ZKGC New Energy Ltd F-1, filed Jan 25, 2022
ZKGC New Energy Ltd (DAZSF)
As filed with the Securities and Exchange Commission on January 25, 2022
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ZKGC New Energy Limited
(Exact Name of Registrant as Specified in Its Charter)
Not Applicable
(Translation of Registrant’s name into English)
| Cayman Islands | 3699 | Not Applicable | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
12 Xinxiangdi Jiari
Laocheng Town, Chengmai County
Hainan Province 571924, People’s Republic of China
(+86) 0760 88963658
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
CCS Global Solutions, Inc.
99 Washington Avenue, Suite 805A, Albany, NY 12210
(800)-300-5067
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
Robert Brantl, Esq.
181 Dante Avenue
Tuckahoe, NY 10707-3042
(914) 693-3026
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please 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, please 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. ☒
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 Each Class of Securities to Be Registered | Amount to be Registered | Proposed Maximum Offering Price per Unit | Proposed Maximum Aggregate Offering Price (1)(2) | Amount of Registration Fee | ||||||||||||
| Ordinary shares, par value $0.001 | 3,000,000 | $ | 0.30 | $1,000,000. | $ | 92.70 | ||||||||||
| (1) | Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933. |
| (2) | Includes (a) ordinary shares represented by American depositary shares initially offered and sold outside the United States that may be resold from time to time in the United States, and (b) ordinary shares represented by American depositary shares that are issuable upon the exercise of the underwriters’ overallotment option to purchase additional shares. The ordinary shares are not being registered for the purpose of sales outside the United States. |
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, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
| The information in this prospectus is not complete and may be amended. The Issuer may 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 DATED JANUARY 25, 2022
PRELIMINARY PROSPECTUS
ZKGC NEW ENERGY LIMITED
3,000,000 ORDINARY SHARES
OFFERING PRICE $0.30 PER SHARE
This prospectus relates to the resale from time to time of up to 3,000,000 of our ordinary shares by the selling shareholders identified in the section entitled “Selling Shareholders” on page 34. We issued the 3,000,000 shares in private placement transactions prior to the filing of the registration statement that contains this prospectus.
The selling shareholders may offer and sell all or a portion of the shares in accordance with one or more of the methods described in the plan of distribution, which begins on page 36 of this prospectus. ZKGC New Energy Limited is not selling any of our ordinary shares in this offering and therefore, we will not receive any proceeds from the sales by the selling shareholders. The selling shareholders will offer and sell the ordinary shares at a fixed price of $0.30 per share until our ordinary shares are quoted on the OTCQB or other established public market, at which time the selling shareholders may sell the ordinary shares at prevailing market prices or in privately negotiated transactions.
This is an initial public offering of our ordinary shares. There is no public market for our ordinary shares, nor are our ordinary shares currently eligible for trading on any national securities exchange, NASDAQ or any over-the-counter market. We intend to arrange for a registered broker-dealer to apply for permission to post a quotation for our stock, and we intend to then apply to have our ordinary shares quoted on the OTCQB system of the OTC Market Group. However, no assurance can be given that our ordinary shares will be quoted on the OTCQB or any other quotation service.
ZKGC New Energy Limited is a holding company organized in the Cayman Islands. The business described in this prospectus is not carried out by ZKGC New Energy Limited or by any of its subsidiaries, but by a variable interest entity (“VIE”) located in China. We have no direct control over the VIE; our control is based on a series of contracts. The enforceability of such contracts has not been tested in the courts of China, We adopted the VIE arrangement because Chinese law restricts foreign ownership of value-added telecommunications companies, such as our VIE. For this reason, there is doubt as to whether Chinese courts would enforce our contracts with the VIE. If they did not, that refusal could cause the value of our ordinary shares to significantly decline or be eliminated. See the discussion of the risks of the VIE arrangement in “Risk Factors: Risks Relating to our VIE Structure” on page 13.
OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR ORDINARY SHARES WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON PAGE 8 BEFORE INVESTING IN OUR ORDINARY SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is ____, 2022
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form F-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the selling shareholders may, from time to time, sell the shares offered by them described in this prospectus. We will not receive any proceeds from the sale by such selling shareholders of the securities offered by them described in this prospectus.
We have not, nor have any of the selling shareholders, 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 or on behalf of us or to which we have referred you. None of us or the selling shareholders take responsibility for, or can provide assurance as to the reliability of, any other information that others may give you. Neither we nor the selling shareholders will make an offer to sell these shares in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of our ordinary shares. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: We have not, nor have any of the selling shareholders done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside the United States.
TABLE OF CONTENTS
i
Identifiers
As used in this prospectus, the following terms have the following meanings:
PRC means the People’s Republic of China.
SEC means the U.S. Securities and Exchange Commission
For ease of reference, the entities discussed in this prospectus will be identified as follows:
| Identifier | Jurisdiction | Entity Name | ||
| ZKGC Cayman | Cayman Islands | ZKGC New Energy Limited | ||
| ZKGC International | Hong Kong | ZKGC International Group Holdings Limited | ||
| Zhongke WFOE | PRC | Hainan GCGY Commercial & Trading Co., Ltd. | ||
| Hainan ZKGC | PRC | Hainan ZKGC New Energy Co., Ltd. | ||
| Network ZKGY | PRC | Hainan ZKGY Network Technology Co., Ltd. |
The terms “we”, “us” and “our”, as used in this prospectus, refer to ZKGC Cayman and its subsidiaries, ZKGC International and Zhongke WFOE, both of which are holding companies without operations. When we refer to the two operating entities discussed in this prospectus, we identify them by name (Hainan ZKGC and Network ZKGY) and we at times refer to Hainan ZKGC as our “VIE” – i.e. variable interest entity. We make this distinction because we have no ownership interest in the VIE or in its subsidiary, Network ZKGY.
Our Corporate Structure
The following diagram illustrates our corporate and operating structure:
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Contractual Arrangements with VIE
This is an offering of ordinary shares issued by ZKGC Cayman. However, ZKGC Cayman does not have any business operations; nor do either of its two subsidiaries. The business operations described in this prospectus are carried on by two companies organized and located in the PRC: one is a variable interest entity (“VIE”) with respect to the Chinese subsidiary of ZKGC Cayman; the other is a subsidiary of the VIE. ZKGC Cayman has entered into contracts that promise it control over the VIE. However, there is no reason to believe that ZKGC Cayman will ever gain direct ownership of the business carried on by the VIE.
“Variable Interest Entity” does not describe a legal relationship; it is an accounting concept. Under U.S. Generally Accepted Accounting Principles, if Entity A exercises effective control over Entity B through contractual arrangements, then the financial results and balance sheet of Entity B should be consolidated with the financial results and balance sheet in Entity A’s consolidated financial statements.
Due in part to limitations under PRC law on foreign investment in value-added telecommunication services, we conduct substantially all of our operations in China through contractual arrangements with Hainan ZKGC and Network ZKGY, our consolidated variable interest entity, its subsidiary, and their shareholders. We do not hold any equity interest in either Hainan ZKGC or Network ZKGY. We depend on Hainan ZKGC and Network ZKGY to operate substantially all of our business. We have entered into contractual arrangements with Hainan ZKGC and its shareholder, which enable us to:
| ● | direct the activities of Hainan ZKGC and Network ZKGY that most significantly impact their economic performance; |
| ● | absorb losses and receive benefits from Hainan ZKGC’s and Network ZKGY’s operations; and |
| ● | have an exclusive option to purchase, to the extent permitted by applicable PRC law, all of the equity interests in Hainan ZKGC. |
These contracts promise that we will realize substantially all of the benefits and losses resulting from the business operations of the VIE, and will have control over the operations carries on in China. (A detailed summary of the terms of the VIE contracts may be found in the section titled “Our Corporate Structure” at page 20.) However, for reasons described in the section of this prospectus titled “Risk Factors: Risks Related to our VIE Structure”, we may not be able to exercise the control promised by the VIE contracts and we may not realize the benefits resulting from the business operations of the VIE.
In general, investment in an entity whose equity value depends on contractual arrangements governed by the laws of the PRC is less advantageous to the investor than investment in an entity that has legal ownership of the assets on which the business of the entity depends. The specific risks of depending on a VIE relationship with a Chinese entity include the following:
| ● | The courts in China have not determined whether the VIE contracts are enforceable. |
| ● | The reason for using the VIE relationship is that Chinese law prevents direct ownership of a company engaged in the business described in this prospectus. This may influence the Chinese courts to decide that the VIE contracts are not enforceable. |
| ● | The courts may determine that the VIE structure actually violates the restriction on foreign investment in the value-added telecommunications industry, and so find our VIE to be operating illegally. |
| ● | If the enforceability of the VIE contracts became the subject of legal proceedings in China, ZKGC Cayman could incur substantial legal expenses in the effort to enforce its rights, with no assurance of ultimate success. |
Cash Flow
The Exclusive Business Cooperation Agreement between Zhongke WFOE and Hainan ZKGC provides that on a quarterly basis Hainan ZKGC will pay to Zhongke WFOE a fee equal to the net income of Hainan ZKGC for the preceding quarter. However, the same agreement also says that the quarterly fee payable may be reduced to assure that Hainan ZKGC has sufficient capital to implement its business plan. In reliance on that latter provision, Hainan ZKGC has, to date, paid nothing to Zhongke WFOE, as it requires all of its cash resources to launch its business operations.
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Business Summary
The business that will be described in this prospectus is business carried on by Hainan ZKGC and Network ZKGY. Neither ZKGC nor its subsidiaries has any direct control over that business, as they do not own either Hainan ZKGC or Network ZKGY. The Company’s control over the business is limited to the contractual covenants contained in certain agreements (identified by reference to their accounting significance as “VIE Agreements”) among Zhongke WFOE, Hainan ZKGC, and Liao Jinqi in his role as owner of the equity in Hainan ZKGC.
Hainan ZKGC and its 99%-owned subsidiary, Network ZKGY, are engaged in the business of constructing and operating charging stations for electric vehicles (“EV”). All of the charging stations installed by Hainan ZKGC are linked to a software platform provided by Network ZKGY under the tradename “Charging Cloud SaaS Platform”, which enables the parties responsible for each charging station to monitor and manage the charging stations.
The offices of Hainan ZKGC are located in Haikou City, which is the capital city of Hainan Province. To date, Hainan ZKGC has installed charging stations exclusively in the 18 cities and counties of Hainan Province. Its business plan is to rapidly grow into a dominant provider of charging stations in Hainan Province, and then, during 2022, expand its operations onto the mainland, and develop a market presence in southeast China.
Foreign Private Issuer Status
We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:
| ● | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; |
| ● | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies in the United States; |
| ● | 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. |
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (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, (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. We intend to take advantage of these exemptions. As a result, investors may find investing in our ordinary shares less attractive.
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 of 1933, as amended (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 could remain an emerging growth company for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
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THE OFFERING
| Shares of common stock offered by us: | None | |
| Securities offered by Selling Shareholders | 3,000,000 Ordinary Shares. | |
| Ordinary Shares currently outstanding | 13,000,000 Ordinary Shares | |
| Other Equity Securities Outstanding | None | |
| Use of Proceeds: | The Company will not receive any proceeds from the resale or other disposition of common stock offering by the selling shareholders covered by this prospectus. |
Risk Factors
An investment in the Company’s common stock is speculative and involves substantial risks. You should read the “Risk Factors” section of this prospectus beginning on page 8 for a discussion of certain factors to consider carefully before deciding to invest in our Ordinary Shares.
Our operations in China give rise to a number of significant risks that could result in a significant reduction in the value of the ordinary shares you purchase, or could limit the ability of ZKGC Cayman to finance the operations of the VIE. In brief, some of the more significant risks that arise from investment in an entity dependent on operations in China carried on by a VIE are:
| ● | the possibility that Chinese courts will refuse to enforce the VIE contracts which give us control over our operating entities; |
| ● | the possibility that Chinese courts may consider our involvement in the field of value-added telecommunications to be illegal; |
| ● | restrictions by the Chinese government on foreign investment in China may limit our ability to adequately finance the business activities of our VIE; |
| ● | currency conversion restrictions imposed by the government of China may limit or eliminate our ability to distribute the profits from our Chinese operation. |
| ● | recently adopted regulations of the Cyberspace Administration of China or recently pronounced policies of the China Securities Regulatory Commission may in the future lead to restrictions on our ability to fund our VIE from the proceeds of securities offerings by ZKGC Cayman; |
| ● | the fact that the Chinese legal system is still in its development stage, and lacks the binding precedents that enable business entities to anticipate how the courts will interpret regulations; |
| ● | The absence of principles of substantive due process in China, which enables the Chinese government to frequently intervene in business affairs in China for the sake of new government policies. |
At the same time, our business operations face the kind of significant risks that are common to start-up enterprises, including:
| ● | The ability of larger competitors to exert pressure on Hainan ZKGC by charging lower service fees to customers; and |
| ● | Hainan ZKGC's need to secure substantial capital investment in order to secure a competitive position in the market for EV charging services. |
These and other risks that may cause your investment in ZKGC Cayman to fail are discussed in detail in the section of this prospectus titled “Risk Factors” at page 8.
4
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary consolidated statement of operations data for the period from August 11, 2020 (inception of operations) to May 31, 2021 and the summary balance sheet information as of May 31, 2021 have been derived from the audited financial statement of ZKGC Cayman and subsidiaries included elsewhere in this prospectus. This summary financial data should be read in conjunction with the consolidated financial statements of ZKGC Cayman and subsidiaries for the period ended May 31, 2021.
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
SUMMARY CONSOLIDATED BALANCE SHEET
| May 31, 2021 | ||||
| Current assets | $ | 695,452 | ||
| Total assets | 961,291 | |||
| Current and total liabilities | $ | 735,785 | ||
| Shareholders’ equity | $ | 225,316 | ||
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
| Period
from August 11, 2020 (inception) to May 31, 2021 | ||||
| Revenues | $ | 320,012 | ||
| Gross profit | 54,543 | |||
| Loss from operations | $ | (7,552 | ) | |
| Net income | $ | 35,806 | ||
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements and information relating to our business that are based on our beliefs as well as assumptions made by us or based upon information currently available to us. These statements reflect our current views and assumptions with respect to future events and are subject to risks and uncertainties. Forward-looking statements are often identified by words such as: “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project” and similar expressions or words which, by their nature, refer to future events. In some cases, you can also identify forward-looking statements by terminology such as “may,” “will,” “should,” “plans,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled Risk Factors beginning on page 8, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In addition, you are directed to factors discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operation section beginning on page 22, and the section entitled “Business of Hainan ZKGC” beginning on page 27, and as well as those discussed elsewhere in this prospectus.
These forward-looking statements speak only as of the date of this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking to disseminate any update or revisions of any of the forward-looking statements to reflect any change in our expectations with regard thereto or to conform these statements to actual results.
DETERMINATION OF THE OFFERING PRICE
Since our Ordinary Shares are not listed or quoted on any exchange or quotation system, the offering price of our Ordinary Shares in this prospectus was arbitrarily determined. The offering price of our Ordinary Shares does not bear any rational relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market.
We have not declared or paid any cash dividends on our Ordinary Shares since our inception. Our Board of Directors currently intends to retain all earnings for use in the business of our VIE for the foreseeable future. Any future payment of dividends will depend upon the results of operations of our VIE, our financial condition, cash requirements and other factors deemed relevant by our board of directors. There are currently no restrictions that limit our ability to declare cash dividends on our Ordinary Shares.
The source of funds for any payment of dividends by ZKGC Cayman would be fee payments by Hainan ZKGC to Zhongke WFOE pursuant to the Exclusive Business Cooperation Agreement. To date, no fees have been paid, and we do not anticipate any fees being paid while Hainan ZKGC is implementing its plan to expand its business operations through Hainan Province and then into mainland China. Investors in ZKGC Cayman, therefore, should not anticipate receiving dividends by reason of their investment at any time in the next several years.
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MARKET FOR OUR ORDINARY SHARES
There is no established public market for our Ordinary Shares.
We intend to apply for a listing on the Pink Market maintained by OTC Markets concurrently with the filing of the effective notice of this prospectus, and then apply for a listing on the OTCQB as soon as we meet the standards for such a listing. In order to be quoted on the OTC Markets, a market maker must file an application on our behalf in order to make a market for our Ordinary Shares. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, nor can there be any assurance that such an application for quotation will be approved.
In addition, there is no assurance that our Ordinary Shares will trade at market prices in excess of the initial offering price as prices for the Ordinary Shares in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the stock’s depth and liquidity.
We have issued 13,000,000 shares of our Ordinary Shares since our inception on May 31, 2021. There are no outstanding options, warrants, or other securities that are convertible into Ordinary Shares.
An entity’s functional currency is the currency of the primary economic environment in which it operates. Normally that is the currency of the jurisdiction in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The functional currency of the Company is the Renminbi (“RMB’). The reporting currency of these consolidated financial statements is the United States Dollar (“US Dollars” or “$”).
The financial statements of the Company, which are prepared using the RMB, are translated into the Company’s reporting currency, the United States Dollar. Assets and liabilities are translated using the exchange rate at each reporting period end date. Revenue and expenses are translated using weighted average rates prevailing during each reporting period, and shareholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income or expense.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Foreign currency exchange gains and losses resulting from these transactions are included in results of operations.
The exchange rates used for foreign currency translation in this prospectus are as follows:
| Period
from August 11, 2020 (inception) to May 31, 2021 | ||||
| (USD to RMB) | ||||
| Assets and liabilities (period-end exchange rate) | 1 to 6.369427 | |||
| Revenue and expenses (period weighted average) | 1 to 6.600660 |
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An investment in the ZKGC Cayman Ordinary Shares involves a high degree of risk. You should carefully consider the following risk factors and other information in this prospectus before deciding to invest in the Ordinary Shares. If any of the following risks actually occur, the Company business, financial condition, results of operations and prospects for growth could be seriously harmed. As a result, the trading price of the ZKGC Cayman Ordinary Shares could decline and you could lose all or part of your investment.
Risks Related to Our Business
Hainan ZKGC will require substantial additional capital contributions in order to fully implement its business plan and achieve a significant position in the market for charging station services.
The operations of Hainan ZKGC, on which the financial success of the Company depends, have been financed primarily by capital contributions and loans from related parties, primarily Liao Jinqi. Significant expansion of the operations of Hainan ZKGC, however, will require significant capital investment. There can be no assurance that we would be able to raise the additional funding needed to implement its business plan.
Based upon current plans, we expect that Hainan ZKGC will incur operating losses in future periods as it incurs significant expenses associated with the effort of expanding the business of Hainan ZKGC. Further, we cannot guarantee that Hainan ZKGC will be successful in realizing sufficient revenues or in achieving or sustaining positive cash flows at any time in the future. Any such failure could result in the possible closure of the business or force us to seek additional financing through loans or additional sales of our equity securities to continue business operations, which could dilute the value of any shares you purchase in this offering.
Hainan ZKGC faces intense competition. It may lose market share and customers if it fails to compete effectively.
The demand for charging stations in China is strong, and the barriers to entry into the supply market are not great. So there are many enterprises competing to meet the demand. Hainan ZKGC’s current or potential competitors include several major suppliers of charging stations as well as many low volume suppliers similar to Hainan ZKGC. Increased competition may adversely affect its margins, market share and brand recognition, or result in significant losses. When Hainan ZKGC sets prices, it has to consider how competitors have set prices, since electricity is fungible. When they cut prices or offer additional benefits to compete with Hainan ZKGC, Hainan ZKGC may have to lower its own prices or offer additional benefits or risk losing market share, either of which could harm our financial condition and results of operations.
Some of the competitors have longer operating histories, greater brand recognition, better supplier relationships, larger customer bases and greater financial, technical and marketing resources than Hainan ZKGC has. These and other smaller companies may receive investment from or enter into strategic relationships with well-established and well-financed companies or investors, which would help enhance their competitive positions. Some of the competitors may be able to secure more favorable terms from suppliers, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to their website, mobile application and systems development. We cannot assure you that Hainan ZKGC will be able to compete successfully against current or future competitors, and competitive pressures may have a material and adverse effect on its business, financial condition and results of operations.
Changes to fuel economy standards or the success of alternative fuels may negatively impact the EV market and thus the demand for Hainan ZKGC’s products and services.
As regulatory initiatives have required an increase in the mileage capabilities of cars, consumption of renewable transportation fuels, such as ethanol and biodiesel, and consumer acceptance of EVs and other alternative vehicles has been increasing. If fuel efficiency of non-electric vehicles continues to rise, whether as the result of regulations or otherwise, and affordability of vehicles using renewable transportation fuels improves, the demand for electric vehicles could diminish. In addition, developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect demand for EVs and EV charging stations. Regulatory bodies may also adopt rules that substantially favor certain alternatives to petroleum-based propulsion over others, which may not necessarily be EVs. If any of these factors contribute to consumers or businesses to no longer purchasing EVs or purchasing them at a lower rate, it would materially and adversely affect Hainan ZKGC’s business, operating results, financial condition and prospects.
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The EV market in China has benefitted from the availability of rebates, tax benefits and other financial incentives from governments to offset the purchase or operating cost of EVs and EV charging stations. In particular, Hainan ZKGC’s marketing efforts have benefitted from rebates and interest free loans available to purchasers of its EV charging stations that effectively provide purchasers with a significantly discounted purchase price. The reduction, modification, or elimination of such benefits could cause reduced demand for EVs and EV charging stations, which would adversely affect Hainan ZKGC’s financial results.
Over the past decade, the central government of the PRC has swelled the market for EVs in China by providing rebates to purchasers of EVs calculated to significantly reduce the disparity in cost between internal combustion powered vehicles and EVs. The government began in 2020 to reduce and eliminate those rebates. It is not clear how the eventual elimination of the rebates will affect the Chinese market for EVs. If it results in a substantial slowing of the market’s growth, that result could have an adverse effect on Hainan ZKGC’s financial results.
In addition, the government of Hainan Province has provided financial support to the expansion of EV charging infrastructure, primarily in the form of purchaser rebates and interest free loans. If Hainan Province decides to withdraw its support for the industry’s growth, demand for Hainan ZKGC’s charging stations would be likely to diminish.
The EV charging market is characterized by rapid technological change, which requires Hainan ZKGC to continue to develop new products and product innovations. Any delays in such development could adversely affect market adoption of its products and Hainan ZKGC’s financial results.
Continuing technological changes in battery and other EV technologies could adversely affect adoption of current EV charging technology and/or Hainan ZKGC’s products. Hainan ZKGC’s future success will depend upon its ability to develop and introduce a variety of new capabilities and innovations to its existing product offerings, as well as introduce a variety of new product offerings, to address the changing needs of the EV charging market. As new products are introduced, gross margins tend to decline in the near term and improves as the product become more mature and with a more efficient manufacturing process.
As EV technologies change, Hainan ZKGC may need to upgrade or adapt its charging station technology and introduce new products and services in order to serve vehicles that have the latest technology, in particular battery cell technology, which could involve substantial costs. Even if Hainan ZKGC is able to keep pace with changes in technology and develop new products and services, its research and development expenses could increase, its gross margins could be adversely affected in some periods and its prior products could become obsolete more quickly than expected.
If Hainan ZKGC is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or services that meet customer requirements on a timely basis or that remain competitive with technological alternatives, its products and services could lose market share, its revenue will decline, it may experience higher operating losses and its business and prospects will be adversely affected.
If Hainan ZKGC fails to obtain and maintain the requisite licenses, permits and approvals applicable to our business, or fails to obtain additional licenses that become necessary as a result of new enactment or promulgation of laws and regulations or the expansion of our business, its business and results of operations may be materially and adversely affected.
Energy delivery services in China are highly regulated, which require multiple licenses, permits, filings and approvals to conduct and develop business. In particular, each new charging station installation requires that we secure a permit from the provincial government. The labor cost related to the effort to comply with these government regulations is extensive, and the need to sustain good relations with local government can be burdensome. In addition, as the market for charging stations expands, more regulations are likely to emerge. If Hainan ZKGC is unable to efficiently meet the regulatory requirements applicable to our business, its expansion will slow.
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Risks Related to Doing Business in China
Because the operations of Hainan ZKGC, on which the financial success of ZKGC Cayman depend, are located entirely in the PRC, you may not receive the benefits that come from effective enforcement of U.S. federal securities laws.
China has often restricted U.S. regulators’ access to information and limited regulators’ ability to investigate or pursue remedies with respect to China-based issuers, generally citing to state secrecy and national security laws, blocking statutes, or other laws or regulations. In addition, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator can directly conduct investigations or evidence collection activities within the PRC and no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators without Chinese government approval. The SEC, U.S. Department of Justice, and other U.S. authorities face substantial challenges in bringing and enforcing actions against China-based issuers and their officers and directors. As a result, investors in China-based issuers, such as ZKGC Cayman, may not benefit from a regulatory environment that fosters effective enforcement of U.S. federal securities laws.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may restrict or delay us from using monies invested in ZKGC Cayman to make loans or additional capital contributions to our PRC subsidiaries and making loans to Hainan ZKGC or its subsidiary, which could adversely affect our liquidity and our ability to fund and expand the business of Hainan ZKGC.
We are an offshore holding company conducting our operations in China through a VIE arrangement with Hainan ZKGC. Our business plan contemplates that we will finance the growth of Hainan ZKGC by making loans to Zhongke WFOE, our PRC subsidiary, or to Hainan ZKGC, or we may make additional capital contributions to our PRC subsidiary.
Any loans to Zhongke WFOE, our PRC subsidiary, will be subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our PRC subsidiary to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of the State Administration on Foreign Exchange (“SAFE”), or filed with SAFE in its information system. We may also provide loans directly to Hainan ZKGC, according to the Circular of the People’s Bank of China on Matters relating to the Comprehensive Macro-prudential Management of Cross-border Financing issued by the People’s Bank of China in January 2017. According to the Notice of the People’s Bank of China and the State Administration of Foreign Exchange on Adjustments to Comprehensive Macro-prudential Regulation Parameters for Cross-border Financing issued by the People’s Bank of China and the State Administration of Foreign Exchange in March 2020, the limit for the total amount of foreign debt is 2.5 times its net assets. Moreover, any medium or long-term loan to be provided by us to Hainan ZKGC or to our PRC subsidiary must also be filed and registered with the NDRC. We may also decide to finance our PRC subsidiary by means of capital contributions. These capital contributions must be reported to the Ministry of Commerce, or MOFCOM, or its local counterpart. In addition, a foreign invested enterprise is required to use its capital pursuant to the principle of authenticity and self-use within its business scope.
SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19, effective June 2015. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit such capital to be used for equity investments in China in actual practice. 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 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold to Zhongke WFOE or to Hainan ZKGC, which may adversely affect our liquidity and our ability to fund and expand our business in China.
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On October 23, 2019, SAFE issued Notice by the State Administration of Foreign Exchange of Further Facilitating Cross-border Trade and Investment, or Circular 28, which took effect on the same day. Circular 28, subject to certain conditions, allows foreign-invested enterprises whose business scope does not include investment, or non-investment foreign-invested enterprises, to use their capital funds to make equity investments in China. Since Circular 28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties.
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 Zhongke WFOE or to Hainan ZKGC or future capital contributions by us to Zhongke WFOE. As a result, uncertainties exist as to our ability to provide prompt financial support to Zhongke WFOE or to Hainan ZKGC when needed. If we fail to complete such registrations or obtain such approvals, our ability to use capital invested in ZKGC Cayman to capitalize or otherwise fund the operations of Hainan ZKGC may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. Unless Zhongke WFOE or Hainan ZKGC were able to find other funding sources, the business of Hainan ZKGC could fail for lack of sufficient working capital.
Rules recently adopted by the Cybersppace Administration of China may restrict our ability to finance our VIE from the proceeds of securities offerings by ZKGC Cayman.
On January 4, 2022 the Cyberspace Administration of China (“CAC”) adopted rules mandating that an issuer who is a “critical information infrastructure operator” or a “data processing operator” as defined therein and who possesses personal information of more than one million users, and intends to have its securities listed for trading in a foreign country must complete a cybersecurity review by the CAC. Alternatively, relevant governmental authorities in the PRC may initiate cyber security review if such governmental authorities determine an operator’s cyber products or services, data processing or potential listing in a foreign country affect or may affect national security. The rules will become effective on February 15, 2022.
The new CAC rules do not appear to apply to Hainan ZKGC or Network ZKGY at this time. The continued expansion of business operations by Hainan ZKGC, however, could bring that company within the scope of authority of the CAC rules. We may face challenges in addressing such enhanced regulatory requirements and in making necessary changes to our internal policies and practices in data privacy and cybersecurity matters. In that event, our ability to finance the business of Hainan ZKGC could be hindered, which could prevent Hainan ZKGC from achieving profitable operations.
Increased regulation of offshore offerings by the CSRC could interfere with our ability to finance the operations of Hainan ZKGC from sales of securities issued by ZKGC Cayman.
On July 6, 2021, PRC government authorities published the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened regulation over illegal securities activities and supervision on overseas listings by China-based companies. They propose to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks faced by China-based overseas-listed companies. As of the date of this prospectus, no official guidance or related implementation rules have been issued in relation to these recently issued opinions. We could, however, become subject to a requirements that we obtain pre-approval by the China Securities Regulatory Commission (“CSRC”) before offering securities or listing the securities for trade outside of China. These requirements, if adopted, could interfere with our ability to fund Hainan ZKGC from the proceeds of sales of securities issued by ZKGC Cayman.
PRC laws and regulations governing our current business operations are sometimes vague and subject to interpretation. Moreover, the PRC has recently adopted regulatory policies regarding the conduct of business in the PRC that have had sudden adverse effects on business operations. Any changes in PRC laws and regulations or in their interpretation may have a material and adverse effect on our business.
There are substantial uncertainties regarding the interpretation, application and enforcement of PRC laws and regulations, including but not limited to the laws and regulations governing our business. These laws and regulations are sometimes vague and are subject to future changes, and their official interpretation and enforcement by the various branches of the PRC government may involve substantial uncertainty. The PRC legal system is based in part on governmental policies and internal rules some of which are not published on a timely basis or at all. New laws, regulations, rules and policies that affect existing and proposed future businesses may also be applied retroactively.
The principles of substantive due process that apply to the regulatory scheme in the United States are not honored in China. As a result, particularly in the past several years, enterprises operating in China are often subject to policies adopted by the government without prior notice that have had sudden and significant adverse effect on the ability of the enterprise to conduct its business. We cannot predict with certainty what effect existing or new PRC laws or regulations may have on the business of our VIE. If restrictions are adopted that make it impossible for Hainan ZKGC to operate profitably, your investment could become worthless.
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Failure to make adequate contribution to various employee benefit plans, as required by PRC regulations, may subject Hainan ZKGC to penalties.
Companies operating in China are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations. Such companies must contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, earned by employees up to a maximum amount specified by the local government from time to time at locations where the employees are based. The requirement to contribute to employee benefit plans has not been implemented consistently by the local governments in China, reflecting the different levels of economic development in different locations. For the sake of efficient administration and to optimize the cash flows of Hainan ZKGC and Network ZKGY, our VIE does not make the contribution to benefit plans for its employees. Due to its failure to make contributions to employee benefit plans, Hainan ZKGC could be required to make the contributions to these plans as well as to pay late fees and fines. We have accrued liability for the unpaid contributions on our financial statements. However, if the amount of our estimates is inaccurate, our financial condition and cash flow may be adversely affected if Hainan ZKGC was required to pay late fees or fines in relation to the underpaid employee benefits.
Dividends payable to foreign investors and gains on the sale of our Ordinary Shares by our foreign investors may become subject to PRC taxation.
Under the Enterprise Income Tax Law and its implementation regulations, a 10% PRC withholding tax is applicable to dividends payable by a resident enterprise to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have an establishment or place of business but the dividends are not effectively connected with the establishment or place of business, to the extent these dividends are derived from sources within the PRC, subject to any reduction set forth in applicable tax treaties. Similarly, any gain realized on the transfer of shares of a PRC resident enterprise by these investors is also subject to PRC tax at a current rate of 10%, subject to any exemption set forth in relevant tax treaties. If we are deemed a PRC resident enterprise, dividends paid on our Ordinary Shares and any gain realized by the non-resident enterprise investors from the transfer of our Ordinary Shares may be treated as income derived from sources within the PRC and as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of our Ordinary Shares by these investors may be subject to PRC tax at a current rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties. It is unclear, if we are considered a PRC resident enterprise, whether holders of our Ordinary Shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas and claim foreign tax credit if applicable. If dividends payable to our non-PRC investors, or gains from the transfer of our Ordinary Shares by these investors are subject to PRC tax, the value of your investment in our ADSs and/or ordinary shares may decline significantly.
