Form F-1/A Sancai Holding Group

As
filed with the Securities and Exchange Commission on December 6, 2021

Registration
No. 333-248636

 

UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549

 

AMENDMENT
NO. 4 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. ☐

 

 

CALCULATION
OF REGISTRATION FEE

 

Title
of Class of Securities to be Registered
  Amount
to be
registered
    Proposed

maximum
offering
price per
unit
    Proposed

Maximum
Aggregate
Offering
Price(1)
    Amount
of
Registration
Fee(1)
 
Class
A Ordinary Shares, par value $0.0001 per share(2)
         [●]   $        [●]     $ [●]     $ [●]  
Underwriter
Warrants(3)
                       
Class
A Ordinary Shares, par value $0.0001 per share underlying Underwriter Warrants(3)
    [●]       [●]       [●]       [●]  
Total                   $ 18,388,500     $ 2,006.19 (4) 

 

(1) The
registration fee for securities is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, assuming
the sale of the maximum number of shares at the highest expected offering price, and such estimate is solely for the purpose of calculating
the registration fee pursuant to Rule 457(o).

 

(2) We
have granted the Underwriter an option for a period of 45 days after the closing of this offering to purchase up to 15% of the total
number of the Class A Ordinary Shares to be offered by us pursuant to this offering (excluding Class A Ordinary Shares subject to this
option), solely for the purpose of covering over-allotments, at the public offering price less the underwriting discounts. In accordance
with Rule 416(a), the Registrant is also registering an indeterminate number of additional Class A Ordinary Shares that shall be issuable
pursuant to Rule 416 to prevent dilution resulting from share splits, share dividends or similar transactions.

 

(3) The
Registrant will issue to Univest Securities, LLC (the “Underwriter”) warrants to purchase a number of Class A Ordinary Shares
equal to an aggregate of six percent (6%) of the Class A Ordinary Shares (the “Underwriter Warrants”) sold in the offering.
The exercise price of the Underwriter Warrants is equal to 110% of the offering price of the Class A Ordinary Shares offered hereby.
Assuming an exercise price of $[●] per share, we would receive, in the aggregate, $[●] upon exercise of the Underwriter
Warrants. The Underwriter Warrants are exercisable commencing 180 days from the date of commencement of sales of the public equity offering,
except as provided in FINRA Rule 5110(e)(2), until the five year anniversary of such date.

 

 

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 DECEMBER 6, 2021

 

 

 

SANCAI
HOLDING GROUP LTD.

 

[●] Class
A Ordinary Shares

 

This is an initial public offering of our
Class A ordinary shares, par value $0.0001 (the “Class A Ordinary Shares”). Prior to this offering, there has been no public
market for our securities. We expect the offering price to be $ [●] per Class A Ordinary Share (the “Offering Price”).
We have applied to list our Class A Ordinary Shares on the Nasdaq Capital Market under the symbol “SCIT.”
This offering is contingent upon us listing our Class A Ordinary Shares on Nasdaq or another national exchange. There is no
guarantee or assurance that our 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 132.

 

Our
issued and outstanding share capital 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 the Company 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.

 

We
are 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 our Board of Directors and our Chief Executive Officer, will beneficially own Ordinary Shares representing approximately
[●]% of the total voting power of our outstanding Ordinary Shares, or [●]% of the total voting power of our outstanding
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, we are 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 13.

 

We are 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.”

 

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.

 

We are a holding company incorporated in
the Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations
through the operating entities established in the People’s Republic of China, including our indirect subsidiary and
consolidated variable interest entity, or VIE, and its subsidiaries in China. Due to PRC legal restrictions on foreign ownership in
the value-added telecommunication services, which the VIE engages in currently, we do not have any equity ownership of the VIE,
instead we control and receive the economic benefits of the VIE’s and its subsidiaries’ business operations through
certain contractual arrangements. The Class A Ordinary Shares offered in this prospectus are shares of Sancai Holding Group Ltd, the
Cayman Islands holding company. You are not directly investing in and may never hold equity interests in the VIE or its subsidiaries
in China. 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 contractual
arrangements, see “Corporate History and Structure” starting on page 54. The Chinese regulatory authorities
could disallow this VIE structure, which would likely result in a material change in our operations and the value of our Class A
ordinary shares, including that it could cause the value of such securities to significantly decline or become worthless. See
Risk Factors—Risks Related to Our Corporate Structure” starting on page 21 for certain risks related to
the contractual arrangements.

 

Additionally, as we conduct substantially
all of our operations in China, we are subject to certain legal and operational risks associated with our operations in China. PRC laws
and regulations governing our 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 its 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. 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 our company, any
of our subsidiaries or the VIE 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 our 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 our company, the VIE or its subsidiaries to obtain regulatory approval from Chinese
authorities before listing in the U.S. See “Risk Factors” beginning on page 13 for a discussion of these legal and operational
risks and other information that should be considered before making a decision to purchase our ordinary shares.

 

The
Class A ordinary shares offered in this prospectus are those of Sancai Holding Group Ltd, the Cayman Islands holding company. You are
not directly investing in and may never hold equity interests in the VIE or its subsidiaries in China.

 

 

 

As
used in this prospectus supplement, “we,” “us,” “our company,” or “our,” refers to Sancai
Holding Group Ltd, our Cayman Islands holding company, its subsidiaries, and, in the context of describing our operations and consolidated
financial information, the VIE and its subsidiaries in China.
 

 

  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                  ,
2021.

 

 

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, “we,” “us,” “our,”
the “Company” and similar designations refer to:

 

Sancai
Holding Group Ltd (“Sancai Holding” when individually referenced), a Cayman Islands exempted company;

 

Sancai
Limited (“Sancai Seychelles” when individually referenced), a Seychelles company and a wholly-owned subsidiary of Sancai
Holding;

 

Sancai
International Holding Limited (“Sancai HK” when individually referenced), a Hong Kong company and a wholly-owned subsidiary
of Sancai Seychelles;

 

Xi’an
Minglan Management Co., Ltd. (“Sancai WFOE” when individually referenced), a PRC company and a wholly-owned subsidiary of
Sancai HK;

 

and,
in the context of describing our operations and consolidated financial information, include: 

 

Sancaijia
Co., Ltd. (“Sancaijia” or “VIE” when individually referenced), a PRC company and a variable interest entity (VIE)
contractually controlled by Sancai WFOE;

 

Sancaijia
Technology Co., Ltd. (“Sancaijia Technology” when individually referenced), a PRC company and a 100% owned subsidiary of
Sancaijia;

 

Xi’an
Dacai Management Consulting Co., Ltd. (“Xi’an Dacai” when individually referenced), a PRC company and a 100% owned
subsidiary of Sancaijia;

 

Shanghai
Wenxu Information Technology Co., Ltd. (“Shanghai Wenxu” when individually referenced), a PRC company and a 100% owned subsidiary
of Sancaijia;

 

Caibaoyun
Settlement Technology (Xi’an) Co., Ltd. (“Caibaoyun” when individually referenced), a PRC company and a 100% owned
subsidiary of Sancaijia; and

 

Xi’an
Miaobijia Internet  Co., Ltd. (“Xi’an Miaobijia” when individually referenced), formerly known as Sancaijia Property
Industry Service Co., Ltd., a PRC company and a 100% owned subsidiary of Sancaijia Technology.

 

We
are 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, we currently qualify for treatment
as a “foreign private issuer.” As a foreign private issuer, we 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”).

 

Our business is conducted by Sancaijia Co.,
Ltd., the VIE in the PRC, and its subsidiaries and branch offices, 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 the Company 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 Group Ltd. (“Sancai Holding,”
the “Company”) 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 Co., Ltd (“Sancaijia”
or the “VIE”), and the VIE’s subsidiaries are the operating entities. Sancaijia Co., Ltd., 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%).

 

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 Sancaijia engages in, Sancai Holding is not eligibility to
hold direct or indirect equity interest in Sancaijia. Therefore, Sancai Holding, through Sancai WFOE, controls and 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 believed that the VIE Agreements would enable
Sancai Holding to (1) exercise effective control over the VIE, (2) receive substantially all of the economic benefits of the VIE, and
(3) have an exclusive option to purchase all or part of the equity interests and assets in the VIE when and to the extent permitted by
the PRC law.

 

As a result of these contractual arrangements,
Sancai WFOE is considered the primary beneficiary of Sancaijia and we treat it as the VIE under U.S. GAAP. 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.

 

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
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 solutions. Sancai Real Estate 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
Co., Ltd. to Sancai Group Co., Ltd., a former related party of the Company, 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 the Company, was the legal representative and
a majority shareholder of Sancai Group Co., Ltd. As the Company 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 Co., Ltd. was $3.12 million. The Company 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.

 

Our Products and Services

 

The Company currently provides the followings
two services to its customers:

 

SaaS Solutions – Standard SaaS Platform
Application Services

 

Our standard SaaS platform application service
provides digitalization solutions for small businesses. We built a mobile management solution system that enables business owners to
manage and monitor their operations via mobile phones. We 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 our business develops and the application industries grows, we will develop more functions to meet the needs
of business owners. We typically charge a 3% to 5% fee on the transaction settlement amount, between the businesses we serve and their
customers, which are completed on our SaaS platform.

 

SaaS Solutions – SaaS Platform Customization
and Development

 

We also provide customization and development
services according to the requirements of our customers. We charge a one-time customization fee and an annual maintenance fee. Certain
customers can request maintenance and warranty services to be performed for certain customization & development services the Company
provides. The annual maintenance 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 annual maintenance fee are based on the services we provide
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 annual maintenance fee is amortized over the contract period.

 

Our
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 our system customization and
development services. We are proud to achieve their goal and fulfill our mission step by step.

 

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

 

Discontinued Business – Rental Property
Subleasing and Smart Locks Distribution

 

Prior to December 2020, Sancai Real Estate
Co., Ltd., a than subsidiary of the VIE, 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 Co., Ltd. leased an aggregate 11,434 properties from property owners. On July 1, 2019, Sancai Real Estate 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 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 solutions. The large amount of smart locks Sancai Real Estate Co., Ltd. purchased
allowed it to negotiate a lower price for our corporate customers. The smart locks were connected to our SaaS platform so that the corporate
customers can control the locks.

 

On December 10, 2020, the VIE entered into
an equity transfer agreement, to sell 100% of the equity interest it held in Sancai Real Estate Co., Ltd., which operated subleasing
business, to Sancai Group Co., Ltd., a former related party of the Company, 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 we shifted our 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 Co., Ltd., we discontinued the smart lock business and the rental property subleasing business in December 2020. Historical results
are not necessarily indicative of the results that may be expected for any future period.

 

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. We maintain a website at www.sancaijia.com. We do not incorporate the information on our
website into this prospectus and you should not consider any information on, or that can be accessed through, our website as part of
this prospectus.

 

 

 

 

All of our business operations currently are
conducted through the VIE, Sancaijia, and its subsidiaries. The following diagram illustrates the corporate structure of the Company
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
Group Ltd, an exempted company under the laws of the Cayman Islands, as our offshore holding company to facilitate financing and offshore
listing. We operate our business through the VIE, Sancaijia Co., Ltd., and its subsidiaries in China. Mr. Ning Wen, the Chairman of our
Board of Directors and Chief Executive Officer, owns 63% of Sancaijia Co., Ltd. The remaining equity of the VIE is beneficially owned
by Lizhi He (20%), Lizhen Tang (13%) and Zhijie Zhang (4%).

 

The Class A Ordinary Shares offered in this
prospectus are those of Sancai Holding Group Ltd, our Cayman Islands holding company, 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 or its subsidiaries in China.

 

Mr. Ning Wen, the Chairman of our Board of
Directors and Chief Executive Officer, owns 63.0% of Sancaijia Co., Ltd. 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, 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.”

 

Contractual
Arrangements with the VIE 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. We are 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 we entered into with Sancaijia and its shareholders. These contractual arrangements with the
VIE and its respective shareholders allow us to: (i) exercise effective control over the VIE; (ii) receive substantially all of the economic
benefits of the VIE; and (iii) have an exclusive option to purchase all or part of the equity interest in and/or assets of the VIE when
and to the extent permitted by PRC laws. As a result, we are regarded as the primary beneficiary of Sancaijia and its subsidiaries. We
treat them as our 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 a description of our corporate structure and VIE contractual arrangements,
see “Corporate History and Structure – Contractual Arrangements with the VIE and its Shareholders” starting
on page 56, 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, the VIE 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, 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. Accordingly, 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 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. In the event we are unable to enforce these VIE Agreements, 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, 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 be worthless.

 

Additionally, these VIE Agreements may be
less effective than direct ownership and that the Company may incur substantial costs to enforce the VIE Agreements. For example, the
VIE 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 the VIE, we would be able to exercise
our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could implement changes, subject to
any applicable fiduciary obligations, at the management and operational level. However, under the current VIE Agreements, we rely on
the performance by the VIE and its shareholders of their obligations under the contracts to exercise control over the VIEs. The shareholders
of our consolidated VIE may not act in the best interests of our company or may not perform their obligations under these contracts.
In addition, failure of the VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies available
under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.

 

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 the Company 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”” and “— Risks Related to Doing Business in China.” 

 

 

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 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 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 we 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. 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. We may be required to change our 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.

 

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 any other PRC governmental authorities for this
offering, nor has our company, any of our subsidiaries or the VIE 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 by the PRC government
are newly published and official guidance and related implementation rules have not been issued, it is highly uncertain what the potential
impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments
and list on an U.S. exchange. The SCNPC or other PRC regulatory authorities may in the future promulgate laws, regulations or implementing
rules that requires our company, the VIE or its subsidiaries to obtain regulatory approval from Chinese authorities before listing in
the U.S. See “Risk Factors” beginning on page 13 for a discussion of these legal and operational risks and other information
that should be considered before making a decision to purchase our ordinary shares. 

 

 

 

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 13 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 

 

  Our reliance on VIE Agreements with the VIE in
China for our business operations because we do not hold direct equity interest in the VIE, which may not be as effective in providing
operational control or enabling us to derive economic benefits as through ownership of controlling equity interests;

 

  The adverse impact on our operations if the PRC government determines
that our contractual arrangements with the VIE do not comply with regulatory restrictions or if such regulations change or are interpreted
differently in the future;
     
  Contractual arrangements in relation to the VIE may be subject to
scrutiny by the PRC tax authorities and they may determine that we or the VIE owe additional taxes, which could negatively affect
our financial condition and the value of your investment;

 

  The material adverse effect on our business if the VIE or its shareholders
fail to perform their obligations under the contractual arrangement;

 

  The potential conflict of interest between the Company and the VIE;

 

  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;

 

  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 could significantly
limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities
to significantly decline or be worthless;

 

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

 

  The laws of the Cayman Islands may not provide
our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States;

 

  Recently introduced economic substance legislation
of the Cayman Islands may adversely impact us or our operations;

 

  The ability of the shareholder to bring an action
against us or our officers and directors or to enforce any judgment because we are a Cayman Islands company and all of our business
is conducted in China.

 

 

 

Risks Related to Doing Business in China

 

  General business, economic conditions in China
where all of our operations are located;

 

  The PRC government exerts substantial influence
over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations at
any time with little or no advance notice, which could result in a material change in our operations and our ordinary shares could
decline in value or become worthless.

 

  The lack of legal protections available to us due
to uncertainty in the interpretation and enforcement of PRC laws and regulations;

 

  We may rely on dividends and other distributions
on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE
to make payments to us and any tax we are required to pay could have a material adverse effect on our ability to conduct our business;;

 

  Governmental control of currency conversion may
limit our ability to utilize our net revenue and affect the value of your investment;

 

  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;
     
  PRC regulations relating to investments in offshore
companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit
our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered
capital or distribute profits;
     
  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;

 

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

 

  The approval of the CSRC may be required in connection
with this offering, and, if required, we cannot predict whether we 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;

 

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

 

  The concentration of voting control as a result
of dual class structure of our Class A and Class B ordinary shares;

 

  Less protection to the holders of our Class A ordinary
shares because we are permitted to rely on exemptions from certain Nasdaq corporate governance standards as a foreign private issuer
and a controlled company;

 

  Increased costs as a result of operating as a public
company;

 

  The volatility of the trading price of our Class
A ordinary shares;

 

Risks Related to Our Business and Industry

 

  Increased competition in the business and industry
that we are involved in;

 

  Limited operating history;

 

  Reliance on a limited number of customers;

 

  Our ability to successfully expand in our existing
market segments and penetrate new market segments;

 

  Our financial performance, including our revenues,
cost of revenues, operating expenses, and our ability to attain and sustain profitability

 

  Our ability to attract and retain qualified employees
and key personnel;

 

  The economic, financial, and other impacts of the COVID-19 pandemic;

 

  We have identified material weaknesses in our internal
control over financial reporting and 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;

 

 

 

 

Implications
of Being an Emerging Growth Company

 

As
a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An “emerging growth company” may take advantage
of reduced reporting requirements that are otherwise 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, or MD&A;

 

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

 

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

 

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

 

are
exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and 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 we no longer meet the definition of an emerging growth company. The JOBS Act provides that we
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

 

We
are 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 we are no longer a foreign private issuer. We 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

 

We
are and will remain, following this offering, to be a “controlled company” within the meaning of the Nasdaq Stock Market
Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders
of other companies.

 

We
are 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 we are a controlled company under that definition, we are 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 our Company 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     4,776,995       3,550,183  
Total operating expenses     3,508,760       4,209,141  
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
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 the Company in this offering.  
     
Capitalization:   As of the
date of this prospectus, the authorized share capital of the Company 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.
     
Ordinary Shares to be
Outstanding after the Offering:
  [●]
Ordinary Shares including (i) [●] Class A Ordinary Shares and (ii) 1,500,000 Class B Ordinary Shares, or [●]
Ordinary Shares including (i) [●] Class A Ordinary Shares if the Underwriter exercises the Over-Allotment
Option in full and (ii) 1,500,000 Class B Ordinary Shares.   The numbers do not include any of the up to [●] Class
A Ordinary Shares underlying the Underwriter Warrants. Our authorized share capital upon the completion of this offering
will be $50,000 divided into [●] Ordinary Shares, comprised of (i) [●] Class A Ordinary Shares, and (ii) 1,500,000
Class B Ordinary Shares. See “Description of Share Capital.
         
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:   $[●], $ [●] 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 13
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 Business and Industry

 

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

 

We
launched our Software-as-a-Service (SaaS) solutions in July 2019 to help small businesses in China achieve digitalization. We 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 SaaS platform solution services.

 

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

 

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

 

If
the market for our 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, we must achieve a high level of customer satisfaction and contract renewals, extend our relationships with existing
customers over time and sell our solutions to new customers.

 

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

 

Our
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. Our success with customers also
depends on our ability to maintain a consistently high level of customer service and technical support to retain existing customers and
attract new customers. If we are unable to hire and train sufficient support resources to provide adequate and timely support to our
customers, our customers’ satisfaction with our solutions will be adversely affected. To the extent that our 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 we develop may contain errors or defects or may not achieve the broad market acceptance necessary to generate sufficient revenues.
If we are unable to successfully enhance our existing solutions to meet customer requirements, increase adoption and usage of our solutions
or develop new solutions, our business and operating results will be adversely affected.

 

Our
business is susceptible to changes in China’s national economic conditions.

 

Our
business 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.

 

We
are subject to evolving regulatory requirements; if we do not comply with these regulations, or fail to adapt to regulatory changes,
our business and prospects may be materially and adversely affected.

