, medical resource management, health code and E-commerce in extraordinary
time.

 

Current
Challenges to Small Businesses and Opportunities of Digitalization

 

Digitalization
presents opportunities and challenges to all companies in the digital age, including small businesses. Challenges faced by small business
includes the following:

 

High
cost.
Traditional offline business operation requires more human resources and has high management costs, but usually yields low
operating efficiency. High employee and customer turnover in certain industries further reduces profits. Cutting cost may increase the
profit in the short term, but does not benefit the small business in the long run.

 

With
digitalization that brings traditionally offline businesses online, companies can implement offline operations online through software
systems such as financial management, enterprise resource invoicing, and human resource management. This not only facilitates monitoring
and management of business operations at all time, but also enables immediate discovery of problems in operation management and provides
early warning of possible problems through timely statistics and analysis of operational data, so as to optimize timely, prevent problems
before they occur, and reduce losses. Managers can easily and intuitively participate in management control, relying on information stored
and organized in the software to make well informed decisions, which in turn increases management efficiency and profits.

 

Failure
to compete efficiently.
According to China Internet Network Information Center, as of March 2020, there were about 904,000,000 Internet
users in China, account for about 54% of the total population in China. Online customer acquisition, transactions, and settlement have
penetrated into all aspects of people’s lives. Traditional businesses search for customers offline. It is not only difficult to
acquire customers, but even more difficult to keep customers. This makes traditional offline companies face greater challenges to survive,
let alone to compete with other companies.

 

According
to China Internet Network Information Center, as of December 2020, there were about 989 million Internet users in China, account for
about 70% of the total population in China. China has become the world’s largest digital society. Netizens are the most important
consumer group in the digital age. Whoever has more online consumers will win opportunities for survival and development and to occupy
more market share. Therefore, it provides great advantage to make full use of the online market by accessing online digital operation
to increase the exposure of the business and products and expand the reach to potential online customers.

 

Limited
resources.
Small businesses usually have limited resources and capital. This obstacle makes it difficult for small businesses to
expand their operations and markets, especially in competitive, segmented industries.

 

In
the digital age, small businesses can find opportunities to change course and surpass large enterprises. A business not only can reach
more customers online, it also can attract