You may experience difficulties in effecting service of a 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 with limited liability incorporated under the laws of the Cayman Islands. However, we conduct substantially all of our operations in China, and substantially all of the assets reflected on our balance sheet are located in China. In addition, all of our senior executive officers reside within China and are PRC nationals. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside China. In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands or the United States. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.
Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of a mutual and practical cooperation mechanism.
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Risks Related to our VIE Structure
We rely on contractual arrangements with Hainan ZKGC and Liao Jinqi to exercise control over the operations of Hainan ZKGC, which may not be as effective as direct ownership in providing operational control.
We have relied and expect to continue to rely on contractual arrangements with Hainan ZKGC and Liao Jinqi to conduct our operations in China. These contractual arrangements, however, may not be as effective as direct ownership in providing us with control over Hainan ZKGC. For example, Hainan ZKGC and Mr. Jinqi could breach their contractual arrangements with us by, among other things, failing to conduct the operations of Hainan ZKGC in an acceptable manner or taking other actions that are detrimental to our interests.
If we had direct ownership of Hainan ZKGC, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Hainan ZKGC, 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 Hainan ZKGC and Mr. Jinqi of their obligations under the contracts to exercise control over Hainan ZKGC. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system.
Neither the Government of the PRC nor the Chinese legal system has ever formally acknowledged the legality of using a VIE-type contractual arrangement where direct ownership of a Chinese entity is forbidden.
Foreign ownership of value-added telecommunications services, such as those provided by Hainan ZKGC, is restricted by the laws of the PRC. Primarily for this reason, our Company does not directly engage in the business of providing charging stations, but instead has entered into a series of contracts with Hainan ZKGC that are intended to provide our Company with control over the operations of Hainan ZKGC and the right to receive the net profits realized by Hainan ZKGC. These contracts are customarily identified as “VIE Agreements”, as they are designed to cause the operating company to be treated under U.S. generally accepted accounting principles as a “variable interest entity”, whose profits and losses can be consolidated with those of its contractual counterpart.
One significant risk of this structure is that the Chinese government has never expressly acknowledged it as a way to legally navigate the country’s investment restrictions. The Chinese government could determine at any time and without notice that the underlying contractual arrangements on which our control of Hainan ZKGC is based violate Chinese law. Any such determination from the Chinese government could eliminate all or most of the value of your investment in ZKGC Cayman.
All or most of the value of an investment in ZKGC Cayman depends on the enforceability of the VIE Agreements between Zhongke WFOE and Hainan ZKGC. A breach of any of the VIE Agreements between Zhongke WFOE and Hainan ZKGC (or its officers, directors, or Chinese equity owners) will be subject to Chinese law and jurisdiction. We cannot assume that the Chinese legal system would enforce the VIE Agreements. If judicial or regulatory determinations are made in China that contractual relationships such as ours with our VIE are unenforceable under Chinese law, it will be likely that the value of the ordinary shares of ZKGC Cayman will significantly diminish or be eliminated.
Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and operations.
The value-added telecommunications services that we conduct through our VIE and its subsidiaries are subject to foreign investment restrictions set forth in the Special Management Measures (Negative List) for the Access of Foreign Investment issued by the MOFCOM, and the National Development and Reform Commission, or the NDRC, effective July 2020.
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On March 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, or the Foreign Investment Law (2019), which became effective on January 1, 2020 and replaced the Sino-Foreign Equity Joint Venture Enterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-Owned Enterprise Law to become the legal foundation for foreign investment in the PRC. Since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, under the Foreign Investment Law (2019), “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does 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 activity in the future. In addition, the definition of foreign investment contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws, administrative regulations or provisions of the State Council. Therefore, it 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. If further actions must be taken under future laws, administrative regulations or provisions of the State Council, we may face substantial uncertainties as to whether we can complete such actions. Failure to do so could materially and adversely affect our current corporate structure, corporate governance and operations.
The contractual arrangements we have entered into with Hainan ZKGC may be subject to scrutiny by the PRC tax authorities. A finding that we owe additional taxes 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. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements in relation to Hainan ZKGC 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 therefore adjust the income of Hainan ZKGC 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 Hainan ZKGC for PRC tax purposes, which could in turn increase its tax liabilities without reducing the PRC tax expenses of Zhongke WFOE. In addition, the PRC tax authorities may impose late payment fees and other administrative sanctions on Hainan ZKGC for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if Hainan ZKGC’s tax liabilities increase or if they are required to pay late payment fees and other penalties.
Risks Related to the Organization of our Holding Company in the Cayman Islands
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands and certain of our officers and directors are residents of jurisdictions outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the United States courts against our directors or officers.
Our corporate affairs will be governed by our Memorandum and Articles of Association as amended from time to time, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under 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 that 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 responsibilities of our directors under Cayman Islands law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
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We have been advised by our Cayman Islands legal counsel, Ogier, that there is uncertainty as to whether the courts of the Cayman Islands would:
| ● | recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and |
| ● | entertain original actions brought in the Cayman Islands against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
There is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment, without any re-examination or re-litigation of matters adjudicated upon, provided such judgment:
| (a) | is given by a foreign court of competent jurisdiction; |
| (b) | imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; |
| (c) | is final; |
| (d) | is not in respect of taxes, a fine or a penalty; |
| (e) | was not obtained by fraud; and |
| (f) | is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. |
Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our board of directors, management or controlling shareholders than they would as public shareholders of a U.S. company. For a discussion of certain differences between the provisions of the Companies Act, remedies available to shareholders and the laws applicable to companies incorporated in the United States and their shareholders, see “Enforceability of Civil Liabilities” and “Description of Securities.”
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Risks Related To Our Management
The loss of the services of our Chairman our failure to timely identify and retain competent personnel could negatively impact our ability to develop our products and sales.
Liao Jinqi, Chairman of both ZKGC Cayman and Hainan ZKGC, is the sole executive officer responsible for our operations and the operations of Hainan ZKGC, and is also the primary source of the know-how that governs our installation of charging stations. Our future success depends upon the continued service of Mr. Jinqi, as well as on our ability to identify and retain additional competent executives with the skills required to execute our business objectives. The loss of the services of any of our officers or our failure to timely identify and retain competent personnel could negatively impact our ability to develop a competitive position in the market for charging stations, which would adversely affect our financial results and impair the growth of Hainan ZKGC.
Our internal controls over financial reporting may not be effective, which could have a significant and adverse effect on our business and reputation.
As a newly public reporting company, we will be in a continuing process of developing, establishing, and maintaining internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting if and when required to do so under Section 404 of the Sarbanes-Oxley Act of 2002. Although our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act until the date we are no longer an emerging growth company, our management will be required to report on our internal controls over financial reporting under Section 404. If we do not remediate any material weaknesses in our internal controls, our reported financial results could be materially misstated or could subsequently require restatement, and we could be subject to investigations or sanctions by regulatory authorities.
Our board of directors acts as our compensation committee, which presents the risk that compensation and benefits paid to those executive officers who are board members and other officers may not be commensurate with our financial performance.
A compensation committee consisting of independent directors is a safeguard against self-dealing by company executives. Our board of directors, which has no independent members, acts as the compensation committee for the Company and determines the compensation and benefits of our executive officers, will administer our employee stock and benefit plans, if any, and reviews policies relating to the compensation and benefits of our employees. Our lack of an independent compensation committee presents the risk that an executive officer on the board may have influence over his or her personal compensation and may obtain benefits levels that may not be commensurate with our financial performance.
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Limitations on director and officer liability and indemnification of our Company’s officers and directors by us may discourage shareholders from bringing a lawsuit against an officer or director.
Our Company’s Memorandum and Articles of Association provide that a director or officer shall not be personally liable to us or our shareholders for breach of fiduciary duty as a director or officer, except for acts or omissions which involve actual fraud or willful default. These provisions may discourage shareholders from bringing a lawsuit against a director or officer for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by shareholders on the Company’s behalf against a director or officer.
Our management has no experience managing a public company.
At the present time, none of our management or any person associated with the Company has experience in managing a public company. This may hinder our ability to establish effective controls and systems and comply with all applicable requirements associated with being a public company. If compliance problems result, these problems could have a material adverse effect on our business, financial condition or results of operations. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. Our management and other personnel will need to devote a substantial amount of time to our new compliance requirements. Moreover, these requirements will increase our legal, accounting and financial compliance costs and will make some activities more time-consuming and costly. These requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
Hainan ZKGC may have difficulty establishing adequate management, legal and financial controls in the PRC.
Hainan ZKGC may have difficulty in hiring and retaining a sufficient number of qualified employees to perform financial management services in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet western standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as will be required under Section 404 of the Sarbanes Oxley Act of 2002.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability in order to enjoy the following benefits:
| ● | political and economic stability; |
| ● | an effective judicial system; |
| ● | a favorable tax system; |
| ● | the absence of foreign exchange control or currency restrictions; and |
| ● | the availability of professional and support services. |
However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:
| ● | the Cayman Islands has a less developed body of securities laws as compared to the United States, and these securities laws provide significantly less protection to investors; and |
| ● | Cayman Islands companies and their shareholders may not have standing to sue in the federal courts of the United States. |
Currently, substantially all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. Substantially or all of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
We have appointed CCS Global Solutions, Inc., located at 99 Washington Avenue, Suite 805A, Albany, NY 12210, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.
Ogier, our counsel as to Cayman Islands law, has advised us that there is uncertainty as to whether the courts of the Cayman Islands would:
| ● | recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of securities laws of the United States or any state in the United States; or |
| ● | entertain original actions brought against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
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Ogier has informed us that it is uncertain whether the courts of the Cayman Islands will allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Ogier has further advised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign judgement, without any re-examination or re-litigation of matters adjudicated upon, provided such judgment:
| (a) | is given by a foreign court of competent jurisdiction; |
| (b) | imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; |
| (c) | is final; |
| (d) | is not in respect of taxes, a fine or a penalty; |
| (e) | was not obtained by fraud; and |
| (f) | is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. |
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as shareholders of a U.S. public company.
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Our Chairman, Liao Jinqi, organized Hainan ZKGC on August 11, 2020 and Network ZKGY on September 28, 2020 to carry out the business plan he developed.
After deciding that a listing in the U.S. would best serve our capital requirements, we organized ZKGC Cayman on May 31, 2021 and subsequently organized ZKGC International and Zhongke WFOE later in 2021 in order to achieve the optimal corporate structure for securities listing and tax purposes. As of October 18, 2021, the Company had been organized by ZKGC Cayman’s acquisition of ZKGC International and ZKGC International’s acquisition of Zhongke WFOE, and the Company’s business had been organized by Zhongke WFOE’s acquisition of contractual control over the operations of Hainan ZKGC and its subsidiary, Network ZKGY.
The following diagram illustrates our corporate and operating structure:
Contractual Arrangements
Due in part to limitations under PRC law on foreign investment in value-added telecommunications services, we conduct substantially all of our operations in China through contractual arrangements with Hainan ZKGC and Network ZKGY, our consolidated variable interest entities, and their shareholders. We do not hold any equity interest in either Hainan ZKGC or its subsidiary, Network ZKGY. We depend on Hainan ZKGC and Network ZKGY to operate substantially all of our business. We have entered into contractual arrangements with Hainan ZKGC and its shareholder, which enable us to:
| ● | direct the activities of Hainan ZKGC and Network ZKGY that most significantly impact their economic performance; |
| ● | absorb losses and receive benefits from Hainan ZKGC’s and Network ZKGY’s operations; and |
| ● | have an exclusive option to purchase, to the extent permitted by applicable PRC law, all of the equity interests in Hainan ZKGC. |
Set forth below is a summary of those contractual arrangements. This summary is qualified in its entirety by reference to the relevant agreements, which have been filed as exhibits to the registration statement on Form F-1 that contains this prospectus.
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Exclusive Business Cooperation Agreement
Under the Exclusive Business Consulting Agreement between Zhongke WFOE and Hainan ZKGC, Zhongke WFOE has the exclusive right to provide to Hainan ZKGC marketing, management, consulting and other services related to its business operations. Most significantly, Zhongke WFOE will license to Hainan ZKGC intellectual property relating to the operation of Charging Stations and will provide Hainan ZKGC consulting services and technical support regarding the development, marketing and installation of Charging Stations. Zhongke WFOE will also provide the software development services required for Zhongke WFOE to expand its client base.
In compensation for the services and licenses provided by Zhongke WFOE, Hainan ZKGC will pay Zhongke WFOE a quarterly fee equal net income of Zhongke WFOE for the preceding quarter less any losses carried forward from prior quarters. The Exclusive Business Consulting Agreement will remain in effect until terminated by the parties.
Equity Interest Pledge Agreement
Liao Jinqi, who owns all of the registered equity in Hainan ZKGC, has entered into an Equity Interest Pledge Agreement with Zhongke WFOE. Pursuant to this agreement, Mr. Jinqi pledged all of his equity interest in Hainan ZKGC, including the right to receive dividends, to Zhongke WFOE to secure the performance of Hainan ZKGC’s obligations under the Exclusive Business Consulting Agreement described above. If Hainan ZKGC breaches relevant contractual obligations under this agreement, Zhongke WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. Mr. Jinqi has agreed not to transfer or create any new encumbrance on his equity interests without the prior written consent of Zhongke WFOE. The Equity Interest Pledge Agreement shall terminate when Hainan ZKGC has fully performed its obligations under the Exclusive Business Consulting Agreement.
Exclusive Option Agreement
Under the Exclusive Option Agreement among Zhongke WFOE, Hainan ZKGC and Liao Jinqi, Mr. Jinqi irrevocably granted Zhongke WFOE or its designated person(s) an exclusive option to purchase, when and to the extent permitted under PRC law, all or part of his equity interest in Hainan ZKGC. The purchase price for the equity interest in Hainan ZKGC shall be determined through consultation according to the appraisal value approved by the relevant authorities and shall be the minimum amount permissible under PRC law. The Exclusive Option Agreement will be valid until all of the equity interest in Hainan ZKGC has been transferred to Zhongke WFOE. The Exclusive Option Agreement provides, among other things, that without Zhongke WFOE’s prior written consent:
| ● | Liao Jinqi may not transfer, encumber, grant a security interest in, or otherwise dispose of any equity interest in Hainan ZKGC, except as provided in the Exclusive Option Agreement; |
| ● | Hainan ZKGC may not (i) sell, transfer, grant security interest in or otherwise dispose of any assets, business, revenue or interest, (ii) enter into any material contract except for those incurred in the ordinary course of business, or (iii) incur any liabilities (except for those incurred in the ordinary course of business) or extend loans or credit facilities to any third party; |
| ● | Hainan ZKGC may not declare or pay any dividends and its shareholder must remit in full any funds received from Hainan ZKGC to Zhongke WFOE; and |
| ● | Hainan ZKGC may not merge with or acquire any third parties, or make investment in any third parties. |
Power of Attorney
Liao Jinqi has executed a power of attorney appointing Zhongke WFOE to be his attorney and irrevocably authorizing it to vote on his behalf on all of the matters of Hainan ZKGC that require shareholders’ approval. The power of attorney is effective so long as the grantor is a shareholder of Hainan ZKGC.
Cash Flow
The Exclusive Business Cooperation Agreement between Zhongke WFOE and Hainan ZKGC provides that on a quarterly basis Hainan ZKGC will pay to Zhongke WFOE a fee equal to the net income of Hainan ZKGC for the preceding quarter. However, the same agreement also says that the quarterly fee payable may be reduced to assure that Hainan ZKGC has sufficient capital to implement its business plan. In reliance on that latter provision, Hainan ZKGC has, to date, paid nothing to Zhongke WFOE, as it requires all of its cash resources to launch its business operations.
The business plan of Hainan ZKGC contemplates that it will pursue rapid growth during the next several years, as the installation of EV charging stations throughout China proceeds apace and Hainan ZKGC attempts to secure a competitive position sufficient to enable it to operate profitably. For that reason, we anticipate that the net income generated by the operations of Hainan ZKGC will be needed to fund that expansion during the foreseeable future. Payments of the fee mandated by the Exclusive Business Cooperation Agreement are, therefore, unlikely to occur during the next several years, as the fee obligation will be accrued as a debt from Hainan ZKGC to Zhongke WFOE.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following management’s discussion and analysis of financial condition and results of operations contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. We assume no obligation to update forward-looking statements or the risk factors. You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus.
Overview; VIE Relationship
ZKGC Cayman is a holding company incorporated in the Cayman Islands on May 31, 2021 under the laws of the Cayman Islands. ZKGC has no substantive operations other than holding all of the outstanding share capital of ZKGC International which was established under the laws of Hong Kong on September 9, 2021. ZKGC International is a holding company holding all of the outstanding equity of Zhongke WFOE, which is a wholly foreign-owned enterprise (“WFOE”) that was incorporated in China on October 12, 2021.
The Company (i.e. ZKGC Cayman and its subsidiaries collectively) carries on business through a contractual relationship between Zhongke WFOE and Hainan ZKGC. Hainan ZKGC was incorporated in the PRC on August 11, 2020 and its subsidiary, Network ZKGY, was incorporated in the PRC on September 28, 2020. Zhongke WFOE and Hainan ZKGC are parties to an Exclusive Business Cooperation Agreement dated October 18, 2021 that requires Zhongke WFOE to provide intellectual property for use by Hainan ZKGC and also to provide Hainan ZKGC and Network ZKGY managerial and technical assistance in carrying on their business. In exchange for the IP licenses and the consulting services provided, Hainan ZKGC is required to pay to Zhongke WFOE all of its net income. Because the terms of the Exclusive Business Cooperation Agreement make Zhongke WFOE the entity that enjoys the financial benefits and risks of the business operations carried on by Hainan ZKGC, accounting principles generally accepted in the United States deem Hainan ZKGC to be a variable interest entity (“VIE”) with respect to Zhongke WFOE. As a VIE, the balance sheet and financial results of Hainan ZKGC are consolidated with those of Zhongke WFOE in the consolidated financial statements of the Company.
In the discussion that follows, the operating results that are presented are primarily the operating results of Hainan ZKGC, even though Hainan ZKGC is not owned, directly or indirectly, by the Company. Moreover, the assets and liabilities presented on the Company’s balance sheet in this prospectus are almost entirely assets and liabilities of Hainan ZKGC. Neither ZKGC or its subsidiary owns any material amount of assets, nor do they have any material amount of liabilities. Therefore the value of the Ordinary Shares issued by ZKGC Cayman is not related to assets that would be distributed to the holders of the Ordinary Shares in the event the Company were liquidated. Instead, the equity value of the Ordinary Shares issued by ZKGC Cayman depends entirely on the extent to which Hainan ZKGC complies with the Exclusive Business Cooperation Agreement or the extent to which, absent such compliance, Zhongke WFOE is able to enforce its rights under the Exclusive Business Cooperation Agreement or the other VIE Agreements. The ability of Zhongke WFOE to enforce the VIE Agreements in the Chinese courts that would have jurisdiction over that dispute is unknown, and represents a significant risk factor relative to an investment in the Ordinary Shares.
Results of Operations
Revenue and Gross Profit
Hainan ZKGC generates revenue from three different sources:
| ● | charging service revenue from charging stations that it owns, independently or jointly; |
| ● | sales revenue from selling ready-to-use charging stations; and |
| ● | other revenue from charging stations that it does not own, but for which it provides network services. Revenue from these charging stations is recorded on the gross method, with revenue earned by the station included in Company revenue. |
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Total revenues for the period from August 11, 2020 (inception) through May 31, 2021 were $320,012. The revenue on transactions subject to value-added taxation (VAT) is recorded net of the applicable VAT. Hainan ZKGC currently pays a VAT of only 3% because it is classified as a small-scale taxpayer. When Hainan ZKGC achieves annual sales of 5,000,000 RMB (US$785,000), its value-added tax rate will increase to 13%.
The allocation of this revenue among the three sources of revenue was:
| ● | Hainan ZKGC- owned charging stations: | $ | 65,982 | |||||
| ● | Sales of charging stations: | 177,280 | ||||||
| ● | Network service: | 76,750 | ||||||
| $ | 320,012 |
The principal components of the direct costs that Hainan ZKGC incurs from production of revenue vary from one revenue source to the next:
| Revenue Source | Principal Costs | |||||
| ● | Hainan ZKGC- owned charging stations: | electricity, revenue share with Property Partners, site usage fees, depreciation | ||||
| ● | Sales of charging stations: | cost of stations, value-added tax | ||||
| ● | Network service: | revenue share to station owner, costs of station operation, amortization of software cost |
During the period from August 11, 2020 (inception) to May 31, 2021, Hainan ZKGC’s revenue and cost of revenue by revenue source were:
| Owned
Stations | Sales
of Stations | Network Service | Total | |||||||||||||
| Revenue | $ | 65,982 | $ | 177,280 | $ | 76,250 | $ | 320,012 | ||||||||
| Cost of Revenue | 61,704 | 130,787 | 72,978 | 265,469 | ||||||||||||
| Gross Profit | $ | 4,278 | $ | 46,493 | $ | 3,772 | $ | 54,543 | ||||||||
The profit margin realized by Hainan ZKGC for the first 10 months of its operations is not necessarily predictive of future profitability. Among the more significant factors that may cause Hainan ZKGC’s profit margin to vary from period to period are:
| ● | the unit price of electricity may vary from time to time; |
| ● | the site usage fees paid by Hainan ZKGC and the revenue share payments to its Property Partners are determined in proportion to the revenue generated by individual charging stations, which is a function of usage of each particular station; |
| ● | the cost incurred by Hainan ZKGC in securing the charging stations that it distributes vary among stations based on the types of charging stations and the parts used in manufacturing them. |
Operating Expenses; Loss from Operations
Selling and marketing expenses were $4,820 for the period from August 11, 2020 (inception) through May 31, 2021. This represented primarily advertising and business promotion expenses.
General and administrative expenses during the same period totaled $57,275. The primary components of general and administrative expense were payroll expense of $17,754, rent expense of $6,489 and depreciation and amortization costs of $7,106. The other $25,926 was comprised of utility expenses, rent expenses, insurance, business entertainment and miscellaneous office expenses.
Operating expenses exceeded gross income by $7,552, representing the loss from operations for the period from inception to May 31, 2021.
Hainan ZKGC anticipates that its operating expenses will increase significantly as it expands its operations. The challenge to administrators will be to maintain a healthy relationship between gross income and operating expenses.
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Net Income; Comprehensive Income
Total other income (expense) was $59,122 for the period from August 11, 2020 (inception) through May 31, 2021. The greater portion of that sum, $59,773, was the gain realized on the sale of a charging station that Hainan ZKGC had operated for a brief period of time.
The Corporate Income Tax rate in the PRC is 25%. In addition, Hainan ZKGC pays to Hainan Province an urban construction tax with an effective rate of 3.5%, and education surcharge with an effective rate of 1.5% and a local education surcharge with an effective rate of 1%. When Hainan ZKGC achieves annual sales of 5,000,000 RMB (US$785,000), the tax rate for the three local taxes will double. For the period ended May 31, 2021, Hainan ZKGC recorded an allowance for income taxes of $15,764.
After adjusting for other income and the provision for income taxes, net income for the period from inception to May 31, 2021 was $35,806. However, because Hainan ZKGC owns only 99% of the equity in Network ZKGY, U.S. GAAP directs us to record all of the revenue and expenses attributable to the operations of Network ZKGY, and then offset the portion of that entity’s net loss that is attributable to the 1% non-controlling interest in the entity. That adjustment resulted in an increase of $115 in the net income attributable to the Company.
Our reporting currency is the U.S. dollar. Our local currency, the Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period being reported upon, and assets and liabilities are translated at the unified exchange rate quoted by Yahoo Finance on the balance sheet date. Translation adjustments resulting from this process are included in other comprehensive income (loss). For the period from August 11, 2020 (inception) to May 31, 2021, a foreign currency translation adjustment of $7,040 has been reported as other comprehensive income in the consolidated statement of operations and comprehensive income (loss).
Liquidity and Capital Resources
Implementation of the business plan of Hainan ZKGC will require substantial amounts of cash investment, primarily to fund the expansion of its fleet of charging stations. During the period from inception to May 31, 2021, Hainan ZKGC financed its initial growth almost exclusively from contributions to the capital of Hainan ZKGC by Liao Jinqi, our Chairman, who contributed $182,660 to capital during that period. That resource was supplemented, as needed, by short-term, non-interest-bearing loans from related parties: during the period from inception to May 31, 2021, we borrowed $36,150 in this fashion and repaid $25,755.
Going forward, we will have to develop external sources of investment capital in order to meet the goals for expansion set into the Hainan ZKGC business plan. To date, the only external financing that we have contributed to Hainan ZKGC was the proceeds of the private placement to the Selling Shareholders, which totaled approximately $60,000. These funds were paid into Hainan ZKGC as a non-interest-bearing loan from Zhongke WFOE. No amount of the loan has been repaid nor has Hainan ZKGC distributed any amount of its profits to Zhongke WFOE. We do not anticipate loan repayment or distributions by Hainan ZKGC to occur during the next several years, as we expect Hainan ZKGC to utilize all of its cash resources for purposes of expansion.
The following summarizes the key components of our cash flows for the period from August 11, 2020 (inception) through May 31, 2021:
| Net cash provided by operating activities | $ | 46,132 | ||
| Net cash (used in) investing activities | (192,904 | ) | ||
| Net cash provided by financing activities | 238,505 | |||
| Effect of exchange rate changes on cash | 1,198 | |||
| Net increase in cash | 92,931 | |||
| Cash, beginning | - | |||
| Cash, ending | $ | 92,931 |
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Operating Activities
Net cash provided by operating activities was $46,132. Hainan ZKGC achieved relative parity between its net income of $35,806 and its net cash used by growing its accounts receivable balance slightly ($34,507) faster than it grew its accounts payable balance. Parity is also assisted by our method of accounting for work in process, as we capitalize as Construction Costs relating to Uncompleted Contracts Hainan ZKGC’s expenditures on development of charging stations while recording as a liability (Deferred Revenue) a portion of the projected expenses determined by the projected schedule for each development project.
Investing Activities
Net cash used in investing activities was $192,904 of which $288,197 was used primarily to construct fully/partially owned charging stations and $86,507 was paid to a outsource software developer for writing Network ZKGY’s charging station software. These expenditures were partially offset when Hainan ZKGC sold a charging station after a short period of operations and realized $181,800 in cash proceeds.
Financing Activities
Net cash provided by financing activities was $238,505, of which $182,600 represented capital contributions, primarily by Liao Jinqi, which was supplemented by advances, net of repayments, totaling $10,395. Hainan ZKGC also had use of $45,450 that a potential customer deposited in anticipation of purchasing a charging station. The customer cancelled the order after May 31, 2021, and the deposit was recorded as a third party loan until it was repaid.
Working Capital
The Company's balance sheet at May 31, 2021 showed a working capital deficit of ($40,333). The primary reason for the deficit was our method of accounting for work in process. For each charging station that Hainan ZKGC begins to construct we estimate the time required for construction, then allocate the estimated cost of construction over the estimated time, and recognize as "Deferred Revenue" the growing liability for the estimated cost in proportion to the passage of estimated time. We also capitalize the expenses that Hainan ZKGC incurs with respect to the project as "Construction in Progress". At May 31, 2021 Hainan ZKGC had four charging stations under construction, and recorded $78,167 more as Deferred Revenue than as Construction Costs relating to Uncompleted Contracts, which determined that we would show a working capital deficit at that time.
We believe that Hainan ZKGC’s revenues and operations will continue to grow and that the profits it should realize on completion of the construction in progress should be sufficient to support its operations for the next year. Nevertheless, in order to be competitive, Hainan ZKGC must establish a significant position among providers of charging stations. To accomplish that position, we will need to secure investment capital, either debt or equity.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that are reasonably likely to have a material effect on the Company’s financial conditions, results of operations, liquidity, capital expenditures or capital resources.
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Critical Accounting Policies and Estimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
In our preparation of the financial statements for the period ended May 31, 2021, there were two estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results. This was:
| ● | Our estimate that the construction of each new charging station would require an average period of sixty days, which estimate we used to measure Deferred Revenue, as described in Note 2 to our Financial Statements. This estimate was uncertain because it was based on our experience in constructing charging stations, which may not bear upon future construction. |
| ● | Our estimate that the useful life of our charging stations, for purposes of depreciation, is five years. The estimate is uncertain because it is based on our prior experience, which may not apply to charging stations currently being installed. |
Recent Accounting Pronouncements
See Note 2 in the Notes to the Consolidated Financial Statements for a discussion of recently issued accounting standards.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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VIE Relationship
As used in this prospectus, the term “Company” refers collectively to ZKGC Cayman, a holding company organized in the Cayman Islands, and its two wholly-owned subsidiaries: ZKGC International, a holding company organized in Hong Kong, and Zhongke WFOE, a wholly foreign-owned enterprise organized in the PRC. The “business” of the Company, as such, is to provide managerial and technical consulting services and intellectual property to Hainan ZKGC and its 99%-owned subsidiary, Network ZKGY, pursuant to the Exclusive Business Cooperation Agreement. At the present time, the services being provided are the services of Liao Jinqi, who is the principal executive officer of ZKGC Cayman, of Zhongke WFOE, and of Hainan ZKGC, and the intellectual property being provided is the know-how that Liao Jinqi acquired during his prior employment in the charging station industry.
The business that will be described in this section of the prospectus is business carried on by Hainan ZKGC and Network ZKGY. The Company has no direct control over that business, as it does not own either Hainan ZKGC or Network ZKGY. The Company’s control over the business is limited to the contractual covenants contained in the Exclusive Business Cooperation Agreement and the other VIE Agreements among Zhongke WFOE, Hainan ZKGC, and Liao Jinqi in his role as owner of the equity in Hainan ZKGC. Although Chinese companies for almost two decades have been using similar VIE arrangements to facilitate offshore investment in industries in which Chinese law does not permit offshore ownership, there is still no governing legal policy as to whether the VIE agreements are enforceable in Chinese courts. For that and other reasons described in the “Risk Factors” section of this prospectus, investment in an entity whose equity value depends on VIE arrangements is less advantageous to the investor than investment in an entity that has legal ownership of the assets on which the business of the entity depends.
The Business of Hainan ZKGC
Hainan ZKGC was organized under the law of the PRC on August 11, 2020; its 99%-owned subsidiary, Network ZKGY, was organized under PRC law on September 28, 2020. Together they are engaged in the business of constructing and operating charging stations for electric vehicles (“EV”). All of the charging stations installed by Hainan ZKGC are linked to a software platform provided by Network ZKGY under the tradename “Charging Cloud SaaS Platform” (the “SaaS Platform”), which enables the parties responsible for each charging station to monitor and manage the charging stations.
Hainan ZKGC distributes its charging stations in three ownership classes:
| ● | ZKGC-Owned. These stations are installed on leased property by Hainan ZKGC, which retains ownership of the charging station, pays the maintenance costs, and manages the station through the SaaS Platform; |
| ● | Joint Ownership. These stations are jointly-owned by Hainan ZKGC and a “Property Partner”. The Property Partner pays a portion of the installation fee, shares the cost of maintaining the station with Hainan ZKGC and is charged a portion of the standard fee for use of the SaaS Platform. Hainan ZKGC manages the charging station, and shares net revenues with the Property Partner. |
| ● | Independent Ownership. Hainan ZKGC sells full ownership of these charging stations to the Property Partners, who pays Hainan ZKGC the cost of the installation and is responsible for the costs of maintaining the station. Hainan ZKGC enters into an ongoing contract with each Property Partner in an Independent Ownership situation, pursuant to which Hainan ZKGC consults with the Property Partner regarding operation of the station, provides payment processing services, and provides use of the SaaS Platform. In some cases, Hainan ZKGC also provides maintenance services. |
The offices of Hainan ZKGC are located in Haikou City, which is the capital city of Hainan Province. Located in the southeast area of the PRC, off the coast of Guangdong, Hainan Province is the smallest province in the PRC and is comprised of Hainan Island, the largest island in the PRC, and two hundred much smaller islands. The population of Hainan, officially known as Hainan Dao, recently passed 10 million persons. High speed railroads, highways and ferry service connect Hainan Province to the mainland, making it relatively easy to secure supplies. The price of electricity in Hainan is approximately equal to the mainland price.
To date, Hainan ZKGC has installed charging stations exclusively in the 18 cities and counties of Hainan Province. Its business plan is to rapidly grow into a dominant provider of charging stations in Hainan Province, and then, during 2022, expand its operations onto the mainland, and develop a market presence in southeast China.
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The Charging Station Industry in China
In recent decades, China’s rapid economic growth has enabled more and more consumers to buy their own cars. The result has been the creation of the largest automotive market in the world—but also serious urban air pollution, high greenhouse gas emissions, and growing dependence on oil imports. To counteract those troubling trends, the Chinese government has imposed policies to encourage the adoption of plug-in electric vehicles (EVs). Since buying an EV costs more than buying a conventional internal combustion engine vehicle, in 2009 the government began to provide generous subsidies for EV purchases. As a result, China became the world’s largest market for EV’s, accounting for approximately 50% of global sales. In 2020 1.1 million EVs were produced and sold in China. The central government’s “New Energy Vehicle Industry Development Plan (2021 - 2035) predicts that sales of new energy vehicles will account for 20% of car sales in China in 2025.