 

Many
aspects of our business, 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 we continue to expand the solutions on our
SaaS platform, we may be subject to new and more complex regulatory requirements. We are also required to comply with applicable laws
and regulations to protect the privacy and security of our customers’ information. Legal and regulatory restrictions may delay,
or possibly prevent, some of our 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.
We may also become subject to fines or other penalties, or, if we determine that the requirements to operate in compliance are overly
burdensome, we 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 majority 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 our major customers in each period
to be those that accounted for more than 10% of our revenue in such period. We 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 our 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 the Company holds any equity interest in Chengcheng. We 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 we will maintain or improve the relationships with customers
who does not have long-term contracts with us. If we 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, Ms. Lizhen Tang, the shareholder
of the VIE, was imposed by people’s court on measures of consumption restrictions as the principal of several branches of Sancai
Real Estate Co., Ltd, a former subsidiary of Sancaijia, due to these branches of Sancai Real Estate Co., Ltd.’s failure 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, 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 our management, which could in turn harm our business.

 

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

 

Our intellectual property rights are important
to our business. We rely on a combination of confidentiality procedures and contractual provisions to protect our intellectual property
rights. As of the date of this prospectus, we have 10 registered trademarks, 2 registered patents and 20 registered software copyrights
in China. We are licensed to use 33 trademarks in China. We are in the process of registering 31 trademarks and 8 copyrights.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

As
we entered into contractual relationship with various real estate management companies and leasing agencies, we have been and may continue
to be involved in legal proceedings and assume joint liability when we provide services to our customers on our 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, we have been and may from time to time be involved in labor and employment related disputes with and subject to such claims
by employees. Complaints, claims, arbitration, lawsuits, and litigations are subject to inherent uncertainties, and we are uncertain
whether the foregoing claims would develop into lawsuits or regulatory penalties and other disciplinary actions.

 

As of the date of this prospectus, there are
some ordinary routine legal proceedings incidental to our business, to which our subsidiaries, our variable interest entity or any of
its subsidiaries is a party or of which any of our 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 the Company and
its subsidiary 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 us to additional risks.

 

From
time to time, we 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, we 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.

 

Neither
we nor our subsidiaries maintain any insurance to cover assets, property and potential liability of our business. The lack of insurance
could leave our business inadequately protected from loss. If we were to incur substantial losses or liabilities due to fire, explosions,
floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected.

 

Our
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. Our IT infrastructure is currently deployed,
and our data is currently maintained through a customized cloud computing system. Our 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, we 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 our internet infrastructure and the fixed
telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.

 

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

 

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

 

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

 

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 US 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 US 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 US 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 US 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 Company’s
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 have undertaken and will continue to undertake steps to strengthen our internal
control over financial reporting. These measures include the following:

 

(i) We
have hired new accounting staff 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
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
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
have taken steps to build and enhance an internal control function. Particularly, each department within the company 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.

 

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.

 

 

Risks
Related to Our Corporate Structure

 

We
do not hold direct equity interest in Sancaijia, our consolidated variable interest entity. We control and receive the economic benefits
of the business operations of Sancaijia through a series of contractual arrangements (the “VIE Arrangements”) with Sancaijia
and its shareholders. Such VIE Arrangements are subject to significant risks, as set forth in the following risk factors.

 

Our
PRC subsidiary has nominal operations or assets. We conduct our business in China through the consolidated VIE and its subsidiaries.
If the PRC government deems that the contractual arrangements in relation to Sancaijia, our consolidated variable interest entity (VIE),
do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation
of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those
operations.

 

Investors are cautioned that you are not buying
shares of a China-based operating company but instead are buying shares of a shell company issuer that maintains contractual arrangements
with the associated operating company. Our PRC subsidiary has nominal operations or assets. We conduct our business in China through
the consolidated VIE and its subsidiaries.

 

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 2020), which was promulgated on June 23, 2020 and implemented
on July 23, 2020, and such major foreign investor in a Foreign-Invested Telecommunications Enterprise must have experience in providing
value-added telecommunications services, or VATS, and maintain a good track record in accordance with the Administrative Provisions on
Foreign-Invested Telecommunications Enterprises (revised in 2016), and other applicable laws and regulations.

 

We are an exempted company incorporated under
the laws of the Cayman Islands, which is classified as a foreign enterprise under PRC laws and regulations, and our wholly foreign-owned
enterprise (WFOE) in the PRC is considered as a foreign-invested enterprise. Accordingly, our PRC subsidiary is not eligible to operate
VATS business in China. To comply with PRC laws and regulations, we conduct our VATS business in the PRC through our consolidated VIE,
Sancaijia Co., Ltd. In February 2020, Sancai WFOE has entered into a series of contractual arrangements with the VIE and its shareholders,
respectively, which enable us to (i) exercise effective control over the VIE, (ii) receive substantially all of the economic benefits
of the VIE, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in the VIE when and to the
extent permitted by PRC law. As a result of these contractual arrangements, we have control over and are the primary beneficiary of the
VIE and hence consolidate their financial results into our consolidated financial statements under U.S. GAAP. See “Corporate History
and Structure” for further details.

 

The VIE contributed substantially all of the
Company’s 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 accounted for substantially all of the consolidated total assets and total liabilities of the Company.

 

In the opinion of B&D Law Firm, our PRC
legal counsel, each of the contractual arrangements among Sancai WFOE, the VIE and its shareholders governed by PRC laws are valid, binding
and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However, our PRC legal counsel
has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws,
regulations and rules. Accordingly, the PRC regulatory authorities may ultimately take a view that is contrary to the opinion of our
PRC legal counsel. In addition, it is uncertain whether any new PRC laws or regulations relating to variable interest entity structures
will be adopted or if adopted, what they would provide. PRC government authorities may deem that foreign ownership is directly or indirectly
involved in 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 lose control of our consolidated VIE and have to modify such structure to
comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our VATS
business. Furthermore, if we or 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;

 

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

 

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

 

placing
restrictions on our right to collect revenues;

 

shutting
down our servers or blocking our app/websites;

 

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

 

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

 

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

 

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, our consolidated variable interest entity. We rely on contractual arrangements 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
Group Holding Ltd 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 contractual arrangements with Sancaijia and its shareholders to operate our business. For a description of these
contractual arrangements, see “Corporate History and Structure.” These contractual arrangements may not be as effective as
direct ownership in providing us with control over our consolidated variable interest entity. For example, Sancaijia and its shareholders
could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining
our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.

 

All of these contractual arrangements are
governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not
as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit
our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not
be able to exert effective control over 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, our consolidated variable interest
entity, or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect
on our business” below. Therefore, our contractual arrangements with Sancaijia, our consolidated variable interest entity, may
not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be. If we
are unable to assert our contractual control 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.

 

All
of our business is conducted through Sancaijia, which currently is considered for accounting purposes as VIE, and we are considered the
primary beneficiary, enabling us to consolidate our financial results in our consolidated financial statements. In the event that in
the future the company we hold as a VIE would no longer meet the definition of a VIE, or we are deemed not to be the primary beneficiary,
we would not be able to consolidate line by line that entity’s financial results 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, our consolidated variable interest entity, or its shareholders to perform their obligations under our contractual
arrangements with them would have a material adverse effect on our business.

 

We refer to the shareholders of the VIE as
its nominee shareholders because although they remain the holders of equity interests on record in the VIE, pursuant to the terms of
the relevant power of attorney, such shareholders have irrevocably authorized the individual appointed by Sancai WFOE to exercise their
rights as a shareholder of the relevant VIE. If the VIE, or its shareholders fail to perform their respective obligations under the contractual
arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to
rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot
assure you will be effective under PRC laws. For example, if the shareholders of 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—Uncertainties with respect to the PRC legal system and changes in laws and regulations in China
could adversely affect us.” Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements
in the context of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain significant
uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings
by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable
by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties
may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional
expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other
obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our consolidated
variable interest entity, and if we are unable to assert our contractual control rights over the assets of the consolidated variable
interest entity, our securities may decline in value or become worthless..

 

 

The
shareholders of Sancaijia, our 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 the VIE 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 the VIE, 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 effectively control Sancaijia and 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 the VIE 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 our consolidated
VIE as provided under the shareholder voting proxy agreement, directly appoint new directors of our consolidated VIE. We rely on the
shareholders of our consolidated VIE 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, our consolidated variable interest entity, may be subject to scrutiny by the PRC tax authorities
and they may determine that we or Sancaijia 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, our 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 our consolidated variable interest entity’s 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, our 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,
our consolidated variable interest entity, holds certain assets that are material to the operation of our business, including intellectual
property. Under the contractual arrangements, our 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.

 

We are a holding company, and the investors
will have ownership in a holding company that does not directly own all of its operation in China. We rely on the VIE, and its subsidiaries
for our operation in PRC. We also 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.

 

We are a holding company and the investors
will have ownership in a holding company that does not directly own all of its operation in China. We rely on the VIE, and its subsidiaries
for our operation in PRC. We may rely on dividends to be paid by our PRC subsidiary to fund our cash and financing requirements, including
the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our
operating expenses. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict
its ability to pay dividends or make other distributions to us.

 

Under
PRC laws and regulations, our PRC subsidiary, which is a wholly foreign-owned enterprise in China, may pay dividends only out of its
accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise
is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund,
until the aggregate amount of such fund reaches 50% of its registered capital.

 

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

 

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

 

 

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 2020) was issued on June 23, 2020,
which took effect on July 23, 2020 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 our
consolidated VIE is subject to foreign investment restrictions/prohibitions set forth in Negative List (Edition 2020). 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 control over the VIE through contractual arrangements 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 have control over 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
we fail to obtain or keep licenses, permits or approvals required for conducting our business in China, we 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.

 

 

We
only have contractual control over our website. 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.

 

Our online marketplace, operated by our 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, we have obtained valid ICP and EDI License for provision
of internet information services and online data processing and transaction processing services through our PRC consolidated variable
interest entity, Sancaijia. Before we obtained the above Licenses, the VIE 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, the Company confirms that as of the date of this
prospectus, the VIE has not received any punishment from local relevant authorities. The controlling shareholder of the VIE, 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 we are 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 we 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 we held may not be sufficient to meet
regulatory requirements, which may restrain our ability to expand our business scope and may subject us to fines or other regulatory
actions by relevant regulators if our practice is deemed as violating relevant laws and regulations. As we further develop and expand
our business scope, we may need to obtain additional qualifications, permits, approvals or licenses. Moreover, we may be required to
obtain additional licenses or approvals if the PRC government adopts more stringent policies or regulations for our 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 our value-added telecommunications business and has the necessary personnel
to operate our 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 our business. We cannot assure you that we have obtained
all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain
new ones. If the PRC government considers that we were operating 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
our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us
to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC
government may have a material adverse effect on our business and results of operations.

 

 

Uncertainties
with respect to the PRC legal system and changes in laws and regulations in China could adversely affect us.

 

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

 

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

 

In
addition, the PRC government has recently announced its plans to enhance its regulatory oversight of Chinese companies listing overseas.
The Opinions on Strictly Cracking Down on Illegal Securities Activities issued on July 6, 2021 called for:

 

tightening
oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulation
to specify responsibilities of overseas listed Chinese companies with respect to data security and information security;

 

enhanced
oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and

 

extraterritorial
application of China’s securities laws.

 

On July 10, 2021, the Cyberspace Administration
of China issued a revised draft of the Measures for Cybersecurity Review for public comments, which proposes 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
aforementioned policies and any related implementation rules to be enacted may subject us to additional compliance requirement in the
future. As these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects
at this time. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions
or any future implementation rules on a timely basis, or at all. 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.

 

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

 

  

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

 

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

 

Furthermore, rules and regulations in China
can change quickly with little advance notice. The Chinese government may intervene or influence our operations 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 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 adapt to any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure
and business operations. We may be forced to make material changes to our operation and the value of our Class A ordinary shares could
depreciate.

 

As of the date of this prospectus, there are
no laws, regulations or other rules require the China based operating entities to obtain permission or approvals from Chinese authorities
to list on U.S. exchanges, and neither we nor the China based operating entities have received or were denied such permission. However,
there is no guarantee that we or the China based operating entities will receive or not be denied permission from Chinese authorities
to list on U.S. exchanges in the future. Any actions by the Chinese government to exert more oversight and control over offerings that
are conducted overseas and/or foreign invest in China-based issuers could significantly limit or completely hinder our ability to offer
or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

 

The PRC government exerts substantial
influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations
at any time with little or no advance notice, which could result in a material change in our operations and our 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 or the holding company were
required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not
be able to continue listing on U.S. exchange, continue to offer securities to investors, or materially affect the interest of the investors
and cause significantly depreciation of our price of 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. Our ability
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 our operations 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 we operate. We 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 operations 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.

 

Regulation
and censorship of information disseminated over the internet in China may adversely affect our business, and we may be liable for information
displayed on, retrieved from or linked to our websites and mobile applications.

 

The
PRC government has adopted regulations governing internet access and the distribution of information over the internet. Under these regulations,
internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other
things, impairs the national dignity of China, contains terrorism or extremism content, or is reactionary, obscene, superstitious, fraudulent
or defamatory, or otherwise violates PRC laws and regulations. Failure to comply with these requirements may result in the revocation
of licenses to provide internet content and the closure of the concerned websites and applications. The website operator may also be
held liable for such censored information displayed on or linked to the website.

 

In
addition, the MIIT has published regulations that subject website operators to potential liability for content displayed on their websites
and for the actions of users and others using their systems, including liability for violations of PRC laws prohibiting the dissemination
of content deemed to be socially destabilizing. The Ministry of Public Security has the authority to order any local internet service
provider to block any internet website at its sole discretion. From time to time, the Ministry of Public Security has stopped the dissemination
over the internet of information which it believes to be socially destabilizing. The State Administration for the Protection of State
Secrets is also authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating
to the protection of state secrets in the dissemination of online information.

 

Although
we attempt to monitor the illicit content posted by users in our marketplace, we may not be able to effectively control or restrict illicit
content (including comments as well as pictures, videos and other multimedia content) generated or placed in our marketplace by our users.
To the extent that PRC regulatory authorities find any content displayed in our marketplace inappropriate, they may require us to limit
or eliminate the dissemination of such information in our marketplace. Failure to do so may subject us to liabilities and penalties and
may even result in the temporary blockage or complete shutdown of our online operations. If this were to happen, our business and results
of operations would be materially and adversely affected.

 

 

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 our PRC subsidiary, the VIE and the VIE’s subsidiaries, or may make additional capital contributions
to our PRC subsidiary, subject to satisfaction of applicable governmental registration and approval requirements.

 

Any
loans we extend to our PRC subsidiary, which are 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 our PRC subsidiary
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 the VIE 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 the VIE and
our PRC subsidiary, 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, our PRC subsidiary may use its income in Renminbi generated
from their operations to finance the VIE through entrustment loans to the VIE or loans to the VIE’s shareholders for the purpose
of making capital contributions to the VIE. In addition, our PRC subsidiary can use Renminbi funds converted from foreign currency registered
capital to carry out any activities within their normal course of business and business scope, including to purchase or lease servers
and other relevant equipment and fund other operational needs in connection with their provision of services to the relevant VIE under
the applicable exclusive technical support agreements.

 

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

 

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. To date, 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. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our Company 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 our Company 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 us to penalties.

 

We
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 our employees up to a maximum amount specified by the local government
from time to time at locations where we operate our 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. We did not pay, or were
not able to pay, certain social insurance or housing fund contributions for all of our employees and the amount we paid was lower than
the requirements of relevant PRC regulations. If we are determined by local authorities to fail to make adequate contributions to any
employee benefits as required by relevant PRC regulations, we 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 Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory
agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional
procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including
requirements in some instances that the 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 our PRC subsidiary’s ability to increase its
registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties
under PRC law.

 

In
July 2014, the 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, our PRC subsidiary
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 our PRC subsidiary. 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 the Company 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 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.

 

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

 

Our
PRC counsel, 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) our PRC subsidiary was incorporated as a wholly foreign-owned enterprise by means of direct investment rather than by merger
or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A
Rules that are our beneficial owners; (ii) the CSRC currently has not issued any definitive rule or interpretation concerning whether
offerings like ours under this prospectus are subject to the M&A Rules; and (iii) no provision in the M&A Rules clearly classifies
contractual arrangements as a type of transaction subject to the M&A Rules.

 

However, 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.

 

If
we 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 or any British Virgin Islands or 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 our Company 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.

 

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.

 

We
are 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. Our Company may be subject to withholding obligations if our Company is transferee
in such transactions, under SAT Bulletin 37 and SAT Bulletin 7. For transfer of shares in our Company 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 our Company 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.

 

We are an exempted company incorporated under
the laws of the Cayman Islands, we conduct substantially all of our operations in China and our 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 the Company, 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. 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 our employees has also increased
in recent years. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able
to pass on these increased labor costs to those who pay for our 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 we decide to
terminate some of our employees or otherwise change our 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. We 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 “Regulations-Regulations
on Labor Protection”.

 

As the interpretation and implementation of labor-related
laws and regulations are still evolving, we cannot assure you that our employment practices do not and will not violate labor-related
laws and regulations in China, which may subject us to labor disputes or government investigations, and we may thus be subject to related
penalties, fines or legal fees. We cannot assure you that we have complied or will be able to comply with all labor-related law and regulations
including those relating to obligations to make social insurance payments and contribute to the housing provident funds. If we are deemed
to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our
business, financial condition and results of operations will be adversely affected.

 

If the custodians
or authorized users of controlling non-tangible assets of our Company, including our 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 we usually utilize chops to enter into
contracts, the designated legal representatives of our PRC subsidiary, the VIE and its 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,
the VIE and its subsidiaries are members of our senior management team who have signed employment agreements with us or our PRC subsidiary,
or the VIE or its 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 our PRC entities, we generally store these items in secured locations accessible only by the authorized personnel
in the legal or finance department of our PRC subsidiary, the VIE and its subsidiaries. Although we 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 our corporate chops or seals, we 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 our PRC subsidiary, the VIE and its subsidiaries, we or our PRC subsidiary, the VIE or its 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.

 

 

We may be liable for improper use
or appropriation of personal information provided by our customers.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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 we will comply with the PIPL in all respects. We 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 our business operations and this offering. However, there remains uncertainty as to how the Draft
Measures 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 Draft Measures. PRC regulators, including the Department of Public
Security, the MIIT, the SAMR and the Cyberspace Administration of China, have been increasingly focused on regulation in the areas of
data security and data protection and are enhancing the protection of privacy and data security by rule-making and enforcement actions
at central and local levels. We expect that these areas will receive greater and continued attention and scrutiny from regulators and
the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with
data security and protection. If any such new laws, regulations, rules, or implementation and interpretation comes into effect, we will
take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us.

 

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

 

 

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 the Company 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 the Company’s or its subsidiaries employees
or those entities of which any of its principal shareholders is an employee of the Company or its subsidiaries. Termination of such employment
with the Company 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 our outstanding Ordinary Shares 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 our Company 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 our Company 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 our company and
must act in good faith in a manner he reasonably believes to be in the best interests of our company. 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 our Company 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 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.

 

 

We are 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.

 

We are 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.

 

We are 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.

 

We are 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 the Company, it
is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of our
Company 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

 

 

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

 

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 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.

 

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 is located in San Mateo, California with additional full-time staff located in China and Hong Kong and is subject
to inspection by the PCAOB. The recent developments would add uncertainties to our offering and we cannot assure you whether the
national securities exchange we apply to for listing or regulatory authorities would apply additional and more stringent criteria to
us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel
and training, or sufficiency of resources, geographic reach, or experience as it relates to our audit. It remains unclear what the SEC’s
implementation process related to the March 2021 interim final amendments will entail or what further actions the SEC, the PCAOB or Nasdaq
will take to address these issues and what impact those actions will have on U.S. companies that have significant operations in the PRC
and have securities listed on a U.S. stock exchange. In addition, the March 2021 interim final amendments and 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 ordinary shares could be adversely affected, and we could be delisted if we and our auditor are
unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense
and management time. If the PCAOB determines that it cannot inspect or fully investigate our auditor in the future, Nasdaq may determine
not to list our securities.

 

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
we are 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.

 

We
are 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 our Company, 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 our Company 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 we are incorporated under Cayman Islands law, we currently conduct substantially all of our operations outside the United States
and some of our directors and executive officers reside outside the United States.

 

We
are incorporated in the Cayman Islands and 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 — We are a holding company, and the investors will have ownership in a holding company that does not
directly own all of its operation in China. We rely on the VIE, and its subsidiaries for our operation in PRC. We also 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
                 
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.

 

 

Sancaijia was incorporated on November 6,
2018 under the laws of PRC, which is our variable interest entity (hereinafter referred to as “VIE”). In February 2020, Sancai
WFOE entered into a series of contractual agreements with Sancaijia and its shareholders. Pursuant to these agreements, the Company believes
that these contractual arrangements enable the Company to (1) have power to direct the activities that most significantly affects the
economic performance of the Sancaijia and its subsidiaries, and (2) receive the economic benefits of Sancaijia and its subsidiaries that
could be significant to Sancaijia and its subsidiaries. Accordingly, the Company is considered the primary beneficiary of Sancaijia and
is able to consolidate Sancaijia and its subsidiaries. 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.

 

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 Co., Ltd. (“Sancaijia Technology”) was incorporated on July 11, 2019 under the laws of PRC, which is 100% owned
by Sancaijia, and it currently does not have any operations. We plan to promote our SaaS platform through Sancaijia Technology in the
future,

 

Xi’an
Dacai Management Consulting Co., Ltd. (“Xi’an Dacai”) was incorporated on October 9, 2019 under the laws of PRC, which
is 100% owned by Sancaijia, and it currently does not have any operations. We plan to provide consulting services to small businesses
through Xi’an Dacai in the future,

 

Shanghai
Wenxu Information Technology Co., Ltd. (“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
Settlement Technology (Xi’an) Co., Ltd. (“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 Industry Service Co.,
Ltd. (“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 our SaaS platform through Xi’an Miaobijia in the agriculture industry
in the future.

 

 

Contractual
Arrangements with the VIE 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. We are 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 we entered into with Sancaijia and its shareholders. These contractual arrangements with the
VIE and its respective shareholders allow us to: (i) exercise effective control over the VIE; (ii) receive substantially all of the economic
benefits of the VIE; and (iii) have an exclusive option to purchase all or part of the equity interest in and/or assets of the VIE when
and to the extent permitted by PRC laws. As a result, we are regarded as the primary beneficiary of Sancaijia and its subsidiaries. We
treat them as our 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.

 

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.

 

Agreements
that provide us with effective control over the VIE

 

Business
Operation Agreement.
 Pursuant to the Business Operation Agreement entered into among Sancai WFOE, the VIE and the shareholders
of the VIE (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, the VIE 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, the VIE 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 the VIE’s
employees, its day-to-day business management and the financial management system of the VIE. This Business Operation Agreement shall
become effective upon execution by Sancai WFOE, the VIE 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, none of the VIE or 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 the VIE and the Shareholders. In addition, Sancai WFOE, the VIE 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, the VIE 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 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. 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 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. Upon the expiration of this agreement, unless
Sancai WFOE gives a non-renewal written notice to the VIE 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, the VIE and the Shareholders (collectively
as the “Parties”), 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, 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 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.

 

Agreements that allow us to receive economic benefits
from the VIE

 

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 with the VIE
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.

 

 

Agreements
that provide us with the option to purchase the equity interest in the VIE

 

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.

 

In
the opinion of B&D Law Firm, our PRC legal counsel, the contractual arrangements among Sancai WFOE, the VIE 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, 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. Accordingly, 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 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.

 

See
“Risk Factors—Risks Related to Our Corporate Structure—If the PRC government deems that the contractual arrangements
in relation to Sancaijia, our consolidated variable interest entity, do not comply with PRC regulatory restrictions on foreign investment
in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject
to severe penalties or be forced to relinquish our interests in those operations” and “Risk Factors — Risks Related
to Doing Business in China — 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 Co., Ltd., 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 Sanjiacai engages in, 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, controls and
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 believed that the VIE Agreements would enable
Sancai Holding to (1) exercise effective control over the VIE, (2) receive substantially all of the economic benefits of the VIE, and
(3) have an exclusive option to purchase all or part of the equity interests and assets in the VIE when and to the extent permitted by
the PRC law.

 

As a result of these contractual arrangements,
Sancai WFOE is considered the primary beneficiary of Sancaijia and we treat it as the VIE under U.S. GAAP. 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.

 

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
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 solutions. Sancai Real Estate 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
Co., Ltd. to Sancai Group Co., Ltd., a former related party of the Company, 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 the Company, was the legal representative and
a majority shareholder of Sancai Group Co., Ltd. As the Company 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 Co., Ltd. was $3.12 million. The Company 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”), the Company presented the operating results from the rental
property subleasing business and distribution of smart locks as a discontinued operation. Our 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

 

Our standard SaaS platform application service
provides digitalization solutions for small businesses. We built a mobile and computer management solution system that enables business
owners to manage and monitor their operations via mobile phones. We 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 our business develops and the application industries grows, we will develop more functions to meet the needs
of business owners. We typically charge a 3% to 5% fee on the transaction settlement amount, between the businesses we serve and their
customers, which are completed on our SaaS platform.

 

 

The transaction settlement amount completed
through our SaaS platform is an indicator that we use to monitor our operating results because our revenue from standard SaaS platform
application services is based on the transaction settlement amount completed through our SaaS platform. We amortize the SaaS Platform
service revenue throughout the contract period from the date of the transaction. Our revenue from standard SaaS Platform Application
service was $4.06 million and $3.65 million (restated) for the fiscal year ended September 30, 2021 and September 30, 2020, respectively.

 

SaaS Platform Customization and Development

 

We also provide customization and development
services according to the requirements of our customers. We charge a one-time customization fee and an annual maintenance fee. Certain
customers can request maintenance and warranty services to be performed for certain customization & development services the Company
provides. The annual maintenance 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 annual maintenance fee are based on the services we provide
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 annual maintenance fee is amortized over the contract period.

 

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

 

Our revenue from SaaS platform customization
and development services was $3.83 million and $nil for the fiscal year ended September 30, 2021 and September 30, 2020, respectively.

 

 

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 we 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:

 

Our
investments in technology advancement.
Our results of operations are affected by
our investment in technology. We have 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 our SaaS platform further and create new services which further allows us to expand our
market segments. We 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.

 

Our
ability to compete effectively and execute our strategies successfully.
The SaaS
industry in China is very competitive. Our customers 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 our ability to maintain our competitive advantages
and execute our strategies successfully.

 

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

  

Impact
of COVID-19

 

In December 2019, an outbreak of the coronavirus
(COVID-19) was reported in China and has since spread globally. Our business, results of operations and financial condition have been
adversely affected by the 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 recent outbreak of the pandemic in many areas of China has caused, and may continue to cause, 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 and shutdowns. These measures have created significant uncertainty and economic disruption, both short-term and
potentially long-term. Furthermore, the global spread of COVID-19 pandemic in a significant number of countries around the world has
resulted in, and may intensify, global economic distress.

 

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 we 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   $ 4,058,769     $ 3,651,817       11.14 %
SaaS Customization & Development service     3,830,022             N/A  
Total   $ 7,888,791     $ 3,651,817       116.02 %

 

Our total revenue increased by approximately
$4.31 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 we started to provide to our customers in October 2020. In fiscal year 2021, we 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 $0.41 million, or 11.14%, to $4.06 million for fiscal year 2021, from $3.65 million (restated) for last fiscal
year. The revenue from SassS Platform for fiscal year 2021 was mainly from contract liabilities recorded in fiscal year 2020 for unrealized
revenue.

 

 

We consider our major customers in each period
to be those that accounted for more than 10% of our revenue in such period. We had one such major customer, who accounted for 39.73%
and 79.66% (restated) our 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 60.55% in fiscal year 2021, a decrease of 36.66% compared to 97.22% (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 $4.78 million, an increase of $1.23 million,
or 34.65%, compared to $3.55 million (restated) for fiscal year 2020.

 

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     1,091,011       3,147,847  
3,508,7604,209,141Total operating expenses   $ 3,508,760     $ 4,209,141  

 

 

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 our 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
our 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 office overhead and other
expenses relating to our R&D activities. Our research and development expenses were $1.09 million in fiscal year 2021, a decrease
of $2.06 million, or 65.40%, compared to $3.15 million (restated) to fiscal year 2020. The decrease in research and development expenses
in fiscal year 2021 was mainly because we 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 Co., Ltd., which operated
subleasing business and the distribution of smart locks in December 2020, in accordance with ASC205, the Company presented the operating
results from Sancai Real Estate Co., Ltd. as a discontinued operation.

 

We suffered operating loss from discontinued
operation in previous years. We don’t think that absence of cash flows associated with our 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 Company 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.

 

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 non-interest bearing loans to related parties, as compared to a cash inflow of $8.52 million
(restated) from non-interest bearing loans to related parties 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 the Company, its subsidiaries, the VIEs and VIEs’ subsidiaries for which the Company is the ultimate
primary beneficiary. All transactions and balances among the Company, its subsidiaries, the VIEs and VIEs’ 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. The Company 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 Holding 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.

 

The Company believes that the contractual
arrangements with the VIEs 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 VIEs 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 VIEs
accounted for almost 100% of the consolidated total assets respectively.

 

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

 

Relevant PRC laws and regulations restrict
the VIEs from transferring a portion of their net assets, equivalent to the balance of their statutory reserve and their share capital,
to the Company 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

 

The Company adopted ASC 606 “Revenue
Recognition,” and the Company applies 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.

 

The Company generates the following revenue
from its continuing operations:

 

Revenues generated from SaaS Platform

 

The Company generates revenue through
its software-as-a-service (“SaaS”) platform (“the platform”). The Company 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 the Company and the Customers, which sets out the Company’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 the Company within a few days based on the agreed percentage. The Company’s obligation regarding
such transactions are fulfilled when the leasing contracts and rental contracts are executed and processed using the platform, and when
the rental payments are distributed to the agents.

 

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

 

Customization
and Service Fee Income

 

The Company provides specific customized functions
on the Company’s SaaS platform for individual customers based on requirements set forth in a scope of work; the Company recognizes
revenue upon completion of this customization work. Such contracts are typically short term in nature; accordingly, the Company does
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 Company’s 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 the Company
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. The Company has completed its assessment and concluded that this
update has no significant impact to the Company’s consolidated financial statements.

 

The Company has 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 have undertaken and will continue to undertake steps to strengthen our internal
control over financial reporting. These measures include the following:

 

(i) We
have hired new accounting staff 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
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
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
have taken steps to build and enhance an internal control function. Particularly, each department
within the company 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 Co., Ltd., 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 Sancaijia engages in, Sancai Holding is not eligibility to
hold direct or indirect equity interest in Sancaijia. Therefore, Sancai Holding, through Sancai WFOE, controls and 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 believed that the VIE Agreements would enable
Sancai Holding to (1) exercise effective control over the VIE, (2) receive substantially all of the economic benefits of the VIE, and
(3) have an exclusive option to purchase all or part of the equity interests and assets in the VIE when and to the extent permitted by
the PRC law.

 

As a result of these contractual arrangements,
Sancai WFOE is considered the primary beneficiary of Sancaijia and we treat it as the VIE under U.S. GAAP. 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.

 

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
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 solutions. Sancai Real Estate 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
Co., Ltd. to Sancai Group Co., Ltd., a former related party of the Company, 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 the Company, was the legal representative and
a majority shareholder of Sancai Group Co., Ltd. As the Company 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 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, g, 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 partners, distributors and other sales agents. Products manufactured in one place can be sold
and delivered to another place thousands of miles away. Having a digitalized operation facilitates these sales that were not available
or expensive to manage to small businesses. Expanding the market will no longer be a bottleneck to the survival of the company. Such
expansion will eventually urge the company to achieve large-scale production and operation, thereby changing its path from being a small
business to growing into a large corporation.

 

 

Digitalization
is the use of digital technology to promote changes in the business model, operating model, organizational structure, and corporate culture
of a business. Digitalization will bring new sources of income, products and services and business models, and maximize the operation
scale and profits. Therefore, digitalization is a deep integration of technology and business model, and the final result is a change
in business model: through the digital reconstruction, a business adapts to an online environment, and optimizes the back-end office
work and interaction with its customers. Through digitalization, a business can achieve automation and standardization without manual
intervention, which minimizes costs and maximizes operating efficiency.

 

Our
Mission

 

Inspired
by the prospects of China’s Internet network digital operation industry and based on our in-depth analysis of the survival and
development status of traditional small businesses, we captured business opportunities, followed the trend, and established our mission:
to help traditional small businesses achieve digitalization.

 

Our
Business Strategies

 

In
2017, Mr. Ning Wen, the founder of Sancaijia, our consolidated variable interest entity, who is a management researcher with 20 years
of business operation experience in different industries, together with a team of experts in information technology, marketing, human
resources, financial management and other fields, launched the market and technical research for our SaaS platform.

 

We
were looking for a target industry as a foothold to start the design of SaaS platform. In 2018, we decided to first utilize our SaaS
platform in the residential housing leasing industry (hereinafter referred to as real estate leasing). Compared with other industries
that have achieved different degrees of digitalization, real estate leasing is a new field that has not been digitalized. The demands
for operational data accuracy, depth, and breadth were greatly limited by the operation of traditional offline stores. As China’s
urbanization accelerates, the transaction volume of real estate leasing has skyrocketed. Market participants urgently need advanced management
systems that conform to market needs. to break through the difficulties of standardization and large-scale operations caused by traditional
offline transaction methods.

 

In
order to conduct a test of the target industry and to understand the operating rules and needs of this industry in order to independently
develop SaaS platform, we started operating the real estate leasing business in December 2017, and independently designed and developed
SaaS products in September 2018. In July 2019, we released our SaaS platform for the first time, and immediately put it into real estate
leasing business applications.

 

Our
SaaS platform in the real estate leasing business proves that our solution addresses and solves the management and operation challenges
in the large-scale leasing industry. On the one hand, it proves that our strategy was correct. On the other hand, it gave us assurance
and confidence in the business value of our SaaS platform.

 

In
2020, the COVID-19 pandemic greatly affected the housing leasing industry in China. Additionally, the SaaS application in real estate
leasing industry grew competitive and saturated quickly. As a result, we strategically discontinued the real estate leasing business
and officially embarked on the journey of exploring new target industries.

 

We
are convinced that, under the digital era, a business can enjoy the economic benefits brought by digitalization as long as we integrate
the core elements, the management of human resources, financial resources, and inventory and equipment into our SaaS platform. In the
long run, we aim to maintain and strengthen our position in China. We intend to focus on the following key strategies in pursuit of our
goal:

 

attract
and retain more clients and improve their performance;

 

continue
to expand our reach by expanding the industries we serve;

 

diversify
and expand our value-added product and service offerings;

 

 

pursue
selective acquisition and partnership;

 

continue
to innovate, upgrade our technology and enhance our database, as well as attract more property
listings; and

 

attract,
retain and motivate talent.

 

Our
Competitive Strengths

  

Extensive and
integrated digitalization solutions
. Our SaaS platform provides integrated tools and
value-added services to help our customers reduce the cost of doing business and expand their
scope of operations.

 

Increased
customer satisfaction
. We listen to our users’ feedbacks and continue to develop
and improve our SaaS platform to help customers grow their online business with integrated
tools and services to execute transactions and source customers.

 

Unique
Competitive Position with Differentiated Business Model
. Our SaaS solutions help traditional
enterprises achieve digitalization. We build our solutions based on people, finance and products,
the three pillars of operation and help enterprises improve efficiency, reduce costs, broaden
the scope of services, and realize the digitalization of traditional enterprises with mobility,
streamlining, standardization and digitalization.

 

Multiple
Avenues to Drive Strong Long-Term Growth.
We have our own sales team and work with business
partners facilitate business development.

 

Highly
Experienced and Incentivized Management Team.
Our management team are consisted of talents
from different background, all passionate about and experienced with the industry. We are
able to achieve our goals quickly and efficiently with the leadership of the resourceful
management team.

 

Our
Challenges

 

Our
ability to realize our mission and execute our strategies is subject to risks and uncertainties, including the following:

 

our
ability to continue to attract new and retain existing customers and other market participants
using our website and mobile applications;

 

our
ability to successful develop, deploy and market new products and services;

 

our
ability to protect our intellectual property and proprietary rights;

 

our
ability to compete successfully with current and future competitors;

 

our
directors, officers and principal shareholders have substantial influence over our Company
and their interests may not be aligned with the interests of our other shareholders; and

 

fluctuations
in the PRC overall economic growth and our ability to adapt our business to fluctuations
in the general economy.

 

Please
see “Risk Factors” and other information included in this prospectus for a discussion of these and other risks and uncertainties
that we face.

 

Our
Products and Services

 

Our
SaaS platform is to help businesses realize digital operation, which is a deep integration of Internet computing technology and business
model. This integration will inevitably bring about changes in corporate business models, operating models, organizational structures,
corporate culture, etc. Through the digital restructure of business processes, it will adapt to an online operating environment, optimizes
the back-end office work and interaction with its customers Through digitalization, a business can achieve automation and standardization
without manual intervention, which encourages innovation of new products, updates of business models, minimizes costs, thus maximizes
operating efficiency.

 

Our
SaaS platform is designed with good compatibility and can easily adapt to the current Internet operating environments and methods. It
can be run on a computer, as a WeChat application, and an independent mobile application on a smart phone. In this way, business owners
and managers can view operation data in a timely manner no matter where they are, make correct decisions in a timely manner, and effectively
manage the business, thus reducing operating losses and increasing economic benefits.

 

 

The Company currently provides the followings
two services to its customers:

 

SaaS Solutions – Standard SaaS Platform
Application Services

 

Our standard SaaS platform application service
provides digitalization solutions for small businesses. We built a mobile management solution system that enables business owners to
manage and monitor their operations via mobile phones. We 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 our business develops and the application industries grows, we will develop more functions to meet the needs
of business owners. We typically charge a 3% to 5% fee on the transaction settlement amount, between the businesses we serve and their
customers, which are completed on our SaaS platform.

 

  1. Customer
Acquisition

 

We
set up WeChat subscription accounts, WeChat video accounts, Douyin, live broadcast and other Internet customer acquisition channels for
the companies, so that their products and services can be easily accessed by the public through these channels. Through these social
media accounts, the companies can conduct marketing and promotion and complete transactions online. Viewers can easily access the company’s
webpage through these social media. Online marketing expand customer reach and the customers can get quick access information about the
company. Compared traditional sales and marketing method through retail stores, television, billboard, etc., online marketing is much
more effective and cost-efficient.