As the number of EV purchases grew, paying for the subsidies became extremely costly for the government. As a result, beginning in 2020, China’s government began to phase out the subsidies and instead rely on a mandate imposed on car manufacturers. The mandate requires that a certain percent of all vehicles sold by a manufacturer each year must be battery-powered. To avoid financial penalties, every year manufacturers must earn a stipulated number of points, which are awarded for each EV produced based on a complex formula that takes into account range, energy efficiency, performance, and more. The requirements get tougher over time, with a goal of having EVs make up 40% of all car sales in China by 2030.
The mandate on vehicle manufacturers to produce EVs is supplemented by a number of Chinese government policies:
| ● | Tax exemptions. The Chinese government exempts electric vehicles from consumption and sales taxes, which can save purchasers tens of thousands of RMB (equivalent to thousands of dollars). It also waives 50% of vehicle registration fees for electric vehicles. |
| ● | Procurement. The Chinese government also uses its procurement power to promote electric vehicles. A May 2016 order required that half of new vehicles purchased by China’s central government be new energy vehicles within five years. |
| ● | New auto factory requirements. Chinese regulations strongly discourage the construction of factories for manufacturing internal combustion engine vehicles only. Subject to exceptions that are difficult to satisfy, any new vehicle factory is required to include capacity for the construction of electric vehicles. |
Since EVs will be useless without charging stations, the Chinese central government has promoted the development of EV charging infrastructure as a matter of national policy. As the central government has withdrawn subsidies for purchase of EVs, it has redirected a significant portion of those funds to support the development of EV infrastructure, primarily charging stations. In November 2020, the General Office of the State Council promulgated its “Development Plan of the New Energy Vehicle Industry (2021 - 2035), in which it mandated financial support for the construction of charging stations and proposed preferential policies with respect to allocation of space in parking lots to charging stations. China State Grid and China Southern Grid, China’s two state-owned electric utilities, both have programs to promote the development of electric vehicle charging infrastructure.
Hainan Province has also been aggressive in support of EVs and EV infrastructure. Currently, residents of Hainan are restricted in their purchases of fossil fuel vehicles by a lottery system, while there is no restriction on purchase of clean energy vehicles. Rather the Province subsidizes certain purchases of EVs, and encourages insurance companies to provide preferential premiums for EVs. Moving forward, Hainan Province has mandated that sales of internal combustion engine vehicles will be banned in Hainan Province after 2030. In February 2021, the Hainan Provincial People’s Government published its “2021 Action Plan for Promotion of Clean Energy Vehicles in Hainan Province” in which it directed the construction of 10,000 charging stations in Hainan Province to insure that the ratio of pure electric vehicles to charging stations will be below 2.5:1 by the end of 2021.The Action Plan also mandated that 80% of the Province’s highway service areas include EV charging capacity, and provided for reduced parking fees while charging.
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Hainan ZKGC Charging Stations
To take advantage of the market demand being instigated by the central and provincial governments, Liao Jinqi established Hainan ZKGC to be a full service provider and maintainer of EV charging stations. Having supervised the construction and installation of charging stations in his prior employment, Mr. Jinqi was able to choose components from a variety of manufacturers that would work efficiently together. Each charging station component that Hainan ZKGC uses has readily-available alternative sources. Hainan ZKGC also outsources the job of installing the heavy duty transformer to a number of contractors, each of which is replaceable. Electricity is purchased from China Southern Power Grid, one of the largest utilities in southern China.
To date, Hainan ZKGC has marketed its stations primarily by word of mouth, as well as by locating stations with its identifiers in public areas. A purchaser interested in joint ownership executes an Investment Cooperation Contract of Intelligent Charging Station, which is usually a fifteen year contract that specifies the amount each party will invest in the installation, the percentage profit share allocated to each party, and the relative responsibilities for management of the station. If the purchaser prefers independent ownership of the station, he will sign a different form of Investment Cooperation Contract of Intelligent Charging Station, in this case providing for a ten year agreement, with Hainan ZKGC providing certain specified maintenance services and receiving a profit participation of, usually, 10%. In each case, the owner of the property on which the station will be located, if different from the purchaser, may be a third party with a smaller profit participation.
Installation of a charging station in Hainan requires the specific approval of the Hainan Provincial Development and Reform Commission. If the location is being newly developed, the application must comply with relevant construction application procedures. Others, such as construction in existing parking lots, require application to the Development and Reform Commission only. The Commission’s agents review each completed installation for compliance with local construction, electric and industrial standards, and only upon satisfactory review is the charging station connected to the electric grid.
Hainan ZKGC installed its first charging stations in December 2020: five were ZKGC-owned; five Joint-Owned, and eight independently owned. Those 18 stations served as the Beta test for Hainan ZKGC’s business plan, while Hainan ZKGB initiated operations at scale. The next installations, eight independently owned, were completed in May 2021. Since that time, the schedule of installations has been:
| ZKGC-owned | Joint-Owned | Independent | Total YTD | |||||||||||||
| June ’21 | 7 | - | 10 | 43 | ||||||||||||
| July ’21 | - | - | 10 | 53 | ||||||||||||
| Aug. ’21 | - | 2 | 10 | 65 | ||||||||||||
| Sept. ’21 | - | - | 19 | 84 | ||||||||||||
| Oct. ’21 | - | 6 | 18 | 108 | ||||||||||||
Hainan ZKGC anticipates that at year-end 2021 it will have 162 charging stations operating in 26 locations, of which 38 will be owned or partially owned by Hainan ZKGC and the remainder will be independently owned but managed in whole or in part by Hainan ZKGC.
SaaS Platform
Each charging station sold or operated by Hainan ZKGC is linked to the SaaS Platform owned by Network ZKGY, which is part of the services provided by Hainan ZKGC under the Investment Cooperation Contracts. The SaaS Platform is being developed for Network ZKGY by Guangdong Liufutian Network Technology Co., Ltd. under a contract that calls for three stages of development plus ongoing maintenance services by the developer. The first two stages, which were necessary for functionality, have been completed. The third stage, which will allow data sharing and analysis among the charging stations tied to the network, is in development.
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Network ZKGY has registered the copyright on six packages comprising the SaaS Platform. In brief, the functions of each package involve:
| ● | Package One: Provides site revenue analysis, site equipment status, maintenance status, as well as a function to allow the manager to adopt pricing changes and operational strategies. |
| ● | Package Two: Provides vehicle for inputting the terms of the profit share, which facilitates automatic cash settlement among the owners and Hainan ZKGC. |
| ● | Package Three: Provides procurement services, including intelligent charging as well as purchases of equipment and spare parts as needed. Data analysis included in the Platform allows automatic adjustment to market demands. |
| ● | Package Four: Provides data to customers using the Zhongke Fast Charging app, including station location, prices, location map, payment processing, and other facilities useful to customers. |
| ● | Package Five: Provides usage and billing data on a per customer or per group basis. |
| ● | Package Six: Facilitates remote monitoring and remote maintenance of the charging station. |
With the proliferation of charging stations, the facility of the SaaS Platform to allow the charging station owner/manager to remotely and promptly adjust pricing to changes in the market is crucial to maintaining a competitive advantage. Electricity prices in China are generally fixed by formulas developed by local government. The Hainan Development and Reform Commission, for example, divides each day into three eight hour segments: peak, normal and valley. Electricity is priced differently in each segment. The ability of station managers to adjust to changes in prices for specific segments is very useful to maintaining profits and competitive status.
Competition
The charging station industry in China and in Hainan Province is heavily populated, as the industry has relatively low barriers to entry. The principal competitors are Qindao TGood EVC Co., Ltd., which operates more than 350,000 charging stations in the PRC, and Jiangsu Wanbang Charge Equipment Co., Ltd., which operates more than 600,000 charging stations in the PRC.
Hainan ZKGC believes it can achieve and maintain a substantial competitive positions by reason of the quality of its product, the utility of its SaaS Platform, and the skill of Liao Jinqu at site assessment.
Intellectual Property
Hainan ZKGC has made six copyright registrations with the government of the PRC, one for each package included in the SaaS Platform.
Hainan ZKGC has also registered a “trademark name” consisting of a graphic incorporating its corporate name, and the application was accepted by the China National Intellectual Property Administration.
Property
Within Haikou City, Hainan ZKGC leases three dormitory rooms for its employees and one location for its executive offices. The leases terminate in 2023. The aggregate annual rental fee is $17,000. Management believes that the facilities are adequate for present operations. However, as Hainan ZKGC grows, additional facilities will be required.
Employees
Our Company has no employees. Our VIE affiliates currently employ ten individuals: seven are employed by Hainan ZKGC and three are employed by ZKGY Network. Four of their employees perform administrative functions, three perform construction and engineering functions, two are technicians, and one is dedicated to marketing. None of their employees are represented by a labor union or similar collective bargaining organization.
COVID-19
The COVID-19 pandemic had a significant adverse effect on the business climate in the PRC. Hainan Province, however, perhaps by reason of its isolation as an island, was relatively unaffected, with only 190 COVID cases reported.
The business of Hainan ZKGC was also not significantly affected by the COVID-19 pandemic. Its charging stations are self-serving and placed at safe distances from each other; so customers felt safe in charging their vehicles.
There are still hot spots of COVID-19 in the PRC. If a significant number of infections are reported in Hainan in the future, the government will likely impose quarantine measures. To the extent that a quarantine reduced traffic in Hainan, the business of Hainan ZKGC would be adversely affected.
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Directors and Senior Management
ZKGC Cayman
The sole director and senior manager of ZKGC Cayman is identified in the following table.
| Name | Age | Position/Title | ||||
| Liao Jinqi | 48 | Director; Chairman | ||||
Liao Jinqi is the founder of our company and has been our chairman and chief executive officer since our inception. Mr. Liao has many years of experience in the construction and management of charging stations, and is skilled in assessing the feasibility of a charging station location. Prior to organizing Hainan ZKGC in 2020, Mr. Jinqi was for one year employed as General Manager of Guangdong Jiangmen Gongchuang New Energy Automobile Co., Ltd., for two years employed as Supervisor by Guangdong Gongchuang Pure Electric Vehicle Charging Service Co., Ltd., and for three years employed as Chairman by Guangdong Gongchuang New Energy Automobile Co., Ltd., each of which companies was involved in the construction and operation of charging stations. Previously, Mr. Jinqi had been for three years employed as General Manager by Guangdong Century Hongyan Decoration Engineering Co., Ltd. and for two years employed as General Manager by Maoming City Tianxi Art General Store, each of which provided interior decoration services.
Hainan ZKGC
The directors and senior managers of Hainan ZKGC are identified in the following table.
| Name | Age | Position/Title | ||||
| Liao Jinqi | 48 | Executive Director; General Manager | ||||
| Chunai Liu | 47 | Accounting Manager | ||||
Liao Jinqi, See above.
Chunai Liu has been employed as Accounting Manager by Hainan ZKGC since January 2021. In that position, Ms. Liu is responsible for bookkeeping, financial reporting, and the daily financial operations of Hainan ZKGC. Prior to joining Hainan ZKGC, Ms. Liu was employed for ten years as Gas Station Manager by the Shanxi Linken Branch of Sinopec Chemical Commercial Holding Company Limited. In that position, Ms. Liu was responsible for the daily operations of her Branch’s stations, including sales, storage, accounting and human resources management. in 1997, Ms. Liu was awarded a Bachelor’s degree with a concentration in Accounting by Shanxi University of Finance and Economics.
Compensation of Directors and Managers
ZKGC Cayman does not compensate Liao Jinqi for his services as its sole director and manager.
Hainan ZKGC pays Liao Jinqi a salary of 5,000 RMB (US$784) per month for his services as director and General Manager. This amount consists only of cash and does not include any share-based compensation or benefits in kind.
Each of our directors and officers is entitled to reimbursement for all necessary and reasonable expenses properly incurred in the course of employment or service. We do not pay or set aside any amounts for pension, retirement or other benefits for our directors and managers, except our contributions on behalf of our managers located in China to a government-mandated multi-employer defined contribution plan.
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Employment Agreements
Hainan ZKGC is party to a Labor Contract with Liao Jinqi dated August 11, 2020, which provides for Mr. Jinqi’s employment for a term ending August 10, 2023. The Contract designates Mr. Jinqi Executive Director and General Manager for Hainan ZKGC. The Labor Contract provides for a monthly salary of 5,000 RMB (US$784).
Hainan ZKGC is party to a Labor Contract with Chunai Liu dated January 13, 2021, which provides for Ms. Liu’s employment for a term ending January 14, 2023. The Contract designates Ms. Liu Manager of the Financial Department of Hainan ZKGC. The Labor Contract provides for a monthly salary of 3,000 RMB (US$470).
Duties of Members of the Board of Directors
Unlike directors of U.S. corporations, which perform a role that is supervisory and policy-making, under Cayman Islands law, our board of directors has the powers necessary for managing, as well as for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:
| ● | convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings; |
| ● | declaring dividends and distributions; |
| ● | appointing officers and determining the term of office of the officers; |
| ● | exercising the borrowing powers of our company and mortgaging the property of our company; and |
| ● | approving the transfer of shares in our company, including the registration of such shares in our share register. |
Under Cayman Islands law, directors owe the following fiduciary duties:
| i. | duty to act in good faith in what the director believes to be in the best interests of the company as a whole; |
| ii. | duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; |
| iii. | duty to leave unfettered the exercise of future discretion; |
| iv. | duty to avoid a conflict between their duty to the company and their personal interests; and |
| v. | duty to exercise independent judgment. |
In addition to the above, directors also owe a duty to act with skill, care and diligence. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge, skill and experience which that director has. As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders, provided that there is full disclosure by the directors. This can be done by way of permission granted in the Memorandum and Articles of Association or alternatively by shareholder approval at a general meetings.
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The following table sets forth information regarding the beneficial ownership of our Ordinary Shares by each person known by us to beneficially own more than 5% of our Ordinary Shares; each of our named executive officers; each of our directors; and all of our executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
The percentage ownership information shown in the table below is calculated based on 13,000,000 of our Ordinary Shares issued and outstanding. We do not have any outstanding options, warrants or other securities exercisable for or convertible into our Ordinary Shares.
| Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percentage of Class | ||||||
| Liao Jinqi | 5,100,000 | (2) | 39.2 | % | ||||
| All officers and directors as a group (1 person) | 5,100,000 | 39.2 | % | |||||
| Wanqi International Investment Co., Ltd.(3) | 4,900,000 | 37.7 | % | |||||
| (1) | Ownership is of record and beneficial, unless otherwise indicated. |
| (2) | Represents shares owned of record by G&C International Investment Co., Ltd. of which Mr. Jinqi is the sole owner. |
| (3) | Zhong Zhuowei has voting and dispositional control over the shares owned of record by Wanqi International Investment Co., Ltd. |
We are not aware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our Company.
Other than the shares covered by the registration statement of which this prospectus is a part, we have not registered any shares for sale by security holders under the Securities Act. None of our shareholders are entitled to registration rights.
There has been no transaction since the organization of ZKGC Cayman nor any currently proposed transaction, in which a related party had or has a material interest, in which the amount involved exceeded the lesser of $120,000 or one percent of our average total assets at the end of the two most recent fiscal years.
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This prospectus covers offers and sales of up to 3,000,000 of our Ordinary Shares, which may be offered from time to time by the selling shareholders identified in this prospectus. Each of the selling shareholders purchased the shares offered in this prospectus from the Company during November 2021 for a price of 0.13 RMB (US$0.02) per share
The table below identifies each selling shareholder and shows the number of Ordinary Shares beneficially owned by the selling shareholder before and after this offering, and the numbers of shares offered for resale by the selling shareholder. Our registration of these shares does not necessarily mean that each such selling shareholder will sell all or any of its Ordinary Shares. For purposes of preparing the table below, we assume that all shares covered by this prospectus will be sold by each such selling shareholder and that no additional Ordinary Shares will be bought or sold by the selling shareholder.
The following table sets forth the name of each selling shareholder, and, if applicable, the nature of any position, office, or other material relationship which the selling shareholder has had, within the past three years, with us or with any of our predecessors or affiliates, the amount of Ordinary Shares beneficially owned by such shareholder before the offering, the amount being offered for the shareholder’s account, and the amount to be owned by such shareholder after completion of the offering.
| Name
of Selling Shareholder and Position, Office or Material | Ordinary
Shares owned by the Selling | Percent
beneficially owned before | Total
Shares to be Registered Pursuant to this | Number
of Shares Owned by Selling Shareholder After Offering and Percent of Total Issued and Outstanding | |||||||||||||||||
| Relationship with the Company | Shareholder | Offering | Offering | Shares | % of Class | ||||||||||||||||
| Zhuowei Zhong | 5,034,000 | (1) | 38.7 | % | 134,000 | 4,900,000 | 37.7 | ||||||||||||||
| Muxian Hu | 52,000 | <1% | 52,000 | 0 | 0 | ||||||||||||||||
| Rongli Zheng | 48,000 | <1% | 48,000 | 0 | 0 | ||||||||||||||||
| Shanming Huang | 4,000 | <1% | 4,000 | 0 | 0 | ||||||||||||||||
| Peifen Wu | 8,000 | <1% | 8,000 | 0 | 0 | ||||||||||||||||
| Lipeng Huang | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Shaoru Han | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Guosheng Liu | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Yuling Lu | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Chubiao Ning | 4,000 | <1% | 4,000 | 0 | 0 | ||||||||||||||||
| Ruojin Zheng | 4,000 | <1% | 4,000 | 0 | 0 | ||||||||||||||||
| Haiqun Zhang | 4,000 | <1% | 4,000 | 0 | 0 | ||||||||||||||||
| Heng Man Leong | 4,000 | <1% | 4,000 | 0 | 0 | ||||||||||||||||
| Tou Mui Ku | 8,000 | <1% | 8,000 | 0 | 0 | ||||||||||||||||
| Xingjiu Liu | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Ping Zhang | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Lihua Chen | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Haiping Xu | 200,000 | 1.5 | % | 200,000 | 0 | 0 | |||||||||||||||
| Chun Xu | 100,000 | <1% | 100,000 | 0 | 0 | ||||||||||||||||
| Shuzhen Chen | 80,000 | <1% | 80,000 | 0 | 0 | ||||||||||||||||
| Peng Zhao | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Hong Cheng | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Rongzheng Mo | 400,000 | 3.1 | % | 400,000 | 0 | 0 | |||||||||||||||
| Kangli Zhao | 5,200 | <1% | 5,200 | 0 | 0 | ||||||||||||||||
| Shunyao Huang | 34,800 | <1% | 34,800 | 0 | 0 | ||||||||||||||||
| Yujun Xu | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Yanling Zhao | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Qiuyuan Sun | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Chaokan Liu | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Junqin Yang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Xing Wan | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Yaohong Wu | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Jiayi Zhou | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Jin Luo | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Zhicheng Ouyang | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Xiaomi Hu | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Jing Xu | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Liguo Zhang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Huameng Wang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Julie Zhu | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Yangjun Wang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Zhangyou Yan | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Guoming Liang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
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| Name of Selling Shareholder and Position, Office or Material | Ordinary
Shares owned by the Selling | Percent
beneficially owned before | Total
Shares to be Registered Pursuant to this | Number
of Shares Owned by Selling Shareholder After Offering and Percent of Total Issued and Outstanding | |||||||||||||||||
| Relationship with the Company | Shareholder | Offering | Offering | Shares | % of Class | ||||||||||||||||
| Jinfeng Gao | 150,000 | <1% | 150,000 | 0 | 0 | ||||||||||||||||
| Xianyun Pan | 30,000 | <1% | 30,000 | 0 | 0 | ||||||||||||||||
| Jianjun Zhou | 150,000 | 1.2 | % | 150,000 | 0 | 0 | |||||||||||||||
| Lihua Gao | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Jiaen Yu | 100,000 | <1% | 100,000 | 0 | 0 | ||||||||||||||||
| Lu He | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Huabin Huang | 300,000 | 2.3 | % | 300,000 | 0 | 0 | |||||||||||||||
| Liya Zhou | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Tingfang Xu | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Hanlin Chen | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Lehan Li | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Qing Tang | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Fanrong Zeng | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Kaimin Liang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Xinlin Du | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Xiaoyan Jiang | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Xiaosheng Cao | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Ruilin Wang | 200,000 | 1.5 | % | 200,000 | 0 | 0 | |||||||||||||||
| Chunxia Lu | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Xia Li | 40,000 | <1% | 40,000 | 0 | 0 | ||||||||||||||||
| Liangya Chen | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Zhi Cui | 20,000 | <1% | 20,000 | 0 | 0 | ||||||||||||||||
| Xin Zhang | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Shihui Lu | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| Jiacui Zhou | 10,000 | <1% | 10,000 | 0 | 0 | ||||||||||||||||
| (1) | Includes 4,900,000 shares owned of record by Wanqi International Investment Co., Ltd., over which Mr. Zhong holds investment and voting control. |
Except as set forth above, none of the selling shareholders has not held any position or office with us or any of our affiliates, nor has had any other material relationship (other than as a purchaser of securities) with us or any of our affiliates or predecessors within the past three years. Furthermore, none of the selling shareholders is a registered broker-dealer or an affiliate of a registered broker-dealer.
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We are registering 3,000,000 Ordinary Shares for resale by the Selling Shareholders from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the Selling Shareholders of the Ordinary Shares. We will bear all fees and expenses incident to the registration of the Ordinary Shares.
The Selling Shareholders may sell all or a portion of the Ordinary Shares held by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the Ordinary Shares are sold through underwriters, broker-dealers or agents, the Selling Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The Selling Shareholders will offer and sell our Ordinary Shares at a fixed price of $0.30 per share until our Ordinary Shares is quoted on the OTCQB or another established trading market, at which time the Selling Shareholders may sell the Ordinary Shares at prevailing market prices or in privately negotiated transactions. These sales may be affected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:
| ● | On any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; |
| ● | In the over-the-counter market; |
| ● | In transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| ● | Through the writing or settlement of options, whether such options are listed on an options exchange or otherwise; |
| ● | Ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | Block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | Purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | Broker-dealers may agree with the Selling Shareholders to sell a specified number of such shares at a stipulated price per share; |
| ● | A combination of any such methods of sale; and |
| ● | Any other method permitted pursuant to applicable law. |
If the Selling Shareholders effect transactions by selling Ordinary Shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Shareholders or commissions from purchasers of the Ordinary Shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the Ordinary Shares or otherwise, the Selling Shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Ordinary Shares in the course of hedging in positions they assume. The Selling Shareholders may also sell Ordinary Shares short and deliver Ordinary Shares covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The Selling Shareholders may also loan or pledge Ordinary Shares to broker-dealers that in turn may sell such shares.
The Selling Shareholders may pledge or grant a security interest in some or all of the Ordinary Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Ordinary Shares from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of Selling Shareholders to include the pledgee, transferee or other successors in interest as Selling Shareholders under this prospectus. The Selling Shareholders also may transfer, donate and pledge the Ordinary Shares in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
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To the extent required by the Securities Act, the Selling Shareholders and any broker-dealer participating in the distribution of the Ordinary Shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the Ordinary Shares is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of Ordinary Shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Shareholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
The selling security holders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. See: “Shares Eligible for Future Resale” later in this prospectus.
Under the securities laws of some states, the Ordinary Shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the Ordinary Shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that any Selling Shareholder will sell any or all of the Ordinary Shares registered pursuant to the registration statement, of which this prospectus forms a part.
The Selling Shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, including, without limitation, to the extent applicable, Regulation M under the Exchange Act, which may limit the timing of purchases and sales of any of the Ordinary Shares by the Selling Shareholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the Ordinary Shares to engage in market-making activities with respect to the Ordinary Shares. All of the foregoing may affect the marketability of the Ordinary Shares and the ability of any person or entity to engage in market-making activities with respect to the Ordinary Shares.
We will pay all expenses of the resale registration of the Ordinary Shares, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions, if any.
The following table sets forth the estimated expenses in connection with this offering that the Company expects to bear:
| Nature of Expense | Amount | |||
| Securities and Exchange Commission registration fee | $ | 93 | ||
| Transfer Agent fees | 2,000 | |||
| Legal and accounting fees and expenses | 90,000 | |||
| EDGAR filing, printing and engraving fees | 2,000 | |||
| Total | $ | 94,093 | ||
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SHARES ELIGIBLE FOR FUTURE RESALE
As of the date of this prospectus, we have outstanding an aggregate of 13,000,000 Ordinary Shares. Of these shares, the 3,000,000 shares covered by this prospectus may be transferred without restriction or further registration under the Securities Act by use of this prospectus.
The remaining 10,000.000 restricted Ordinary Shares are owned beneficially by affiliates of the Company and may not be resold in the public market except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 of the Securities Act.
Rule 144
In general, under Rule 144 as currently in effect, a person who is not one of our affiliates and who is not deemed to have been one of our affiliates at any time during the three months preceding a sale and who has beneficially owned Ordinary Shares that are deemed restricted securities for at least six months would be entitled after such six-month holding period to sell the Ordinary Shares held by such person, subject to the continued availability of current public information about us (which current public information requirement is eliminated after a one-year holding period).
A person who is one of our affiliates, or has been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned Ordinary Shares that are deemed restricted securities for at least six months would be entitled after such six-month holding period to sell his or her securities, provided that he or she sells an amount that does not exceed 1% of the number of our Ordinary Shares then outstanding (or, if our Ordinary Shares are listed on a national securities exchange, the average weekly trading volume of the shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale), subject to the continued availability of current public information about us, compliance with certain manner of sale provisions, and the filing of a Form 144 notice of sale if the sale is for an amount in excess of 5,000 shares or for an aggregate sale price of more than $50,000 in a three-month period.
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Organization
ZKGC was incorporated as an exempted company with limited liability under the Companies Act of the Cayman Islands (the “Companies Act”) on May 31, 2021. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares. A Cayman Islands-exempted company:
| ● | is a company that conducts its business outside the Cayman Islands; |
| ● | is exempted from certain requirements of the Companies Act, including the filing of an annual return of its shareholders with the Registrar of Companies; |
| ● | is not required to open its register of shareholders for inspection; and |
| ● | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance). |
Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:
| ● | does not have to file an annual return of its shareholders with the Registrar of Companies; |
| ● | is not required to open its register of members for inspection; |
| ● | does not have to hold an annual general meeting; |
| ● | may not issue negotiable or bearer shares, but may issue shares with no par value; |
| ● | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); |
| ● | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
| ● | may register as a limited duration company; and |
| ● | may register as a segregated portfolio company. |
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
Issued Capital
The following table sets forth the issued capital of ZKGC Cayman as of the date of this prospectus. Sales of Ordinary Shares pursuant to this prospectus will have no effect on the amount of issued capital, as the shares subject to this prospectus are being offered by selling shareholders and not by ZKGC Cayman.
There are 13,000,000 Ordinary Shares of ZKGC Cayman currently outstanding. 5,100,000 were sold to the founders for par value when the Company was organized. 4,900,000 were sold to Wanqi International Investment Company Limited for par value in September 2021. The remaining 3,000,000 were sold to the Selling Shareholders identified as such in this prospectus for 0.13 RMB (US$0.02) paid to Hainan ZKGC in October and November 2021.
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You should read this table together with our consolidated financial statements, including the Notes thereto, included elsewhere in this prospectus.
| Issued Capital | As of
date of this prospectus | |||
| Ordinary Shares, US$0.001 par value per share; 50,000,000 shares authorized; 13,000,000 shares issued and outstanding | $ | 13,000 | ||
| Additional paid-in capital | 57,000 | |||
| Total paid-in capital | $ | 70,000 | ||
Memorandum and Articles of Association
Our affairs are governed by our memorandum and articles of association and by the Companies Act. The following summarizes the material terms of our Amended and Restated Memorandum and Articles of Association and describes certain ways in which the Companies Act varies from the norm in U.S. corporate laws insofar as they relate to the material terms of our Ordinary Shares. This summary is not complete, and you should read the form of our Amended and Restated Memorandum and Articles of Association (the “Memorandum and Articles of Association”), which will be filed as an exhibit to the registration statement of which this prospectus is a part.
Meetings
Subject to the company’s regulatory requirements, an annual general meeting and any extraordinary general meeting may be called by not less than seven days’ notice in writing. There is no requirement for ZKGC Cayman to hold an annual meeting. Any director may call a meeting. Upon the written request of shareholders holding 10% or more of the voting rights specifying a purpose for a meeting, a director will call the meeting. Notice of every general meeting will be given to all of our shareholders and each of the directors. A meeting called without compliance with the notice requirement is valid if the holders of 90% of the voting power attend the meeting.
Two shareholders present throughout the meeting in person or by proxy or (in the case of a shareholder that is a corporation by its duly authorized representative) will constitute a quorum. No business may be transacted at any general meeting unless a quorum is present at the commencement of business. However, the absence of a quorum will not preclude the appointment of a chairman. If present, the chairman of our board of directors shall be the chairman presiding at any shareholders meetings.
Subject to any special rights or restrictions as to voting attached to any shares at any general meeting, on a show of hands, every shareholder who is present in person or by proxy (or, in the case of a shareholder that is a corporation, by its duly authorized representative) shall have one vote, and on a poll every shareholder present in person or by proxy (or, in the case of a shareholder that is a corporation, by its duly appointed representative) shall have one vote for each share held by such shareholder.
No shareholder shall be entitled to vote or be counted in a quorum, in respect of any share, unless such shareholder is registered as our shareholder at the applicable record date for that meeting and all calls or installments due by such shareholder to us have been paid.
Liquidation Rights
Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation attached to any class or classes of shares, (1) if we are wound up and the assets available for distribution among our shareholders are more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu among those shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, and (2) if we are wound up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the share capital, those assets shall be distributed so that the losses shall be borne by the shareholders in proportion to the par value of the shares held by them at the commencement of the winding up respectively.
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If we are wound up, the liquidator may, with the sanction of a special resolution and any other sanction required by the Companies Law, divide among our shareholders in specie or kind the whole or any part of our assets (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders. The liquidator may also vest the whole or any part of these assets in trustees upon such trusts for the benefit of the shareholders as the liquidator shall deem fit, but so that no shareholder will be compelled to accept any assets, shares or other securities upon which there is a liability.
Modification of Rights
Except with respect to share capital (as described below), alterations to our Memorandum and Articles of Association may only be made by special resolution, meaning a majority of not less than two-thirds of the votes cast at a shareholders meeting.
Subject to the Companies Law, all or any of the special rights attached to shares of any class (unless otherwise provided for by the terms of issue of the shares of that class) may be varied, modified or abrogated with the consent in writing of the holders of not less than two thirds of the issued shares of the relevant class or the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The provisions of our Memorandum and Articles of Association relating to general meetings shall apply similarly to every such separate general meeting, but so that the quorum for the purposes of any such separate general meeting or at its adjourned meeting shall be one or more persons together holding (or represented by proxy) on the date of the relevant meeting not less than one-third of the issued shares of that class, every holder of shares of the class shall be entitled on a poll to one vote for every such share held by such holder and that any holder of shares of that class present in person or by proxy may demand a poll.
The special rights conferred upon the holders of any class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
Alteration of Capital
Our directors may from time to time by ordinary resolution:
| ● | increase our capital by such sum, to be divided into shares of such amounts, with such rights, privileges, priorities and restrictions as the resolution shall prescribe; |
| ● | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; |
| ● | cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person; and |
| ● | subdivide our shares or any of them into shares of a smaller amount than is fixed by our Memorandum and Articles of Association, subject nevertheless to the Companies Law. |
We may, by special resolution, and subject to the Companies Law, reduce our share capital or any capital redemption reserve in any manner authorized by law.
Transfer of Shares
Any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in the usual or common form that our directors may approve. Our directors may decline to register any transfer of any share for any reason.
If our directors refuse to register a transfer, they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
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Share Repurchase
We are empowered by the Companies Law and our Memorandum and Articles of Association to purchase our own shares, subject to certain restrictions. Our directors may only exercise this power on our behalf, subject to the Companies Law, our Memorandum and Articles of Association and to any applicable requirements imposed by any stock exchange on which our securities may be listed.
Dividends
Subject to the Companies Law, our Directors may declare dividends in any currency to be paid to our shareholders. Dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our directors determine is no longer needed. Our board of directors may also declare and pay dividends out of funds of our company that are lawfully available for such payment. Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provides, all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid.
No dividend or other money payable by us on or in respect of any share shall bear interest against us.
Any dividend interest or other sum payable in cash to the holder of shares may be paid by electronic funds transfer or by check or warrant sent by mail addressed to the holder at his registered address, or addressed to such person and at such addresses as the holder may direct. Every check or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares.