 

 

We
set up small programs, service numbers, and official websites for companies and their customers to facilitate transactions in our SaaS
platform. It enables customers of the companies to select products, confirm price, delivery address, delivery methods, and place order
online. The company can track transactions, customer services in our SaaS platform. Customer can evaluation the products and purchase
experiences, which helps to implement employee performance management for the companies.

 

 

We
set up a settlement function in our SaaS platform. This function can process not only settlement of payments between the companies and
their customers, but also the settlement of multi-party split accounting between the companies and its vendors and customers. Our settlement
function supports WeChat payment, Alipay and other payment methods. Our SaaS platform provides convenience for companies to conduct online
settlement with split accounting as its highlight and core feature. Multi-party settlement is relatively easy to implement offline, but
it becomes a challenge when execute online. We made it possible in our settlement function, and therefore digitalized the full transaction
and settlement process.

 

  4. Customer
Management

 

Our
SaaS platform help a company collect, organize, analyze and share customer information internally online, which improves service quality,
maintains the relationship with old customers, and helps decision makers understand the overall situation of customers and any problems
in the process of customer maintenance, so as to carry out business guidance and strategic adjustments in time to avoid the loss of customers.
Through the customer management function, a company can collect customer feedback. On the one hand, the feedback can be used as a basis
for improving products and management. On the other hand, customers feel that they are valued and are more likely to repurchase.

 

  5. Employee
Management

 

In
SaaS platform, we built an integrated online solution system for human resource management utilizing DingTalk and WeChat and established
a connection with the business data on the SaaS platform. It assists companies in onboarding, resignation, performance appraisal, salary
accounting, social security information maintenance, etc. This function can also be extended to the management of temporary laborers
other than formal employees and to connect with talent recruitment resources in the blockchain talent pool.

 

 

 

By
taking advantage of the standardized characteristics of the SaaS platform, we help companies solve the problems of high communication
costs caused by scattered offline suppliers, inconvenient management, excessive product varieties, complicated order information, and
the untimely and unsecured offline transmission of incomplete data. This facilitates standardized operation, improves operation efficiency,
reduces supply chain management costs, and makes large-scale operation possible.

 

 

The
mobility feature of the SaaS platform enables business managers to receive operating business data and financial data anytime and anywhere
through a mobile phone, providing decision-makers with decision-making basis. Additionally, companies can analyze the date of their customers
to better understand their customers, timely adjust business strategies, and find pain points to timely resolve, therefore improving
operating efficiency. 

 

The standard SaaS platform application services
charge system service fee, which is at 3-5% of the transaction amount completed through our SaaS platform.

 

SaaS
Solutions – SaaS Platform Customization and Development

 

We also provide customization and development
services according to the requirements of our customers. We charge a one-time customization fee and an annual maintenance fee. Certain
customers can request maintenance and warranty services to be performed for certain customization & development services the Company
provides. The annual maintenance 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 annual maintenance fee are based on the services we provide
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 annual maintenance fee is amortized over the contract period.

 

Our
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 our system customization and
development services. We are proud to achieve their goal and fulfill our mission step by step. To ensure that the SaaS solutions perform
effectively, we also provide warranty and support in addition to the customization services.

 

Our SaaS Solutions have a limited operating
history. We had $7.89 million and $3.65 million in revenue for the fiscal year ended September 30, 2021 and 2020, respectively,
all of which was from our SaaS solutions. 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 – We have a limited operating history in a competitive and rapidly evolving industry; it may be difficult to evaluate
our prospects, and we may not be able to effectively manage our growth.”

 

Discontinued
Business – Rental Property Subleasing and Smart Locks Distribution

 

On December 10, 2020, Sancaijia Co., Ltd.,
the VIE, entered into an equity transfer agreement, which was completed on December 28, 2020, to sell 100% of the equity interest it
held in Sancai Real Estate Co., Ltd., which operated subleasing business, to Sancai Group Co., Ltd., a former related party of the Company,
for a total of approximately $3.42 million (RMB22.33 million). Mr. Ning Wen previously was the legal representative and a majority shareholder
of Sancai Group Co., Ltd. On December 8, 2020, Mr. Ning ceased to be the legal representative and majority shareholder. Since December
8, 2020, Sancai Group Co., Ltd. has been controlled by a non-related party. The price was determined based on the valuation provided
by Shaanxi Long Hao Real Estate Asset Appraisal Co., Limited, a national registered and licensed appraisal firm, Prior to December 2020,
through Sancai Real Estate Co., Ltd., we 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, we leased an aggregate
11,434 properties from property owners. On July 1, 2019, we 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,
through Sancai Real Estate Co., Ltd., we engaged in the distribution of smart locks for residential properties and offices as an added
value for our corporate customers that subscribe to our SaaS solutions. The large amount of smart locks we purchased allowed us to negotiate
a lower price for our corporate customers. The smart locks were connected to our SaaS platform so that our corporate customers can control
the locks.

 

As a result of the disposal of Sancai Real
Estate Co., Ltd., we discontinued the smart lock business and the rental property subleasing business. In accordance with ASC 205, the
Company presented the operating results from Sancai Real Estate Co., Ltd. as a discontinued operation, as the Company believed that no
cash flow would be generated by the disposed component and that the Company would have no significant continuing involvement in the operation
of the discontinued component.

 

As
we discontinued the rental property subleasing business and smart locks distribution in December 2020, historical results are not necessarily
indicative of the results that may be expected for any future period.

 

Sales
and Marketing

 

We
adopted a business-to-business (B2B) marketing strategy. We currently rely on our customer network for referral and have not relied heavily
on advertising. Our sales personnel are responsible for engaging with small businesses and marketing our products and services. We plan
to build a sales and marketing team that is consisted of experienced personnel in information technology and finance industries.

 

Employees

 

We
had 80 full-time employees as of the date of this prospectus. The following table sets forth a breakdown of our employees by function
as of the date of this prospectus.

 

    Number of
employees
    % of total  
Products
design and development
    32       40.00 %
Sales
and marketing
    15       18.75 %
Customer
service and operation
    14       17.50 %
Management
and administration
    19       23.75 %
                 
Total     80       100.00 %

  

 

Our
success depends on our ability to attract, retain and motivate qualified personnel. We offer competitive salaries and encourage a corporate
culture of passion and innovation.

 

We
enter into standard contracts and agreements regarding confidentiality, intellectual property, employment, and commercial ethics policies
with most of our executive officers, managers and core employees.

 

Under
PRC law, we participate in various employee social security plans that are organized by municipal and provincial governments for our PRC-based full-time
employees, including pension, unemployment insurance, work-related injury insurance, medical insurance and housing insurance. We are
required under PRC law to make contributions from time to time to employee benefit plans for our PRC-based full-time employees
at specified percentages of the salaries, bonuses and certain allowances of such employees, up to a maximum amount specified by the local
governments in China.

 

None
of our employees are represented by labor unions. We believe that we maintain a good working relationship with our employees and we have
not experienced any significant labor disputes.

 

Intellectual
Property

 

We regard our intellectual property
rights as critical to our operations. We rely on a combination of copyrights, patents and trademarks laws to protect our
intellectual property. As of the date of this prospectus, we have 10 registered trademarks, 2 registered patents and 20 registered
software copyrights in China. We are licensed to use 33 trademarks in China. We are in the process of registering 31 trademarks and
8 copyrights.

 

All of our trademarks, copyrights, patents
and domain names are owned by the VIE and its subsidiaries, for the purpose of maintaining and renewing their operating licenses as required
by relevant PRC government authorities.

 

We
implement comprehensive measures to protect our intellectual property in addition to making trademark and patent registration applications.
Our key measures to protect our intellectual property include: (i) trademark searches prior to the launch of our new products; (ii) timely
registration and filing with relevant authorities and application of intellectual property rights for our significant technologies; and
(iii) overall source code protection of proprietary information.

 

Properties

 

Our headquarter is located in Xi’an,
Shaanxi Province, China. Our operations, including for products design and development, operations, sales and marketing and general and
administration, are located at our headquarter. We have marketing, communication and business development personnel at our office in
Xi’an, China. These leases are renewal on yearly basis. We believe that our facilities are adequate to meet our needs for the immediate
future. The following table sets forth the leases term and monthly rent for our main offices.

 

Lease
Term
  Address   Space
(square
meters)
    Monthly
Rent
October
21, 2020 to October 20, 2022 (renewable annually)
  No.
6 Fengcheng Second Road, 4th Floor, Xi’an Economic and Technological Development Zone, Xi’an, Shaanxi, China
    1,490     RMB 89,400
($12,508)

 

 

Legal
Proceedings

 

From time to time, the VIE, and subsidiaries
of the VIE have been and will be involved in various legal proceedings and claims in the ordinary course of our business, including employment
disputes, contractual disputes and other commercial disputes. As we entered into contractual relationship with various real estate management
companies and leasing agencies, we have been and may continue to be involved in legal proceedings and assume joint liability when we
provide services to our customers on our 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, we have been and may from time to time be involved in labor
and employment related disputes with and subject to such claims by employees. As of the date of this prospectus, there are some ordinary
routine legal proceedings incidental to our business, to which our subsidiaries, our variable interest entity or any of its subsidiaries
is a party or of which any of our 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 the Company and its subsidiary
on a consolidated basis. We will 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. Regardless of the
outcome, however, litigations or other legal or administrative proceedings may result in substantial costs and diversion of management
resources and attention. See “Risk Factors — Risks Related to Our Business and Industry —We have been and may continue
to be subject to complaints, claims, controversies, regulatory actions, arbitrations and legal proceedings from time to time. If the
outcome of these complaints, claims, controversies, regulatory actions, arbitrations and legal proceedings is adverse to us, it could
have a material adverse effect on our business, results of operations, financial condition, liquidity, cash flows and reputation.”
and “Risk Factors — Risks Related to Our Business and Industry —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.”

 

Regulations

 

We
operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC and foreign laws, rules and regulations
across numerous aspects of our business. This section sets forth a summary of the principal PRC laws, judicial interpretations, rules
and regulations relevant to our business and operations in the PRC.

 

Regulations
Relating to Foreign Investment

 

The
Guidance Catalogue of Industries for Foreign Investment

 

Investment
activities in the PRC by foreign investors are subject to the Catalogue for the Guidance of Foreign Investment Industry, or the Catalogue,
which was promulgated and is amended from time to time by the MOFCOM and the NDRC. The Foreign Investment Catalogue which was promulgated
jointly by MOFCOM and the NDRC, on June 28, 2017 and became effective on July 28, 2017, classifies industries into three categories with
regard to foreign investment: (1) “encouraged,” (2) “restricted,” and (3) “prohibited.” The latter
two categories are included in a negative list, which was first introduced into the Foreign Investment Catalog in 2017 and specified
the restrictive measures for the entry of foreign investment.

 

On
June 28, 2018, MOFCOM and NDRC jointly promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access,
or the Negative List (Edition 2018), which replaced the negative list attached to the Foreign Investment Catalogue in 2017. On June 30,
2019, MOFCOM and NDRC jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative
List (Edition 2019), which replaced the Negative List (Edition 2018), and the Catalogue of Industries for Encouraging Foreign Investment
(Edition 2019), or the Encouraging Catalogue (Edition 2019), which replaced the encouraged list attached to the Foreign Investment Catalogue
in 2017. The latest version of the Negative List (Edition 2020) was issued on June 23, 2020, which took effect on July 23, 2020 and superseded
the previous lists.

 

 

The
Encouraging Catalogue (Edition 2020) effective on January 27, 2021, which replaced the Encouraging Catalogue (Edition 2019) effective
on July 30, 2019, is divided into two parts, namely the Nationwide Catalogue of Encouraged Industries for Foreign Investment and the
Catalogue of Priority Industries for Foreign Investment in Central and Western China. The Nationwide Catalogue of Encouraged Industries
for Foreign Investment lists a total of 480 industry sectors that encourage foreign investments; the Catalogue of Priority Industries
for Foreign Investment in Central and Western China lists industry sectors that each province and city wish to introduce.

 

Pursuant
to the Negative List (Edition 2020) effective on July 23, 2020, any industry that is not listed in any of the restricted or prohibited
categories is classified as a permitted industry for foreign investment. Establishment of wholly foreign-owned enterprises is generally
allowed for industries outside of the Negative List. For the restricted industries within the Negative List, some are limited to equity
or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures.
Industries not listed in the Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations.
In addition, restricted category projects are subject to higher-level government approvals and certain special requirements. Foreign
investors are not allowed to invest in industries in the prohibited category. The provision of value-added telecommunications services
falls in the restricted category under the Special Administrative Measures and the percentage of foreign ownership cannot exceed 50%
(except for e-commerce).

 

The
Administrative Provisions on Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, are the key
regulations for foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that the foreign investor
of a telecommunications enterprise is prohibited from holding more than 50% of the equity interest in a foreign-invested enterprise,
or the FIE, that provides value-added telecommunications services. In addition, the main foreign investor who invests in a value-added
telecommunications enterprise in China must demonstrate a positive track record and experience in providing such services. Moreover,
foreign investors that meet these qualification requirements that intend to invest in or establish a value-added telecommunications enterprise
operating the value-added telecommunications business must obtain approvals from the Ministry of Industry and Information Technology,
or the MIIT, and MOFCOM, or their authorized local counterparts, which retain considerable discretion in granting approvals.

 

On
July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunications
Services, or the MIIT Circular 2006, which requires that (i) foreign investors can only operate a telecommunications business in China
through establishing a telecommunications enterprise with a valid telecommunications business operation license; (ii) domestic license
holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any
form, or providing any resource, sites or facilities to foreign investors to facilitate the unlicensed operation of telecommunications
business in China; (iii) value-added telecommunications services providers or their shareholders must directly own the domain names and
registered trademarks they use in their daily operations; (iv) each value-added telecommunications services provider must have the necessary
facilities for its approved business operations and maintain such facilities in the geographic regions covered by its license; and (v)
all value-added telecommunications services providers should improve network and information security, enact relevant information safety
administration regulations and set up emergency plans to ensure network and information safety. The provincial communications administration
bureaus, as local authorities in charge of regulating telecommunications services, may revoke the value-added telecommunications business
operation licenses of those who fail to comply with the above requirements or fail to rectify such noncompliance within specified time
limits.

 

 

To comply with the above foreign investment
restrictions, we operate our value-added telecommunications services in China through Sancaijia Co., Ltd., the VIE. However, there remain
substantial uncertainties with respect to the interpretation and application of existing or future PRC laws and regulations on foreign
investment. See “Risk Factors—Risks Related to Our Corporate Structure—If the PRC government deems that the contractual
arrangements in relation to Sancaijia, our consolidated variable interest entity, do not comply with PRC regulatory restrictions on foreign
investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we
could be subject to severe penalties or be forced to relinquish our interests in those operations.”

 

In
October 2016, the MOFCOM issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested
Enterprises or FIE Record-filing Interim Measures, which was revised in June 2018. Pursuant to FIE Record-filing Interim Measures, the
establishment and change of FIE are subject to record-filing procedures, instead of prior approval requirements, provided that the establishment
or change does not involve special entry administration measures. If the establishment or change of FIE matters involves the special
entry administration measures, the approval of the MOFCOM or its local counterparts is still required. Pursuant to the Announcement [2016]
No. 22 of the NDRC and the MOFCOM dated October 8, 2016, the special entry administration measures for foreign investment apply to restricted
and prohibited categories specified in the Catalogue, and the encouraged categories are subject to certain requirements relating to equity
ownership and senior management under the special entry administration measures.

 

The
Foreign Investment Law

 

On
March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced
three existing laws on foreign investments in China, namely, the PRC Sino-foreign Equity Joint Venture Law, the PRC Sino-foreign Cooperative
Joint Venture Law and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations.
On December 26, 2019, the Regulation on the Implementation of the Foreign Investment Law of the People’s Republic of China, was
issued by the State Council and came into force on January 1, 2020. The form of organization, organizational structures and activities
of foreign-invested enterprises shall be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested
enterprises established before the implementation of the Foreign Investment Law may retain the original business organization and so
on within five years after the implementation of this law. 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 invested enterprises in China. The Foreign Investment Law establishes the basic framework
for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair
competition.

 

According
to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one
or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign
investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or
collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares,
equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually
or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws,
administrative regulations, or the State Council.

 

 

According
to the Foreign Investment Law, the State Council will publish or approve to publish the “negative list” for special administrative
measures concerning foreign investment. The Foreign Investment Law grants national treatment to foreign-invested entities, or FIEs, except
for those FIEs that operate in industries deemed to be either “restricted” or “prohibited” in the “negative
list.” The Foreign Investment Law provides that FIEs operating in foreign restricted or prohibited industries will require market
entry clearance and other approvals from relevant PRC governmental authorities. If a foreign investor is found to invest in any prohibited
industry in the “negative list,” such foreign investor may be required to, among other aspects, cease its investment activities,
dispose of its equity interests or assets within a prescribed time limit and have its income confiscated. If the investment activity
of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the “negative list,”
the relevant competent department shall order the foreign investor to make corrections and take necessary measures to meet the requirements
of the special administrative measure for restrictive access. On June 30, 2019, MOFCOM and NDRC jointly issued the Negative List (Edition
2019). The latest version of the Negative List (Edition 2020) was issued on June 23, 2020, which took effect on July 23, 2020 and superseded
the previous lists. See “Regulations — Regulations relating to Foreign Investment-The Guidance Catalogue of Industries for
Foreign Investment.”

 

Besides,
the PRC government will establish a foreign investment information reporting system, according to which foreign investors or foreign-invested
enterprises shall submit investment information to the competent department for commerce concerned through the enterprise registration
system and the enterprise credit information publicity system, and a security review system under which the security review shall be
conducted for foreign investment affecting or likely affecting the state security.

 

Furthermore,
the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment
before the implementation of the Foreign Investment Law may maintain their structure and corporate governance within five years after
the implementing of the Foreign Investment Law.

 

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

 

Company
Law

 

Pursuant
to the PRC Company Law, promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”) on December
29, 1993, effective as of July 1, 1994, and as revised on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and
October 26, 2018, the establishment, operation and management of corporate entities in the PRC are governed by the PRC Company Law. The
PRC Company Law defines two types of companies: limited liability companies and companies limited by shares.

 

Our
PRC subsidiary is a limited liability company. Unless otherwise stipulated in the related laws on foreign investment, foreign invested
companies are also required to comply with the provisions of the PRC Company Law.

 

 

Regulations
Relating to Value-Added Telecommunication Services

 

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. Among all of the applicable laws and regulations, the Telecom Regulations,
promulgated is the primary governing law, and sets out the general framework for the provision of telecommunications services by domestic
PRC companies. The Telecom Regulations divided the telecommunications services into two categories, namely “infrastructure telecommunications
services” and “value-added telecommunications services.” Pursuant to the Telecom Regulations, operators of value-added
telecommunications services, or VATS, must first obtain a Value-added Telecommunications Business Operating License, or VATS License,
from the MIIT, or its provincial level counterparts. 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
Classified Catalog of Telecommunications Services (2015 Version), or the 2015 MIIT Catalog, defines information services as “the
information services provided for users through public communications networks or internet by means of information gathering, development,
processing and the construction of the information platform.” Moreover, information services continue to be classified as a category
of VATS and are clarified to include information release and delivery services, information search and query services, information community
platform services, information real-time interactive services, and information protection and processing services under the 2015 MIIT
Catalog.

 

The
Administrative Measures on Internet Information Services, or ICP Measures, which was promulgated by the State Council in September 2000
and most recently amended on January 8, 2011, set forth more specific rules on the provision of internet information services. According
to ICP Measures, any company that engages in the provision of commercial internet information services shall obtain a sub-category VATS
License for Internet Information Services, or ICP License, from the relevant government authorities before providing any commercial internet
information services within the PRC. Pursuant to the above-mentioned regulations, “commercial internet information services”
generally refer to provision of specific information content, online advertising, web page construction and other online application
services through internet for profit making purpose.

 

The
Administrative Measures on Licensing of Telecommunications Business, or the Licenses Measures, issued on March 1, 2009 and most recently
amended on July 3, 2017, which set forth more specific provisions regarding the types of licenses required to operate VATS, the qualifications
and procedures for obtaining such licenses and the administration and supervision of such licenses. Under these regulations, a commercial
operator of VATS must first obtain a VATS License from MIIT or its provincial level counterparts, otherwise such operator might be subject
to sanctions including corrective orders and warnings from the competent administration authority, fines and confiscation of illegal
gains and, in the case of significant infringements, the related websites may be ordered to close.

 

Under
the Licenses Measures, where telecommunications operators change the name, legal representative or registered capital within the validity
period of their operating licenses, they shall file an application for update of the operating license to the original issuing authority
within 30 days after completing the administration for industry and commerce. Those fail to comply with the procedure may be ordered
to make rectifications, issued a warning or imposed a fine of RMB5,000 to RMB30,000 by the relevant telecommunications administrations.

 

 

The
Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, issued
by the MITT in July 2006, requires foreign investors to set up foreign-invested enterprises and obtain a license for value-added telecommunications
services. It 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.  The
MIIT or its provincial counterpart has the power to require corrective actions after discovering any non-compliance by operators,
and where operators fail to take those steps, the MIIT or its provincial counterpart can revoke the value-added telecommunications
services license.

 

We engage in business activities that are
VATS as defined in the Telecom Regulations and the Catalog. To comply with the relevant laws and regulations, the VIE has obtained the
ICP and EDI licenses on August 10, 2020, while the subsidiary of the VIE, Xi’an Miaobijia is in the process of applying for the
ICP license.

 

Regulations
on Internet Information Services

 

On
September 25, 2000, the State Council promulgated the Administrative Measures on Internet Information Services, or the Internet Measures,
which was later amended on January 8, 2011. Under the Internet Measures, a value-added telecommunications license shall be obtained before
conducting profitable internet information services in the PRC, and a filing requirement shall be satisfied before conducting non-profitable
internet information service. The provision of information services through mobile apps is subject to the PRC laws and regulations governing
Internet information services.

 

The
content of the internet information is highly regulated in China and pursuant to the Internet Measures, the PRC government may shut down
the websites of internet information providers and revoke their value-added telecommunications licenses (for profitable Internet information
services) if they produce, reproduce, disseminate or broadcast internet content that contains content that is prohibited by law or administrative
regulations. Internet information services operators are also required to monitor their websites. They may not post or disseminate
any content that falls within the prohibited categories, and must remove any such content from their websites, save the relevant records
and make a report to the relevant governmental authorities. The PRC government may require corrective actions to address non-compliance by
ICP license holders or revoke their ICP license for serious violations. In addition, as the internet information service providers, under
the PRC Tort Liability Law, which became effective in July 2010, they shall bear tortious liabilities in the event they infringe upon
other person’s rights and interests due to providing wrong or inaccurate content through the internet. Where an internet service
provider conducts tortious acts through internet services, the infringed person has the right to request the internet service provider
take necessary actions such as deleting contents, screening and de-linking. Failing to take necessary actions after being informed, the
internet service provider will be subject to its liabilities with regard to the additional damages incurred. Where an internet service
provider knows that an internet user is infringing upon other persons’ rights and interests through its internet service but fails
to take necessary actions, it is jointly and severally liable with the internet user.

 

Regulations
on Mobile Internet Applications

 

On
June 28, 2016, the State Internet Information Office promulgated the Administrative Provisions on Mobile Internet Application Information
Services, or the Mobile Application Administrative Provisions, which became effective on August 1, 2016. Pursuant to the Mobile Application
Administrative Provisions, a mobile internet app refers to an app software that runs on mobile smart devices providing information services
after being pre-installed, downloaded or embedded through other means. Mobile internet app providers refer to the owners or operators
of mobile internet apps.

 

 

Pursuant
to the Mobile Application Administrative Provisions, a mobile internet app provider shall obtain the relevant qualifications as required
by laws and regulations, strictly implement their information security management responsibilities, and carry out the duties including
to establish and complete user information security protection mechanism, to establish and complete information content inspection and
management mechanisms, to protect users’ right to know the right to choose in the process of usage, and to record users’
daily information and preserve it for sixty (60) days.

 

Furthermore,
a mobile internet app provider shall authenticate the identity information of the registered users including their mobile telephone number
and other identity information under the principle that mandatory real name registration at the back-office end, and voluntary real name
display at the front-office end and must not enable functions that can collect a user’s geographical location information, access
user’s contact list, activate the camera or recorder of the user’s mobile smart device or other functions irrelevant to its
services, nor is it allowed to conduct bundle installations of irrelevant app programs, unless it has clearly indicated to the user and
obtained the user’s consent on such functions and app programs. If an app provider violates the regulations, the internet app store
service provider must take measures to stop the violations, including giving a warning, suspension of release, withdrawal of the app
from the platform, keeping a record of the incident and reporting the incident to the relevant governmental authorities.

 

Under
the Interim Measures on the Administration of Pre-Installation and Distribution of Applications for Mobile Smart Terminals,
which took effect on July 1, 2017, the internet information service provider is also required to ensure that an app, as well as its ancillary
resource files, configuration files and user data, can be conveniently uninstalled by its users, unless it is a basic function software
(i.e., software that supports the normal functioning of hardware and operating system of a mobile smart device).

 

The
MIIT issued the Notice on the Further Special Rectification of Apps Infringing upon Users’ Personal Rights and Interests, or the
Further Rectification Notice, on July 22, 2020. The Further Rectification Notice requires that certain conducts of app service providers
should be inspected, including, among others, (i) collecting personal information without the user’s consent, collecting or using
personal information beyond the necessary scope of providing services, and forcing users to receive advertisements; (ii) requesting user’s
permission in a compulsory and frequent manner, or frequently launching third-parties apps; and (iii) deceiving and misleading users
into downloading apps or providing personal information. The Further Rectification Notice also set forth that the period for the regulatory
specific inspection on apps and that the MIIT will order the non-compliant entities to modify their business within five business days,
or otherwise to make public announcement to remove the apps from the app stores and impose other administrative penalties.

 

Regulations
on Security Review

 

In
August 2011, the MOFCOM promulgated the Rules of Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rule, which came into effect on September 1, 2011, to implement
the Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors promulgated on February 3, 2011. Under these regulations, a security review is required for foreign
investors’ mergers and acquisitions having “national defense and security” implications and mergers and acquisitions
by which foreign investors may acquire “de facto control” of domestic enterprises having “national security”
implications. In addition, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject
to a security review, the MOFCOM will look into the substance and actual impact of the transaction. The MOFCOM Security Review Rule further
prohibits foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect
investments, leases, loans, control through contractual arrangements or offshore transactions.

 

 

On
December 19, 2020, the NDRC and MOFCOM promulgated the Measures for the Security Review of Foreign Investments which became effective
on January 18, 2021. Under the Security Review of Foreign Investments, for foreign investments that affect or may affect national security,
security review shall be conducted by the office led by NDRC and MOFCOM. For the purpose of these Measures, the term “foreign investment”
refers to the investment activities carried out by foreign investors directly or indirectly within the territory of the PRC, including
the following circumstances:

 

where
foreign investors invest, solely or jointly with other investors, in new projects or establishing
enterprises in the PRC;
     
where
foreign investors acquire equity or assets of domestic enterprises by way of merger and acquisition;
or
     
where
foreign investors make investments in the PRC in any other form.

 

Regulations
Relating to Information Security and Privacy Protection

 

Internet
information in China is regulated and restricted from a national security standpoint. The PRC government has enacted laws and regulations
with respect to internet information security and protection of personal information from any abuse or unauthorized disclosure. The National
People’s Congress, or the NPC, promulgated the Decisions on Preserving Internet Security in December 2000 and amended in August
2009, which subject violators to potential criminal punishment in China for any effort to: (i) gain improper entry into a computer or
system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial
information; or (v) infringe intellectual property rights. In addition, the Ministry of Public Security has promulgated measures prohibiting
use of the internet in ways which result in a leak of state secrets or a spread of socially destabilizing content, among other things.
If an internet information service provider violates any of these measures, competent authorities may revoke its operating license and
shut down its websites.

 

In
recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized
disclosure. The ICP Measures, promulgated by the State Council requires internet information service providers to maintain an adequate
system that protects the security of user information. In December 2005, the Ministry of Public Security, or the MPS, promulgated the
Regulations on Technical Measures of Internet Security Protection, requiring internet service providers to utilize standard technical
measures for internet security protection. Under the Several Provisions on Regulating the Market Order of Internet Information Services,
issued by the MIIT in December 2011 and effective March 2012, an internet information service provider may not collect any personal information
on a user or provide any such information to third parties without the user’s consent. It must expressly inform the user of the
method, content and purpose of the collection and processing of such user’s personal information and may only collect information
to the extent necessary provide its services. An internet information service provider is also required to properly maintain users’
personal information, and in case of any leak or likely leak of such information, it must take immediate remedial measures and, in the
event of a serious leak, report to the telecommunication’s regulatory authority immediately.

 

Pursuant
to the Decision on Strengthening the Protection of Online Information, issued by the Standing Committee of the National People’s
Congress in December 2012, and the Order for the Protection of Telecommunication and Internet User Personal Information, issued by the
MIIT in July 2013, any collection and use of a user’s personal information must be subject to the consent of the user, be legal,
rational and necessary and be limited to specified purposes, methods and scopes. An internet information service provider must also keep
such information strictly confidential, and is further prohibited from divulging, tampering or destroying any such information, or selling
or providing such information to other parties. An internet information service provider is required to take technical and other measures
to prevent the collected personal information from any unauthorized disclosure, damage or loss. Any violation of these laws and regulations
may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation
of filings, closedown of websites or even criminal liabilities.

 

 

Moreover, pursuant to the PRC Criminal Law lastly
amended in November 2017, any individual or entity that (i) sells or discloses any citizen’s personal information to others in a
way violating the applicable law, or (ii) steals or illegally obtains any citizen’s personal information, shall be subject to criminal
penalty in severe situation. Any internet service provider that fails to fulfill the obligations related to internet information security
administration as required by applicable laws and refuses to rectify upon orders, shall be subject to criminal penalty for the result
of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information;
(iii) any serious loss of criminal evidence; or (iv) other severe situation. In addition, the Interpretations of the Supreme People’s
Court and the Supreme People’s Procuratorate of the PRC on Several Issues Concerning the Application of Law in Handling Criminal
Cases of Infringing Personal Information, promulgated in May 2017 and effective June 2017, clarified certain standards for the conviction
and sentencing of the criminals in relation to personal information infringement. Further, the NPC promulgated a new National Security
Law, effective July 2015, to replace the former National Security Law and covers various types of national security including technology
security and information security.

  

The PRC Cyber Security Law, which was promulgated
in November 7, 2016 and took effect on June 1, 2017, requires a network operator, including internet information services providers among
others, to adopt technical measures and other necessary measures in accordance with applicable laws and regulations as well as compulsory
national and industrial standards to safeguard the safety and stability of network operations, effectively respond to network security
incidents, prevent illegal and criminal activities, and maintain the integrity, confidentiality and availability of network data. The
Cyber Security Law emphasizes that any individuals and organizations that use networks must not endanger network security or use networks
to engage in unlawful activities such as those endangering national security, economic order and the social order or infringing the reputation,
privacy, intellectual property rights and other lawful rights and interests of others. The Cyber Security Law has also reaffirmed certain
basic principles and requirements on personal information protection previously specified in other existing laws and regulations, including
those described above. Any violation of the provisions and requirements under the Cyber Security Law may subject an internet service
provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or
even criminal liabilities. Furthermore, MIIT’s Rules on Protection of Personal Information of Telecommunications and Internet Users
promulgated in July 2013, effective September 2013, contain detailed requirements on the use and collection of personal information as
well as security measures required to be taken by telecommunications business operators and internet information service providers.

 

In April 2020, the Cyberspace Administration
of China, the NDRC, MIIT, the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, the People’s
Bank of China, State Administration for Market Regulation, the National Radio and Television Administration, the National Administration
of State Secrets Protection, the National Cryptography Administration promulgated Cybersecurity Review Measures, which came into effect
on June 1, 2020. The Cybersecurity Review Measures provides that the operators of critical information infrastructure must pass a cybersecurity
review when purchasing network products and services which do or may affect national security.

 

The Cybersecurity Review Measures, together
with the Cybersecurity Law, specifies that any purchase of network products and services by critical information infrastructure operators
(the “CIIOs”) that may impact national security will be subject to the cybersecurity review. Where the purchase of network
products and services by a CIIO influences or may influence state security, the CIIO shall notify the Cybersecurity Review Office, which
is under the CAC, and a cybersecurity review shall be conducted pursuant to the Measures. According to Cybersecurity Review Measures,
the CIIO shall be identified by the relevant department as protecting critical information infrastructure. In addition, under the Cybersecurity
Review Measures, the term “network products and services” mainly refers to core network equipment; high-performance computers
and servers; large-capacity storage devices; large-capacity databases and application software; network security equipment; cloud computing
services; and other network products and services that have a significant impact on critical information infrastructure security. Under
the Cybersecurity Law, where CIIOs use network products or services that have neither been reviewed for security, nor passed the cybersecurity
review, they shall be ordered by the relevant competent departments to stop using such products or services, and a fine of no less than
one, but no more than ten times the purchase amount shall be imposed. As for the persons directly in charge or otherwise directly responsible,
a fine of no less than RMB 10,000 but no more than RMB 100,000 shall be imposed. The VIE, as an internet information services provider,
is therefore subject to the regulations relating to information security.

 

 

Regulations on House
Leasing

 

Pursuant to the Administration of Urban Real Estate
Law of the PRC, which was promulgated by the Standing Committee on July 5, 1994 and most recently amended on January 1, 2020, a written
lease contract shall be entered into between the lessor and the lessee for leasing a property, and the contract shall include the terms
and conditions such as the term, purpose and price of leasing and liability for maintenance and repair, etc., as well as other rights
and obligations of both parties. In March 1999, the National People’s Congress, or the NPC, passed the PRC Contract Law, of which
Chapter 13 governs lease contracts. On May 28, 2020, the Third Session of the 13th National People’s Congress passed the Civil Code
of the People’s Republic of China which took effect on January 1, 2021, and replaced the PRC Contract Law. According to the Civil
Code of the People’s Republic of China, subject to the consent of the lessor, the lessee may sublease the leased item to a third
party. Where the lessee subleases the leased item, the leasing contract between the lessee and the lessor remains valid. The lessor is
entitled to terminate the contract if the lessee subleases the leased item without the consent of the lessor.

 

Pursuant to the Administrative Measures on Leasing
of Commodity Housing which was issued by Ministry of Housing and Urban-Rural Development on December 1, 2010 and came into effect on February
1, 2011, House may not be leased in any of the following circumstances: (i) the house is an illegal structure;(ii) the house fails to
meet mandatory engineering construction standards with respect to safety and disaster preventions; (iii) house usage is changed in violation
of applicable regulations; and (iv) other circumstances which are prohibited by laws and regulations. The lessor and the lessee shall
register and file with the local property administration authority within thirty days after entering into the lease contract and make
further registration for changes of such lease (if any). Non-compliance with such registration and filing requirements shall be subject
to fines from RMB1,000 to RMB10,000 provided that they fail to rectify within required time limits. In addition, the housing and urban-rural
development department of government of provinces, autonomous regions and centrally-administered municipalities may formulate implementation
regulations based on these measures.

 

Pursuant to the Opinion on Rectifying and Regulating
the Order of the Residential Rental Market, or the Opinion, which was jointly promulgated by Ministry of Housing and Urban-Rural Development,
National Development and Reform Commission, Ministry of Public Security, State Administration for Market Regulation, China Banking and
Insurance Regulatory Commission, Cyberspace Administration on December 13, 2019 and came into effect on the same day, an entity engaging
in real estate brokerage business should include “real estate brokerage” in the business scope of its business license, while
an entity engaging in house leasing business should include “house leasing” in the business scope of its business license.
The Opinion also requires the real estate brokerage companies and the house leasing companies to file the leasing agreements online, use
the template of the leasing agreement prepared by the local governmental authorities, prepare the instructions for use of the house and
inform the lessee how to use the house. In addition, the Opinion also requires that the amount of payment that a house leasing company
receives through rent financing shall not exceed 30% of the rental income of such company, and all the house leasing companies shall rectify
such ratio by the end of 2022. Since the Opinion is relatively new, the interpretation and enforcement of the Opinion involve uncertainties.

  

Regulations on Consumer
Protection

 

In October 1993, the SCNPC promulgated the Law
on the Protection of the Rights and Interests of Consumers, or the Consumer Protection Law, which became effective on January 1, 1994
and was further amended on August 27, 2009 and October 25, 2013. Under the Consumer Protection Law, any business operator providing a
commodity or service to a consumer is subject to certain mandatory requirements, including the following:

 

(a)
to ensure that commodities and services up to certain safety requirements;

 

(b)
to protect the safety of consumers;

 

 

(c)
to disclose serious defects of a commodity or a service and to adopt preventive measures against occurrence of damage;

 

(d)
to provide consumers with accurate information and to refrain from conducting false advertising;

 

(e)
to obtain consents of consumers and to disclose the rules for the collection and/or use of information when collecting data or information
from consumers; to take technical measures and other necessary measures to protect the personal information collected from consumers;
not to divulge, sell, or illegally provide consumers’ information to others; not to send commercial information to consumers without
the consent or request of consumers or with a clear refusal from consumers;

 

(f)
not to set unreasonable or unfair terms for consumers or alleviate or release itself from civil liability for harming the legal rights
and interests of consumers by means of standard contracts, circulars, announcements, shop notices or other means;

 

(g)
to remind consumers in a conspicuous manner to pay attention to the quality, quantity and prices or fees of commodities or services, duration
and manner of performance, safety precautions and risk warnings, after-sales service, civil liability and other terms and conditions vital
to the interests of consumers under a standard form of agreement prepared by the business operators, and to provide explanations as required
by consumers; and

 

(h)
not to insult or slander consumers or to search the person of, or articles carried by, a consumer or to infringe upon the personal freedom
of a consumer.

 

Business operators in China may be subject to
civil liabilities for failing to fulfill the obligations discussed above. These liabilities include restoring the consumer’s reputation,
eliminating the adverse effects suffered by the consumer, and offering apology and compensation for any loss thus incurred to the consumer.
The following penalties may also be imposed by relevant governmental agencies upon business operators for the infraction of these obligations:
issuance of a warning, confiscation of any illegal income, imposition of a fine, an order to cease business operation, revocation of its
business license or imposition of criminal liabilities under circumstances that are specified in laws and statutory regulations.