All dividends unclaimed for six months after having been declared may, in the discretion of the directors, be paid into a separate account in the Company’s name, provided that the Company shall not be constituted as a trustee in respect of that account and the distribution shall remain as a debt due to such shareholder. Any dividend that remains unclaimed after a period of six years from the date of declaration of such dividend may be forfeited by our board of directors and, if so forfeited, shall revert to us.
Whenever our directors have resolved that a dividend be paid or declared, our directors may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind, and, in particular, of paid up shares, debentures or warrants to subscribe for our securities or securities of any other company. Where any difficulty arises with regard to such distribution, our directors may settle it as they think expedient. In particular, our directors may issue fractional certificates, fix the value for distribution purposes of any such specific assets, determine that cash payments shall be made to any of our shareholders based upon the value so fixed in order to adjust the rights of the parties, or vest any such specific assets in trustees as may seem expedient to our directors.
Issuance of Additional Ordinary Shares or Preferred Shares
Our Memorandum and Articles of Association authorize our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our Memorandum and Articles of Association authorize our board of directors to establish from time to time one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:
| ● | the designation of the series; |
| ● | the number of shares of the series; |
| ● | the dividend rights, dividend rates, conversion rights, and voting rights; and |
| ● | the rights and terms of redemption and liquidation preferences. |
Our board of directors may issue series of preferred shares without action by our shareholders to the extent authorized but unissued. Accordingly, the issuance of preferred shares may adversely affect the rights of the holders of the Ordinary Shares. In addition, the issuance of preferred shares may be used as an anti-takeover device without further action on the part of the shareholders. Issuance of preferred shares may dilute the voting power of holders of Ordinary Shares.
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Inspection of Books and Records
Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See ’‘Where You Can Find More Information.’’
Board of Directors
We are managed by our board of directors. Among other things, our board of directors may exercise all the powers of our company to borrow money. Our Articles of Association provide that, unless otherwise determined by our shareholders in a general meeting, the number of our directors shall be determined by our board. There shall be no shareholding qualification for directors, unless a qualification is adopted by the board. Each director has a term of office a fixed on the appointment of the director.
Any director may by written notice to the Company appoint any other Director or any other person willing to act to be an alternate Director. The alternate Director shall be entitled to attend and vote at any meeting of the Board at which the director appointing the alternate is not present.
No director may be removed from office before the expiration of his term except by vote of all of the other directors (minimum: two). In addition, the office of a director shall be vacated automatically if he or she (1) becomes bankrupt or makes any arrangement or composition with his or her creditors; (2) dies or becomes of unsound mind; (3) resigns by notice in writing to us; or (4) without being represented by an alternate Director or by special leave of absence from the board of directors, is absent from meetings of the board for three consecutive meetings and the board resolves that his or her office be vacated.
Meetings of our board of directors may be convened at any time deemed necessary by our chairman or any member of our board of directors. Advance notice of a meeting is not required if each director entitled to attend consents to the holding of such meeting.
A meeting of our board of directors with the necessary quorum shall be competent to make lawful and binding decisions. At any meeting of our directors, each director, be it by such director’s presence or by such director’s alternate, is entitled to one vote.
Questions arising at a meeting of our board of directors are required to be decided by simple majority votes of the members of our board of directors present or represented at the meeting. Our board of directors may also pass resolutions without a meeting by unanimous written consent.
Differences in Corporate Law
The Companies Act is modeled after similar laws in the United Kingdom but does not follow recent changes in United Kingdom laws. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United States.
Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a ’‘consolidation’’ means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of the shareholders of each constituent company, and such other authorization, if any, as may be specified in such constituent company’s articles of association. A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman Islands subsidiary if a copy of the plan of merger is given to every member of that Cayman Islands subsidiary to be merged unless that member agrees otherwise. For this purpose, a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.
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The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by a Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement in question is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting or meetings convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
| ● | the statutory provisions as to the required majority vote have been met; |
| ● | the shareholders have been fairly represented at the meeting in question; |
| ● | the arrangement is such as an intelligent and honest man of that class acting in respect of his interest would reasonably approve; and |
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act. |
When a takeover offer is made and accepted by holders of 90% of the shares within four months of the offer, the offeror may, within a two-month period, give notice to require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection may be made to the Grand Court of the Cayman Islands by a dissenting shareholder within one month from the date on which the notice was given but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.
If the arrangement and reconstruction are thus approved, the dissenting shareholders would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of United States corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoing principle, including when:
| ● | a company acts or proposes to act illegally or ultra vires and is therefore incapable of ratification by the shareholders; |
| ● | the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and |
| ● | those who control the company are perpetrating a “fraud on the minority.” |
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Indemnification of Directors and Executive Officers and Limitation of Liability. The Companies Act does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles of Association permit, in the absence of fraud or willful default, indemnification of officers and directors for costs, losses, damages and expenses, which such director or officers may incur or become liable in respect of by reason of any contract entered into or act or thing done by him as such director and officer in any way in or about the execution of his duties incurred in connection with legal, administrative or investigative proceedings incurred in their capacities as such. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
Directors’ Fiduciary Duties. As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our Articles of Association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.
Shareholder Proposals. Cayman Islands law does not provide shareholders any right to put proposals before a meeting or requisition a general meeting. However, these rights may be provided in articles of association. Our Articles of Association allow our shareholders holding not less than one-tenth of all voting power of our share capital in issue to requisition a shareholder’s meeting. Other than this right to requisition a shareholders’ meeting, our articles of association do not provide our shareholders other right to put proposal before a meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.
Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
The Cayman Islands has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.
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Corporate Governance. Cayman Islands laws do not restrict transactions with directors, requiring only that directors exercise a duty of care and owe a fiduciary duty to the companies for which they serve. Under our Memorandum and Articles of Association, subject to any separate requirement for audit committee approval under the applicable rules of any stock exchange on which we list, so long as a director discloses the nature of his interest in any contract or arrangement which he is interested in, such a director may vote in respect of any contract or proposed contract or arrangement in which such director is interested and may be counted in the quorum at such meeting.
Dissolution. Under the Companies Act, a Cayman Islands company may be wound up by either an order of the courts of the Cayman Islands or by two-thirds vote of the shareholders (or, if the company is unable to pay its debts as they come due, by a vote of the majority of the shareholders). The courts also have authority to order winding up in a number of circumstances where the court determines it is just and equitable to order a winding up.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by the Companies Act, our Memorandum and Articles of Association may only be amended with a special resolution of our shareholders.
Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our Memorandum and Articles of Association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Memorandum and Articles of Association governing the ownership threshold above which shareholder ownership must be disclosed
Anti-Money Laundering — Cayman Islands
In order to comply with legislation or regulations aimed at the prevention of money laundering, we are required to adopt and maintain anti-money laundering procedures. Pursuant to those procedures, we reserve the right to refuse to make any payment to a shareholder if our directors or officers suspect or are advised that the payment to such shareholder might result in a breach of applicable anti-money laundering or other laws or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure our compliance with any such laws or regulations in any applicable jurisdiction.
If any person in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct or money laundering or is involved with terrorism or terrorist financing and property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority (“FRA”) of the Cayman Islands, pursuant to the Proceeds of Crime Act (Revised) of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the FRA, pursuant to the Terrorism Act (Revised) of the Cayman Islands, if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.
Data Protection in the Cayman Islands – Privacy Notice
This privacy notice explains the manner in which the company collects, processes and maintains personal data about investors of the company pursuant to the Data Protection Act, 2017 of the Cayman Islands, as amended from time to time and any regulations, codes of practice or orders promulgated pursuant thereto (“DPA”).
The company is committed to processing personal data in accordance with the DPA. In its use of personal data, the company will be characterized under the DPA as a ‘data controller’, whilst certain of the company’s service providers, affiliates and delegates may act as ‘data processors’ under the DPA. These service providers may process personal information for their own lawful purposes in connection with services provided to the company.
This privacy notice puts our shareholders on notice that, by virtue of making an investment in the company, the company and certain of the company’s service providers may collect, record, store, transfer and otherwise process personal data by which individuals may be directly or indirectly identified. Your personal data will be processed fairly and for lawful purposes, including (a) where the processing is necessary for the company to perform a contract to which you are a party or for taking pre-contractual steps at your request (b) where the processing is necessary for compliance with any legal, tax or regulatory obligation to which the company is subject or (c) where the processing is for the purposes of legitimate interests pursued by the company or by a service provider to whom the data are disclosed. As a data controller, we will only use your personal data for the purposes for which we collected it. If we need to use your personal data for an unrelated purpose, we will contact you.
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We anticipate that we will share your personal data with the company’s service providers for the purposes set out in this privacy notice. We may also share relevant personal data where it is lawful to do so and necessary to comply with our contractual obligations or your instructions or where it is necessary or desirable to do so in connection with any regulatory reporting obligations. In exceptional circumstances, we will share your personal data with regulatory, prosecuting and other governmental agencies or departments, and parties to litigation (whether pending or threatened), in any country or territory including to any other person where we have a public or legal duty to do so (e.g. to assist with detecting and preventing fraud, tax evasion and financial crime or compliance with a court order).
Your personal data shall not be held by the company for longer than necessary with regard to the purposes of the data processing.
We will not sell your personal data. Any transfer of personal data outside of the Cayman Islands shall be in accordance with the requirements of the DPA. Where necessary, we will ensure that separate and appropriate legal agreements are put in place with the recipient of that data.
The company will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.
If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation to your investment into the company, this will be relevant for those individuals and you should inform such individuals of the content.
You have certain rights under the DPA, including (a) the right to be informed as to how we collect and use your personal data (and this privacy notice fulfils the Company’s obligation in this respect); (b) the right to obtain a copy of your personal data; (c) the right to require us to stop direct marketing; (d) the right to have inaccurate or incomplete personal data corrected; (e) the right to withdraw your consent and require us to stop processing or restrict the processing, or not begin the processing of your personal data; (f) the right to be notified of a data breach (unless the breach is unlikely to be prejudicial); (g) the right to obtain information as to any countries or territories outside the Cayman Islands to which we, whether directly or indirectly, transfer, intend to transfer or wish to transfer your personal data, general measures we take to ensure the security of personal data and any information available to us as to the source of your personal data; (h) the right to complain to the Office of the Ombudsman of the Cayman Islands; and (i) the right to require us to delete your personal data in some limited circumstances.
If you consider that your personal data has not been handled correctly, or you are not satisfied with the company’s responses to any requests you have made regarding the use of your personal data, you have the right to complain to the Cayman Islands’ Ombudsman. The Ombudsman can be contacted by calling +1 (345) 946-6283 or by email at info@ombudsman.ky.
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The taxation of income and capital gains of holders of Ordinary Shares is subject to the laws and practices of jurisdictions in which holders of Ordinary Shares are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in Ordinary Shares. In particular, the discussion does not address the tax consequences under state, local and other laws, such as non-U.S. federal laws. Accordingly, you should consult your own tax advisor regarding the tax consequences of an investment in the Ordinary Shares. The discussion is based upon laws and relevant interpretations in effect as of the date of this prospectus, all of which are subject to changes.
Cayman Islands Taxation
The following is a discussion on certain Cayman Islands income tax consequences of an investment in our securities. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.
Payments of dividends and capital in respect of our securities will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the securities nor will gains derived from the disposal of the securities be subject to Cayman Islands income or corporation tax.
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands. No stamp duty is payable in respect of the issue of our securities or on an instrument of transfer in respect of our securities.
Pursuant to Section 6 of the Tax Concessions Act of the Cayman Islands, we intend to apply for, and expect to obtain, an undertaking from the Financial Secretary of the Cayman Islands:
| ● | that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations shall apply to us or our operations; and |
| ● | in addition, that no tax to be levied on profits, income, gains or appreciation or which is in the nature of estate duty or inheritance tax shall be payable: on or in respect of the shares, debentures or other obligations of the Company; or by way of the withholding in whole or part, of any relevant payment as defined in the Tax Concessions Act. |
These concessions shall befor a period of 20 years from the date of issuance of the undertaking.
PRC Taxation
See “Business of the Company: Regulation—Tax.”
United States Federal Income Taxation
This section describes the material United States federal income tax consequences of owning Ordinary Shares. It applies to you only if you are a U.S. Holder (defined below) and you acquire your Ordinary Shares in this offering and you hold your Ordinary Shares as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:
| ● | a dealer in securities or currencies, |
| ● | a trader in securities that elects to use a mark-to-market method of accounting for securities holdings, |
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| ● | a tax-exempt organization, |
| ● | a life insurance company, |
| ● | a person liable for alternative minimum tax, |
| ● | a person that actually or constructively owns 10% or more of our voting shares, |
| ● | a person that holds Ordinary Shares as part of a straddle or a hedging or conversion transaction, |
| ● | a financial institution, |
| ● | a partnership or other pass-through entity for United States federal income tax purposes, or |
| ● | a U.S. Holder whose functional currency is not the U.S. dollar. |
If a partnership holds the Ordinary Shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the Ordinary Shares, you should consult your own tax advisors.
U.S. Holder
You are a “U.S. Holder” if you are a beneficial owner of Ordinary Shares and you are:
| ● | a citizen or individual resident of the United States, |
| ● | a corporation (or other entity taxable as a corporation for United States federal income tax purposes) organized under the laws of the United States, any State or the District of Columbia, |
| ● | an estate whose income is subject to United States federal income tax regardless of its source, or |
| ● | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust or if the trust has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
You should consult your own tax advisor regarding the United States federal, state and local, and other tax consequences of owning and disposing of Ordinary Shares in your particular circumstances.
Taxation of Dividends
Under the United States federal income tax laws, and subject to the PFIC rules discussed below, if you are a U.S. holder, the gross amount of any distributions we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be treated as dividends and will be subject to United States federal income taxation. Since we do not expect that our Ordinary Shares will be listed immediately on an established securities market, we do not believe that dividends we pay on our Ordinary Shares currently meet the conditions required to be treated as qualified dividend income.
The dividend is taxable to you when the dividend, actually or constructively, is received by you. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the Ordinary Shares and thereafter as capital gain. Notwithstanding the foregoing, we do not intend to maintain the calculation of earning and profits as determined for United States federal income tax purposes, and consequently, any distribution generally must be reported as dividend income for United States federal income tax purposes.
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Taxation of Capital Gains
Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise dispose of your Ordinary Shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis in your Ordinary Shares. Capital gain of a non-corporate U.S. holder, including an individual, is generally taxed at preferential rates where the holder has a holding period greater than one year.
PFIC Rules.
In general, a non-U.S. corporation, such as ZKGC Cayman, will be classified as a “passive foreign investment company” or PFIC if, in the case of any particular taxable year:
| ● | at least 75% of our gross income for the taxable year is passive income or |
| ● | at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. |
Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income.
We believe that our Ordinary Shares should not be treated as stock of a PFIC for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. Our belief is based in part on our estimates of the value of our assets as determined based on the price of the Ordinary Shares in this offering. However, it is not entirely clear how the contractual arrangements between us and our consolidated variable interest entities will be treated for purposes of the PFIC rules. If it is determined that we do not own the stock of the variable interest entities for United States federal income tax purposes, we would possibly be treated as a PFIC for certain years.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will be subject to special rules with respect to:
| ● | any gain you realize on the sale or other disposition of your Ordinary Shares, and |
| ● | any excess distribution that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the Ordinary Shares during the three preceding taxable years or, if shorter, your holding period for the ordinary shares or Ordinary Shares). |
Under the PFIC rules:
| ● | the gain or excess distribution will be allocated ratably over your holding period for the Ordinary Shares, |
| ● | the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income, |
| ● | the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and |
| ● | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. |
The special PFIC tax rules described above will not apply to you if you make a QEF election, that is, if you elect to have us treated as a qualified electing fund and we provide certain required information to you. However, please note that we do not intend to provide U.S. holders with such information as may be required to make a QEF election effective.
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If you own Ordinary Shares in a PFIC that are treated as marketable stock (stock that is regularly traded on a qualified exchange), you may make a mark-to-market election. At this time, we cannot predict whether the Ordinary Shares will be listed on a qualified exchange; so there can be no assurance that the Ordinary Shares will be ’‘regularly traded’’ for purposes of the mark-to-market election.
Information with Respect to Foreign Financial Assets
Individuals that own ’’specified foreign financial assets’’ with an aggregate value in excess of US$50,000 will generally be required to file an information report with respect to such assets with their tax returns. ’’Specified foreign financial assets’’ include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons; (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties; and (iii) interests in foreign entities. U.S. holders that are individuals are urged to consult their tax advisors regarding the application of this legislation to their ownership of the Ordinary Shares.
Backup Withholding and Information Reporting.
U.S. Holders may be subject to information reporting to the IRS and backup withholding with respect to dividends on, and proceeds from the sale or other disposition of, the Ordinary Shares. Information reporting will apply to payments of dividends on, and to proceeds from the sale or other disposition of, Ordinary Shares by a paying agent within the United States to a U.S. Holder, other than U.S. Holders that are exempt from information reporting and properly certify their exemption. A paying agent within the United States will be required to withhold at the applicable statutory rate, currently 24%, in respect of any payments of dividends on, and the proceeds from the disposition of, Ordinary Shares within the United States to a U.S. Holder (other than U.S. Holders that are exempt from backup withholding and properly certify their exemption) if the holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with applicable backup withholding requirements. U.S. Holders who are required to establish their exempt status generally must provide a properly completed IRS Form W-9.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s United States federal income tax liability. A U.S. Holder generally may obtain a refund of any amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS in a timely manner and furnishing any required information. Each U.S. Holder is advised to consult with its tax advisor regarding the application of the United States information reporting rules to their particular circumstances.
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The Company is being represented by Robert Brantl, Esq., Tuckahoe, New York, with respect to legal matters relating to United States federal securities law.
The validity of the Ordinary Shares offered by this prospectus and legal matters as to Cayman Islands law will be passed upon for us by Ogier.
Legal matters as to the laws of the People’s Republic of China will be passed upon for us by Beijing Zhong Lun W and D (Tianjin) Law Firm.
The consolidated financial statements of the Company as of May 31, 2021 included in this prospectus have been included in reliance on the report of Michael T. Studer CPA P.C., an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We filed with the Securities and Exchange Commission a registration statement on Form F-1 under the Securities Act with respect to the Ordinary Shares in this offering. This prospectus, which is part of the registration statement, does not contain all of the information in the registration statement and the exhibits that were filed with the registration statement. For further information with respect to us and our Ordinary Shares, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement.
You can read our registration statement and the exhibits and schedules that were filed with the registration statement, as well as any other filings we make with the Securities and Exchange Commission in the future, at the SEC’s website at http://www.sec.gov. You may also read and copy any of the documents that we file without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington, DC 20549. Copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330.
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ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 11, 2020 (Inception) through May 31, 2021:
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of ZKGC New Energy Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of ZKGC New Energy Limited and Subsidiaries and Variable Interest Entity (the “Company”) as of May 31, 2021 and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash flows for the period from August 11, 2020 (inception) through May 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ZKGC New Energy Limited and Subsidiaries and Variable Interest Entity as of May 31, 2021 and the results of their operations and cash flows for the period from August 11, 2020 (inception) through May 31, 2021 in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| /s/ Michael T. Studer CPA P.C. | |
| Michael T. Studer CPA P.C. |
Freeport, New York
December 6, 2021
We have served as the Company’s auditor since 2021.
F-2
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN UNITED STATES DOLLARS)
| May 31, | ||||
| 2021 | ||||
| ASSETS | ||||
| Current assets: | ||||
| Cash | $ | 92,931 | ||
| Accounts receivable, net of allowance for doubtful accounts of $0 | 272,293 | |||
| Construction costs relating to uncompleted contracts | 316,148 | |||
| Prepayments, and other current assets | 14,080 | |||
| Total current assets | 695,452 | |||
| Noncurrent assets: | ||||
| Property and equipment, net | 181,389 | |||
| Intangible assets, net | 84,450 | |||
| Total non-current assets | 265,839 | |||
| TOTAL ASSETS | $ | 961,291 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 261,108 | ||
| Deferred revenue | 394,315 | |||
| Taxes payable | 21,075 | |||
| Due to related party | 12,187 | |||
| Accrued liabilities and other payables | 47,100 | |||
| Total current liabilities | 735,785 | |||
| Total liabilities | 735,785 | |||
| Commitments and contingencies | - | |||
| Stockholders’ equity: | ||||
| Ordinary shares (50,000,000 shares authorized, par value of $0.001 each; 10,000,000 shares issued and outstanding at May 31, 2021*) | 10,000 | |||
| Additional paid-in capital | 172,355 | |||
| Retained earnings | 31,192 | |||
| Statutory reserves | 4,729 | |||
| Other comprehensive income | 7,040 | |||
| Total shareholders’ equity attributable to ZKGC New Energy Limited | 225,316 | |||
| Noncontrolling interest | 190 | |||
| Total stockholders’ equity | 225,506 | |||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 961,291 | ||
| * | Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on September 14, 2021. |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
| Revenues: | ||||
| Product sales | $ | 177,280 | ||
| Charging service revenue – company-owned charging stations | 65,982 | |||
| Charging service revenue – third-party-owned charging stations | 76,750 | |||
| Total Revenues | 320,012 | |||
| Cost of Revenues: | ||||
| Cost of product sales | 130,787 | |||
| Cost of charging services – company-owned charging stations | 61,704 | |||
| Cost of charging services – third-party-owned charging stations | 72,978 | |||
| Total Cost of Revenues | 265,469 | |||
| Gross Profit | 54,543 | |||
| Operating expenses: | ||||
| Selling and marketing | 4,820 | |||
| General and administrative | 57,275 | |||
| Total operating expenses | 62,095 | |||
| Loss From Operations | (7,552 | ) | ||
| Other income (expense): | ||||
| Interest (expense) income | (849 | ) | ||
| Gain on assets disposal | 59,773 | |||
| Other non-operating income | 198 | |||
| Total other income | 59,122 | |||
| Income before provision for income taxes | 51,570 | |||
| Provision for income taxes | 15,764 | |||
| Net income | 35,806 | |||
| Add: loss attributable to noncontrolling interests | 115 | |||
| Net income attributable to ZKGC New Energy Limited | 35,921 | |||
| Other comprehensive income (loss): | ||||
| Foreign currency translation adjustment | 7,040 | |||
| Comprehensive income | 42,846 | |||
| Add: comprehensive loss attributable to noncontrolling interests | 115 | |||
| Comprehensive income attributable to ZKGC New Energy Limited | 42,961 | |||
| Weighted average number of ordinary shares* | ||||
| Basic and diluted | 10,000,000 | |||
| Earnings per share | ||||
| Basic and diluted | $ | 0.00 | ||
| * | Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on September 14, 2021. |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
| Ordinary shares* | Ordinary shares amount | Additional Paid-in Capital | Retained Earnings | Statutory Reserve Fund | Other Comprehensive Income | Noncontrolling Interests | Total | |||||||||||||||||||||||||
| Balance at August 11, 2020 (inception) | 10,000,000 | $ | 10,000 | $ | (10,000 | ) | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Capital contributions to Hainan ZKGC and Network ZKGC | - | - | 182,355 | - | - | - | 305 | 182,660 | ||||||||||||||||||||||||
| Net income | - | - | - | 35,921 | - | - | (115 | ) | 35,806 | |||||||||||||||||||||||
| Allocation to statutory reserve | - | - | - | (4,729 | ) | 4,729 | - | - | - | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | 7,040 | - | 7,040 | ||||||||||||||||||||||||
| Balance at May 31, 2021 | 10,000,000 | $ | 10,000 | $ | 172,355 | $ | 31,192 | $ | 4,729 | $ | 7,040 | $ | 190 | $ | 225,506 | |||||||||||||||||
| * | Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on September 14, 2021. |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
| Cash flows from operating activities: | ||||
| Net income | $ | 35,806 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 17,738 | |||
| Gain on assets disposal | (59,773 | ) | ||
| Change in operating assets and liabilities: | ||||
| Accounts receivable | (262,754 | ) | ||
| Construction costs relating to uncompleted contracts | (305,072 | ) | ||
| Prepayments and other current assets | (13,587 | ) | ||
| Accounts payable | 232,936 | |||
| Deferred revenue | 380,501 | |||
| Taxes payable | 20,337 | |||
| Net cash provided by operating activities | 46,132 | |||
| Cash flows from investing activities: | ||||
| Purchases of property and equipment | (288,197 | ) | ||
| Purchases of intangible assets | (86,507 | ) | ||
| Proceeds on assets disposal | 181,800 | |||
| Net cash (used in) investing activities | (192,904 | ) | ||
| Cash flows from financing activities: | ||||
| Capital contributions from stockholder | 182,660 | |||
| Advances from related party | 36,150 | |||
| Repayment of advances from related party | (25,755 | ) | ||
| Proceeds from third party loan | 45,450 | |||
| Net cash provided by financing activities | 238,505 | |||
| Effect of exchange rate changes on cash | 1,198 | |||
| Net increase in cash | 92,931 | |||
| Cash, beginning | - | |||
| Cash, ending | $ | 92,931 | ||
| Supplemental disclosure of cash flow information: | ||||
| Cash paid during the period for: | ||||
| Interest | $ | - | ||
| Income taxes | $ | - | ||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Note 1 – Nature of business and organization
ZKGC New Energy Limited (“ZKGC Cayman” or the “Company”) is a holding company incorporated in the Cayman Islands on May 31, 2021 under the laws of the Cayman Islands. ZKGC Cayman has no substantive operations other than holding all of the outstanding share capital of ZKGC International Group Holdings Limited (“ZKGC International”) established under the laws of Hong Kong on September 9, 2021. ZKGC International is a holding company holding all of the outstanding equity of Hainan GCGY Commercial & Trading Co., Ltd. (“Zhongke WFOE”) which is a wholly foreign-owned enterprise (“WFOE”) and was established on October 12, 2021 under the laws of the People’s Republic of China (“PRC” or “China”).
The Company, through its variable interest entity (“VIE”), Hainan ZKGC New Energy Co., Ltd. (“Hainan ZKGC”), a PRC limited liability company established on August 11, 2020, and through Hainan ZKGC’s 99% owned subsidiary, Hainan ZKGY Network Technology Co., Ltd (“Network ZKGC”), a PRC limited liability company established on September 28, 2020, is a builder, owner, operator, and manager of electric vehicle (“EV”) charging stations and provider of EV charging equipment and networked EV charging services. The Company offers residential and commercial EV charging equipment, enabling EV drivers to recharge at various location types. The Company’s principal line of products and services is its Charging Cloud SAAS Platform (the “SAAS network”), EV charging equipment, and EV charging services. The SAAS network provides property owners, managers, parking companies, and state and municipal entities (“Property Partners”) with cloud-based services that enable the remote monitoring and management of EV charging stations. The SAAS network also provides EV drivers with vital station information, including station location, availability and fees payment.
On October 18, 2021, ZKGC Cayman completed a reorganization of entities under common control of its then existing shareholders, who collectively owned all of the equity interests of ZKGC Cayman prior to the reorganization. ZKGC Cayman and ZKGC International were established as the holding companies of Zhongke WFOE. Zhongke WFOE is the primary beneficiary of Hainan ZKGC and its subsidiary. All of these entities are under common control which results in the consolidation of ZKGC and subsidiary which have been accounted for as a reorganization of entities under common control at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of ZKGC Cayman.
The accompanying consolidated financial statements reflect the activities of ZKGC Cayman and each of the following entities:
| Subsidiaries | Activities | Place Incorporated | Date Incorporated | Ownership Percentage | ||||
| ZKGC International Group Holdings Limited (“ZKGC International”) | Holding company | Hong Kong, the PRC | September 9, 2021 | 100% owned by ZKGC Cayman | ||||
| Hainan GCGY Commercial & Trading Co., Ltd. (“Zhongke WFOE”) | Holding company | Hainai, the PRC | October 12, 2021 | 100% owned by ZKGC International | ||||
| Hainan ZKGC New Energy Co., Ltd. (“Hainan ZKGC”) | Construction and operation of electric vehicle (“EV”) charging stations | Hainai, the PRC | August 11, 2020 | VIE of Zhongke WFOE | ||||
| Hainan ZKGY Network Technology Co., Ltd (“Network ZKGC”) | Provider and manager of Charging Cloud SAAS Platform (the “SAAS network”) | Hainai, the PRC | September 28, 2020 | 99% owned by Hainan ZKGC |
F-7
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Contractual Arrangements
Due to legal restrictions on foreign ownership and investment in, among other areas, the development and operation of information technology in China, the Company operates its businesses in which foreign investment is restricted or prohibited in the PRC through certain PRC domestic companies. Neither the Company nor its subsidiaries own any equity interest in Hainan ZKGC. As such, Hainan ZKGC is controlled through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements consist of a series of three agreements, along with shareholders’ powers of attorney (“POAs”) (collectively the “Contractual Arrangements”, which were signed on October 18, 2021.
The significant terms of the Contractual Arrangements are as follows:
Exclusive Business Cooperation Agreement
Pursuant to the exclusive business cooperation agreement between Zhongke WFOE and Hainan ZKGC, Zhongke WFOE has the exclusive right to provide Hainan ZKGC with technical support services, consulting services and other services, including technical support and training, business management consultation, consultation, collection and research of technology and market information, lease equipment or properties, provide legitimate rights to use software license, provide deployment, maintenances and upgrade of software, design installation, daily management, maintenance and updating network system, and other services requested by Hainan ZKGC from time to time to the extent permitted under PRC law. In exchange, Zhongke WFOE is entitled to an annual service fee that equals Hainan ZKGC’s net income. The exclusive business cooperation agreement remains in effect unless terminated in writing by Zhongke WFOE.
Exclusive Option Agreements
Pursuant to the exclusive option agreements among Zhongke WFOE, Hainan ZKGC and the shareholders who collectively owned all of Hainan ZKGC, such shareholders jointly and severally grant Zhongke WFOE an option to purchase their equity interests in Hainan ZKGC. The purchase price shall be the lowest price then permitted under applicable PRC laws. Zhongke WFOE or its designated person may exercise such option at any time to purchase all or part of the equity interests in Hainan ZKGC until it has acquired all equity interests of Hainan ZKGC, which is irrevocable during the term of the agreements.
The exclusive option agreement remains in effect until all equity interest held by shareholders in Hainan ZKGC has been transferred or assigned to Zhongke WFOE and/or any other person designated by the Zhongke WFOE in accordance with such agreement.
Equity Interest Pledge Agreements
Pursuant to the equity interest pledge agreements, among Zhongke WFOE, Hainan ZKGC, and the shareholders who collectively owned all of Hainan ZKGC, such shareholders pledge all of the equity interests in Hainan ZKGC to Zhongke WFOE as collateral to secure the obligations of Hainan ZKGC under the exclusive business cooperation agreement and exclusive option agreements. These shareholders are prohibited from transferring the pledged equity interests without the prior consent of Zhongke WFOE unless transferring the equity interests to Zhongke WFOE or its designated person in accordance with the exclusive option agreements.
The equity interest pledge agreements shall come into force the date on which the pledged interests are recorded, which is upon the signing of the agreements on October 18, 2020.
F-8
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Shareholders’ Powers of Attorney (“POAs”)
Pursuant to the shareholders’ POAs, the shareholders of Hainan ZKGC give Zhongke WFOE an irrevocable proxy to act on their behalf on all matters pertaining to Hainan ZKGC and to exercise all of their rights as shareholders of Hainan ZKGC, including the (i) right to attend shareholders meetings; (ii) to exercise voting rights and all of the other rights including but not limited to the sale or transfer or pledge or disposition of the shares held in part or in whole; and (iii) designate and appoint on behalf of the shareholder the legal representative, the directors, supervisors, the chief executive officer and other senior management members of Hainan ZKGC, and to sign transfer documents and any other documents in relation to the fulfillment of the obligations under the exclusive option agreements and the equity interest pledge agreements. The shareholders’ POAs shall remain in effect while the shareholders of Hainan ZKGC hold the equity interests in Hainan ZKGC.
Spousal Consent Letters
Pursuant to the spousal consent letters, the spouses of the shareholders of Hainan ZKGC commit that they have no right to make any assertions in connection with the equity interests of Hainan ZKGC, which are held by the shareholders. In the event that the spouses obtain any equity interests of Hainan ZKGC, which are held by the shareholders, for any reasons, the spouses of the shareholders shall be bound by the exclusive option agreement, the equity interest pledge agreement, the shareholder POA and the exclusive business cooperation agreement and comply with the obligations thereunder as a shareholder of Hainan ZKGC. The letters are irrevocable and shall not be withdrawn without the consent of Zhongke WFOE.