 

Regulations on Labor
Protection

 

The principal laws that govern employment include:
(i) the Labor Law of the PRC, or the Labor Law, promulgated by the SCNPC on July 5, 1994, which has been effective since January 1, 1995
and most recently amended on December 29, 2018; and (ii) the Labor Contract Law of the PRC, or the Labor Contract Law, which was promulgated
by the SCNPC on June 29, 2007, came into effect on January 1, 2008, and was amended on December 28, 2012 and became effective on July
1, 2013, and the Implementation Regulations on Labor Contract Law, which was promulgated on September 18, 2008, and became effective since
the same day.

 

According to the Labor Law, an employer shall
develop and improve its rules and regulations to safeguard the rights of its workers. An employer shall develop and improve its labor
safety and health system, stringently implement national protocols and standards on labor safety and health, conduct labor safety and
health education for workers, guard against labor accidents and reduce occupational hazards. Labor safety and health facilities must comply
with relevant national standards. An employer must provide workers with the necessary labor protection gear that complies with labor safety
and health conditions stipulated under national regulations, as well as provide regular health checks for workers that are engaged in
operations with occupational hazards. Laborers engaged in special operations shall have received specialized training and have obtained
the pertinent qualifications. An employer shall develop a vocational training system. Vocational training funds shall be set aside and
used in accordance with national regulations and vocational training for workers shall be carried out systematically based on the actual
conditions of the company.

 

 

The Labor Contract Law and its implementation
rules regulate both parties through a labor contract, namely the employer and the employee, and contain specific provisions involving
the terms of the labor contract. It is stipulated under the Labor Contract Law and the Implementation Regulations on Labor Contract Law
that a labor contract must be made in writing. If an employer fails to enter into a written employment contract with an employee within
one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a
written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following
the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written
employment contract. In addition, an employer is obligated to sign an indefinite term labor contract with an employee if the employer
continues to employ the employee after two consecutive fixed term labor contracts. The Labor Contract Law and its implementation rules
also require compensation to be paid upon certain terminations, which significantly affects the cost of reducing workforce for employers.
In addition, if an employer intends to enforce a non-compete provision in an employment contract or non-competition agreement with an
employee, it has to compensate the employee on a monthly basis during the term of the restriction period after the termination or expiry
of the labor contract. Employers in most cases are also required to provide severance payment to their employees after their employment
relationships are terminated.

 

Enterprises in China are required by PRC laws
and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance
plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund,
and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees
as specified by the local government from time to time at locations where they operate their businesses or where they are located.

 

According to the Interim Regulations on the Collection
and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations on Unemployment Insurance and the
Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall provide benefit plans for their employees,
which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance.
An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall
pay or withhold relevant social insurance premiums for or on behalf of employees. The Law on Social Insurance of the PRC, which was promulgated
by the SCNPC on October 28, 2010, became effective on July 1, 2011, and was most recently updated on December 29, 2018, has consolidated
pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical
insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations
on social insurance. Without force majeure reasons, employers must not suspend or reduce their payment of social insurance for employees,
otherwise, competent governmental authorities will have the power to enforce employers to pay up social insurance within a prescribed
time limit, and a fine of 0.05% of the unpaid social insurance can be charged on the part of the employers per day commencing from the
first day of default. Provided that the employers still fail to make the payment within the prescribed time limit, a fine of over one
time and up to three times of the unpaid sum of social insurance can be charged.

 

According to the Regulations on the Administration
of Housing Provident Fund, which was promulgated by the State Counsel and became effective on April 3, 1999, and was amended on March
24, 2002 and was partially revised on March 24, 2019 by Decision of the State Council on Revising Some Administrative Regulations (Decree
No. 710 of the State Council), housing provident fund contributions by an individual employee and housing provident fund contributions
by his or her employer shall belong to the individual employee. Registration by PRC companies at the applicable housing provident fund
management center is compulsory and a special housing provident fund account for each of the employees shall be opened at an entrusted
bank.

 

 

The employer shall timely pay up and deposit housing
provident fund contributions in full amount and late or insufficient payments shall be prohibited. The employer shall process housing
provident fund payment and deposit registrations with the housing provident fund administration center. Under the circumstances where
financial difficulties do exist due to which an employer is unable to pay or pay up housing provident funds, permission of labor union
of the employer and approval of the local housing provident funds commission must first be obtained before the employer can suspend or
reduce their payment of housing provident funds. With respect to companies who violate the above regulations and fail to process housing
provident fund payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be
ordered by the housing provident fund administration center to complete such procedures within a designated period. Those who fail to
process their registrations within the designated period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When companies
breach these regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration
center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory
enforcement against those who still fail to comply after the expiry of such period.

 

Regulations Relating to Taxation

 

PRC Enterprise Income
Tax

 

The PRC Enterprise Income Tax Law, or EIT Law,
which was promulgated on March 16, 2007 and took effect on January 1, 2008, and further amended on February 24, 2017 and December 29,
2018, imposes a uniform enterprise income tax rate of 25% on all PRC resident enterprises, including foreign-invested enterprises, unless
they qualify certain exceptions. The enterprise income tax is calculated based on the PRC resident enterprise’s global income as
determined under PRC tax laws and accounting standards. Under the PRC EIT Law, an enterprise established outside China with “de
facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and
is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation regulations to the
PRC Enterprise Income Tax Law, a “de facto management body” is defined as the body that exercises full and substantial control
and overall management over the business, productions, personnel, accounts and properties of an enterprise. If a non-resident enterprise
sets up an organization or establishment in the PRC, it will be subject to enterprise income tax for the income derived from such organization
or establishment in the PRC and for the income derived from outside the PRC but with an actual connection with such organization or establishment
in the PRC. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed
permanent establishments or premises in the PRC but their relevant income derived in the PRC is not related to those establishments, then
their enterprise income tax would be set at a rate of 10% for their income sourced from inside the PRC.

 

The PRC EIT Law and its implementation rules,
which was promulgated on December 6, 2007 and took effect on January 1, 2008 and partly amended on April 23, 2019 and became effective
on the same date, permit certain “high and new technology enterprises strongly supported by the state” that independently
own core intellectual property and meet statutory criteria, to enjoy a reduced 15% enterprise income tax rate. On January 29, 2016, the
State Administration for Taxation, or SAT, the Ministry of Science and Technology and the Ministry of Finance jointly issued the Administrative
Rules for the Certification of High and New Technology Enterprises specifying the criteria and procedures for the certification of High
and New Technology Enterprises, and the certificate of a high and new technology enterprise, is valid for three years.

 

 

Pursuant to Circular of the State Administration
of Taxation on Printing and Distributing the Implementing Measures for Special Tax Adjustments (for Trial Implementation), effective on
January 1, 2008, enterprises shall adopt a reasonable transfer pricing method when conducting transactions with their affiliates. Tax
authorities have the power to assess whether related transactions conform to the principle of equity and make adjustments accordingly.
Therefore, the invested enterprise should faithfully report relevant information of its related transactions. Pursuant to the Announcement
of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual
Consultation Procedures, effective on May 1, 2017, an enterprise may adjust and pay taxes at its own discretion when it receives a special
tax adjustment risk warning or identifies its own special tax adjustment risks, and the tax authorities may also carry out special tax
investigation and adjustment in accordance with the relevant provisions in regard to enterprises that adjust and pay taxes at their own
discretion.

 

In January 2009, the SAT promulgated the Provisional
Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident Enterprises
Measures, which was repealed by Announcement of the State Administration of Taxation on Issues Relating to Withholding at Source of Income
Tax of Non-resident Enterprises in December 2017. According to the new announcement, it shall apply to handling of matters relating to
withholding at source of income tax of non-resident enterprises pursuant to the provisions of Article 37, Article 39 and Article 40 of
the Enterprise Income Tax Law. According to Article 37, Article 39 of the Enterprise Income Tax Law, income tax over non-resident enterprise
income pursuant to the provisions of the third paragraph of Article 3 shall be subject to withholding at the source, where the payer shall
act as the withholding agent. The tax amount for each payment made or due shall be withheld by the withholding agent from the amount paid
or payable. Where a withholding agent fails to withhold tax or perform tax withholding obligations pursuant to the provisions of Article
37, the taxpayer shall pay tax at the place where the income is derived. Where the taxpayer fails to pay tax pursuant to law, the tax
authorities may demand payment of the tax amount payable, from a payer of the taxpayer with payable tax amounts from other taxable income
items in China.

 

On April 30, 2009, the MOFCOM and the SAT jointly
issued the Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59, which
became effective retroactively as of January 1, 2008 and was partially revised on January 1, 2014. By promulgating and implementing this
circular, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident
enterprise by a Non-resident Enterprise.

 

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, which was partially abolished on December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions
involving transfer of immovable property in China and assets held under the establishment, and placement in China, of a foreign company
through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses transfer of the equity interest
in a foreign intermediate holding company broadly. In addition, SAT Bulletin 7 introduces safe harbor scenarios applicable to internal
group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer as they
have to assess whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly.

 

On October 17, 2017, the SAT issued 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 came into effect on December 1, 2017 and was revised on June 15, 2018. The SAT Bulletin 37 further clarifies the practice and
procedure of withholding of non-resident enterprise income tax.

 

If non-resident investors were involved in our
private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose, we and our
non-resident investors may be at risk of being required to file a return and be taxed under SAT Bulletin 7 and we may be required to expend
valuable resources to comply with SAT Bulletin 7 or to establish that we should not be held liable for any obligations under SAT Bulletin
7.

 

 

PRC Value Added Tax

 

According to the Temporary Regulations on Value-added
Tax, which was most recently amended on November 19, 2017, and the Detailed Implementing Rules of the Temporary Regulations on Value-added
Tax, which was amended on October 28, 2011, and became effective on November 1, 2011, all taxpayers selling goods, providing processing,
repair or replacement services or importing goods within the PRC shall pay Value-Added Tax. The tax rate of 17% shall be levied on general
taxpayers selling or importing various goods; the tax rate of 17% shall be levied on the taxpayers providing processing, repairing or
replacement service; the applicable rate for the export of goods by taxpayers shall be zero, unless otherwise stipulated.

 

On January 1, 2012, the State Council officially
launched a pilot value-added tax reform program, or the Pilot Program, applicable to businesses in selected industries. Businesses in
the Pilot Program would pay value added tax, or VAT, instead of business tax. The Pilot Program initially applied only to transportation
industry and “modern service industries” in Shanghai and would be expanded to eight trial regions (including Beijing and Guangdong
province) and nationwide if conditions permit. The pilot industries in Shanghai included industries involving the leasing of tangible
movable property, transportation services, research and development and technical services, information technology services, cultural
and creative services, logistics and ancillary services, certification and consulting services. Revenues generated by advertising services,
a type of “cultural and creative services,” are subject to the VAT tax rate of 6%. According to official announcements made
by competent authorities in Beijing and Guangdong province, Beijing launched the same Pilot Program on September 1, 2012, and Guangdong
province launched it on November 1, 2012.

 

On May 24, 2013, the MOFCOM and the SAT issued
the Circular on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry
and Certain Modern Services Industries, or the Pilot Collection Circular. The scope of certain modern services industries under the Pilot
Collection Circular extends to the inclusion of radio and television services.

 

On March 23, 2016, the MOFCOM and the SAT jointly
issued the Circular on the Pilot Program for Overall Implementation of the Collection of Value Added Tax Instead of Business Tax, or Circular
36, which took effect on May 1, 2016. Pursuant to the Circular 36, all of the companies operating in construction, real estate, finance,
modern service or other sectors which were required to pay business tax are required to pay VAT, in lieu of business tax. The VAT rate
is 6%, except for rate of 11% for real estate sale, land use right transferring and providing service of transportation, postal sector,
basic telecommunications, construction, real estate lease; rate of 17% for providing lease service of tangible property; and rate of zero
for specific cross-bond activities.

 

At the State Council executive meeting on March
28, 2018, China’s State Council has announced the VAT rate on manufacturing is to be cut by one percent to 16% which took effect
on May 1, 2018. On April 4, 2018, the Ministry of Finance and the SAT promulgated the Notice on Adjusting Value-added Tax Rates, which
reduced the tax rates for sale, import and export of goods, as well as the deduction rate for taxpayer’s purchaser of agricultural
products. According to the Announcement on Relevant Policies for Deepening the Value-Added Tax Reform, which is jointly issued by Ministry
of Finance, SAT and the General Administration of Customs on March 20, 2019 and took effect on April 1, 2019. The tax rate of 16% applicable
to the VAT taxable sale or import of goods by a general VAT taxpayer shall be adjusted to 13%.

 

According to the Circular of the SAT on Printing
and Distributing the Administrative Measures for Tax Refund (Exemption) for Exported Goods (for Trial Implementation), effective on May
1, 2005, unless otherwise provided by law, for the goods as exported via an export agency, the exporter may, after the export declaration
and the conclusion of financial settlement for sales, file a report to competent State Taxation Bureau for the approval of refund or exemption
of VAT or consumption tax on the strength or the relevant certificates.

 

PRC Dividend Withholding
Tax

 

Under the PRC tax laws effective prior to January
1, 2008, dividends paid to foreign investors by foreign-invested enterprises were exempt from PRC withholding tax. Pursuant to the EIT
Law and the Implementation Rules, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its
foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation
has a tax treaty with China that provides for a different withholding arrangement.

 

 

Pursuant to an Arrangement Between the Mainland
of 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 other applicable PRC laws and regulations, if a Hong Kong resident
enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double
Tax Avoidance Arrangement and other applicable laws and regulations, the 10% withholding tax on the dividends the Hong Kong resident enterprise
receives from a PRC resident enterprise may be reduced to 5%. According to the Announcement of the SAT on Issuing the Measures for the
Administration of Non-resident Taxpayers’ Enjoyment of Treaty Benefits effective on January 1,2020, non-resident taxpayers can enjoy
tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection”
mechanism. Non-resident taxpayers who have self-assessed that they are eligible for the treaty benefits can claim such tax treaty benefits
accordingly provided that they have collected and retained relevant supporting documents for inspection by the tax authorities in their
post-filing administration process. Pursuant to the Announcement on Certain Issues with Respect to the “Beneficial Owner”
in Tax Treaties, issued by the SAT on February 3, 2018, and effective on April 1, 2018, when determining an applicant’s “beneficial
owner” status regarding tax treatments in connection with dividends, interests or royalties in tax treaties, several factors set
forth below will be taken into account, although the actual analysis will be fact-specific: (i) whether the applicant is obligated to
pay more than 50% of his or her income in 12 months to residents in a third country or region; (ii) whether the business operated by the
applicant constitutes a substantial business operation; and (iii) whether the counterparty country or region to the tax treaties does
not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate. The applicant must submit relevant documents
to the competent tax authorities to prove his or her “beneficial owner” status. Although Sancai WFOE is currently wholly-owned
by Sancai HK, we cannot assure you that we will be able to enjoy the preferential withholding tax rate of 5% under the China-HK Taxation
Arrangement.

 

Tax on Indirect Transfer

 

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 SAT Bulletin 7, an “indirect transfer” of assets, including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises, may be recharacterized 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. When determining whether there is a “reasonable
commercial purpose” of the transaction arrangement, factors to be taken into consideration include, inter alia, whether the main
value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; whether the assets
of the relevant offshore enterprise mainly consist of direct or indirect investment in China or if its income is mainly derived from China;
and whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature
that is evidenced by their actual function and risk exposure. The SAT Bulletin 7 does not apply to transactions of sale of shares by investors
through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017, the SAT issued 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 further elaborates on the relevant implemental rules regarding the calculation, reporting and payment obligations of the withholding
tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of the SAT Bulletin
7. The SAT Bulletin 7 may be determined by the tax agencies to be applicable to our offshore transactions or sale of our shares or those
of our offshore subsidiaries where non-resident enterprises, being the transferors, were involved.

 

 

Regulations Relating to Intellectual Property

 

The PRC has adopted comprehensive legislation
governing intellectual property rights, including patents, trademarks, copyrights and domain names.

 

Patents

 

Pursuant to the PRC Patent Law, promulgated in
December 2008, which became effective in October 2009 and was recently revised by the SCNPC on October 17, 2020 (which shall become effective
on June 1, 2021), and its implementation rules, most recently amended on January 9, 2010, patents in China fall into three categories:
invention, utility model and design. An invention patent is granted to a new technical solution proposed in respect of a product or method
or an improvement of a product or method. A utility model is granted to a new technical solution that is practicable for application and
proposed in respect of the shape, structure or a combination of both of a product. A design patent is granted to a new design of the shape,
pattern, or a combination thereof, as well as a combination of the color, shape and pattern, of the entirety or a portion of a product,
which creates an aesthetic feeling and is fit for industrial application. Under the PRC Patent Law, the term of patent protection starts
from the date of application. The duration of patent right for inventions shall be twenty years, and the duration of patent right for
utility models shall be ten years, and the duration of patent right for designs shall be 15 years, counted from the date of filing. The
PRC Patent Law adopts the principle of “first-to-file” system, which provides that where more than one person files a patent
application for the same invention, a patent will be granted to the person who files the application first.

  

Existing patents can become narrowed, invalid
or unenforceable due to a variety of grounds, including lack of novelty, creativity, and deficiencies in patent application. In China,
a patent must have novelty, creativity and practical applicability. Under the PRC Patent Law, novelty means that before a patent application
is filed, no identical invention or utility model has been publicly disclosed in any publication in China or overseas or has been publicly
used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority
an application that describes an identical invention or utility model and is recorded in patent application documents or patent documents
published after the filing date. Creativity means that, compared with existing technology, an invention has prominent substantial features
and represents notable progress, and a utility model has substantial features and represents any progress. Practical applicability means
an invention or utility model can be manufactured or used and may produce positive results. Patents in China are filed with the State
Intellectual Property Office, or SIPO. Normally, the SIPO publishes an application for an invention patent within 18 months after the
filing date, which may be shortened at the request of applicant. The applicant must apply to the SIPO for a substantive examination within
three years from the date of application.

 

Article 20 of the PRC Patent Law provides that,
for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent
application outside of China, must first submit it to the SIPO for a confidential examination. Failure to comply with this requirement
will result in the denial of any Chinese patent for the relevant invention. This added requirement of confidential examination by the
SIPO has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development
activities to service providers in China.

 

Patent Enforcement

 

Unauthorized use of patents without consent from
owners of patents, forgery of the patents belonging to other persons, or engagement in other patent infringement acts, will subject the
infringers to infringement liability. Serious offences such as forgery of patents may be subject to criminal penalties.

 

 

When a dispute arises out of infringement of the
patent owner’s patent right, Chinese law requires that the parties first attempt to settle the dispute through mutual consultation.
However, if the dispute cannot be settled through mutual consultation, the patent owner, or an interested party who believes the patent
is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority.
A Chinese court may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting
any legal proceedings or during the proceedings. Damages for infringement are calculated as the loss suffered by the patent holder arising
from the infringement, or the benefit gained by the infringer from the infringement. If it is difficult to ascertain damages in this manner,
damages may be determined by using a reasonable multiple of the license fee under a contractual license. Statutory damages may be awarded
in the circumstances where the damages cannot be determined by the above-mentioned calculation standards. Generally, the patent owner
has the burden of proving that the patent is being infringed. However, if the owner of an invention patent for manufacturing process of
a new product alleges infringement of its patent, the alleged infringer has the burden of proof.