Based on the foregoing contractual arrangements, which grant Zhongke WFOE effective control of Hainan ZKGC and subsidiaries and enable Zhongke WFOE to receive all of their expected residual returns, the Company accounts for Hainan ZKGC as a VIE. Accordingly, the Company consolidates the accounts of Hainan ZKGC and its subsidiary for the period presented herein, in accordance with Regulation S-X-3A-02 promulgated by the Securities and Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.
Note 2 – Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries and its VIE, over which the Company exercises control and is the primary beneficiary. Although the VIE agreements were entered into in October 2021, since the Company and the VIE are under common control, the financial statements reflect the operations as if the VIE agreements were in effect as of the beginning of the earliest period presented. All transactions and balances among the Company, its subsidiaries and VIE have been eliminated upon consolidation.
Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property and equipment, impairment of long-lived assets, and revenue recognition. The inputs into the Company’s judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates. Actual results could differ from these estimates.
F-9
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Cash
Cash comprises cash at banks and on hand. Cash at banks are held in accounts at financial institutions located in the PRC‚ which is not freely convertible into foreign currencies. The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. As of May 31, 2021, the Company had cash of approximately $93,000.
Accounts receivable
Accounts receivable are stated and carried at their original invoiced amount. Accounts are considered overdue after 180 days. In establishing the required allowance for doubtful accounts, management considers historical collection experience, age of the receivable, the economic environment, industry trend analysis, and the credit history and financial condition of the customer. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after all means of collection have been exhausted and that the likelihood of collection is not probable. As of May 31, 2021, no allowance for doubtful accounts was deemed necessary.
Construction costs relating to uncompleted contracts and deferred revenue
Construction costs relating to uncompleted contracts consist of costs of construction incurred associated with the building of charging stations for customers. Deferred revenue is accrued with construction in progress until the project wraps up. The Company recognizes deferred revenue through use of the input method which is measured by reference to the ratio of contract costs incurred to date to the estimated total costs for the contract. Contract costs incurred to date are shown as construction costs relating to uncompleted contracts on the balance sheet unless it is not probable that such contract costs are recoverable from the customers, in which case, such costs are recognized as an expense immediately. The construction period of each charging station is approximately 60 days. As of May 31, 2021, there was $316,148 construction costs relating to uncompleted contracts and $394,315 deferred revenue on the balance sheet.
Prepayments
Prepayments are mainly payments made to vendors or service providers for purchasing goods or services that have not been received or provided, including rent and utilities. These amounts are refundable and bear no interest. Prepayments are classified as either current or non-current based on the terms of the respective agreements. These prepayments are unsecured and are reviewed periodically to determine whether their carrying value has become impaired. As of May 31, 2021, the Company made no allowance for impairment.
Value added tax
The Company is subject to value added tax (“VAT”) in the PRC. As of May 31, 2021, the net VAT payable balance of approximately $4,000 is included in taxes payable on the consolidated balance sheet. Revenues from domestic sales are presented net of applicable VAT. The Company is subject to a 3% VAT rate due to qualification as a small-scale taxpayer which was reduced to 1% until December 31, 2021 due to the Covid-19 pandemic.
Property and Equipment
Property and equipment are stated at cost and consist of charging stations, transportation and office equipment. Property and equipment are depreciated over their estimated useful life and the related depreciation expense is computed using the straight-line method.
F-10
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
The estimated useful lives are as follows:
| Useful life | ||
| Transportation equipment | 4 years | |
| Charging stations | 5 years | |
| Furniture and fixtures | 5 years | |
| Office equipment | 3 years |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the useful lives to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Intangible assets, net
The Company’s intangible assets with definite useful lives primarily consist of the platform software for charging station management. The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company amortizes its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated useful lives of 5 years.
Impairment for long-lived assets
Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. From August 11, 2020 (inception) through May 31, 2021, no impairment of long-lived assets was recognized.
Statutory reserves
Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has an accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulated loss.
Financial instruments
US GAAP, regarding fair value of financial instruments and related fair value measurements, defines fair value and establishes a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
F-11
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
The three levels of the hierarchy are defined as follows:
Level 1: inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2: inputs include quoted prices, other than those in level 1, for the same in inactive markets or similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;
Level 3: inputs are unobservable.
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximates fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
Noncontrolling Interests
The Company’s noncontrolling interests represent the minority shareholders’ ownership interests related to the Company’s subsidiaries, including 1% for Network ZKGC. The noncontrolling interests are presented in the consolidated balance sheets separately from equity attributable to the shareholders of the Company. Noncontrolling interests in the results of the Company are presented on the consolidated statement of income as allocations of the total income or loss from August 11, 2020 (inception) through May 31, 2021 between noncontrolling interests holders and the shareholders of the Company.
Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred, and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical factors and the specific facts and circumstances of each matter.
Revenue recognition
The Company has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers” (ASC 606). The core principle underlying revenue recognition is that the Company recognizes its revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.
The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.
The Company recognizes revenue primarily from three different types of contracts:
| ● | Product sales* – The Company builds ready-to-use charging stations for sale. Product sales contracts are on a fixed price basis with no separate sales rebate, discount, or other incentive, and no right of return exists on sales of inventory. Revenue is recognized at a point in time when the customer obtains control of the goods and the Company satisfies its performance obligations, which generally is at the time it transfers the ownership of the product to the customer. |
F-12
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
| ● | Charging service revenue – company-owned charging stations – The Company generates revenue from fully owned and jointly owned charging stations by providing charging service to electric vehicles. Service price, which is measured by unit price per kWh, is fixed and determinable. Revenue is recognized at a point in time when a particular charging session is completed. The Company is the primary obligor and is responsible for (1) soliciting customers and fulfilling the promise to provide charging services (2) setting service price for charging service (3) handling customer services and complaints and (4) performing collection and payment activities. The Company acts as the principal of these arrangements and therefore reports revenue earned and costs incurred related to these transactions on a gross basis. |
| ● | Charging service revenue – third-party-owned charging stations – The Company generates revenue from non-company-owned charging stations. Revenue is recognized at a point in time when a particular charging session is completed in accordance with a contractual relationship between the Company and the owner of the station. |
| * | The Company derives its product sales from contracting with its customers to construct the charging stations and with revenues being recognized upon delivery of products when the “transfer of control” occurs. The completed contract method is used to recognized such revenues at a point in time after the performance obligations are satisfied. The contract is so short, which is normally 60 days, that splitting it up into multiple billings isn’t feasible. The customer doesn’t receive or consume benefits from the work until the very end. The Company recognizes the progress billing amount on the balance sheet using the cost-to-cost input method, based primarily on contract costs incurred to date compared to total estimated contract costs. This method is the most accurate measure of work completed to date, which normally includes direct material, and subcontractor costs. Construction costs relating to uncompleted contracts and deferred revenue continue to accrue until the project wraps up. Once the Company completes the contract, the revenue and related cost of construction is recognized. Persuasive evidence of an arrangement is demonstrated via sales contract, and the sales price to the customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or other incentive. Revenue is recognized net of returns. For the period from August 11, 2020 (inception) through May 31, 2021, total sales returned was nil. |
Advertising costs
Advertising costs amounted to $3,748 for the period from August 11, 2020 (inception) through May 31, 2021. Advertising costs are expensed as incurred and included in selling expenses.
Income taxes
The Company accounts for income taxes in accordance with US GAAP. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax assets and liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. The net deferred tax asset is reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income taxes are classified as income tax expense in the period incurred. PRC tax returns filed for the year ended December 31, 2020 are subject to examination by the applicable tax authorities.
F-13
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Foreign currency translation and transaction
The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the noon buying rate in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. There were no transaction gains and losses for the period from August 11, 2020 (inception) through May 31, 2021.
Translation adjustments included in accumulated other comprehensive income amounted to $7,040 as of May 31, 2021. The balance sheet amounts, with the exception of equity at May 31, 2021 were translated at the current exchange rate of $0.1570. The equity accounts were translated at their historical rate. The average translation rate applied to statement of income accounts for the period from August 11, 2020 (inception) through May 31, 2021 was $0.1515. Cash flows are also translated at average translation rates for the periods; therefore, amounts reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the period from August 11, 2020 (inception) through May 31, 2021, there were no dilutive shares.
Comprehensive income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under US GAAP are recorded as an element of shareholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustments resulting from the Company’s PRC subsidiaries and VIE not using the USD as its functional currency.
Recent accounting pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase the transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. For US public companies, ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. ASU 2020-05 delayed the effective date of ASU 2016-02 for non-public companies and foreign private issuers to annual periods beginning after December 15, 2021. The Company does not expect the impact of this new standard to be impacted to its financial positions or results of operations.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.
F-14
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Note 3 – Variable interest entity (“VIE”)
On October 18, 2021, Zhongke WFOE entered into Contractual Arrangements with Hainan ZKGC. The significant terms of these Contractual Arrangements are summarized in “Note 1—Nature of business and organization” above. As a result, the Company classifies Hainan ZKGC as a VIE which should be consolidated based on the structure as described in Note 1.
A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Zhongke WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Hainan ZKGC because it has both of the following characteristics:
(1) The power to direct activities at Hainan ZKGC that most significantly impact such entity’s economic performance, and
(2) The right to receive benefits from Hainan ZKGC that could potentially be significant to such entity.
Pursuant to the Contractual Arrangements, Hainan ZKGC pays service fees equal to all of its net income to Zhongke WFOE. The Contractual Arrangements are designed so that Hainan ZKGC operates for the benefit of Zhongke WFOE and ultimately, the Company.
Under the Contractual Arrangements, the Company has the power to direct activities of the VIE and can have assets transferred out of the VIE. Therefore, the Company considers that there is no asset in the VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves, if any. As the VIE is incorporated as a limited liability company under the Company Law of the PRC, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the VIE.
Accordingly, the accounts of Hainan ZKGC and its subsidiary Network ZKGC are consolidated in the accompanying consolidated financial statements.
The carrying amounts of the VIE’s consolidated assets and liabilities as of May 31, 2021 are as follows:
| May 31, | ||||
| 2021 | ||||
| Current assets | $ | 695,452 | ||
| Non-current assets | 265,839 | |||
| Total assets | 961,291 | |||
| Total liabilities | 735,785 | |||
| Net assets | $ | 225,506 | ||
F-15
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
The summarized consolidated operating results of the VIE for the period from August 11, 2020 (inception) through May 31, 2021 are as follows:
| Sales | $ | 320,012 | ||
| Cost of sales | 270,484 | |||
| Gross profit | 49,528 | |||
| Operating expenses | 57,080 | |||
| (Loss) from operations | (7,552 | ) | ||
| Other income, net | 59,122 | |||
| Provision for income taxes | (15,764 | ) | ||
| Net income | $ | 35,806 |
The summarized consolidated statements of cash flows of the VIE for the period from August 11, 2020 (inception) through May 31, 2021 are as follows:
| Net cash provided by operating activities | $ | 46,132 | ||
| Net cash (used in) investing activities | (192,904 | ) | ||
| Net cash (used in) provided by financing activities | 238,505 | |||
| Effect of exchange rate changes on cash | 1,198 | |||
| Net increase in cash | 92,931 | |||
| Cash, beginning | - | |||
| Cash, ending | $ | 92,931 |
Note 4 – Prepayments and other current assets
Prepayments and other current assets consisted of the following:
| Rent | $ | 8,881 | ||
| Other services | 1,628 | |||
| Advance to employee | 3,571 | |||
| Total | $ | 14,080 |
Note 5 – Property and equipment, net
Property and equipment consisted of the following:
| May
31, 2021 | ||||
| Office equipment | $ | 14,505 | ||
| Furniture and fixtures | 1,701 | |||
| Transportation equipment | 62,635 | |||
| Charging stations | 113,718 | |||
| Total | 192,559 | |||
| Less: accumulated depreciation | (11,170 | ) | ||
| Property and equipment, net | $ | 181,389 | ||
Depreciation expense for the period from August 11, 2020 (inception) through May 31, 2021 was $12,723.
F-16
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Note 6 – Intangible assets, net
Intangible assets consisted of the following:
| May
31, 2021 | ||||
| Software | $ | 89,647 | ||
| Less: accumulated amortization | (5,197 | ) | ||
| Intangible assets, net | $ | 84,450 | ||
Amortization expense charged to operations for the period from August 11, 2020 (inception) through May 31, 2021 was $5,197.
Note 7 – Related party balances and transactions
Related party balances
Due to related party consists of the following:
| May 31, | |||||||
| Name | Relationship | Nature | 2021 | ||||
| Liao Jinqi | Stockholder of the Company | Advances for operations, no interest, due on demand | $ | 12,187 | |||
| $ | 12,187 | ||||||
Note 8 – Income taxes
Cayman Islands
ZKGC Cayman was incorporated in the Cayman Islands and is not subject to tax on income or capital gains under the laws of Cayman Islands. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Hong Kong
ZKGC International is incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provision for the Hong Kong profits tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, ZKGC International is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
PRC
Zhongke WFOE, Hainan ZKGC, and Network ZKGC are governed by the income tax laws of the PRC and the income tax provisions in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis.
F-17
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Provision for income taxes consisted of:
| For
the period from August 11, 2020 (inception) through May 31, 2021 | ||||
| Current income tax expense | $ | 15,764 | ||
| Provision for income taxes | $ | 15,764 | ||
Significant components of net deferred tax assets and liabilities were as follows:
| May
31, 2021 | ||||
| Deferred tax assets | ||||
| Net operating loss carryforwards in China | $ | 2,976 | ||
| Total deferred tax assets | 2,976 | |||
| Valuation allowance | (2,976 | ) | ||
| Total net deferred tax asset | $ | - | ||
As of May 31, 2021, the Company had a net operating loss (NOL) carryforward of approximately $12,000, from the Company’s PRC subsidiary, Network ZKGC, which operated at a loss from September 28, 2020 (inception) through May 31, 2021. The NOL will expire by December 31, 2025. Network ZKGC expects to continue to generate losses in the coming years, and believes it is more likely than not that its PRC operations will not be able to fully utilize its deferred tax assets related to the net operating loss carryforwards in the PRC. The Company evaluates the recoverable amounts of deferred tax assets and considers both positive and negative factors when assessing the future realization of the deferred tax assets and applies weight to the relative impact of the evidence to the extent it can be objectively verified. Management provided a 100% valuation allowance for the deferred tax assets as of May 31, 2021.
Reconciliation of the effective income tax rate is as follows:
| For
the period from August 11, 2020 (inception) through May 31, 2021 | ||||
| Tax at PRC statutory rate | 25.0 | % | ||
| Change in valuation allowance | 6.0 | % | ||
| Effective tax rate | 31.0 | % | ||
F-18
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of May 31, 2021, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur interest and penalties tax for the period from August 11, 2020 (inception) through May 31, 2021. The Company does not anticipate any significant increases or decreases in unrecognized tax benefits in the next twelve (12) months from May 31, 2021.
Taxes payable consisted of the following:
| May
31, 2021 | ||||
| Income taxes | $ | 16,336 | ||
| VAT taxes | 4,492 | |||
| Other taxes | 247 | |||
| Total | $ | 21,075 | ||
Note 9 – Stockholders’ equity
Ordinary shares
ZKGC Cayman has authorized 50,000,000 ordinary shares with a par value of $0.001.
Capital contributions
For the period from August 11, 2020 (inception) through May 31, 2021, Jinqi Liao (Company’s CEO and sole stockholder of Hainan ZKGC) contributed a total of $182,660 to Hainan ZKGC and Network ZKGC.
Statutory reserves
In accordance with the relevant PRC laws and regulations, the Company’s subsidiary and VIE in the PRC are required to provide for certain statutory reserves, which are appropriated from net profit as reported in accordance with PRC accounting standards. The Company’s subsidiary and VIE in the PRC are required to allocate at least 10% of their after-tax profits to a statutory reserve until such reserve has reached 50% of their respective registered capital. Appropriations to other types of reserves in accordance with relevant PRC laws and regulations are to be made at the discretion of the board of directors of each entity in the PRC. The statutory reserves are restricted from being distributed as dividends under PRC laws and regulations. The statutory reserves recorded by the Company’s subsidiaries in the PRC were $4,729 as of May 31, 2021.
Restricted assets
As a result of these PRC laws and regulations and the requirement that distributions by the Company’s subsidiary and VIE in the PRC can only be paid out of distributable profits reported in accordance with PRC accounting standards, the Company’s subsidiary and VIE in the PRC are restricted from transferring a portion of their net assets to the Company. The restricted amounts include the paid-in capital and the statutory reserves of the Company’s subsidiary and VIE in the PRC. The aggregate amount of paid-in capital and statutory reserves, which represents the amount of net assets of the Company’s subsidiaries in the PRC not available for distribution, was $187,084 as of May 31, 2021.
F-19
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
Note 10 – Commitments
Lease Commitments
The Company entered into leases for four plants located in the PRC. The total future minimum lease payments under the non-cancellable operating leases as of May 31, 2021 are as follows:
| Twelve months ending May 31, | Minimum
lease payments | |||
| 2022 | $ | 17,000 | ||
| 2023 | 8,000 | |||
| Future minimum operating lease payments | $ | 25,000 | ||
Lease expense for the period from August 11, 2020 (inception) through May 31, 2021 was $6,489.
Variable interest entity structure
In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Zhongke WFOE and the VIE and its subsidiary are in compliance with existing PRC laws and regulations in all material respects.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual Arrangements is remote based on current facts and circumstances.
COVID-19
In March 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in China and elsewhere. Given the nature of the COVID-19 pandemic, and because substantially all of the Company’s business operations and workforce are concentrated in China, the Company’s business, results of operations, and financial condition have been adversely affected. The impact of COVID-19 on the macroeconomic outlook of China and any business disruption due to further resurgence of COVID-19 may have adverse financial impacts for the Company beyond 2021 and cannot be reasonably estimated at this time.
Note 11 – Risks and Uncertainties
Foreign currency risk
A majority of the Company’s transactions are denominated in RMB and a significant portion of the Company consolidated assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). It is difficult to predict how market forces, PRC or U.S. government policies may impact the exchange rates between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar may affect the Company’s financial results reported in U.S. dollar terms without giving effect to any underlying changes in the Company’s business or results of operations. Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.
F-20
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
As a result, the Company is exposed to foreign exchange risk as revenues and results of operations may be affected by fluctuations in the exchange rate between the USD and RMB. If the RMB depreciates against the U.S. dollar, the value of RMB revenues, earnings and assets as expressed in USD financial statements will decline. The Company has not entered into any hedging transactions in an effort to reduce its exposure to foreign exchange risk.
Credit risk
The Company is exposed to credit risk from its cash in banks and its accounts receivable.
As of May 31, 2021, approximately $88,000 was on deposit with two banks located in the PRC. In China, the insurance coverage of each bank is RMB 500,000 (approximately USD $79,000). As of May 31, 2021, no bank accounts are over the China deposit insurance limit.
Management believes that the credit risk on its cash in bank is limited because the counterparties are recognized financial institutions.
For the credit risk related to its accounts receivable, the Company performs ongoing credit evaluations of its customers. At May 31, 2021, no allowance for doubtful accounts was considered necessary.
Significant customers
For the period from August 11, 2020 (inception) through May 31, 2021, two customers accounted for 53.9% and 23.8% of the Company’s total revenues.
As of May 31, 2021, two customers accounted for 72.7%, and 14.1% of accounts receivable.
Vendor concentration risk
For the period from August 11, 2020 (inception) through May 31, 2021, two vendors accounted for 50.2% and 36.7% of the Company’s total construction costs relating to product sales and uncompleted contracts.
As of May 31, 2021, two vendors accounted for 43.6% and 41.2% of accounts payable.
Note 12 – Subsequent events
On May 31, 2021, ZKGC Cayman was established under the laws of the Cayman Islands.
On September 9, 2021, ZKGC International was established under the laws of Hong Kong.
On September 14, 2021, ZKGC Cayman issued 5,100,000 of its ordinary shares to G&C International Investment Company Limited (“GCI”) and 4,900,000 of its ordinary shares to Wanqi International Investment Company Limited (“WII”). Mr.Jinqi Liao, CEO of ZKGC Cayman, is the sole stockholder of GCI. Mr. Zhuowei Zhong has voting and dispositional control over the shares owned by WII. This transaction has been presented on a retroactive basis as of August 11, 2020, date of incorporation of Hainan ZKGC. (See Note 1)
On October 12, 2021, Zhongke WOFE was established under the laws of the PRC.
F-21
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
On October 18, 2021, Zhongke WOFE entered into a series of VIE Agreements with the shareholder of Hainan ZKGC. These agreements include: 1) an Exclusive Business Cooperation Agreement; 2) an Equity Interest Pledge Agreement, 3) an Exclusive Option Agreement; 4) Powers of Attorney and 5) Spousal Consent Letters. Pursuant to these agreements, Zhongke WOFE has the exclusive rights to provide consulting services to Hainan ZKGC related to the business operation and management of Hainan ZKGC. For such services, Hainan ZKGC agrees to pay an annual service fee in the amount of net income of such year. Such contractual arrangements are designed so that the operations of Hainan ZKGC are solely for the benefit of Zhongke WOFE and ultimately, the Company. (See Note 1)
On November 16, 2021, ZKGC Cayman issued a total 3,000,000 of its ordinary shares to 70 non-United States investors in consideration for total proceeds of RMB 390,000 cash.
Note 13 – Condensed financial information of the parent company (unaudited)
The Company performed a test on the restricted net assets of its consolidated subsidiaries and VIE in accordance with Rule 4-08(e)(3) of Regulation S-X promulgated by the SEC, “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the required financial statement information for the parent company, ZKGC New Energy Limited. The subsidiaries did not pay any dividends to the parent for the period presented. For the purpose of presenting parent only financial information, the Company records its investment in its subsidiaries and VIE under the equity method of accounting. Such investments are presented on the separate parent only balance sheet as “Investment in subsidiaries and VIE” and the income of the subsidiaries and VIE are presented as “equity in income of subsidiaries and VIE.” Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.
PARENT COMPANY BALANCE SHEET
| May 31, | ||||
| 2021 | ||||
| ASSETS | ||||
| OTHER ASSETS | ||||
| Investment in subsidiaries and VIE | $ | 225,316 | ||
| Total assets | $ | 225,316 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| LIABILITIES | $ | - | ||
| COMMITMENTS AND CONTINGENCIES | - | |||
| STOCKHOLDERS’ EQUITY | ||||
| Ordinary shares, $0.001 par value, 50,000,000 shares authorized, 10,000,000 shares issued and outstanding as of May 31, 2021* | 10,000 | |||
| Additional paid-in capital | 172,355 | |||
| Retained earnings | 31,192 | |||
| Statutory reserves | 4,729 | |||
| Other comprehensive income (loss) | 7,040 | |||
| Total stockholders’ equity | 225,316 | |||
| Total liabilities and stockholders’ equity | $ | 225,316 | ||
| * | Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on September 14, 2021. |
F-22
ZKGC NEW ENERGY LIMITED AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
(EXPRESSED IN UNITED STATES DOLLARS)
PARENT COMPANY STATEMENT OF INCOME AND
COMPREHENSIVE INCOME
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
| EQUITY IN INCOME OF SUBSIDIARIES AND VIE | $ | 35,806 | ||
| COSTS AND EXPENSES | ||||
| General and Administrative expenses | - | |||
| Total costs and expenses | - | |||
| INCOME BEFORE INCOME TAXES | 35,806 | |||
| PROVISION FOR INCOME TAXES | - | |||
| NET INCOME | 35,806 | |||
| FOREIGN CURRENCY TRANSLATION ADJUSTMENT | 7,040 | |||
| COMPREHENSIVE INCOME | $ | 42,846 |
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH MAY 31, 2021
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net income | $ | 35,806 | ||
| Adjustments to reconcile net income to cash used in operating activities: | ||||
| Equity in income of subsidiaries and VIEs | (35,806 | ) | ||
| Net cash used in operating activities | - | |||
| CHANGE IN CASH | - | |||
| CASH, beginning of the period | - | |||
| CASH, end of the period | $ | - | ||
F-23
Ordinary Shares
ZKGC New Energy Limited
P R O S P E C T U S
________________, 2022
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. An indemnity will be void and of no effect and will not apply to a person unless the person acted honestly and in good faith and in what he believed to be in the best interests of the company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful.
Our memorandum and articles of association provides that we shall indemnify each Director or Officer of the Company against any liability incurred by the Director or Officer as a result of any act or failure to act in carrying out his functions other than such liability that he may incur by his own actual fraud or willful default. Expenses, including legal expenses, incurred by a Director or Officer in defending any legal, administrative or investigative proceeding may be paid by the Company in advance of the final disposition of such proceeding upon receipt of an undertaking to repay the amount if it shall be determined that the Director or Officer is not entitled to be indemnified by the Company.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Recent Sales of Unregistered Securities
The following sets forth information regarding all unregistered sales of our securities since our inception on May 31, 2021. All of these sales were exempt from registration under the Securities Act by reason of Section 4(2) of the Securities Act, as transactions by an issuer not involving a public offering, or were exempt from registration pursuant to Regulation S. The recipient of securities in each of these transactions represented his or her intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution of the securities, and appropriate legends were affixed to the share certificates issued in such transactions and there were no investors who are citizens or residents of the United States. The investors were provided adequate information concerning the Company, and the investment was determined to be suitable. In all cases, there was no public solicitation. The issuances of the securities described below were effected without the involvement of underwriters.
| Date | Purchaser(s) | Ordinary Shares | Price
Per Share | |||||||
| 5/31/21 | Founders | 5,100,000 | $ | 0.001 | ||||||
| 9/14/21 | Wanqi International Investment Company Limited | 4,900,000 | $ | 0.001 | ||||||
| 11/16/2021 | Zhuowei Zhong | 134,000 | $ | 0.02 | ||||||
| 11/16/2021 | Muxian Hu | 52,000 | $ | 0.02 | ||||||
| 11/16/2021 | Rongli Zheng | 48,000 | $ | 0.02 | ||||||
| 11/16/2021 | Shanming Huang | 4,000 | $ | 0.02 | ||||||
| 11/16/2021 | Peifen Wu | 8,000 | $ | 0.02 | ||||||
| 11/16/2021 | Lipeng Huang | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Shaoru Han | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Guosheng Liu | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Yuling Lu | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Chubiao Ning | 4,000 | $ | 0.02 | ||||||
II-1
| Date | Purchaser(s) | Ordinary Shares | Price Per Share | |||||||
| 11/16/2021 | Ruojin Zheng | 4,000 | $ | 0.02 | ||||||
| 11/16/2021 | Haiqun Zhang | 4,000 | $ | 0.02 | ||||||
| 11/16/2021 | Heng Man Leong | 4,000 | $ | 0.02 | ||||||
| 11/16/2021 | Tou Mui Ku | 8,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xingjiu Liu | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Ping Zhang | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Lihua Chen | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Haiping Xu | 200,000 | $ | 0.02 | ||||||
| 11/16/2021 | Chun Xu | 100,000 | $ | 0.02 | ||||||
| 11/16/2021 | Shuzhen Chen | 80,000 | $ | 0.02 | ||||||
| 11/16/2021 | Peng Zhao | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Hong Cheng | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Rongzheng Mo | 400,000 | $ | 0.02 | ||||||
| 11/16/2021 | Kangli Zhao | 5,200 | $ | 0.02 | ||||||
| 11/16/2021 | Shunyao Huang | 34,800 | $ | 0.02 | ||||||
| 11/16/2021 | Yujun Xu | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Yanling Zhao | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Qiuyuan Sun | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Chaokan Liu | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Junqin Yang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xing Wan | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Yaohong Wu | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jiayi Zhou | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jin Luo | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Zhicheng Ouyang | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xiaomi Hu | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jing Xu | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Liguo Zhang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Huameng Wang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Julie Zhu | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Yangjun Wang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Zhangyou Yan | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Guoming Liang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jinfeng Gao | 150,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xianyun Pan | 30,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jianjun Zhou | 150,000 | $ | 0.02 | ||||||
| 11/16/2021 | Lihua Gao | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jiaen Yu | 100,000 | $ | 0.02 | ||||||
| 11/16/2021 | Lu He | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Huabin Huang | 300,000 | $ | 0.02 | ||||||
| 11/16/2021 | Liya Zhou | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Tingfang Xu | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Hanlin Chen | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Lehan Li | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Qing Tang | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Fanrong Zeng | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Kaimin Liang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xinlin Du | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xiaoyan Jiang | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xiaosheng Cao | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Ruilin Wang | 200,000 | $ | 0.02 | ||||||
| 11/16/2021 | Chunxia Lu | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xia Li | 40,000 | $ | 0.02 | ||||||
| 11/16/2021 | Liangya Chen | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Zhi Cui | 20,000 | $ | 0.02 | ||||||
| 11/16/2021 | Xin Zhang | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Shihui Lu | 10,000 | $ | 0.02 | ||||||
| 11/16/2021 | Jiacui Zhou | 10,000 | $ | 0.02 | ||||||
II-2
Exhibits and Financial Statement Schedules
| (a) | Exhibits |
The following exhibits are filed as part of this registration statement:
Undertakings
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to:
| i. | Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| ii. | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. |
| iii. | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F (§249.220f of this chapter) at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act (15 U.S.C. 77j(A)(3) need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, in Laocheng Town, Hainan Province, People’s Republic of China on the 25th day of January, 2022.
| ZKGC NEW ENERGY LIMITED | ||
| By: | /s/ Liao Jinqi | |
| Liao Jinqi, Chief Executive Officer | ||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following person in the capacities and on the date indicated.
| Signatures | Title | Date | ||
| /s/ Liao Jinqi | Chief Executive Officer, Chief Financial Officer and Director | January 25, 2022 | ||
| Liao Jinqi | (Principal Executive Officer; Principal Financial Officer; Principal Accounting Officer) |
II-4
SIGNATURE OF AUTHORIZED U.S. REPRESENTATIVE OF THE REGISTRANT
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of ZKGC New Energy Limited, has signed this Registration Statement or amendment thereto in the City of Verona, New Jersey on January 25, 2022.
| CCS Global Solutions, Inc. | ||
| By: | /s/ Kelly A. Hemphill | |
| Kelly A. Hemphill | ||
II-5
INDEX TO EXHIBITS
II-6
Exhibit 3.1
THE COMPANIES ACT (REVISED)
OF THE CAYMAN ISLANDS
ZKGC NEW ENERGY LIMITED
An Exempted Company Limited By Shares
AMENDED AND RESTATED
MEMORANDUM AND ARTICLES OF ASSOCIATION
(adopted by sole shareholder resolutions passed on 12 August 2021)
 | ||
Filed: 23-Aug-2021 16:26 EST | ||
| www.verify.gov.ky File#: 376695 | Auth Code: B32514535880 | |
THE
COMPANIES ACT (REVISED)
OF THE CAYMAN ISLANDS
AMENDED
AND RESTATED
MEMORANDUM
OF ASSOCIATION
OF
ZKGC NEW ENERGY LIMITED
An Exempted Company Limited By Shares
(adopted by sole shareholder resolutions passed on 12 August 2021)
| 1 | NAME |
The name of the Company is ZKGC NEW ENERGY LIMITED.
| 2 | STATUS |
The Company is a company limited by shares.
| 3 | REGISTERED OFFICE |
The registered office of the Company is at Harneys Fiduciary (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman KY1-1002, Cayman Islands or at such other place as the Directors may from time to time decide.
| 4 | OBJECTS AND CAPACITY |
Subject to paragraph 9 of this Memorandum, the objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands. The Company is a body corporate capable of exercising all the functions of a natural person of full capacity, irrespective of any question of corporate benefit.
| 1 | | |
Filed: 23-Aug-2021 16:26 EST | ||
| www.verify.gov.ky File#: 376695 | Auth Code: B32514535880 | |
| 5 | SHARE CAPITAL |
The share capital of the Company is USD 50,000.00 divided into 50,000,000 Ordinary shares of par value USD 0.001 each.
| 6 | LIABILITY OF MEMBERS |
The liability of each Member is limited to the amount from time to time unpaid on such Member’s Shares.
| 7 | CONTINUATION |
The Company may exercise the powers contained in the Companies Act to transfer and be registered by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be de-registered in the Cayman Islands.
| 8 | DEFINITIONS |
Capitalised terms used and not defined in this Memorandum of Association shall bear the same meaning as those given in the Articles of Association of the Company.
| 9 | EXEMPTED COMPANY |
The Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in this section shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands.
| 10 | FINANCIAL YEAR |
The financial year end of the Company is 31 May or such other date as the Directors may from time to time decide and annex to this Memorandum.
| 2 | | |
Filed: 23-Aug-2021 16:26 EST | ||
| www.verify.gov.ky File#: 376695 | Auth Code: B32514535880 | |
THE
COMPANIES ACT (REVISED)
OF THE CAYMAN ISLANDS
AMENDED AND RESTATED
ARTICLES
OF ASSOCIATION
OF
ZKGC NEW ENERGY LIMITED
An Exempted Company Limited By Shares
(adopted by sole shareholder resolutions passed on 12 August 2021)
| 1 | DEFINITIONS AND INTERPRETATION |
| 1.1 | The Regulations contained in Table A in the First Schedule to the Companies Act do not apply to the Company. In these Articles of Association, if not inconsistent with the context, the following words and expressions shall have the following meanings: |
Articles means these Articles of Association;
Companies Act means the Companies Act (Revised), as amended or re-enacted from time to time;
Company means the above named company;
Director means a director of the Company appointed in accordance with these Articles;
Distribution means a distribution, dividend (including an interim dividend) or other payment or transfer of property of the Company on or in respect of a Share (save in respect of its redemption or repurchase);
Electronic Transactions Act means the Electronic Transactions Act of the Cayman Islands;
Member has the same meaning as in the Companies Act;
Memorandum means the Memorandum of Association of the Company;
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Officer means any person appointed by the Directors to hold an office in the Company;
Ordinary Resolution means a resolution:
| (a) | passed by a majority of such Members as, being entitled to do so, vote in person or by proxy at a general meeting of the Company; or |
| (b) | approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members. |
Register of Directors and Officers means the register of Directors and Officers maintained by the Company in accordance with these Articles;
Register of Members means the register of Members referred to in these Articles;
Registrar means the Registrar of Companies and includes the Deputy Registrar of Companies;
Registered Office means the registered office for the time being of the Company;
Seal means any seal which has been duly adopted as the common seal of the Company and includes every duplicate seal;
Secretary means the person appointed to perform any or all of the duties of secretary of the Company, including any assistant secretary;
Share means a share in the capital of the Company, including a fraction of a share issued or authorised to be issued by the Company;
Special Resolution means a special resolution passed in accordance with Section 60 of the Companies Act, being a resolution:
| (a) | passed by a majority of not less than two-thirds of such Members as, being entitled to do so, vote in person or by proxy at a general meeting of the Company of which notice specifying the intention to propose the resolution as a Special Resolution has been duly given; or |
| (b) | approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members; |
Subscriber means the subscriber to the Memorandum;
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Treasury Share means a Share that has been repurchased, redeemed, surrendered to or otherwise acquired by the Company and not cancelled; and
Written includes information generated, sent, received or stored by electronic, electrical, digital, magnetic, optical, electromagnetic, biometric or photonic means, including electronic data interchange and electronic mail in accordance with the Electronic Transactions Act and in writing shall be construed accordingly.
| 1.2 | In the Memorandum and these Articles, unless the context otherwise requires a reference to: |
| (a) | words importing the masculine gender include the feminine gender; |
| (b) | any Cayman Islands law or regulation, is a reference to such law or regulation as amended or re-enacted from time to time; |
| (c) | the singular includes the plural and vice versa; |
| (d) | a person includes all legal persons and natural persons; and |
| (e) | legal persons include all forms of corporate entity and any other person having capacity to act in its own name created by or in accordance with the laws or regulations of any jurisdiction. |
| 1.3 | Headings are for ease of reference only and shall be disregarded in interpreting the Memorandum and the Articles. |
| 2 | COMMENCEMENT OF BUSINESS |
| 2.1 | Commencement. The business of the Company may be commenced at such time as determined by the Directors. |
| 2.2 | Commencement Costs and Expenses. The Directors may pay, out of capital or other money of the Company, all costs and expenses incurred in the establishment and registration of the Company. |
| 3 | REGISTERED SHARES |
| 3.1 | Registered Shares. The Company shall issue registered Shares only. |
| 3.2 | No Bearer Shares. The Company is not authorised to issue bearer Shares, convert registered Shares to bearer Shares or exchange registered Shares for bearer Shares. |
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| 4 | SHARE CERTIFICATES |
| 4.1 | Share Certificates. Unless and until the Directors resolve to issue share certificates, no share certificate shall be issued, and the records of the shareholdings of each Member shall be in uncertified book entry form. If the Directors do resolve to issue share certificates in respect of any one or more classes of Shares, then every Member holding such Shares shall be entitled, upon written request only, to a certificate signed by a Director or Secretary, or any other person authorised by a resolution of the Directors, or under the Seal specifying the number of Shares held by him and the signature of the Director, Secretary or authorised person and the Seal may be facsimiles or affixed by electronic means pursuant to the Electronic Transactions Act. |
| 4.2 | Indemnity and Replacement. Any Member receiving a certificate shall indemnify and hold the Company and its Directors and Officers harmless from any loss or liability which it or they may incur by reason of any wrongful or fraudulent use or representation made by any person by virtue of the possession thereof. If a certificate for Shares is worn out or lost it may be renewed or, in connection with any proposed share transfer, a new certificate may be issued, on production of the worn out certificate or on satisfactory proof of its loss together with such indemnity as may be required by the Directors. |
| 4.3 | Joint Holders. If several Members are registered as joint holders of any Shares, any one of such Members may give an effectual receipt for any share certificate. |
| 5 | ISSUE OF SHARES |
| 5.1 | Issue. Subject to the provisions, if any, of the Memorandum and directions given by any Ordinary Resolution and the rights attaching to any class of existing Shares, the Directors may issue, allot, grant options over or otherwise dispose of Shares (including any fractions of Shares) and other securities of the Company at such times, to such persons, for such consideration and on such terms as the Directors may determine. |
| 5.2 | Subscriber Share. Notwithstanding the preceding Article, the Subscriber shall have the power to: |
| (a) | issue one Share to itself; |
| (b) | transfer that Share by an instrument of transfer to any person; and |
| (c) | update the Register of Members in respect of the issue and transfer of that Share. |
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| 5.3 | Preferred Shares. Shares and other securities of the Company may be issued by the Directors with such preferred, deferred or other special rights, restrictions or privileges whether in regard to voting, Distributions, a return of capital, or otherwise and in such classes and series, if any, as the Directors may determine. |
| 5.4 | Ordinary Shares. Where the Directors issue a Share having no preferred, deferred, redemption or other special rights, it shall be issued as an ordinary Share and entitle the holder, subject to any other Share having any preferred, deferred, redemption or other special rights, to: |
| (a) | receive notice of, attend and vote at any general meeting of the Company and on any Ordinary Resolution or Special Resolution; |
| (b) | an equal share in any dividend or other Distribution paid by the Company; and |
| (c) | an equal share in the distribution of the surplus assets of the Company. |
| 5.5 | Consideration for Share Issue. A Share may be issued for consideration in any form, including money, a promissory note or other written obligation to contribute money or property, real property, personal property (including goodwill and know-how), services rendered or a contract for future services. |
| 5.6 | Register of Members. The Register of Members kept by the Company shall contain: |
| (a) | the names and addresses of each Member; |
| (b) | a statement of the Shares held by each Member; |
| (c) | the distinguishing numbers of the Shares of each Member (if any); |
| (d) | the amount paid, or agreed to be considered as paid, on the Shares of each Member; |
| (e) | the date on which the name of each person was entered on the register as a Member; and |
| (f) | the date on which any person ceased to be a Member. |
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| 5.7 | Commission. The Company is authorised to pay a commission to any person in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for any Shares or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any Shares. |
| 6 | VARIATION OF RIGHTS |
| 6.1 | Class Variation. If, at any time, the share capital of the Company is divided into different classes of Shares, the rights attached to any class (unless otherwise provided by the terms of issue of the Shares of that class) may be varied with the consent in writing of the holders of two-thirds of the issued Shares of that class or with the sanction of a Special Resolution passed at a separate general meeting of the holders of the Shares of the class. To every such separate general meeting the provisions of these Articles relating to general meetings shall, mutatis mutandis, apply, but so that the necessary quorum shall be one or more persons holding or representing by proxy one-third of the issued Shares of the class and that any holder of Shares of the class present in person or by proxy may demand a poll. |
| 6.2 | No Variation on Further Issue. The rights conferred upon the holders of the Shares of any class shall not, unless otherwise expressly provided by the terms of issue of the Shares of that class, be deemed to be varied by the creation or issue of further Shares ranking pari passu therewith. |
| 7 | REDEMPTION, PURCHASE AND SURRENDER OF SHARES AND TREASURY SHARES |
| 7.1 | Redemption, Purchase and Surrender. Subject to the provisions of the Companies Act and to the rights attaching to any class of Share, the Company may: |
| (a) | issue Shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company or the Member on such terms and in such manner as the Directors may, before the issue of such Shares, determine; |
| (b) | purchase its own Shares (including any redeemable Shares) on such terms and in such manner as the Directors determine; |
| (c) | make a payment in respect of the redemption or purchase of its own Shares in any manner permitted by the Companies Act including out of capital; and |
| (d) | permit the surrender of fully paid Shares for no consideration. |
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| 7.2 | Effect of Redemption, Purchase and Surrender. Shares that the Company redeems, purchases, accepts by way of surrender or otherwise acquires pursuant to Article 7.1 may: |
| (a) | be cancelled; or |
| (b) | be held as Treasury Shares on such terms and in such manner as the Directors determine prior to such acquisition. |
| 7.3 | Treasury Shares. All rights and obligations attaching to a Treasury Share are suspended and shall not be exercised by the Company while it holds the Share as a Treasury Share, other than as set out in this Article. The Company may: |
| (a) | cancel the Treasury Shares on such terms and in such a manner as the Directors may determine; and |
| (b) | transfer the Treasury Shares in accordance with Article 12. |
| 7.4 | No Participation. Any Share in respect of which notice of redemption has been given shall not be entitled to participate in the profits of the Company in respect of the period after the date specified as the date of redemption in the notice of redemption. |
| 7.5 | No other Redemption. The redemption, purchase or surrender of any Share shall not be deemed to give rise to the redemption, purchase or surrender of any other Share. |
| 7.6 | Redemption in Kind. The Directors may, when making payments in respect of redemption or purchase of Shares, if authorised by the terms of issue of the Shares being redeemed or purchased or with the agreement of the holder of such Shares, make such payments either in cash or in kind. |
| 8 | LIEN |
| 8.1 | All Monies Payable. The Company shall have a first and paramount lien on every Share, whether or not it is a fully paid Share, for all moneys, whether presently payable or not, called or payable at a fixed time in respect of that Share and for all debts, liabilities or other obligations owed, whether presently or not, by the Member or by one or more joint Members or by any of their estates to the Company (together, the Lien Amounts) but the Directors may, at any time, declare any Share to be wholly or in part exempt from this Article. The Company’s lien, if any, on a Share shall extend to all Distributions payable thereon. Any registration of the transfer of a Share shall operate to extinguish the Company’s lien on that Share. |
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| 8.2 | Sale. The Company may sell, in such manner as the Directors think fit, any Shares in which the Company has a lien, but no sale shall be made unless some amount in respect of which the lien exists is presently payable and the period of fourteen days has elapsed after the Company has given a notice in writing, stating and demanding payment of such part of the presently payable amount, to the relevant Member. |
| 8.3 | Registration of Purchase. The Directors may authorise any person to transfer the Shares sold in accordance with this Article to the purchaser of such Shares. The purchaser shall be registered as the holder of the Shares so transferred and he shall not be bound to see to the application of the purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the sale of the Shares in accordance with this Article. |
| 8.4 | Application of Proceeds. The proceeds of the sale, net of any costs incurred by the Company in relation to the sale, shall be applied by the Company in payment of such part of the amount in respect of which the lien exists as is presently payable. The Company shall retain and have a lien over such part of the remainder of the proceeds as is equal to the Lien Amounts which exist but are not presently payable by the Member and may apply such proceeds against the Lien Amounts as and when they become payable and the residue shall be paid to the person entitled to the Shares at the date of the sale. |
| 9 | CALLS ON SHARES |
| 9.1 | Calls. The Directors may, from time to time, make calls upon the Members in respect of some or all of any moneys unpaid on their Shares, whether in respect of their par value or the premium payable on those Shares; each Member shall (subject to receiving at least 14 days’ notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on his Shares. A call may be required to be paid in instalments. The Directors may revoke or postpone a call at any time. |
| 9.2 | Joint Holders. The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof and the holder or joint holders of a Share at the time of a call shall remain liable to pay the call on that Share, notwithstanding any subsequent transfer of the Share being registered by the Company. |
| 9.3 | Interest on Calls. If a sum called in respect of a Share is not paid before or on the day appointed for payment of that call, the Member from whom such amount is due shall pay interest upon the sum at such rate as the Directors may determine from the day appointed for payment of the call to the time of the actual payment. The Directors shall have the discretion to waive payment of any such interest in full or in part. |
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| 9.4 | Fixed Payment Dates. The provisions contained in these Articles in respect of calls shall apply to payments, whether on account of the amount of the Share, or by way of premium, to be made on the allotment of a Share or any date fixed on the issue of the Share as if the same had become payable by virtue of a call duly made and notified. |
| 10 | FORFEITURE |
| 10.1 | Failure to pay Call. If a Member fails to pay any call or instalment of a call in respect of Shares on the day appointed for payment, the Directors may serve a notice on such Member naming a further date not earlier than the expiration of 14 days from the date of service on or before which the payment required by the notice is to be made and containing a statement that in the event of non-payment the Shares, or any of them, will be liable to be forfeited. |
| 10.2 | Forfeiture. If the requirements of the notice referenced in this Article are not complied with the Company may forfeit the Shares together with any Distributions declared payable in respect of the forfeited Shares and not paid at any time before tender of payment. |
| 10.3 | No Refund. The Company is under no obligation to refund any moneys to the Member whose Shares have been forfeited. |
| 10.4 | Sale of Forfeited Share. A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the Directors think fit. The proceeds of any sale or disposition of the forfeited Share may be received and used by the Company as the Directors determine. |
| 10.5 | Outstanding Liability. A person whose Shares have been forfeited shall cease to be a Member in respect of the forfeited Shares, but shall, notwithstanding, remain liable to pay to the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the Shares together with interest. |
| 10.6 | Certificate of Forfeiture. A certificate in writing under the hand of a Director or Officer stating that a Share has been duly forfeited on the date stated in the certificate shall be conclusive evidence of the facts stated in the certificate as against all persons claiming to be entitled to the Share. The Directors may authorize any person to transfer the Shares sold in accordance with this Article to the purchaser of such Shares. The purchaser shall be registered as the holder of the Shares so transferred and he shall not be bound to see to the application of the purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the sale of the Shares in accordance with this Article. |
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| 10.7 | Fixed Payment Dates. The provisions of this Article applying to forfeiture for failure to pay any call or instalment of a call shall apply to the failure to make payments, whether on account of the amount of the Share, or by way of premium, to be made on the allotment of a Share or any date fixed on the issue of the Share as if the same had become payable by virtue of a call duly made and notified. |
| 11 | TRANSMISSION OF SHARES |
| 11.1 | Legal Personal Representative. The legal personal representative of a deceased sole holder of a Share shall be the only person recognised by the Company as having any title to the Share. In the case of a Share registered in the names of two or more holders, the survivors, survivor or the legal personal representatives of the deceased survivor, shall be the only person(s) recognised by the Company as having any title to the Share. |
| 11.2 | Transmission. Any person becoming entitled to a Share in consequence of the death or bankruptcy of or any analogous event affecting a Member (each such event a Transmission Event and each such person a Representative) shall, upon such evidence being produced as may from time to time be required by the Directors, have the right either to be registered as a Member in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the Member could have made; but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by such Member before the occurrence of a Transmission Event. |
| 11.3 | Pre-Registration Status. Representatives shall be entitled to the same notices, dividends and other advantages to which he would be entitled if he were the registered holder of the Share, except that he shall not, before being registered as a Member in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company. |
| 11.4 | Requirement for Registration. The Directors may at any time give notice requiring a Representative to elect either to be registered himself or to have some person nominated by him become the holder of the Share (but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by the relevant Member before the Transmission Event). If the notice is not complied with within ninety days the Directors may thereafter withhold payment of all Dividends, bonuses or other monies payable in respect of the Share until the requirements of the notice have been complied with. |
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| 12 | TRANSFER OF SHARES |
| 12.1 | Directors’ Consent. Shares and Treasury Shares are transferable, subject to the consent of the Directors who may, in their absolute discretion, refuse to consent to any transfer and decline to register the transfer without giving any reason. |
| 12.2 | Instrument of Transfer. The instrument of transfer shall be in writing in such form as may be acceptable to the Directors and shall be executed by or on behalf of the transferor and, if required by the Directors, signed by the transferee. |
| 12.3 | Certificates. Subject to Article 4.2, where the Company has issued a certificate in respect of a Share proposed to be transferred, the transferor shall lodge, with the instrument of transfer, the original certificate relating to the Share being transferred. |
| 12.4 | Effective Date. The transfer of a Share is effective when the name of the transferee is entered on the Register of Members. Until such time, the transferor shall be deemed to remain a Member. |
| 12.5 | Lost Certificate. If the Directors are satisfied that an instrument of transfer relating to Shares has been signed but that the instrument has been lost or destroyed, they may, on receipt of such indemnities as they may require: |
| (a) | accept such evidence of the transfer of Shares as they consider appropriate; and |
| (b) | proceed to register the transferee’s name in the Register of Members. |
| 12.6 | Notification of Refusal. Where the Directors refuse to register a transfer of a Share, they shall, within two months after the date on which the transfer was lodged with the Company, notify the transferee of the refusal. |
| 12.7 | Transfer of Treasury Shares. The transfer of Treasury Shares may be for valuable consideration or otherwise, and at a discount to the par value of the Shares. |
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| 13 | REGISTERED HOLDER DEEMED ABSOLUTE OWNER |
| 13.1 | The registered holder of a Share shall be treated as the absolute owner of such Share. No person shall be recognised by the Company as holding any Share upon trust and the Company shall not register nor be bound by or required to recognise any equitable or other interest of whatever nature in a Share other than an absolute right to the Share, irrespective of whether the Company has notice of such interest. |
| 14 | ALTERATION OF SHARE CAPITAL |
| 14.1 | Increase or Amendment. The Company may by Ordinary Resolution: |
| (a) | increase the share capital by such sum, to be divided into Shares of such amount, and with such rights, privileges, priorities and restrictions attached to them as the resolution shall prescribe; |
| (b) | consolidate and divide all or any of its share capital into Shares of larger amount than its existing Shares; |
| (c) | subject to section 13 of the Companies Act, sub-divide its existing Shares, or any of them, into Shares of smaller amounts than is fixed by the Memorandum; and |
| (d) | cancel any Shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person. |
| 14.2 | Reduction. Subject to the provisions of the Companies Act and these Articles, the Company may, by Special Resolution, reduce its share capital and any capital redemption reserve in any manner. |
| 15 | MEETINGS AND CONSENTS OF MEMBERS |
| 15.1 | Meetings. All meetings of Members shall be referred to as extraordinary general meetings unless the general meeting is an annual general meeting. The Company may but shall not be obliged to hold an annual general meeting. |
| 15.2 | Directors Convene. Any Director may convene meetings of the Members at such times and in such manner and places within or outside the Cayman Islands as the Director considers necessary or desirable. |
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| 15.3 | Members Convene. Upon the written request of Members entitled to exercise 10% or more of the voting rights in respect of the matter for which the meeting is requisitioned, any one or more of the Directors shall forthwith proceed to convene a meeting of Members. The written request of Members to requisition a meeting must state the objects of the meeting and must be signed by the Members requisitioning the meeting. The written request must be lodged at the Registered Office and may be delivered in counterpart. |
| 15.4 | Failure to Convene. If the Directors do not proceed to convene a meeting of Members within 21 days of the written request to requisition a meeting being lodged the requisitionists, or any of them together holding at least half of the voting rights of all of them, may convene the meeting of Members in the same manner as nearly as possible as that in which a meeting of Members may be convened by a Director. Where the requisitionists fail to convene the meeting of Members within three months of their right to convene the meeting arising, the right to convene the meeting of Members shall lapse. |
| 15.5 | Notice of Meeting. The Director convening a meeting shall give not less than seven days’ notice of a meeting of Members to: |
| (a) | those Members whose names on the date the notice is given appear as Members in the Register of Members and are entitled to vote at the meeting; and |
| (b) | each of the Directors. |
| 15.6 | Failure to Give General Notice. A meeting of Members held in contravention of the requirement to give notice is valid if Members holding at least 90% of the total voting rights on all the matters to be considered at the meeting have waived notice of the meeting and, for this purpose, the presence of a Member at the meeting shall constitute waiver in relation to all the Shares which that Member holds. |
| 15.7 | Failure to give Individual Notice. The inadvertent failure of a Director who convenes a meeting to give notice of a meeting to a Member or another Director, or the fact that a Member or another Director has not received notice, does not invalidate the meeting. |
| 15.8 | Voting. No person shall be entitled to vote at any meeting of Members unless he is registered as a Member on the record date for such meeting and all calls or other moneys payable by him in respect of Shares have been paid at or before the record date. Subject to the rights and restrictions attached to any Shares and the provisions of this Article, each Member who is present in person, by its duly authorised representative or by proxy, shall have one vote and on a poll each Member shall have one vote for every Share of which he is the holder. |
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| 16 | PROXIES |
| 16.1 | Proxies. A Member may be represented at a meeting of Members by a proxy who may speak and vote on behalf of the Member. |
| 16.2 | Production of Proxies. The instrument appointing a proxy shall be produced at the place designated for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote. The notice of the meeting may specify an alternative or additional place or time at which the proxy shall be presented. |
| 16.3 | Form of Proxy. An instrument appointing a proxy may be in any usual or common form (or such other form as the Directors may approve) and may be expressed to be for a particular meeting or any adjournment thereof or may appoint a standing proxy until notice of revocation is received at the Registered Office or at such place or places as the Directors may otherwise specify for the purpose. |
| 16.4 | Joint Ownership and Proxies. Where Shares are jointly owned: |
| (a) | if two or more persons hold Shares jointly, each of them may be present in person or by proxy at a meeting of Members and may speak as a Member; |
| (b) | if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners; and |
| (c) | if two or more of the joint owners are present in person or by proxy they must vote as one. |
| 17 | PROCEEDINGS OF SHAREHOLDER MEETINGS |
| 17.1 | Chairman of Member Meeting. At every meeting of Members, the chairman of the board of Directors shall preside as chairman of the meeting. If there is no chairman of the board of Directors or if he is not present at the meeting within fifteen minutes of the time appointed after the meeting or if he is unwilling to act the Directors present shall elect the chairman of the meeting. |
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| 17.2 | Adjournment. The chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. |
| 17.3 | Conference Call. A Member, or his duly authorised representative or proxy, shall be deemed to be present at a meeting of Members if he participates by telephone or other electronic means by means of which all the persons participating in the meeting are able to hear each other. |
| 17.4 | Objections. No objection shall be raised to the qualification of any voter except at the meeting of members or adjourned meeting of Members at which the vote objected to is given or tendered and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and binding on all parties. |
| 17.5 | Casting of Votes. A Member holding more than one Share need not cast the votes in respect of the Shares held by him in the same way on any resolution for which a poll is taken. A person appointed as the authorised representative or proxy of a Member may cast the votes in respect of the Shares for which he is appointed in a like manner. |
| 17.6 | Quorum. A meeting of Members is duly constituted if, at the commencement of the meeting, there are present in person, through their authorised representative or by proxy two or more Members entitled to vote on resolutions of Members to be considered at the meeting except where there is only one Member entitled to vote on resolutions of Members to be considered at the meeting in which case the quorum shall be one Member. Where a quorum comprises a single Member or proxy, such person may pass a resolution of Members and a certificate signed by such person accompanied where such person be a proxy by a copy of the proxy instrument shall constitute a valid resolution of Members. |
| 17.7 | No Quorum. If within two hours from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved; in any other case it shall stand adjourned to the next business day in the jurisdiction in which the meeting was to have been held at the same time and place or to such other time and place as the Directors may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the Members present shall be a quorum. |
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| 17.8 | Polls. At any meeting of the Members the chairman is responsible for deciding in such manner as he considers appropriate whether any resolution proposed has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes of the meeting. If the chairman has any doubt as to the outcome of the vote on a proposed resolution, he shall cause a poll to be taken of all votes cast upon such resolution. If the chairman fails to take a poll then any Member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such announcement demand that a poll be taken and the chairman shall cause a poll to be taken. If a poll is taken at any meeting, the result shall be announced to the meeting and recorded in the minutes of the meeting. The minutes of the meeting shall be conclusive evidence of the fact that a resolution was carried or not without proof of the number or proportion of the votes recorded in favour of or against such resolution. |
| 17.9 | Director Participation. Directors may attend and speak at any meeting of Members and at any separate meeting of the holders of any class or series of Shares. |
| 17.10 | Unanimous Written Resolutions. Any Ordinary or Special Resolution of Members and any other action that may be taken by the Members at a meeting may also be taken by a resolution consented to in writing, without the need for any notice, by all Members who would have been entitled to attend and vote at a meeting called for the purpose of passing such a resolution or taking any other action. The consent may be in the form of counterparts, each counterpart being signed by one or more Members. If the consent is in one or more counterparts, and the counterparts bear different dates, then the resolution shall take effect on the latest date borne by the counterparts. |
| 18 | APPOINTMENT AND REMOVAL OF DIRECTORS |
| 18.1 | Number of Directors. The Company shall have a board of Directors consisting of not less than one Director. The Company may by Ordinary Resolution impose a maximum or minimum number of Directors required to hold office at any time and vary such limits from time to time. |
| 18.2 | Appointment of Directors. The first Directors shall be appointed by the subscribers to the Memorandum by a written instrument signed by all the subscribers or by an Ordinary Resolution passed by the subscribers. Thereafter, subject to the limits set out in the preceding Article, Directors shall be appointed by Ordinary Resolution or by a resolution of the Directors and may be removed by Ordinary Resolution. |
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| 18.3 | Term. Each Director holds office for the term, if any, fixed by the terms of his appointment or until his earlier death, bankruptcy, insanity, resignation or removal. If no term is fixed on the appointment of a Director, the Director serves indefinitely until his earlier death, bankruptcy, insanity, resignation or removal. |
| 18.4 | Vacation. The office of a Director shall be vacated if: |
| (a) | he gives notice in writing to the Company that he resigns the office of Director; or |
| (b) | he absents himself (without being represented by an alternate Director appointed by him) from three consecutive meetings of the board of Directors without special leave of absence from the Directors, and they pass a resolution that he has by reason of such absence vacated office; or |
| (c) | he dies, becomes bankrupt or makes any arrangement or composition with his creditors generally; or |
| (d) | he is found to be or becomes of unsound mind; or |
| (e) | all the other Directors (being not less than two in number) resolve that he should be removed as a Director. |
| 19 | REGISTER OF DIRECTORS AND OFFICERS |
| 19.1 | Details. The Register of Directors and Officers shall contain: |
| (a) | the names and addresses of the persons who are Directors and Officers; |
| (b) | the date on which each person whose name is entered in the register was appointed as a Director or Officer; and |
| (c) | the date on which each person named as a Director or Officer ceased to be a Director or Officer. |
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| 20 | POWERS OF DIRECTORS |
| 20.1 | Management by Directors. Subject to the provisions of the Companies Act, the Memorandum, these Articles and any directions given by Ordinary Resolution, the business and affairs of the Company shall be managed by, or under the direction or supervision of, the Directors. The Directors shall have all the powers necessary for managing, and for directing and supervising, the business and affairs of the Company as are not by the Companies Act, the Memorandum, these Articles or the terms of any Special Resolution required to be exercised by the Members. No alteration of the Memorandum or these Articles or any direction given by Ordinary or Special Resolution shall invalidate any prior act of the Directors that was valid at the time undertaken. A duly convened meeting of Directors at which a quorum is present may exercise all powers exercisable by the Directors. |
| 20.2 | Good Faith. Each Director shall exercise his powers for a proper purpose. Each Director, in exercising his powers or performing his duties, shall act honestly and in good faith in what the Director believes to be the best interests of the Company. |
| 20.3 | Acting in Vacancy. The continuing Directors may act notwithstanding any vacancy in their body, but if and for so long as their number is below any minimum number of Directors fixed by or pursuant to these Articles, the continuing Directors may act for the purpose of passing a resolution to appoint further Directors to the board of Directors and of convening a meeting of Members to appoint further Directors but for no other purpose. |
| 20.4 | Indebtedness and Security. The Directors may exercise all the powers of the Company to incur indebtedness, liabilities or obligations and to issue debentures, debenture stock, mortgages, bonds and other such securities and to secure indebtedness, liabilities or obligations whether of the Company or of any third party. |
| 21 | PROCEEDINGS OF DIRECTORS |
| 21.1 | Quorum. The quorum for the transaction of the business of the Directors may be fixed by the Directors, and unless so fixed shall be two if there are two or more Directors, and shall be one if there is only one Director. A person who holds office as an alternate Director shall be counted in the quorum. A Director who also acts as an alternate Director shall count twice towards the quorum. |
| 21.2 | Voting. Subject to the provisions of these Articles, the Directors may regulate their proceedings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall not have a second or casting vote. A Director who is also an alternate Director shall be entitled to a separate vote on behalf of his appointor in addition to his own vote. |
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| 21.3 | Conference Call. A person may participate and vote in a meeting of the Directors or committee of Directors by telephone or other electronic means by means of which all the persons participating in the meeting are able to hear each other. Unless otherwise determined by the Directors the meeting shall be deemed to be held at the place where the chairman is at the start of the meeting. |
| 21.4 | Unanimous Written Resolution. A resolution in writing (in one or more counterparts) signed by all the Directors or all the members of a committee of Directors (an alternate Director being entitled to sign any such resolution on behalf of his appointor) shall be as valid and effectual as if it had been passed at a meeting of the Directors, or committee of Directors as the case may be, duly convened and held. |
| 21.5 | Notice of Meetings. A Director may, or other Officer on the requisition of a Director shall, call a meeting of the Directors by at least two days’ notice in writing to every Director which notice shall set forth the general nature of the business to be considered unless notice is waived by all the Directors either at, before or after the meeting is held. |
| 21.6 | Chairman of the Board. The Directors may elect a chairman of their board and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be chairman of the meeting. |
| 21.7 | Defects. Absent fraud, all acts done by any meeting of the Directors or a committee of Directors shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or alternate Director, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and qualified to be a Director or alternate Director as the case may be. |
| 22 | PRESUMPTION OF ASSENT |
| 22.1 | A Director who is present at a meeting of the board of Directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the chairman or secretary of the meeting before the adjournment thereof. Such right to dissent shall not apply to a Director who voted in favour of such action. |
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| 23 | DIRECTORS’ INTERESTS |
| 23.1 | Other Office. A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director for such period and on such terms as to remuneration and otherwise as the Directors may determine. A Director may act by himself or his firm in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services as if he were not a Director or alternate Director. |
| 23.2 | No Exclusivity. A Director or alternate Director may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as shareholder or otherwise, and no such Director or alternate Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company. |
| 23.3 | Disclosure of Interests. No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any other contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is interested provided that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote thereon. |
| 23.4 | General Notice of Interests. A general notice that a Director or alternate Director is a shareholder, director, officer or employee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure for the purposes of voting on a resolution in respect of a contract or transaction in which he has an interest, and after such general notice it shall not be necessary to give special notice relating to any particular transaction. |
| 24 | MINUTES |
| 24.1 | The Directors shall cause minutes to be made in books kept for the purpose of all appointments of officers made by the Directors, all proceedings at meetings of the Company or the holders of any class of Shares and of the Directors, and of committees of Directors including the names of the Directors or alternate Directors present at each meeting. |
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| 25 | DELEGATION OF DIRECTORS’ POWERS |
| 25.1 | Delegation. The Directors may delegate any of their powers to any committee consisting of one or more Directors. They may also delegate to any managing director or any Director holding any other executive office such of their powers as they consider desirable to be exercised by him provided that an alternate Director may not act as managing director and the appointment of a managing director shall automatically terminate if he ceases to be a Director. Any such delegation may be made subject to any conditions the Directors may impose and may be revoked or altered. Subject to any such conditions, the proceedings of a committee of Directors shall be governed by the Articles regulating the proceedings of Directors, so far as they are capable of applying. |
| 25.2 | Committees. The Directors may establish any committees, local boards or agencies or appoint any person to be a manager or agent for managing the affairs of the Company and may appoint any person to be a member of such committees or local boards. Any such appointment may be made subject to any conditions the Directors may impose, and may be revoked or altered. Subject to any such conditions, the proceedings of any such committee, local board or agency shall be governed by the Articles regulating the proceedings of Directors, so far as they are capable of applying. |
| 25.3 | Third Party Delegation. The Directors may by power of attorney or otherwise appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or authorised signatory of the Company for such purpose and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorneys or authorised signatories as the Directors may think fit and may also authorise any such attorney or authorised signatory to delegate all or any of the powers, authorities and discretions vested in him. |
| 25.4 | Officers. The Directors may appoint such Officers as they consider necessary on such terms, at such remuneration and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors may think fit. Unless otherwise specified in the terms of his appointment an officer may be removed by the Directors. |
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| 26 | ALTERNATE DIRECTORS |
| 26.1 | Alternate Appointment. Any Director (other than an alternate Director) may by writing in notice to the Company appoint any other Director, or any other person willing to act, to be an alternate Director. |
| 26.2 | Conduct of Alternates. An alternate Director shall be entitled to receive notice of all meetings of Directors and of all meetings of committees of Directors of which his appointor is a member, to attend and vote at every such meeting at which the Director appointing him is not personally present, and, save as expressly provided herein, to perform all the functions and exercise all of the powers of his appointor as a Director in his absence. |
| 26.3 | Automatic termination. An alternate Director shall cease to be an alternate Director if his appointor ceases to be a Director. |