 

As of the date of this prospectus, we have 2 patents
granted in China.

 

Trademark Law

 

The PRC Trademark Law and its implementation
rules protect registered trademarks. The PRC Trademark Office of State Administration for Market Regulation is responsible for the registration
and administration of trademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect
to trademark registration. The validity period of registered trademarks is ten years from the date of approval of trademark application,
and may be renewed for another ten years upon request provided relevant application procedures have been completed within twelve months
before the end of the validity period. If a trademark applied for is identical or similar to another trademark which has already been
registered or subject to a preliminary examination and approval for use on the same or similar kinds of products or services, such trademark
application may be rejected. Any person applying for the registration of a trademark may not injure existing trademark rights first obtained
by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient
degree of reputation” through such party’s use. As of the date of this prospectus, we own 10 registered trademarks and are
licensed to use 33 trademarks in different applicable trademark categories in China.

 

In addition, pursuant to the PRC Trademark Law,
counterfeit or unauthorized production of the label of another person’s registered trademark, or sale of any label that is counterfeited
or produced without authorization will be deemed as an infringement to the exclusive right to use a registered trademark. The infringing
party will be ordered to stop the infringement immediately, a fine may be imposed and the counterfeit goods will be confiscated. The infringing
party may also be held liable for the right holder’s damages, which will be equal to the gains obtained by the infringing party
or the losses suffered by the right holder as a result of the infringement, including reasonable expenses incurred by the right holder
for stopping the infringement. If the gains or losses are difficult to determine, the court may render a judgment awarding damages of
no more than RMB 5 million.

 

Copyright Law

 

The newly amended Copyright Law or the Copyright
Law, consists of 67 articles in six chapters, and shall come into force on 1 June 2021. The Copyright Law provides that Chinese citizens,
legal entities or unincorporated organizations, whether published or not, shall enjoy copyright in their works, which refer to ingenious
intellectual achievements in the fields of literature, art and science that can be presented in a certain form. Copyright owners enjoy
certain legal rights, including right of publication, right of authorship and right of reproduction. The purpose of the Copyright Law
aims to encourage the creation and dissemination of works that are beneficial for the construction of socialist spiritual civilization
and material civilization and promote the development and prosperity of Chinese culture. The term of protection for copyrighted software
of legal persons is fifty years and ends on December 31 of the 50th year from the date of first publishing of the software.

 

 

In order to further implement the Computer Software
Protection Regulations promulgated by the State Council in 2001, and amended subsequently, the State Copyright Bureau issued the Computer
Software Copyright Registration Procedures in 2002, which apply to software copyright registration, license contract registration and
transfer contract registration.

 

As of the date of this prospectus, we have
20 software copyrights registered in China.

 

Regulations on Domain
names

 

The domain names are protected under the Administrative
Measures on the Internet Domain Names of China promulgated by MIIT on November 5, 2004 and effective on December 20, 2004, and will be
replaced by the Administrative Measures on the Internet Domain Names promulgated by MIIT on August 24, 2017, which will become effective
on November 1, 2017. MIIT is the major regulatory body responsible for the administration of the PRC Internet domain names, under supervision
of which China Internet Network Information Center, or CNNIC, is responsible for the daily administration of CN domain names and Chinese
domain names. On September 25, 2002, CNNIC promulgated the Implementation Rules of Registration of Domain Name, or the CNNIC Rules, which
was renewed on June 5, 2009 and May 29, 2012, respectively. Pursuant to the Administrative Measures on the Internet Domain Names and the
CNNIC Rules, the registration of domain names adopts the “first-to-file” principle and the registrant shall complete the registration
via the domain name registration service institutions. In the event of a domain name dispute, the disputed parties may lodge a complaint
to the designated domain name dispute resolution institution to trigger the domain name dispute resolution procedure in accordance with
the CNNIC Measures on Resolution of the Top Level Domains Disputes, file a suit to the People’s Court or initiate an arbitration
procedure.

 

As of the date of this prospectus, we have registered
6 domain names.

  

Regulations Relating to Foreign Exchange

 

The principal regulations governing foreign currency
exchange in China are the PRC Foreign Exchange Administration Regulations, which were promulgated by the State Council on January 29,
1996 and last amended on August 5, 2008. Under the Foreign Exchange Administration 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 State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, 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 foreign currency-denominated loans.

 

On August 29, 2008, SAFE issued the Circular on
the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital
of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered
capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign
currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable
government authority and may not be used for equity investments within China. SAFE also strengthened its oversight of the flow and use
of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may
not be changed without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such
loans have not been used. On March 30, 2015, SAFE issued SAFE Circular 19, which took effective and replaced SAFE Circular 142 on June
1, 2015. Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments
in China, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond the
business scope, for entrusted loans or for inter-company RMB loans. SAFE promulgated the Notice of the State Administration of Foreign
Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective
on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital
converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition
against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 or SAFE Circular 16 could result
in administrative penalties.

 

 

On November 19, 2012, SAFE promulgated the Circular
of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment which substantially amends and
simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange
accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts), the reinvestment of lawful
incomes derived by foreign investors in China (e.g. profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation
of investment), and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share
transfer in a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for the same entity may be opened
in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions
on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which
specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted
by way of registration and banks shall process foreign exchange business relating to the direct investment in China based on the registration
information provided by SAFE and its branches.

 

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
took effect on June 1, 2015. SAFE Circular 13 delegates the authority to enforce the foreign exchange registration in connection with
the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies the foreign exchange
registration procedures for inbound and outbound direct investment.

 

In January 2017, SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Further Promoting the Reform of Foreign Exchange Administration and Improving the
Examination of Authenticity and Compliance, or Circular 3, effective simultaneously. Circular 3 sets out various capital control measures
to tighten authenticity and compliance verification of cross-border transactions and cross-border capital flow, which include, without
limitation, requiring banks to verify resolution of the board of directors on distribution of profits (or resolution of partners on distribution
of profits), original tax recordation form, and audited financial statements relating to the outward remittance before conducting the
outward remittance of profits above $50,000, and making up for losses in previous years with profits pursuant to the law before it is
allowed to remit the profits overseas.

  

Regulations on loans to and direct investment
in the PRC entities by offshore holding companies

 

According to the Implementation Rules for the
Provisional Regulations on Statistics and Supervision of Foreign Debt promulgated by SAFE on September 24, 1997 and the Interim Provisions
on the Management of Foreign Debts promulgated by SAFE, the NDRC and the MOFCOM and effective from March 1, 2003, loans by foreign companies
to their subsidiaries in China, which accordingly are FIEs, are considered foreign debt, and such loans must be registered with the local
branches of the SAFE. Under the provisions, the total amount of accumulated medium-term and long-term foreign debt and the balance of
short-term debt borrowed by a FIE is limited to the difference between the total investment and the registered capital of the foreign-invested
enterprise.

  

On January 12, 2017, the People’s Bank of
China promulgated 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, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based
constraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign
currencies at their own discretion. 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 is calculated as capital or assets multiplied by a cross-border financing leverage ratio
and multiplied by a macro-prudential regulation parameter.

 

 

In addition, according to PBOC Circular 9, as
of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises and during
such transition period, FIEs may apply either the current cross-border financing management mode, namely the mode provided by Implementation
Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt and the Interim Provisions on the Management of Foreign
Debts, or the mode in this PBOC Circular 9 at its sole discretion. After the end of the transition period, the cross-border financing
management mode for FIEs will be determined by the People’s Bank of China and SAFE after assessment based on the overall implementation
of this PBOC Circular 9.

 

According to applicable PRC regulations on
FIEs, capital contributions from a foreign holding company to its PRC subsidiaries, which are considered FIEs, may be made when approval
by or registration with the SAFE and MOFCOM or their respective local counterpart is obtained.

 

Regulations on Foreign Exchange Registration
of Offshore Investment by PRC Residents

 

On July 4, 2014, SAFE issued 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 abolished and superseded the Circular on Several
Issues concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and in Return Investments via Overseas
Special Purpose Companies, SAFE Circular 75. Pursuant to SAFE Circular 37 and its implementation guidelines, PRC residents (including
PRC institutions and individuals) must register with local branches of SAFE in connection with their direct or indirect offshore investment
in an overseas special purpose vehicle, or SPV, directly established or indirectly controlled by PRC residents for the purposes of offshore
investment and financing with their legally owned assets or interests in domestic enterprises, or their legally owned offshore assets
or interests. Such PRC residents are also required to amend their registrations with SAFE when there is a change to the basic information
of the SPV, such as changes of a PRC resident individual shareholder, the name or operating period of the SPV, or when there is a significant
change to the SPV, such as changes of the PRC individual resident’s increase or decrease of its capital contribution in the SPV,
or any share transfer or exchange, merger, division of the SPV. Failure to comply with the registration procedures set forth in the Circular
37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment
of dividends and other distributions to its offshore parent or affiliate, the capital inflow from the offshore entities and settlement
of foreign exchange capital, and may also subject relevant onshore company or PRC residents to penalties under PRC foreign exchange administration
regulations.

 

Our shareholders who, to our knowledge, are PRC
residents have completed the required registrations with the local counterpart of SAFE in relation to our financing and restructuring
to our shareholding structure.

 

Regulations on Dividend Distributions

 

The principal regulations governing distribution
of dividends paid by wholly foreign-owned enterprises include:

 

Company Law of the PRC (1993),
as amended in 1999, 2004, 2005, 2013 and 2018;

 

Foreign Investment Enterprise
Law of the PRC (1986), as amended in 2000 and 2016; and

 

Administrative Rules under
the Foreign Investment Enterprise Law (1990), as amended in 2001 and 2014.

 

 

Under these laws and regulations, foreign-invested
enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards
and regulations. In addition, a wholly foreign-owned enterprise in China is required to set aside at least 10% of its after-tax profit
based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50% of its registered
capital. These reserves are not distributable as cash dividends. The foreign-invested enterprise has the discretion to allocate a portion
of its after-tax profits to staff welfare and bonus funds. 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.

 

Regulations on Overseas Listings

 

On August 8, 2006, six PRC regulatory agencies,
namely, the Ministry of Commerce, the State Assets Supervision and Administration Commission, SAT, SAIC, China Securities Regulatory Commission,
or the CSRC, and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the
M&A Rules, which became effective on September 8, 2006 and were amended on June 22, 2009. The M&A Rules purport, among other things,
to require that offshore special purpose vehicles, or SPVs, that are controlled by PRC companies or individuals and that have been formed
for overseas listing purposes through acquisitions of PRC domestic interest held by such PRC companies or individuals, to obtain the approval
of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice
on its official website specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas
listings. While the application of the M&A Rules remains unclear, our PRC legal counsel has advised us that based on its understanding
of the current PRC laws, rules and regulations and the M&A Rules, prior approval from the CSRC is not required under the M&A Rules
for the listing and trading of our Class A Ordinary Shares on the NASDAQ given that (i) our PRC subsidiary was directly established by
us as a wholly foreign-owned enterprise, and we have not acquired any 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 after the effective date of the M&A Rules,
and (ii) no provision in the M&A Rules clearly classifies the contractual arrangements as a type of transaction subject to the M&A
Rules.

 

However, our PRC legal counsel has further advised
us uncertainties still exist as to how the M&A Rules will be interpreted and implemented 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. If CSRC
or another PRC regulatory agency subsequently determines that prior CSRC approval was required for our initial public offering, we may
face regulatory actions or other sanctions from CSRC or other PRC regulatory agencies.

 

These regulatory agencies may impose fines and
penalties on our operations, limit our operating privileges, delay or restrict the repatriation of the proceeds from our initial public
offering into the PRC or payment or distribution of dividends by our PRC subsidiary, or take other actions that could materially adversely
affect our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Class A
Ordinary Shares. In addition, if CSRC later requires that we obtain its approval for our initial public offering, we may be unable to
obtain a waiver of CSRC approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative
publicity regarding CSRC approval requirements could have a material adverse effect on the trading price of our Class A Ordinary Shares.
See “Risk Factors — Risks Related to Doing Business in China — The approval of the China Securities Regulatory Commission
may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.”

  

 

MANAGEMENT

 

Executive Officers and Directors

 

The following table provides information regarding
the executive officers and directors of Sancai Holding Group Ltd as of the date of this prospectus:

 

Name:   Age:   Positions with the Company:
Ning Wen*   43   Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Yuxiu Wang   46   Chief Financial Officer (Principal Financial and Accounting Officer)
Hao Xuan   30   Chief Technology Officer
Siqi Tang   31   Chief Marketing Officer
Dayu Xu   58   Director
Wei (Wendy) Li   35   Independent Director Nominee and Audit Committee Chair
Bo Liu   63   Independent Director Nominee and Compensation Committee Chair
Anthony K. Chan   65   Independent Director Nominee and Nominating Committee Chair

 

* Mr. Ning Wen is also the President and Chairman of the Board of
Sancaijia Co., Ltd., our variable interest entity.

 

The business address of the officers and directors
is No. 6 Fengcheng Second Road, Room 401, Xi’an Economic and Technological Development Zone, Xi’an, Shaanxi Province, People’s
Republic of China 710000.

 

Business Experience

 

Ning Wen, Chief Executive
Officer and Chairman of the Board

 

Ning Wen, age 43, is the founder of our Company.
He started his own business, Xi’an Sancai Smart Engineering Co., Ltd., in 2004 in the design, construction and integration of smart
security system and led renovations for various bank branches and insurance companies. In 2017, Mr. Wen founded Sancaijia Co., Ltd.,
the VIE, and subsequently start exploring the opportunity to use his expertise in digital upgrading to serve traditional enterprises
and other market participants.

 

Yuxiu Wang, Chief Financial Officer

 

Ms. Wang, age 46, has been our Chief Financial
Officer since October 2020. From September 2011 to April 2020, she was the Financial Director of Infront Sports & Media (China) Co.,
LTD and was mainly responsible for overseeing financial reporting, internal control management, and internal and external audit process.
From December 2007 to September 2011, Ms. Wang was the Senior Financial Analyst of CSC Technology (Beijing) Co., Ltd, now DXC. Technology,
during which she gained substantial experience in the United States Generally Accepted Accounting Principles (US GAAP). At CSC Technology,
she was in charge of a comprehensive review of the accounting process related to financial software research and development and services
(FSS) to ensure its compliance with the US GAAP and China’s financial and taxation system. Additionally, she was also responsible
for FSS-related cross-border settlements with CSC Technology’s major international projects, including financial issues with monthly
profits, forecasts and budget adjustments, tax planning, etc. Prior to that, Ms. Wang was the Assistant Chief Financial Officer of Beijing
Longfa Decoration Group from 2006 to 2007. From 2004 to 2006, Ms. Wang was the Audit Project Manager of Huazheng Certified Public Accountants
Co., Ltd., now merged into Pan-China Certified Public Accounts Co., Ltd. During her time at Huazheng Certified Public Accountants Co.,
Ltd., she was in charge of IPO audits, profit forecast audits for the re-funding of listed companies, large-scale state-owned enterprise
restructuring audits, etc. Prior to that, Ms. Wang was the Finance Manager of the National Railway Company.

 

 

Ms. Wang acquired her bachelor’s degree
in Accounting from Xinjiang University of Finance & Economics in 2002 and her Graduate Diploma in Business from the Massey University
of New Zealand in 2017. Ms. Wang is a certified public accountant (CPA) and a certified tax agent in China. Ms. Wang is also an internationally
certified accountant at the Association of Chartered Certified Accounts (ACCA), a certified internal auditor (CIA), and a risk management
professional with a Certification in Risk Management Assurance (CRMA).

 

Dayu Xu, Director

 

Mr. Xu, age 55, has been a Director of the
Company since November 2020. Since 1999, Mr. Xu has been a shareholder of Gansu Xintiandi Sports Engineering Company, the shareholder
legal representative of Gansu Huangdi Trading Company, and a shareholder of Zhongshi International Home Furnishing Company. Prior to
that, from October 1998, Mr. Xu oversaw the Agricultural Bank of China at its Xi’an Chengxi Branch which he had helped establish
and was the Vice President of Credit Accounting since May 1993 and Office Manager from February 1992. From 1991, he served as the Office
Director of the Agricultural Bank of China at its Shanxi Lantian Branch. In 1990, he was seconded to the General Affairs Department of
Agricultural Bank of China at its headquarter office. From 1980, Mr. Xu has served as the Loan Officer and Deputy Chief of Planning,
Industry and Commercial Credit department. Mr. Xu acquired his Associate Degree in Finance from Xi’an Radio and Television University.

 

Hao Xuan, Chief Technology
Officer

 

Mr. Xuan, age 30, has been our Chief Technology
Officer at Sancaijia, the VIE, since February 2020. Prior to joining our team, Mr, Xuan was the vice president at Heng Xun Yun (Shenzhen)
Technology Co., Ltd. in China from December 2018 to May 2020, where he led a team of 30 employees of product, operation and technology
departments and was responsible for the short, medium and long-term planning and management of product design, operation promotion and
technology research and development of the cloud data projects, docking with the marketing department, making design adjustments and
developing products to ensure rapid succession to meet market needs, the online translation of the entire project, complete the entire
media positioning online, and complete the brand positioning, formulating product and operation standards, unifying product specifications
and processes, coordinating products, research and development, and operation of the entire process of investment control progress and
iteration, and the overall product project management, cross-departmental coordination of resources and implementation and promotion
in the product development process, to ensure accurate quality understanding functions for R&D and testing, and to ensure the quality
of online products. From November 2016 to December 2018, Mr. Xuan worked at Shanxi Xun Zhi Da Smart Technology Co., Ltd. in China, where
he was in charge of product design, including bike sharing, smart door lock, and smart vending machine software and hardware development.
Mr. Xuan also had experience with online promotion and customer services. Mr. Xuan has a bachelor’s degree in electricity and automation
from Shaanxi University of Science and Technology.

 

Siqi Tang, Chief Marketing
Officer

 

Mr. Tang, age 31, has been our Chief Marketing
Officer at Sancaijia, the VIE, since April 2020. From June 2019 to March 2020, Mr. Tang was the Chief Marketing Officer of Shanxi Miaowu
Pool Purchase Network Technology Co., Ltd. He was mainly responsible for launching and installing the mobile APP, establishing sales
protocol and logistics, and developing customized service items. Prior to that, Mr. Tang served as the Director of large business department
of Xi’an Jimujia Information Technology Co., Ltd. from May 2018 to June 2019. He handled interior design package project business,
including establishing decoration supply chain, perfecting product system, coordinating regional development, and supervising after sales
customer services. From January 2017 to April 2018, Mr. Tang was the Division Director of Weiyi Customization Company at its Xi’an
Branch, undertaking online sales teams and marketing management. From July 2015 to December 2016, he was the General Manager of her own
startup, specializing in child education and training as well as interior design and decoration. From June 2013 to June 2015, he was
the Director of the sales department at Weiyi Customization Company at its Xi’an Branch, during which he handled overall operation
of the stores, sales performances and talent management. Mr. Tang acquired his bachelor’s degree in Human Resources from Wenan
Normal University in 2013.