| 26.4 | No Agency. An alternate Director shall be deemed for all purposes to be a Director and shall alone be responsible for his own acts and defaults and shall not be deemed to be the agent of the Director appointing him. |
| 27 | NO MINIMUM SHAREHOLDING |
| 27.1 | The Company in general meeting may fix a minimum shareholding required to be held by a Director, but unless and until such a shareholding qualification is fixed a Director is not required to hold Shares. |
| 28 | REMUNERATION OF DIRECTORS |
| 28.1 | Office Remuneration. The remuneration to be paid to the Directors, if any, shall be such remuneration as the Directors shall determine. The Directors shall also be entitled to be paid all travelling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of Directors or committees of Directors, or general meetings of the Company, or separate meetings of the holders of any class of Shares or debentures of the Company, or otherwise in connection with the business of the Company, or to receive a fixed allowance in respect thereof as may be determined by the Directors, or a combination of such methods. |
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| 28.2 | Additional Remuneration. The Directors may by resolution approve additional remuneration to any Director for any services other than his ordinary routine work as a Director. Any fees paid to a Director who is also counsel or solicitor to the Company, or otherwise serves it in a professional capacity shall be in addition to his remuneration as a Director. |
| 28.3 | Pensions. The Directors, on behalf of the Company, may pay a gratuity or pension or allowance on retirement to any Director who has held any other salaried office or place of profit with the Company or to his widow or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance. |
| 29 | INDEMNIFICATION |
| 29.1 | Indemnity and Exclusion of Liability. Every Director, alternate Director or Officer shall be indemnified out of the assets of the Company against any liability incurred by him as a result of any act or failure to act in carrying out his functions other than such liability (if any) that he may incur by his own actual fraud or wilful default. No such Director, alternate Director or Officer shall be liable to the Company for any loss or damage in carrying out his functions unless that liability arises through the actual fraud or wilful default of such Director or officer. References in this Article to actual fraud or wilful default mean a finding to such effect by a competent court in relation to the conduct of the relevant party. |
| 29.2 | Advancement of Expenses. Expenses, including legal fees, incurred by a Director, alternate Director or Officer, or former Director, alternate Director or Officer in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by such party to repay the amount if it shall ultimately be determined that such Director, alternate Director or Officer is not entitled to be indemnified by the Company and upon such terms and conditions, if any, as the Company deems appropriate. |
| 29.3 | Insurance. The Company may purchase and maintain insurance in relation to any person who is or was a Director, alternate Director, Officer or liquidator of the Company, or who at the request of the Company is or was serving as a Director, alternate director, Officer or liquidator of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in that capacity. |
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| 30 | RECORDS |
| 30.1 | Registered Office Records. The Company shall keep the following documents at the Registered Office: |
| (a) | the Certificate of Incorporation and any Certificate on Change of Name; |
| (b) | a copy of the Memorandum and Articles; |
| (c) | the Register of Directors and Officers; and |
| (d) | to the extent the Company has created a security interest over any of its assets the Register of Mortgages and Charges required to be maintained by the Company under Section 54 of the Companies Act. |
| 30.2 | Other Corporate Records. The Company shall keep the following records at the Registered Office or at such other place or places, within or outside the Cayman Islands, as the Directors may determine: |
| (a) | minutes of meetings, Ordinary Resolutions and Special Resolutions of Members and classes of Members; |
| (b) | the Register of Members; and |
| (c) | minutes of meetings and Resolutions of Directors and committees of Directors. |
| 30.3 | Electronic Form. All of the registers and records kept by the Company under these Articles shall be in written form or either wholly or partly as electronic records complying with the requirements of the Electronic Transactions Act. |
| 31 | SEAL |
| 31.1 | Use of Seal. The Company may, if the Directors so determine, have a Seal. The Seal shall only be used by the authority of the Directors or of a committee of the Directors authorised by the Directors. Every instrument to which the Seal has been affixed shall be signed by at least one person who shall be either a Director or an Officer or other person appointed by the Directors for the purpose. |
| 31.2 | Duplicate Seal. The Company may have for use in any place or places outside the Cayman Islands a duplicate Seal or Seals each of which shall be a facsimile of the common Seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used. |
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| 31.3 | Authentication and Filing. A Director or Officer, representative or attorney of the Company may without further authority of the Directors affix the Seal over his signature alone to any document required to be authenticated by him under seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever. |
| 32 | DISTRIBUTIONS |
| 32.1 | Payment of Distributions. Subject to the Companies Act and this Article, the Directors may declare and pay out of the funds of the Company lawfully available for such purpose a Distribution at a time and of an amount they think fit. No Distribution shall be paid except out of the realised and unrealised profits of the Company, and/or out of the share premium account and/ or as otherwise permitted by the Companies Act. |
| 32.2 | Ranking. Except as otherwise provided by the rights attached to Shares, all Distributions shall be declared and paid according to the par value of the Shares that a Member holds. The Company may pay Distributions in proportion to the amount paid upon each Share where a larger amount is paid up on some Shares than on others. If any Share is issued on terms providing that it shall rank for Distributions as from a particular date, that Share shall rank for Distributions accordingly. |
| 32.3 | Deductions. The Directors may deduct from any Distribution payable to any Member all sums of money, if any, then payable by him to the Company on account of calls or otherwise. |
| 32.4 | Distribution in Kind. The Directors may declare that any Distribution be paid wholly or partly by the distribution of specific assets and in particular of shares, debentures, or securities of any other company or in any one or more of such ways and the Directors may settle the same as they think expedient and in particular may issue fractional Shares and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the basis of the value so fixed in order to adjust the rights of all Members and may vest any such specific assets in trustees as may seem expedient to the Directors. |
| 32.5 | Payment. Any Distribution payable in cash in respect of Shares may be paid by electronic funds transfer to the holder or by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of the holder who is first named on the Register of Members or to such person and to such address as such holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any Distributions payable in respect of the Shares held by them as joint holders. |
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| 32.6 | No Interest. No Distribution shall bear interest as against the Company and no distribution shall be paid on Treasury Shares. |
| 32.7 | Unclaimed Payments. Any Distribution which cannot be paid to a Member and/or which remains unclaimed after six months from the date of declaration of such Distribution may, in the discretion of the Directors, be paid into a separate account in the Company’s name, provided that the Company shall not be constituted as a trustee in respect of that account and the Distribution shall remain as a debt due to the Member. Any Distribution which remains unclaimed after a period of six years from the date of declaration of such Distribution shall be forfeited and shall revert to the Company. |
| 33 | CAPITALISATIONS |
| 33.1 | Capitalisations. The Directors may capitalise any sum standing to the credit of any of the Company’s reserve accounts (including share premium account and capital redemption reserve) or to the credit of profit and loss account or otherwise available for distribution and appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a Distribution of profits by way of dividend and apply such sum on their behalf in paying up in full unissued Shares for issue, allotment and distribution credited as fully paid-up to and amongst them in the proportions aforesaid. In such event the Directors may make such provisions as they think fit in the case of Shares becoming distributable in fractions. |
| 34 | RECORD DATE |
| 34.1 | Record Date Determination. For the purpose of determining Members entitled to attend meetings, receive payment of any Distribution or capitalisation or for any other purpose, the Directors may provide that the Register of Members shall be closed for transfers for a stated period which shall not in any case exceed forty days. In lieu of, or apart from, closing the Register of Members, the Directors may fix in advance or arrears a date as the record date for any such determination of Members provided that the record date for a meeting may not be earlier than the date of notice of such meeting. |
| 34.2 | No Record Date Chosen. If the Register of Members is not so closed and no record date is fixed for the determination of Members entitled to attend meetings, receive payment of a Distribution or capitalisation, the date on which the notice of the meeting is given or resolution of the Directors declaring such Distribution or capitalisation is adopted, as the case may be, shall be the record date for such determination of Members. |
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| 35 | REPRESENTATION |
| 35.1 | Representation of Legal Persons. The right of any individual to speak for or represent a Member or a Director being a legal person shall be determined by the law of the jurisdiction where, and by the documents by which, such legal person is constituted or derives its existence but save where an objection has been raised by a Member or a Director, the Directors shall not be obliged to verify the rights of individuals purporting to speak for or represent legal persons. In case of doubt, the Directors may in good faith seek legal advice from any qualified person and unless and until a court of competent jurisdiction shall otherwise rule, the Directors may rely and act upon such advice without incurring any liability to any Member or the Company. |
| 36 | ACCOUNTS |
| 36.1 | Accounts. The Company shall keep proper books of account with respect to (a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure takes place; (b) all sales and purchases of goods by the Company; and (c) the assets and liabilities of the Company, that in each case, are sufficient to give a true and fair view of the Company’s affairs and to explain its transactions. |
| 36.2 | Inspection. The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by the Companies Act or authorised by the Directors or by the Company in general meeting. |
| 36.3 | Financial Information. The Directors may from time to time cause to be prepared and to be laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required by law. |
| 37 | AUDIT |
| 37.1 | Auditor. The Directors may appoint an auditor of the Company who shall hold office until removed from office by resolution of the Directors, and may fix his or their remuneration. |
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| 37.2 | Access Right. Every auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled to require from the Directors and Officers such information and explanation as may be necessary for any audit. |
| 37.3 | Auditor Reports. Auditors shall, if so required by the Directors, make a report on the accounts of the Company during their tenure of office at such times as shall be required by the Directors or any meeting of the Members. |
| 38 | NOTICES |
| 38.1 | Calculation of Elapsed Time. Subject to the laws of the Cayman Islands, where any period of time is expressed as required for the giving of any notice or in any other case where some other action is required to be undertaken within or omitted from being taken during a specified period of time, the calculation of the requisite period of time will not include the day on which the notice is given (or deemed to be given) or the day on which the event giving rise to the need to take or omit action occurred, but shall include the day on which the period of time expires. |
| 38.2 | Delivery of Notices. Notices shall be in writing and may be given by the Company to any Member either personally or by sending it by courier, post, cable, telex, fax or e-mail to him or to his address as shown in the Register of Members (or where the notice is given by e-mail by sending it to the e-mail address provided by such Member). Any notice, if posted from one country to another, is to be sent airmail. E-mail notices may be sent by e-mail text and/or by way of a document attached to an email in portable document format (PDF) or in Microsoft Word format and/or by any other method separately agreed between the Company and its Members. |
| 38.3 | Deemed Receipt. Where a notice is sent by courier, service of the notice shall be deemed to be effected by delivery of the notice to a courier company, and shall be deemed to have been received on the third day (not including Saturdays or Sundays or public holidays) following the day on which the notice was delivered to the courier. Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying and posting a letter containing a notice, and shall be deemed to have been received on the fifth day (not including Saturdays or Sundays or public holidays) following the day on which the notice was posted. Where a notice is sent by cable, telex or fax, service of the notice shall be deemed to have been received on the same day that it was transmitted. Where a notice is given by e-mail service it shall be deemed to be effected by transmitting the e-mail to the e-mail address provided by the intended recipient and shall be deemed to have been received on the same day that it was sent, and it shall not be necessary for the receipt of the e-mail to be acknowledged by the recipient. |
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| 38.4 | Notices of General Meeting. Notice of every general meeting shall be given in any manner hereinbefore authorized to every person shown as a Member in the Register of Members on the record date for such meeting except that in the case of joint holders the notice shall be sufficient if given to the joint holder first named in the Register of Members. |
| 39 | VOLUNTARY LIQUIDATION |
| 39.1 | Subject to the Companies Act, the Company may by Special Resolution be wound up voluntarily. |
| 40 | WINDING UP |
| 40.1 | Distribution of Assets. If the Company shall be wound up, and the assets available for distribution amongst the Members shall be insufficient to repay the whole of the share capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the par value of the Shares held by them. If in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst the Members in proportion to the par value of the Shares held by them at the commencement of the winding up subject to a deduction from those Shares in respect of which there are monies due, of all monies payable to the Company for unpaid calls or otherwise. This Article is without prejudice to the rights of the holders of Shares issued upon special terms and conditions. |
| 40.2 | Valuation of Assets. If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution and any other sanction required by the Companies Act, divide amongst the Members in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any asset upon which there is a liability. |
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| 41 | CONTINUATION |
| 41.1 | The Company may, subject to the provisions of the Companies Act and with the approval of a Special Resolution, transfer and be registered by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and be de- registered in the Cayman Islands. |
| 42 | AMENDMENT OF THE MEMORANDUM AND ARTICLES |
| 42.1 | Subject to the Companies Act and the rights attaching to any class or series of Shares, the Company may by Special Resolution change its name or alter or amend these Articles and/ or the Memorandum in whole or in part. |
| 32 | | |
Filed: 23-Aug-2021 16:26 EST | ||
| www.verify.gov.ky File#: 376695 | Auth Code: B32514535880 | |
Exhibit 4.1
Exhibit 5.1
ZKGC New Energy Limited c/o – Harneys Fiduciary (Cayman) Limited 4th Floor, Harbour Place 103 South Church Street, P.O. Box 10240 Grand Cayman KY1-1002 Cayman Islands |
D +852 3656 6054 | |
| E nathan.powell@ogier.com | ||
| Reference: NMP/JTC/500423.00001 |
January 24, 2022
Dear Sirs
ZKGC New Energy Limited (the Company)
We have acted as Cayman Islands counsel to the Company in connection with the Company’s registration statement on Form F-1, including all amendments or supplements thereto (the Registration Statement), as filed with the United States Securities and Exchange Commission (the Commission) under the United States Securities Act of 1933, as amended (the Act) on or about the date hereof. The Registration Statement relates to the resale (the Resale), from time to time, by the selling shareholders (the “Selling Shareholders”) identified in the Registration Statement under the caption “Selling Shareholders” of up to 3,000,000 of the Company’s ordinary shares (the “Ordinary Shares”), pursuant to the Registration Statement.
A reference to a Schedule is a reference to a schedule to this opinion and the headings herein are for convenience only and do not affect the construction of this opinion.
| 1 | Documents examined |
For the purposes of giving this opinion, we have examined the corporate and other documents and conducted the searches listed in Schedule 1. We have not made any searches or enquiries concerning, and have not examined any documents entered into by or affecting the Company or any other person, save for the searches, enquiries and examinations expressly referred to in Schedule 1.
| 2 | Assumptions |
In giving this opinion we have relied upon the assumptions set forth in Schedule 2 without having carried out any independent investigation or verification in respect of those assumptions.
|
Ogier British Virgin Islands, Cayman Islands,
Floor 11 Central Tower 28 Queen’s Road Central Central Hong Kong
T +852 3656 6000 F +852 3656 6001 ogier.com |
Partners Nicholas Plowman Nathan Powell Ray Ng Kate Hodson Anthony Oakes Oliver Payne James Bergstrom Marcus Leese |
| 3 | Opinions |
On the basis of the examinations and assumptions referred to above and subject to the qualifications set forth in Schedule 24 and the limitations set forth below, we are of the opinion that:
Corporate status
| (a) | The Company has been duly incorporated as an exempted company, and based solely on the Director’s Certificate, the Company has confirmed that it is validly existing and in good standing with the Registrar. |
Shares
| (b) | Based solely on the Memorandum, the authorised share capital of the Company is US$50,000 divided into 50,000,000 ordinary shares of US$0.001 par value each. |
| (c) | The issue of the Ordinary Shares (Issued Shares) to the Selling Shareholders has been duly authorised by the Company. |
| (d) | Based solely on the Register of Members, the Issued Shares are validly issued as fully paid and non-assessable. |
| (e) | The resale of the Ordinary Shares by the Selling Shareholders pursuant to the Resale have been duly authorised by and on behalf of the Company by the resolutions set forth in the Board Resolutions. |
Enforcement of foreign judgments
| (f) | Although there is no statutory enforcement in the Cayman Islands of judgments or orders obtained in foreign courts (other than certain courts of Australia and its external territories), the courts of the Cayman Islands will recognise and enforce a foreign judgment or order, without re-examination or re-litigation of the matters adjudicated upon, if the judgment or order: |
| (i) | is given by a foreign court of competent jurisdiction; |
| (ii) | is final and conclusive; |
| (iii) | is not in respect of a tax, fine or other penalty; |
| (iv) | was not obtained by fraud; and |
| (v) | is not of a kind, the enforcement of which is contrary to public policy in the Cayman Islands. |
The courts of the Cayman Islands will apply the rules of Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction. Subject to these limitations, the courts of the Cayman Islands will recognise and enforce a foreign judgment for a liquidated sum and may also give effect in the Cayman Islands to other kinds of foreign judgments, such as declaratory orders, orders for performance of contracts and injunctions.
Page 2 of 7
No litigation revealed
| (g) | Based solely on our investigation of the Register of Writs and Other Originating Process, no litigation or winding up proceeding was pending in the Cayman Islands against the Company, nor had any petition been presented or order made for the winding up of the Company, as of the close of business on the day before our inspection. |
| 4 | Reliance |
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the headings “Enforceability of Civil Liabilities” and “Legal Matters” of the Registration Statement.
This opinion may be used only in connection with the Resale while the Registration Statement is effective.
Yours faithfully
Ogier
Page 3 of 7
Schedule 1
Documents examined
Corporate and other documents
| 1 | The Certificate of Incorporation of the Company dated 31 May 2021 issued by the Registrar of Companies of the Cayman Islands (the Registrar). |
| 2 | The amended and restated memorandum and articles of association of the Company adopted by sole shareholder resolution of the Company on 12 August 2021 (respectively, the Memorandum and the Articles). |
| 3 | A Certificate of Good Standing dated 18 January 2022 (Good Standing Certificate) issued by the Registrar in respect of the Company. |
| 4 | A certificate dated January 24, 2022 as to certain matters of fact signed by a director of the Company in the form annexed hereto (the Director’s Certificate). |
| 5 | A copy of the register of directors of the Company as at 10 June 2021 (the Register of Directors). |
| 6 | A copy of the register of members of the Company as at 21 January 2022 (the Register of Members, and together with the Register of Directors, the Registers). |
| 7 | A copy of the written resolutions of the sole director of the Company dated 18 November 2021 approving the Company’s filing of the Registration Statement and the Resale (the Board Resolutions). |
| 8 | The Registration Statement. |
| 9 | The Register of Writs and Other Originating Process maintained by the office of the Clerk of Courts in the Cayman Islands as inspected by us on January 24, 2022 (Register of Writs). |
Page 4 of 7
Schedule 2
Assumptions
| 1 | All original documents examined by us are authentic and complete. |
| 2 | All copy documents examined by us (whether in facsimile, electronic or other form) conform to the originals and those originals are authentic and complete. |
| 3 | All signatures, seals, dates, stamps and markings (whether on original or copy documents) are genuine. |
| 4 | Each of the Registers, the Good Standing Certificate and the Director’s Certificate is accurate and complete as at the date of this opinion. |
| 5 | The Issued Shares have been issued at an issue price in excess of the par value thereof and have been entered on the register of members of the Company as fully paid. |
| 6 | The Company has received payment in full by each Selling Shareholder of the Company of the sum agreed to be paid in respect of each Issued Share subscribed by that Selling Shareholder. |
| 7 | The Memorandum and Articles are in full force and effect and have not been amended, varied, supplemented or revoked in any respect; |
| 8 | All copies of the Registration Statement are true and correct copies and the Registration Statement conform in every material respect to the latest drafts of the same produced to us and, where the Registration Statement has been provided to us in successive drafts marked-up to indicate changes to such documents, all such changes have been so indicated. |
| 9 | The Board Resolution remains in full force and effect and each of the directors of the Company has acted in good faith with a view to the best interests of the Company and has exercised the standard of care, diligence and skill that is required of him or her in approving the Resale and no director has a financial interest in or other relationship to a party of the transactions contemplated by the Documents which has not been properly disclosed in the Board Resolutions. |
| 10 | Neither the directors and shareholders of the Company have taken any steps to appoint a liquidator of the Company and no receiver has been appointed over any of the Company’s property or assets; |
| 11 | The Company has issued the Ordinary Shares in furtherance of its objects as set out in its Memorandum. |
| 12 | The issue of any of the Ordinary Shares at the time of issuance, whether as a principal issue or on the conversion, exchange or exercise of any Ordinary Shares, would not result in the Company exceeding its maximum number of shares that it is authorised to issue at the relevant time. |
| 13 | The form and terms of any and all Ordinary Shares, the issuance and sale thereof by the Company, and the Company’s incurrence and performance of its obligations thereunder or in respect thereof (including, without limitation, its obligations under any related agreement, indenture or supplement thereto) in accordance with the terms thereof will not violate the Memorandum and Articles of Association nor any applicable law, regulation, order or decree in the Cayman Islands. |
Page 5 of 7
| 14 | No invitation has been or will be made by or on behalf of the Company to the public in the Cayman Islands to subscribe for any Security and none of the Ordinary Shares have been offered or issued to residents of the Cayman Islands; |
| 15 | All necessary corporate action has been and will be taken to authorise and approve any issuance of Ordinary Shares and the terms of the offering of such Ordinary Shares thereof and any other related matters and that the applicable definitive purchase, underwriting or similar agreement will be duly approved, executed and delivered by or on behalf of the Company and all other parties thereto. |
| 16 | Upon the issue of any Ordinary Shares or any series of shares of the Company, the Company will receive consideration for the full issue price thereof which shall be equal to at least the par value thereof. |
| 17 | The capacity, power and authority of all parties other than the Company to enter into and perform their obligations under any and all documents entered into by such parties in connection with the issuance of the Ordinary Shares, and the due execution and delivery thereof by each party thereto. |
| 18 | The Company is, and after the allotment (where applicable) and issuance of any Ordinary Shares will be, able to pay its liabilities as they fall due. |
| 19 | There is no provision of the law of any jurisdiction, other than the Cayman Islands, which would have any implication in relation to the opinions expressed herein. |
Page 6 of 7
Schedule 3
Qualifications
Good Standing
| 1 | Under the Companies Act (Revised) (Companies Act) of the Cayman Islands annual returns in respect of the Company must be filed with the Registrar, together with payment of annual filing fees. A failure to file annual returns and pay annual filing fees may result in the Company being struck off the Register of Companies, following which its assets will vest in the Financial Secretary of the Cayman Islands and will be subject to disposition or retention for the benefit of the public of the Cayman Islands. |
| 2 | In good standing means only that as of the date of the Good Standing Certificate the Company is up-to-date with the filing of its annual returns and payment of annual fees with the Registrar. We have made no enquiries into the Company’s good standing with respect to any filings or payment of fees, or both, that it may be required to make under the laws of the Cayman Islands other than the Companies Act. |
Limited liability
| 3 | We are not aware of any Cayman Islands authority as to when the courts would set aside the limited liability of a shareholder in a Cayman Islands company. Our opinion on the subject is based on the Companies Act of the Cayman Islands and English common law authorities, the latter of which are persuasive but not binding in the courts of the Cayman Islands. Under English authorities, circumstances in which a court would attribute personal liability to a shareholder are very limited, and include: (a) such shareholder expressly assuming direct liability (such as a guarantee); (b) the company acting as the agent of such shareholder; (c) the company being incorporated by or at the behest of such shareholder for the purpose of committing or furthering such shareholder’s fraud, or for a sham transaction otherwise carried out by such shareholder. In the absence of these circumstances, we are of the opinion that a Cayman Islands’ court would have no grounds to set aside the limited liability of a shareholder. |
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Exhibit 8.1
 |
天津市南开区长江道与三马路交口金融街 融汇广场A座38层 38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
To: ZKGC New Energy Limited,
4th Floor, Harbour Place, 103 South Church Street,
PO BOX 10240, Grand Cayman KYI-1002,
Cayman Islands
Date: January 24, 2022
Dear Sirs or Madams,
We are lawyers qualified in the People’s Republic of China (the “PRC” or “China”, which, for purposes of this opinion only, does not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan) and as such are qualified to issue this opinion on the laws, regulations, rules judicial interpretations and other legislation of the PRC effective as of the date hereof.
We are acting as the PRC counsel for ZKGC New Energy Limited, a company incorporated under the laws of the Cayman Islands solely in connection with (i) the proposed initial public offering (the “Offering”) of ordinary shares of the Company, par value US$0.001 per share (the “Ordinary Shares”), as set forth in the Company’s registration statement on Form F-1, including all amendments and supplements thereto (the “Registration Statement”), filed by the Company with the Securities and Exchange Commission under the U.S. Securities Act of 1933 (as amended) in relation to the Offering, and (ii) the Company’s proposed listing of the Ordinary Shares on the NASDAQ or any over-the-counter market, including an OTC Market Group quotation system such as the OTCQB.
A. Documents and Assumptions
In rendering this opinion, we have carried out due diligence and examined copies of the Registration Statement and other documents, corporate records and certificates issued by the Governmental Agencies (as defined below) (collectively the “Documents”) as we have considered necessary or advisable for the purpose of rendering this opinion. Where certain facts were not independently established and verified by us, we have relied upon certificates or statements issued or made by the relevant Governmental Agencies and appropriate representatives of the Company and the PRC Companies (as defined below).
In giving this opinion, we have assumed without independent investigation that (the “Assumptions”):
| (1) | all signatures, seals and chops are genuine, each signature on behalf of a party thereto is that of a person duly authorized by such party to execute the same, all Documents submitted to us as originals are authentic, and all Documents submitted to us as certified or photostatic copies conform to the originals; |
| (2) | each of the parties to the Documents, other than the PRC Companies, (i) if a legal person or other entity, is duly organized and is validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation, (ii) if an individual, has full capacity for civil conduct; each of them, other than the PRC Companies, has full power and authority to execute, deliver and perform its, her or his obligations under the Documents to which it, she or he is a party in accordance with the laws of its jurisdiction of organization and/or the laws that it, she or he is subject to; |
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38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
| (3) | the Documents presented to us remain in full force and effect on the date of this opinion and have not been revoked, amended or supplemented, and no amendments, revisions, supplements, modifications or other changes have been made, and no revocation or termination has occurred, with respect to any of the Documents after they were submitted to us for the purposes of this opinion; |
| (4) | the laws of jurisdictions other than the PRC which may be applicable to the execution, delivery, performance or enforcement of the Documents are complied with; |
| (5) | all requested Documents have been provided to us and all factual statements made to us by the Company and the PRC Companies in connection with this opinion, including but not limited to the statements set forth in the Documents, are true, correct and complete; |
| (6) | all explanations and interpretations provided by government officials duly reflect the official position of the relevant Governmental Agencies and are complete, true and correct; |
| (7) | each of the Documents is legal, valid, binding and enforceable in accordance with their respective governing laws other than PRC Laws (as defined below) in any and all respects; |
| (8) | all consents, licenses, permits, approvals, exemptions or authorizations required by, and all required registrations or filings with, any governmental authority or regulatory body of any jurisdiction other than the PRC in connection with the transactions contemplated under the Registration Statement and other Documents have been obtained or made, and are in full force and effect as of the date thereof; and |
| (9) | all Governmental Authorizations (as defined below) and other official statements and documentation obtained by the Company or any PRC Company from any Governmental Agency have been obtained by lawful means in due course, and the Documents provided to us conform with those documents submitted to Governmental Agencies for such purposes. |
B. Definitions
In addition to the terms defined in the context of this opinion, the following capitalized terms used in this opinion shall have the meanings ascribed to them as follows.
| “Governmental Agency” | means any national, provincial or local governmental, regulatory or administrative authority, agency or commission in the PRC, or any court, tribunal or any other judicial or arbitral body in the PRC, or any body exercising, or entitled to exercise, any administrative, judicial, legislative, law enforcement, regulatory, or taxing authority or power of a similar nature in the PRC. |
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38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
| “Governmental Authorization” | means any license, approval, consent, waiver, order, sanction, certificate, authorization, filing, declaration, disclosure, registration, exemption, permission, endorsement, annual inspection, clearance, qualification, permit or license by, from or with any Governmental Agency pursuant to any PRC Laws. |
| “M&A Rules” | means the Provisions on Merging and Acquiring Domestic Enterprises by Foreign Investors, which was promulgated by six Governmental Agencies, namely, the Ministry of Commerce, the State-owned Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission (the “CSRC”). and the State Administration of Foreign Exchange, on August 8, 2006 and became effective on September 8,2006, as amended by the Ministry of Commerce on June 22,2009. |
| “PRC Companies” | means the entities as set forth in Appendix A hereto. |
| “PRC Laws” | means all applicable national, provincial and local laws, regulations, rules, notices, orders, decrees and judicial interpretations of the PRC currently in effect and publicly available on the date of this opinion. |
| “VIE Agreements” | means the agreements as set forth in Appendix B hereto. |
C. Opinions
Based on our review of the Documents and subject to the Assumptions and the Qualifications (as defined below), we are of the opinion that:
| (1) | VIE Structure, (a) the ownership structure of the PRC Companies as set forth in the Registration Statement, both currently and immediately after giving effect to this Offering, will not result in any violation of PRC Laws currently in effect; (b) the contractual arrangements under the VIE Agreements, both currently and immediately after giving effect to this Offering, are valid, binding and enforceable, and will not result in (i) any violation of PRC Laws currently in effect, or (ii) any violation of the business license, articles of association, approval certificate or other constitutional documents (if any) of the PRC Companies. However, there are substantial uncertainties regarding the interpretation and application of current PRC Laws, and there can be no assurance that the PRC government will ultimately take a view that is consistent with our opinion stated above. |
| (2) | M&A Rules. The New M&A Rules, among other things, purport to require CSRC approval prior to the listing and trading on an overseas stock exchange of the securities of an offshore special purpose vehicle established or controlled directly or indirectly by the PRC companies or individuals and formed for the purpose of overseas listing through the acquisition of PRC domestic interests held by such PRC companies or individuals. Based on our understanding of the explicit provisions under the PRC Laws, we are of the opinion that a prior approval from the CSRC is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not take a view that is contrary to or otherwise different from our opinions stated herein. |
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38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
| (3) | Enforceability of Civil Procedures. There is uncertainty as to whether the PRC courts would (i) recognize or enforce judgments of United States courts obtained against the Company or the directors or officers of the Company predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in each respective jurisdiction against the Company or the directors or officers of the Company predicated upon the securities laws of the United States or any state in the United States. 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 PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against a company or its 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 or the Cayman Islands. |
| (4) | Taxation. The statements made in the Registration Statement under the caption ’‘Taxation — PRC Taxation”, with respect to the PRC tax laws and regulations or interpretations, are correct and accurate in all material respects. |
| (5) | PRC Laws. All statements set forth in the Registration Statement under the captions ’“Prospectus Summary,” “Risk Factors,” “Use of Proceeds,”“Enforceability of Civil Liabilities,’“Corporate History and Structure, “Business,” “Regulation” and “Taxation―PRC Taxation,” in each case insofar as such statements describe or summarize matters of the PRC Laws, are ture and accurate in all material respects, and nothing has come to our attention, insofar as the PRC Laws are concerned, that causes us to believe that there is any omission from such statements which causes such statements misleading in any material respect. |
Our opinions expressed above are subject to the following qualifications (the “Qualifications”):
| (1) | Our opinions are limited to PRC Laws of general application on the date hereof. We have made no investigation of, and do not express or imply any views on, the laws of any jurisdiction other than the PRC, and we have assumed that no such other laws would affect our opinions expressed above. |
| (2) | PRC Laws referred to herein are laws and regulations publicly available and currently in force on the date hereof and there is no guarantee that any of such laws and regulations, or the interpretation or enforcement thereof, will not be changed, amended or revoked in the future with or without retrospective effect. |
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38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
| (3) | Our opinions are subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws in the PRC affecting creditors’ rights generally, and (ii) possible judicial or administrative actions or any PRC Laws affecting creditors’ rights. |
| (4) | Our opinions are subject to the effects of (i) certain legal or statutory principles affecting the enforceability of contractual rights generally under the concepts of public interests, social ethics, national security, good faith, fair dealing, and applicable statutes of limitation; (ii) any circumstance in connection with the formulation, execution or performance of any legal documents that would be deemed materially mistaken, clearly unconscionable, fraudulent, coercionary or concealing illegal intentions with a lawful form; (iii) judicial discretion with respect to the availability of specific performance, injunctive relief, remedies or defenses, or the calculation of damages; and (iv) the discretion of any competent PRC legislative, administrative or judicial bodies in exercising their authority in the PRC. |
| (5) | This opinion is issued based on our understanding of PRC Laws. For matters not explicitly provided under PRC Laws, the interpretation, implementation and application of the specific requirements under PRC Laws, as well as their application to and effect on the legality, binding effect and enforceability of certain contracts, are subject to the final discretion of competent PRC legislative, administrative and judicial authorities. Under PRC Laws, foreign investment is restricted in certain industries. The interpretation and implementation of these laws and regulations, and their application to and effect on the legality, binding effect and enforceability of contracts such as the VIE Agreements and transactions contemplated by the VIE Agreements, are subject to the discretion of the competent Governmental Agency. |
| (6) | The term “enforceable” or “enforceability” as used in this opinion means that the obligations assumed by the relevant obligors under the relevant Documents are of a type which the courts of the PRC may enforce. It does not mean that those obligations will necessarily be enforced in all circumstances in accordance with their respective terms and/or additional terms that may be imposed by the courts. As used in this opinion, the expression “to the best of our knowledge after due inquiry” or similar language with reference to matters of fact refers to the current, actual knowledge of the attorneys of this firm who have worked on matters for the Company in connection with the Offering and the transactions contemplated thereby. We may rely, as to matters of fact (but not as to legal conclusions), to the extent we deem proper, on certificates and confirmations of responsible officers of the Company, the PRC Companies and Governmental Agencies. |
| (7) | We have not undertaken any independent investigation, search or other verification action to determine the existence or absence of any fact or to prepare this opinion, and no inference as to our knowledge of the existence or absence of any fact should be drawn from our representation of the Company or the PRC Companies or the rendering of this opinion. |
| (8) | This opinion is intended to be used in the context which is specifically referred to herein; each paragraph shall be construed as a whole and no part shall be extracted and referred to independently. |
This opinion is strictly limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. The opinions expressed herein are rendered only as of the date hereof, and we assume no responsibility to advise you of facts, circumstances, events or developments that hereafter may be brought to our attention and that may alter, affect or modify the opinion expressed herein.