 

 

Wei (Wendy) Li, Independent Director Nominee
and Audit Committee Chair

 

Ms. Li, age 35, is our Independent Director
Nominee and Audit Committee Chair, effective upon the approval of Nasdaq of the listing of our Class A Ordinary Shares. Ms. Li has extensive
experience in serving on the management board and as a third-party consultant with regard to assisting listings on the U.S. stock market,
internal audit control, and financial compliance projects. For the past eight years, Ms. Li served as the Chief Financial Officer, Board
Secretary, and Listing Compliance Officer of Heyu Biological Technology Corp, an OTC listed company. She served as an Independent Director
of Dragon Victory International Limited, a Nasdaq listed company. She also served as the Chief Financial Officer and Listing Compliance
Officer of China Education Alliance, Inc., an NYSE listed company. In terms of business consulting services, Ms. Li assisted various
companies with their Hong Kong listing audits and internal controls, including Bank of China Limited, Shenzhen Development Bank, Kunlun
Energy Co., Ltd., Swire Pacific Limited, and China Shengda Package Group Inc. Ms. Li acquired her bachelor’s degree in Finance
and Accounting from the Queensland University of Technology. Ms. Li is a certified public accountant in Australia (CPA).

 

Bo Liu, Independent Director Nominee and Compensation
Committee Chair

 

Mr. Liu, age 63, is our Independent Director
Nominee and Compensation Committee Chair, effective upon the approval of Nasdaq of the listing of our Class A Ordinary Shares. Mr. Liu
has been working as a lawyer in Shaanxi Zhirou Law Firm since January 1985. Mr. Liu is also currently a representative and a member of
the People’s Congress’s Standing Committee in the Yangling District People’s Congress from September 2016. From January
2005 to 2016, he served as the Chief Legal Counsel of the People’s Government of Yangling District, during which he also served
as the legal counsel for the Yangling Demonstration Zone for four years. Prior to that, from March 1979 to June 2017, Mr. Liu served
as the legal adviser and director of legal affairs of Yanchang Chemical Construction Co., Ltd., previously Shaanxi Yanchang Chemical
Construction Engineering Co., Ltd. Mr. Liu acquired his bachelor’s degree in Law from the China National Lawyer Correspondence
Center.

 

Anthony K. Chan, Independent Director Nominee
and Nominating Committee Chair

 

Mr. Chan, age 65, is our Independent Director
Nominee and Nominating Committee Chair, effective upon the approval of Nasdaq of the listing of our Class A Ordinary Shares. Mr. Chan
has been the Chief Financial Officer and Executive Vice President at Borqs Technologies, Inc. (Nasdaq: BRQS) since April 2015. Mr. Chan
has over 30 years of experience in U.S. and China cross border investments and business operations. From July 2013 until March 2015, Mr.
Chan served as the President of Asia Sourcing for Portables Unlimited in New York, a distributor of T-Mobile USA. From March 2009 until
July 2013, he served as the CFO for Tianjin Tong Guang Digital Broadcasting Co. Ltd, a mobile communications products company. For the
20 years prior to that, he was involved in multiple investment and technology transfer projects between China, the U.S and Europe, in
the areas of communication products, chemical fibers, textile machinery and medical equipment. Mr. Chan received both his bachelor’s
and MBA degrees from the University of California at Berkeley.

 

Family Relationships

 

None of the directors or executive officers at
the Company have a family relationship as defined in Item 401 of Regulation S-K.

 

Election of Officers

 

Our executive officers are appointed by, and serve
at the discretion of, our board of directors.

 

 

Board of Directors

 

We currently have two directors. We plan to build
a board of directors consisting of at least five members, a majority of whom will be “independence” as defined in Nasdaq Rule
5605. As of the date of this prospectus, we have elected three director nominees, Wei (Wendy) Li, Bo Liu and Anthony K. Chan, effective
upon the approval of Nasdaq of the listing of our Class A Ordinary Shares. We have determined that all director nominees satisfy the “independence”
requirements under Nasdaq Rule 5605. We expect that all current directors will continue to serve after this offering. The directors will
be re-elected at our annual general meeting of shareholders. Although our post-offering amended and restated memorandum and articles of
association does not require general meetings of shareholders to be held annually, once our Class A Ordinary Shares are listed on Nasdaq
Capital Market, we will be subject to Nasdaq Listing Rule 5620(a), which requires us to hold an annual meeting of shareholders no later
than 12 months following the end each fiscal year. We plan to hold annual general meeting of shareholders pursuant to Nasdaq Listing Rule
5620(a) after our Class A Ordinary Shares are listed on Nasdaq Capital Market.

 

A director who is in any way, whether directly
or indirectly, interested in a contract or proposed contract with the Company shall declare the nature of his interest at a meeting of
the directors. A general notice given to the directors by any director to the effect that he is a member of any specified company or firm
and is to be regarded as interested in any contract which may thereafter be made with that company or firm shall be deemed a sufficient
declaration of interest in regard to any contract so made. A director may vote in respect of any contract or proposed contract or arrangement
notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any
meeting of the directors at which any such contract or proposed contract or arrangement shall come before the meeting for consideration. 

 

Board Committees

 

We will establish three committees under the board
of directors immediately upon the approval of Nasdaq of the listing of our Class A Ordinary Shares: an Audit Committee, a Compensation
Committee and a Nominating Committee. Each committee is to be governed by a charter approved by our Board of Directors. Copies of the
charters have been submitted as exhibits to the registration statement of which this prospectus is a part and will be available at our
investor relations website.

 

Audit Committee

 

Our Audit
Committee will consist of Wei (Wendy) Li (Chair), Bo Liu and Anthony K. Chan.  Each member of the Audit Committee will satisfy
the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and meet the independence
standards under Rule 10A-3 under the Exchange Act. Our Audit Committee Financial Expert is Wei (Wendy) Li who qualifies as an “audit
committee financial expert” within the meaning of the SEC rules and possesses financial sophistication within the meaning of the
Listing Rules of the Nasdaq Stock Market. The Audit Committee oversees our accounting and financial reporting processes and the audits
of the financial statements of our company. The Audit Committee is responsible for, among other things:

 

selecting our independent registered
public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our
independent registered public accounting firm;

 

reviewing with our independent
registered public accounting firm any audit problems or difficulties and management’s response and approving all proposed related
party transactions, as defined in Item 404 of Regulation S-K;

 

discussing the annual audited
financial statements with management and our independent registered public accounting firm;

 

 

annually reviewing and reassessing
the adequacy of our Audit Committee charter;

 

meeting separately and periodically
with the management and our independent registered public accounting firm;

 

reporting regularly to the
full board of directors;

 

reviewing the adequacy and
effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial
risk exposure; and

 

such other matters that are
specifically delegated to our Audit Committee by our board of directors from time to time.

 

Compensation Committee

 

Our Compensation Committee
will consist of Wei (Wendy) Li, Bo Liu (Chair) and Anthony K. Chan. Each of the Compensation Committee members satisfies the “independence”
requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. Our Compensation Committee will assist the board
in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.
No officer may be present at any committee meeting during which such officer’s compensation is deliberated upon. The Compensation
Committee will be responsible for, among other things:

  

reviewing and approving to
the board with respect to the total compensation package for our most senior executive officers;

 

approving and overseeing the
total compensation package for our executives other than the most senior executive officers;

 

reviewing and recommending
to the board with respect to the compensation of our directors;

 

reviewing periodically and
approving any long-term incentive compensation or equity plans;

 

selecting compensation consultants,
legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management;
and

 

programs or similar arrangements,
annual bonuses, employee pension and welfare benefit plans.

 

Nominating Committee

 

Our Nominating Committee will consist of Wei
(Wendy) Li, Bo Liu and Anthony K. Chan (Chair). Each member of the Nominating Committee will satisfy the “independence” requirements
of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market.  The nominating committee will assist the board of directors
in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The Nominating
Committee will be responsible for, among other things:

 

selecting and recommending
to the board nominees for election by the shareholders or appointment by the board;

 

 

reviewing annually with the
board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity;

 

making recommendations on the
frequency and structure of board meetings and monitoring the functioning of the committees of the board; and

 

advising the board periodically
with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws
and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.

 

Duties of Directors

 

Under Cayman Islands Law, our directors have a
duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the skills they
actually possess such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their
duty of care to us, our directors must ensure compliance with our memorandum and articles of association. In limited exceptional circumstances,
a shareholder may have the right to seek damages if a duty owed by our directors is breached. See “Description of Ordinary Shares—Differences
in Corporate Law” for additional information on our directors’ fiduciary duties under Cayman Islands Law.  

 

Remuneration and Borrowing

 

The directors may receive such remuneration as
our board of directors or a committee of directors or our shareholders by an ordinary resolution may determine from time to time. Each
director is entitled to be repaid or prepaid all traveling, hotel and other expenses properly incurred by him in going to, attending and
returning from meetings of our board of directors or committees of our board of directors or general meetings of the Company, or otherwise
in connection with the business of the Company, or to receive such fixed allowance in respect thereof as may be determined by the Directors
from time to time, or a combination partly of one such method and partly the other. The compensation committee will assist the directors
in reviewing and approving the compensation structure for the directors. Our board of directors may exercise all the powers of the company
to borrow money and to mortgage or charge our undertakings, property assets (present and future) and uncalled capital or any part thereof,
to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation
of the Company or of any third party.

 

Qualification

 

The shareholding qualification for directors may
be fixed by the Company by resolution of directors or a committee of directors or by an ordinary resolution of our shareholders and unless
and until so fixed no share qualification shall be required.

 

Terms of Directors and Officers

 

All directors hold office until such time as he
is removed from office by the Company by resolution of directors or a committee of directors or by an ordinary resolution of our shareholders.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement
or composition with his creditors; (ii) is found to be or becomes of unsound mind; (iii) resigns his office by notice in writing
to the Company; (iv) is removed from office by resolution of directors or by an ordinary resolution of our shareholders; (v) (e) is convicted
of an arrestable offence; or (vi) dies. Officers are elected by and serve at the discretion of the Board of Directors.

 

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors
and officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has been a party to
any judicial or administrative proceeding during the past ten (10) years that resulted in a judgment, decree or final order enjoining
the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our
discussion below in “Related Party Transactions,” our directors and officers have not been involved in any transactions with
us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Code of Business Conduct and Ethics

 

We have adopted a code of business conduct and
ethics applicable to our directors, officers and employees. A copy of the code of business and ethics has been filed as an exhibit to
the registration statement of which this prospectus is a part and will be available on our investor relations website.

 

Executive
compensation

 

We currently do not have a compensation committee
approving our salary and benefit policies. Our board of directors determined the compensation to be paid to our directors and executive
officers based on our financial and operating performance and prospects, and contributions made by the directors and executive officers
to our success. Each of the directors and named executive officers will be measured by a series of performance criteria by the board of
directors or the compensation committee on a yearly basis. Such criteria will be set forth based on certain objective parameters such
as job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance and
overall corporate performance.

 

Our board of directors has not adopted or established
a formal policy or procedure for determining the amount of compensation paid to our executive officers. The board of directors will make
an independent evaluation of appropriate compensation to key employees, with input from management. The board of directors has oversight
of executive compensation plans, policies and programs.

 

The following table sets forth certain information with respect to
compensation for the years ended September 30, 2021 and 2020, earned by or paid to our chief executive officer and principal executive
officer, our principal financial officer, and our other most highly compensated executive officers whose total compensation exceeded $100,000
(the “named executive officers”).

 

Name and Principal Position  

Fiscal
Year
Ended

September 30,

    Salary
($)
    Bonus
($)
    Stock
Awards
($)
    All Other
Compensation
($)
    Total
($)
 
Ning Wen     2021       25,183                         25,183  
CEO and Chairman     2020       25,183                         25,183  
Yanyi Li     2021                                
Former Interim CFO (i)     2020       13,104                         13,104  
Yuxiu Wang     2021       46,162                         46,162  
CFO (ii)     2020                                

 

(i) Yanyi Li has been the financial controller of Sancaijia Co., Ltd. since September 2018 and was the interim CFO of Sancai Holding Group Ltd from September 4, 2020 to October 4, 2020.
   
(ii) Yuxiu Wang is the CFO of Sancai Holding Group Ltd since October
4, 2020.

 

 

Employment Agreements

 

Our employment agreements with our officers generally
provide for employment for a specific term and pay annual salary, health insurance, pension insurance, and paid vacation and family leave
time. The agreement may be terminated by either party as permitted by law.

 

We have entered into an employment agreement with
our Chief Executive Officer and Chairman of the Board, Ning Wen, effective September 1, 2018, with an annual salary of RMB 180,000 (approximately
$25,183).

 

We have entered into an employment agreement with
our financial controller and Interim CFO, Yanyi Li, effective September 1, 2018, for a term of 3 years, with an annual salary of RMB 90,000
(approximately $12,592).

 

We have entered into an employment agreement with
our Chief Technology Officer, Hao Xuan, effective February 25, 2021, for a term of 3 years, with an annual salary of RMB 240,000 (approximately
$33,578).

 

We have entered into an employment agreement with
our Chief Marketing Officer, Siqi Tang, effective April 13, 2020 for a term of 3 years, with an annual salary of RMB 90,000 (approximately
$12,592).

 

We have entered into an employment agreement with
our director, Dayu Xu, effective August 30, 2020 for a term of 3 years, with an annual salary of RMB 120,000 (approximately $16,789).

 

We have entered into an employment agreement
with our CFO, Yuxiu Wang, effective October 4, 2021for a term of 3 years, with an annual salary of RMB 300,000 (approximately $41.973).

 

RELATED
PARTY TRANSACTIONS

 

In addition to the executive officer and director
compensation arrangements discussed in “Compensation of Directors and Executive Officers,” below we describe transactions
since incorporation, to which we have been a participant, in which the amount involved in the transaction is material to our Company and
in which any of the following is a party: (a) enterprises that directly or indirectly through one or more intermediaries, control or are
controlled by, or are under common control with, our Company; (b) associates; (c) individuals owning, directly or indirectly, an interest
in the voting power of our Company that gives them significant influence over our Company, and close members of any such individual’s
family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling
the activities of our Company, including directors and senior management of companies and close members of such individuals’ families;
and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c)
or (d) or over which such a person is able to exercise significant influence.

 

During the fiscal years ended September 30,
2021 and 2020, the related parties consisted of the following:

 

Name of related party   Relationship
Ning Wen   CEO and Chairman of the Board
Shanghai Wenji Technology Co., Ltd. (i)   An entity controlled by Ning Wen
Xi’an Sancai House Cleaning Industry Service Co. Ltd. (ii)   An entity controlled by Ning Wen
Fancy Dream Limited (iii)   An entity controlled by Ning Wen
Lucky Bunny Limited (iv)   An entity controlled by Lizhi He
Superexellence Limited (v)   An entity controlled by Lizhen Tang
Hippogriff Limited (vi)   An entity controlled by Zhijie Zhang

 

(i) Mr. Ning Wen is the registered legal
representative of Shanghai Wenji Technology Co., Ltd. This company does not have material operation at this moment and is in the process
of changing its registered legal representative.

 

 

(ii) Mr. Ning Wen is the registered legal
representative and a majority shareholder of Xi’an Sancai House Cleaning Industry Service Co. Ltd. This company does not have material
operation at this moment and is in the process of dissolution.

 

(iii) Mr. Ning Wen is the sole shareholder
of Fancy Dream Limited, through which Mr. Ning Wen indirectly holds 6,300,000 Class A Ordinary Shares and 1,000,000 Class B Ordinary
Shares of the Company. Mr. Ning Wen also holds 63% equity interest in the VIE.

 

(iv) Mr. Lizhi He is the sole shareholder
of Lucky Bunny Limited, through which Mr. Lizhi He indirectly holds 2,000,000 Class A Ordinary Shares of the Company. Mr. Lizhi He also
holds 20% equity interest in the VIE.

 

(v) Mr. Lizhen Tang is the sole shareholder
of Superexellence Limited, through which Mr. Lizhen Tang indirectly holds 1,300,000 Class A Ordinary Shares and 500,000 Class B Ordinary
Shares of the Company. Mr. Lizhen Tang is an employee of the VIE and also holds 13% equity interest in the VIE.

 

(vi) Mr. Zhijie Zhang is the sole shareholder
of Hippogriff Limited, through which Mr. Zhijie Zhang indirectly holds 400,000 Class A Ordinary Shares of the Company. Mr. Zhijie Zhang
also holds 4% equity interest in the VIE.

 

As of September 30, 2021, the amount due to
the related parties was $0.01 million, which consisted of the followings:

 

Name of Related Party from
Whom Amounts were Received
  Amount     Relationship   Note
Ning Wen    $ 13,279     Founder and CEO of the Company   Loan payable 

 

 During the fiscal years ended September 30,
2021 and 2020, the Company made business expenses advances to the following related parties in the forms of unsecured and non-interest
bearing loan. We do not plan to provide loans to related parties in the future.

 

    As of September 30,  
    2021     2020  
Fancy Dream Limited   $                 –     $ 700  
Hippogriff Limited   $     $ 700  
Shanghai Wenji Technology Co. Ltd   $     $ 61,233  
Xi’an Sancai House Cleaning Industry Service Co. Ltd   $     $ 78,882  
Lucky Bunny Limited   $     $ 700  
Superexellence Limit   $     $ 700  
Total   $     $ 142,915  

 

During the fiscal years ended September 30,
2021 and 2020, the Company owed funds to the following related parties; these loans were unsecured and non-interest bearing.

 

    As of September 30,  
    2021     2020  
Wen Ning   $            –     $ 1,469,401  
Total   $     $ 1,469,401  

 

 

Security
Ownership of Certain Beneficial Owners and Management

 

The following table sets forth information with
respect to beneficial ownership of our Class A Ordinary Shares and Class B Ordinary Shares as of the date of this prospectus by:

  

Each person who is known by
us to beneficially own more than 5% our outstanding Class A Ordinary Shares and Class B Ordinary Shares;

 

Each of our director, director
nominees and named executive officers; and

 

All directors and named executive
officers as a group.

 

The number and percentage of Class A Ordinary
Shares and Class B Ordinary Shares beneficially owned before the offering are based on 10,000,000 Class A Ordinary Shares with a par value
of $0.0001 per share, and 1,500,000 Class B Ordinary Shares with a par value of $0.0001 per share issued and outstanding as of the date
of this prospectus. We are in the process of amending and restating our memorandum and articles of association, which will be effective
immediately prior to the completion of this offering. Holders of Class A Ordinary Share will be entitled to one (1) vote per share. Holders
of Class B Ordinary Shares will be entitled to ten (10) votes per share. Information with respect to beneficial ownership has been furnished
by each director, officer or beneficial owner of more than 5% of either Class A Ordinary Shares or Class B Ordinary Shares. Beneficial
ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power
with respect to securities. In computing the number of Class A Ordinary Shares and Class B Ordinary Shares beneficially owned by a person
listed below and the percentage ownership of such person, Class A Ordinary Shares and Class B Ordinary Shares underlying options, warrants
or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this prospectus are
deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated
in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment
power for all Class A Ordinary Shares and Class B Ordinary Shares shown as beneficially owned by them. Unless otherwise indicated in the
footnotes, the address for each principal shareholder is in the care of our Company at No. 6 Fengcheng Second Road, Room 401, Xi’an
Economic and Technological Development Zone, Xi’an, Shaanxi Province, People’s Republic of China 710000. As of the date hereof,
we have four (4) shareholders of record.

 

 

Executive Officers and Directors   Amount of
Beneficial
Ownership
of Class A
Ordinary
Shares(1)
    Pre-Offering
Percentage
Ownership
of Class A
Ordinary
Shares(2)