We hereby consent to the use of this opinion in, and the filing hereof as an exhibit to, the Registration Statement, and to the reference to our name in such Registration Statement.
| Yours faithfully, | |
| /s/ ZHONGLUN W&D (TIANJIN) LAW OFFICES | |
| ZHONGLUN W&D (TIANJIN) LAW OFFICES |
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38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
Appendix A
List of PRC Companies
No. Name of the PRC Companies
| 1. | Hainan GCGY Commercial & Trading Co., Ltd.（海南共创共赢商贸有限公司） |
| 2. | Hainan ZKGC New Energy Co., Ltd.（海南中科共创新能源有限公司） |
| 3. | Hainan ZKGY Network Technology Co., Ltd. （海南中科共赢网络科技有限责任公司） |
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38/F, Building A, Ronghui Plaza, Nankai District, Tianjin, 300110, P.R. China Tel:86-22- 5858 0758 Fax: 86-22-5858 0759 |
Appendix B
List of VIE Agreements
| 1. | Exclusive Business Cooperation Agreement（独家业务合作协议）dated as of October 18, 2021 between Hainan GCGY Commercial & Trading Co., Ltd.（“GCGY”） and Hainan ZKGC New Energy Co., Ltd.（“ZKGC”）; |
| 2. | Exclusive Option Agreement （独家购买权协议）dated as of October 18, 2021 among LIAO Jinqi （廖金起）, Hainan GCGY Commercial & Trading Co., Ltd.（“GCGY”） and Hainan ZKGC New Energy Co., Ltd.（“ZKGC”）；、 |
| 3. | Equity Interest Pledge Agreement （股权质押协议）dated as of October 18, 2021 among LIAO Jinqi （廖金起）, Hainan GCGY Commercial & Trading Co., Ltd.（“GCGY”） and Hainan ZKGC New Energy Co., Ltd.（“ZKGC”）； |
| 4. | Power of Attorney dated as of October 18, 2021 among LIAO Jinqi （廖金起）, Hainan GCGY Commercial & Trading Co., Ltd.（“GCGY”） and Hainan ZKGC New Energy Co., Ltd.（“ZKGC”）； |
| 5. | Spousal Consent Letter issued by Shaoyun ZHU （祝少云） on October 18, 2021; |
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Exhibit 10.1
独家业务合作协议
Exclusive Business Cooperation Agreement
本独家业务合作协议(“本协议”)由以下双方于2021年8月16日在中华人民共和国(“中国”)海口市签署。
This Exclusive Business Cooperation Agreement (this “Agreement”)is made and entered into by and between the following parties on 16 August, 2021 in Haikou, the People’s Republic of China (“China” or the “PRC”).
甲方：海南共创共赢商贸有限公司
住所：海南省澄迈县老城镇海南生态软件园孵化楼四层1001室
Party A: Hainan GCGY Commercial & Trading Co., Ltd.
Address: Room 1001, 4th Floor, Incubation Building, Hainan Ecological Software Park, Laocheng Town, Chengmai County, Hainan, China
乙方：海南中科共创新能源有限公司
住所：海南省海口市龙华区金贸街道玉沙路国贸中心21楼A号房
Party B: Hainan ZKGC New Energy Co., Ltd.
Address: Room A, Building No.21, Guomao Center, Yusha Road, Jinmao Street, Longhua District, Haikou City, Hainan, China
甲方和乙方以下各称为“一方”，合称为“双方”
Each of Party A and Party B shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
鉴于：
Whereas,
1. 甲方是一家在中国成立的外商独资企业，拥有提供新能源市场拓展，充电桩开发的必要资源；
Party A is a wholly foreign owned enterprise established in China, and has the necessary resources to support marketing and development of New Energy and Charging Pile development resource information.
2. 乙方是一家在中国成立的内资公司，经中国有关政府部门依法批准可以从事汽车充电桩建设和运营等业务。乙方现时及在本协议有效期内的任何时候所经营并发展的所有业务活动以下合称“主营业务”；
Party B is a company established in China with exclusively domestic capital, which is permitted to engage in Charging Pile building and operating for New Energy Cars and other business by relevant PRC government authorities. The businesses conducted by Party B currently and any time during the term of this Agreement are collectively referred to as the “Principal Business”;
3. 甲方同意利用其人员、信息和技术优势，在本协议期间向乙方提供有关主营业务的独家营销服务、管理咨询服务、技术服务和其他服务，乙方同意接受甲方或其指定方按本协议条款的规定提供的各种服务。
Party A is willing to provide Party B with marketing services, management consultation services, technical services and other services on an exclusive basis in relation to the Principal Business during the term of this Agreement, utilizing its advantages in human resources, information and technology, and Party B is willing to accept such services provided by Party A or Party A’s designee(s), each on the terms set forth herein.
据此，甲方和乙方经协商一致，达成如下协议：
Now, therefore, through mutual discussion, the Parties have reached the following agreements:
1. 服务提供
Services Provided by Party A
1.1 按照本协议条款和条件，乙方在此委任甲方在本协议期间作为乙方的独家服务提供者向乙方提供全面的营销服务、管理咨询服务、技术服务和其他服务，包括但不限于以下内容：
According to the terms and conditions of this Agreement, Party B hereby appoints Party A as Party B’s exclusive services provider during the term of this Agreement to provide Party B with comprehensive marketing services, management consultation services, technical support and other services, including but not limited to the following:
1.1.1 为乙方提供企业管理咨询服务；
Providing business management consultation services for Party B;
1.1.2为乙方提供有汽车充电桩建设和运营服务业务的咨询服务；
Providing consultation services regarding Charging Pile building for New Energy Cars and operating services for Party B;
1.1.3为乙方提供经营汽车充电桩建设和运营服务业务生产、技术支持(中国法律 禁止外商独资企业从事的技术支持及服务除外)；
Providing courseware production, technical support regarding Charging Pile building for New Energy Cars and operating services for Party B (excluding technical support that wholly foreign- owned enterprises are prohibited from conducting under PRC law);
1.1.4协助乙方进行新能源汽车充电桩有关的技术和市场信息的咨询、收集与调研(中国法律禁止外商独资企业从事的市场调査除外)；
Assisting Party B in consultancy, collection and research of technology and market information with regard to Charging Pile building for New Energy Cars (excluding market research business that wholly foreign-owned enterprises are prohibited from conducting under PRC law);
1.1.5许可乙方使用甲方拥有合法权利的相关域名、商标；
Licensing Party B to use any domain name or trademark legally owned by Party A;
1.1.6许可乙方使用甲方拥有合法权利的相关软件；
Licensing Party B to use any software legally owned by Party A;
1.1.7提供乙方业务所需的相关应用软件的开发、维护与更新服务；
Providing software development, maintenance and update services necessary for Party B’s business for Party B;
1.1.8为乙方相关人员提供技术支持和专业培训；
Providing technical support and training for employees of Party B;
1.1.9向乙方提供设备、资产出租；和
Leasing of equipment or properties to Party B; and
1.1.10在中国法律允许的情况下，其他应乙方要求而不时提供的其他相关服务。
Other services requested by Party B from time to time to the extent permitted under PRC law.
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1.2 乙方接受甲方提供的服务。乙方进一步同意，除非经甲方事先书面同意，在本协议期间，就本协议约定的服务或其他事宜，乙方不得直接或间接地从任何第三方获得任何与本协议相同或类似的服务，并不得与任何第三方就本协议所述事项建立任何相同或类似的合作关系。甲乙双方同意，甲方提供的服务涉及的技术可以为甲方自有的技术，也可以是甲方从第三方采购的技术。甲方也可以指定其他方(该被指定方可以与乙方签署本协议描述的某些协议)为乙方提供本协议约定的服务。
Party B agrees to accept all the services provided by Party A. Party B further agrees that unless with Party A’s prior written consent, during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar services provided by any third party and shall not establish identical or similar cooperative relationship with any third party regarding the matters contemplated by this Agreement. Party A and Party B agree that, the technology involved in the services provided by Party A may be the technology owned by Party A or purchased by Party A from any third parties. Party A may appoint other parties, who may enter into certain agreements with Party B, to provide Party B with the services under this Agreement.
1.3 服务的提供方式
Service Providing Methodology
1.3.1 甲、乙双方同意在本协议有效期内，视情况而定，乙方可以与甲方或甲方指定的其他方进一步签订服务协议，对各项服务的具体内容、方式、人员、收费等进行约定。
Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the specific services.
1.3.2 为更好地履行本协议，甲乙双方同意，视情况而定，乙方在本协议有效期内将与甲方或甲方指定的其他方根据业务进展需要随时签署知识产权(包括但不限于软件、商标、专利、技术秘密及域名)许可使用协议由甲方将有关的知识产权许可给乙方使用，或签署设备、资产的租用协议，由甲方将有关设备、资产提供给乙方使用。
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into intellectual property (including but not limited to software, trademark, patent, know-how and domain name) licensing agreement with Party A or any other party designated by Party A which shall license Party B to use Party A’s relevant intellectual property rights or may enter into equipment or property leases with Party A or any other party designated by Party A which shall permit Party B to use Party A’s relevant equipment or property based on the needs of the business of Party B.
1.3.3 乙方特此向甲方授予一项不可撤销的排他性的购买权，根据该购买权，甲方可在中国法律法规允许的范围内，由甲方自行选择，向乙方购买任何部分或全部资产和业务，作价为中国法律允许的最低价格。届时双方将另行签订资产或业务转让合同，对该资产转让的条款和条件进行约定。
Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any or all of the assets and business of Party B, to the extent permitted under PRC law, at the lowest purchase price permitted by PRC law. The Parties shall then enter into a separate assets or business transfer agreement, specifying the terms and conditions of the transfer of the assets.
1.3.4 为更好地履行本协议，甲乙双方同意在本协议有效期内将直接或通过其关联方根据业务进展需要随时另行签署专项技术服务协议，即乙方向甲方提供服务项目(包括但不限于通过乙方平台向甲方学员提供教学服务等)，甲方向乙方支付相关费用。
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both parties, directly or through their respective affiliates, may enter into separate agreements regarding special technology service based on the needs of the business of Party A, which shall permit Party B to provide the services (including but not limited to providing educational services for students of Party A through its platform). Party A shall pay a service fee to Party B.
2. 服务的价格和支付方式
Calculation and Payment of the Service Fees
2.1 在本协议有效期内，乙方应向甲方支付的费用应按如下方式计算：
The fees payable by Party B to Party A during the term of this Agreement shall be calculated as follows:
2.1.1 甲乙双方同意，乙方应按季向甲方支付服务费，乙方支付的服务费的金额为乙方上季度的收入减去该季度发生并经甲方批准的乙方销售成本、经营费用及其他费用(包括 销售费用、管理费用、财务费用)后的剩余金额。
Party A and Party B agree that, Party B shall pay a service fee to Party A on a quarterly basis and the amount of service fee paid by Party B for a quarter shall equal to Party B’s revenue during such quarter minus the marketing costs and operating fees and other expenses (including marketing expenses, management expenses and financial expenses) of Party B for that quarter permitted by Party A. In the event that Party B incurs a loss in any quarter, the amount of that loss will reduce the service fee earned in any subsequent quarter.
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2.1.2 甲乙双方同意，视情况而定，乙方可以按照甲方提供服务所花费的时间及预先确定的收费标准向甲方支付服务费。
Party A and Party B agree that, where necessary, Party B may pay the service fee to Party A based on the time spent by Party A for providing such service on a fee scale determined beforehand.
2.1.3 如果甲方向乙方转让技术或者受乙方委托进行软件或其他技术开发或者向乙方出租设备、资产，则技术转让费、委托开发费用或租金应由双方根据实际情况确定。
If Party A transfers technology to Party B or develops software or other technology as entrusted by Party B or leases equipment or properties to Party B, the technology transfer price, development fees or rent shall be determined by the Parties based on the actual situations.
2.1.4 在本协议有效期内，甲方应于每季度第15日之前根据上季度提供服务的内容和数量向乙方发出收取服务费的书面通知，该等服务费通知中所载的服务费的金额应是最终且确凿的；乙方应在每季度第30日前根据甲方通知中所载的金额向甲方足额、及时地支付上一季度的服务费。
During the term of this Agreement, Party A shall, within the first 15 days of each quarter, provide Party B with a written notice of service fee in connection with the content and amount of services during the previous quarter. The amount of service fee contained in the notice of service fee shall be final and certain. Party B shall, within the first 30 days of each quarter, fully and promptly pay the service fee for the previous quarter as requested by the notice of service fee to Party A.
2.1.5 在甲方向乙方发出收取服务费的书面通知之前，乙方应及时、准确地向甲方提供乙方上一季度的收入、发生的销售成本、经营费用及其他有关费用的具体数额和财务报表供甲方审阅和验证。
Prior to Party’s A’s issuance of a written notice of service fee to Party B in relation to the service fee, Party B shall promptly and accurately provide Party A with the precise amount of its revenue, marketing expenses, operating expenses and other relevant fees and its financial statements for Party A’s review and verification.
2.1.6 甲方有权根据乙方的运营情况，减免服务费或允许乙方延期支付服务费，以确保乙方的正常经营。
Party A is entitled to reduce the amount of service fee or permit Party B to defer the payment of service fee based on the actual operating situation of Party B to ensure its proper operation.
2.2 在符合中国法律规定的前提下，甲方同意，在本协议有效期间，甲方将享有和承担任何乙方业务产生的经济利益及风险；在任何乙方经营亏损或出现严重经营困难时，甲方将对其提供财务支持；在发生上述情形时，仅甲方有权决定乙方是否继续营运，乙方无条件认可并同意执行甲方上述决定。
On the premise of complying with the PRC law, Party A agrees that, during the term of this agreement, it is entitled to and responsible for all economic benefits and risks derived by Party B. If any operating loss or critical operation adversity occurs in Party B, Party A shall provide financial support to Party B, and only Party A can decide whether Party B should continue its operation and Party B shall unconditionally accept and execute the decision made by Party A as aforesaid.
3. 知识产权和保密条款
Intellectual Property Rights and Confidentiality Clauses
3.1 甲方对履行本协议而产生或创造的任何和所有知识产权(包括但不限于著作权、专利权、专利申请权、软件、技术秘密、商业机密及其他)均享有独占的和排他的所有权、权利和利益。乙方应签署所有适当的文件，采取所有适当的行动，递交所有的文件和/或申请，提供所有适当的协助，以及做出所有其他依据甲方的自行决定认为是必要的行为，以将任何对该等知识产权的所有权、权利和权益赋予甲方，和/或完善对甲方此等知识产权权利的保护。
Party A shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A at its sole discretion for the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the protections for any such intellectual property rights in Party A.
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3.2 双方承认及确认有关本协议、本协议内容以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。双方应对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三方披露任何保密信息，惟下列信息除外：(1)公众人士知悉或将会知悉的任何信息(惟并非由接受保密信息之一方擅自向公众披露)；(2)根据适用法律法规、股票交易规则或政府部门或法院的命令而所需披露之任何信息；或(3)由任何一方就本协议所述交易而需向其股东、董事、员工、法律或财务顾问披露之信息，而该股东、董事、员工、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方股东、董事、员工或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third party, except for the information that: (1) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (2) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (3) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsel or financial advisors shall be bound by confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agents engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.
4. 陈述和保证
Representations and Warranties
4.1 甲方陈述、保证和承诺如下：
Party A hereby represents, warrants and covenants as follows:
4.1.1 甲方是按照中国法律合法成立并有效存续的外商独资企业；甲方或其指定的服务提供方将在根据本协议提供任何服务前获得提供该等服务所需的必要政府许可、证照。
Party A is a wholly foreign owned enterprise legally established and validly existing in accordance with the laws of China; Party A or the service providers designated by Party A will obtain necessary government permits and licenses for providing the service under this Agreement before providing such services.
4.1.2 甲方已采取必要的公司行为，获得必要的授权，并取得第三方和政府部门的同意及批 准(若需)以签署，交付和履行本协议；甲方对本协议的签署，交付和履行并不违反 法律法规的明确规定。
Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party A’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.
4.1.3 本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。
This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms.
4.2 乙方陈述、保证和承诺如下：
Party B hereby represents, warrants and covenants as follows:
4.2.1 乙方是按照中国法律合法成立且有效存续的公司，乙方已获得并将维持从事主营业务所需的全部政府许可、证照。
Party B is a company legally established and validly existing in accordance with the laws of the PRC and has obtained and will maintain all permits and licenses for engaging in the Principal Business in a timely manner.
4.2.2 乙方已采取必要的公司行为，获得必要的授权，并取得第三方和政府部门的同意及批准(若需)以签署，交付和履行本协议；乙方对本协议的签署，交付和履行并不违反法律法规的明确规定。
Party B has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party B’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.
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4.2.3 本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。
This Agreement constitutes Party B’s legal, valid and binding obligations, and shall be enforceable against it in accordance with its terms.
4.2.4 如在本协议有效期间内的任何时候，中国法律或政府部门对本协议以及相关协议的履行有任何新的规定或其他任何要求，乙方将全力配合甲方对本协议条款作出相应调整 和完善，以使其合乎监管要求并且满足与甲方开展独家业务合作的目的。
During the term of this Agreement, if the PRC laws or PRC government authorities set out new regulations or other requirements regarding the performance of this Agreement or relevant agreements, to meet the regulatory requirements and to accomplish the purpose of carrying out exclusive business cooperation with Party A, Party B shall provide full cooperation for Party A to make corresponding adjustments and improvements on the terms of this Agreement.
5. 协议期限
Term of Agreement
5.1 本协议自双方正式签署之日起生效；除非本协议明确约定或甲方书面决定终止本协议，本协议应永久有效。
This Agreement shall become effective upon execution by the Parties. Unless terminated in accordance with the provisions of this Agreement or terminated in writing by Party A, this Agreement shall remain effective.
5.2 如果在本协议有效期内，任何一方的经营期限届满，则该方应及时续展其经营期限，以使本协议得以继续有效和执行。如一方续展经营期限之申请未获任何主管部门批准或同意，则本协议于该方经营期限届满之时终止。
During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof so as to enable this Agreement to remain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for renewal of its operation term is not approved by relevant government authorities.
5.3 在本协议终止之后，双方在第3、6、7条和第5.3条下的权利和义务将继续有效。
The rights and obligations of the Parties under Sections 3, 6, 7 and Section 5.3 shall survive the termination of this Agreement.
6. 适用法律和争议解决
Governing Law and Resolution of Disputes
6.1 本协议的订立、效力、解释、履行、修改和终止以及争议的解决适用中国法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.
6.2 因解释和履行本协议而发生的任何争议，本协议双方应首先通过友好协商的方式加以解决。如果在一方向另一方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行。仲裁裁决是终局性的，对双方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on both Parties.
6.3 因解释和履行本协议而发生任何争议或任何争议正在进行仲裁时，除争议的事项外，双方仍应继续行使各自在本协议项下的其他权利并履行各自在本协议项下的其他义务。
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
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7. 违约责任和补偿
Breach of Agreement and Indemnification
7.1 若乙方实质性违反本协议项下所作的任何一项约定，甲方有权终止本协议和/或要求乙方给予损害赔偿；本第7.1条不应妨碍甲方在本协议下的任何其他权利。
If Party B commits any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and/or require Party B to indemnify all damages; this Section 7.1 shall not prejudice any other rights of Party A herein.
7.2 除非法律另有规定，乙方在任何情况均无权利终止或解除本协议。
Unless otherwise required by applicable laws, Party B shall not have any right to terminate this Agreement in any event.
7.3 就甲方根据本协议向乙方提供的服务所产生或引起的针对甲方的诉讼、请求或其他要求而招致的任何损失、损害、责任或费用都应由乙方补偿给甲方，以使甲方不受任何损害，除非该损失、损害、责任或费用是因甲方的重大过失或故意不当行为而产生的。
Party B shall indemnify and hold harmless Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or other demands against Party A arising from or caused by the services provided by Party A to Party B pursuant this Agreement, except where such losses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.
8. 不可抗力
Force Maieure
8.1 若由于地震、台风、洪水、火灾、流行病、战争、罢工以及其他任何无法预见并且是受影响方无法防止亦无法避免的不可抗力事件(“不可抗力”)，而直接致使本协议任何一方不能履行或不能完全履行本协议,则受上速不可抗力影响的一方不对此不履行或部份履行承担责任。但该受影响方须立即毫不迟延地向另外一方发出书面通知，并须在发出该书面通知后15天内向另外一方提供不可抗力事件的详情，解释其此种不能履行、部份不能履行或需要迟延履行的原因。
In the case of any force majeure events (the “Force Majeure”) such as earthquake, typhoon, flood, fire, flu, war, strikes or any other events that cannot be predicted and are unpreventable and unavoidable by the affected Party, which directly or indirectly causes the failure of either Party to perform or completely perform this Agreement, then the Party affected by such Force Majeure shall give the other Party written notices without any delay, and shall provide details of such event within 15 days after sending out such notice, explaining the reasons for such failure of, partial or delay of performance.
8.2 若主张不可抗力的一方未能根据以上规定通知另一方并提供适当证明，其不得免于未能履行其在本协议项下义务的责任。受不可抗力影响的一方应作出合理的努力，以减低该不可抗力造成的后果，并在该不可抗力终止后尽快恢复履行所有有关义务。如受不可抗力影响的一方在因不可抗力而暂免履行义务的理由消失后未有恢复履行有关义务，该方应就此向另一方承担责任。
If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party shall not be excused from the non-performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall use reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when the causes of such excuse are cured, such Party shall be liable to the other Party.
8.3 不可抗力发生时，双方应立即互相协商，以求达致公平解决方案，并须作出一切合理努力，尽量减低该不可抗力造成的后果。
In the event of Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure.
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9. 通知
Notices
9.1 本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:
9.1.1 通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在接收或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of receipt or refusal at the address specified for notices.
9.1.2 通知如果是以传真发出的，则以成功传送之日为有效送达日(应以自动生成的传送确认信息为证)。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).
9.2 为通知的目的，双方地址如下：
For the purpose of notices, the addresses of the Parties are as follows:
甲方： 海南共创共赢商贸有限公司
Party A: Hainan GCGY Commercial & Trading Co., Ltd.
住所： 海南省澄迈县老城镇海南生态软件园孵化楼四层1001室
Address: Room 1001, 4th Floor, Incubation Building, Hainan Ecological Software Park, Laocheng Town, Chengmai County, Hainan, China
收件人：廖金起
Attn: LIAO Jinqi
电话： +86
Phone: +86
乙方：海南中科共创新能源有限公司
Party B: Hainan ZKGC New Energy Co., Ltd.
住所：海南省海口市龙华区金贸街道玉沙路国贸中心21楼A号房
Address: Room A, Building No.21, Guomao Center, Yusha Road, Jinmao Street, Longhua District, Haikou City, Hainan, China
收件人：廖金起
Attn: LIAO Jinqi
电话：+86
Phone: +86
9.3 任何一方可按本条规定随时给另一方发出通知来改变其接收通知的地址。
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
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10. 协议的转让
Assignment
10.1 乙方不得将其在本协议项下的权利与义务转让给第三方，除非事先征得甲方书面同意。
Without Party A’s prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.
10.2 乙方在此同意，甲方可以向第三方转让其在本协议项下的权利和义务，并在该等转让发生时甲方仅需向乙方发出书面通知，并且无需再就该等转让征得乙方的同意。
Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party and in case of such assignment; Party A is only required to give written notice to Party B and does not need any consent from Party B for such assignment.
11. 协议的分割性
Severabilitv
如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。双方应通过诚意磋商，争取以法律许可以及双方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
12. 协议的修改、补充
Amendments and Supplements
双方可以书面协议方式对本协议作出修改和补充。经过双方签署的有关本协议的修改协议和补充协议是本协议组成部分，具有与本协议同等的法律效力。
Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
13. 语言和副本
Language and Counterparts
本协议以中文和英文书就，一式四份，甲乙双方各持二份。中英文版本具有同等效力；中英文版本如有歧义，应以中文版本为准。
This Agreement is written in both Chinese and English language in four copies, each Party having two copies. The Chinese version and English version shall have equal legal validity. If there is any discrepancy between Chinese version and English version, Chinese version prevails.
本页其余部分刻意留为空白
The Remainder of this page is intentionally left blank
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有鉴于此，双方已使得经其授权的代表于文首所述日期签署了本《独家业务合作协议》，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representative to execute this Exclusive Business Cooperative Agreement as of the date first above written.
甲方：海南共创共赢商贸有限公司
Party A: Hainan GCGY Commercial & Trading Co., Ltd.
签署：
| By： | /s/ LIAO Jinqi |
姓名：廖金起
Name：LIAO Jinqi
职位：董事
Title：Director
乙方：海南中科共创新能源有限公司
Party B: Hainan ZKGC New Energy Co., Ltd.
签署：
| By： | /s/ LIAO Jinqi |
姓名：廖金起
Name： LIAO Jinqi
职位：董事
Title： Director
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Exhibit 10.2
股权质押协议
Equity Interest Pledge Agreement
本股权质押协议(下称“本协议”)由下列各方于2021年8月18日在中华人民共和国(下称“中国”)海口市签订：
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 18, 2021 in Haikou, the People’s Republic of China (“China” or the “PRC”)：
甲方(下称“质权方”): 海南共创共赢商贸有限公司，一家依照中国法律设立和存在的外商独资公司，地址为海南省澄迈县老城镇海南生态软件园孵化楼四层1001室；
Party A (hereinafter “Pledgee”): Hainan GCGY Commercial & Trading Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC, with its address at Room 1001, 4th Floor, Incubation Building, Hainan Ecological Software Park, Laocheng Town, Chengmai County, Hainan, China;
乙方(下称“出质方”)： 廖金起，一位中国公民，身份证号码：440923197212034032；
Party B（hereinafter “Pledgor”）: Liao Jinqi, a citizen of China with Chinese Identification No.: 440923197212034032;
丙方： 海南中科共创新能源有限公司，一家依照中国法律设立和存在的有限责任公司，地址为海南省海口市龙华区金贸街道玉沙路国贸中心21楼A号房。
Party C: Hainan ZKGC New Energy Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room A, Building No.21, Guomao Center, Yusha Road, Jinmao Street, Longhua District, Haikou City, Hainan, China.
在本协议中，甲方、乙方、丙方以下各称“一方”，合称“各方”
In this Agreement, Party A, Party B, Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as the “Parties”.
鉴于：
Whereas:
1. 在本协议签署日，出质方持有丙方100%的股权，代表丙方注册资本人民币1000万元。丙方是一家在中国海南注册成立的有限责任公司。丙方有意在此确认出质方和质权方在本协议下的权利和义务并提供必要的协助登记该质权；
Pledgor is a citizen of China who as of the date hereof holds 100% of the equity interest in Party C, representing RMB 10 million in the registered capital of Party C. Party C is a limited liability company registered in Hainan, China. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;
2. 质权方是一家在中国注册的外商独资企业。质权方与出质方所部分拥有的丙方于海南签订了业务合作协议(定义如下)；质权方与出质方、丙方签订了独家购买权协议(定义如下)；质权方与出质方签订了独家业务合作协议(定义如下)；出质方签署了授权质权方的授权委托书；
Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C, owned by Pledgor, have executed an Exclusive Business Cooperation Agreement (as defined below) in Hainan; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
3. 为了保证丙方和出质方履行独家业务合作协议、独家购买权协议和授权委托书项下的义务，出质方以其在丙方中拥有的全部股权向质权方就丙方和出质方履行业务合作协议、独家购买权协议和授权委托书做出质押担保。
To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement and the Power of Attorney.
为了履行交易文件的条款，各方商定按照以下条款签订本协议。
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
1. 定义
Definitions
除非本协议另有规定，下列词语含义为：
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1 质权：指出质方根据本协议第2条给予质权方的担保物权，即指质权方所享有的，以出质方质押给质权方的质押股权折价或拍卖、变卖该质押股权的价款优先受偿的权利。
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
1.2 质押股权：指出质方现在和将来持有的其在丙方的全部股权权益。
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
1.3 质押期限：指本协议第3条规定的期间。
Term of Pledge: shall refer to the term set forth in Section 3.1 of this Agreement.
1.4 交易文件：指丙方与质权方于2021年【】月16日签订的独家业务合作协议；出质方、丙方与质权方于2021年8月16 日签订的独家购买权协议；和出质方于2021年8月16 日签署的授权委托书，以 及对前述文件的任何修改、修订和/或重述。
Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on 16 August, 2021(the “‘Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, Pledgee and Pledgor on 16 August, 2021(the “‘Exclusive Option Agreement”), Power of Attorney executed on 16 August, 2021 by Pledgor (the “Power of Attomey”) and any modification, amendment and restatement to the aforementioned documents.
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1.5 合同义务：指出质方在独家购买权协议、授权委托书和本协议项下所负的所有义务；丙方在业务合作协议、独家购买权协议、和本协议项下所负的所有义务。
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement and the Power of Attorney; and all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement and this Agreement.
1.6 担保债务：指质权方因出质方和/或丙方的任何违约事件而遭受的全部直接、间接、衍生损失和可预计利益的丧失，该等损失的金额的依据包括但不限于质权方合理的商业计划和盈利预测、丙方在业务合作协议项下应支付的服务费用，及质权方为强制出质方和/或丙方执行其合同义务而发生的所有费用。
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business plan and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement and all expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation.
1.7 违约事件：指本协议第7条所列任何情况。
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
1.8 违约通知：指质权方根据本协议发出的宣布违约事件的通知。
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
2. 质权
The Pledge
2.1 出质方兹同意将质押股权按照本协议的约定出质给质权方作为履行合同义务和偿还担保债务的担保。丙方兹同意出质方按照本协议的约定将质押股权出质给质权方。
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured Indebtedness under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
2.2 在质押期限内，质权方有权收取质押股权所产生的红利或股利。在质权方事先书面同意的情况下，出质方方可就质押股权而分得股利或分红。出质方因质押股权而分得的股利或分红应根据质权方的要求(1)存入质权方的指定帐户内，受质权方监管，并用于担保合同义务和首先清偿担保债务；或者(2)在不违反中国法律的前提下，将此等红利、股利无条件地赠送给质权方或质权方指定的人。
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be, subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally given to Pledgee or any other person designated by Pledgee to the extent permitted under applicable PRC laws.
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2.3 在质权方事先书面同意的情况下，出质方可对丙方增资。出质方因对公司增资而在公司注册资本中增加的出资额亦属于质押股权。
Pledgor may subscribe for a capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in future capital increase shall be deemed as Equity Interest as well.
2.4 如丙方根据中国法律的强制性规定需予以解散或清算，出质方在丙方依法完成解散或清算程序后，从丙方依法分配的任何利益，应根据质权方的要求(1)存入质权方的指定帐户内，受质权方监管，并用于担保合同义务和首先清偿担保债务；或者(2)在不违反中国法律的前提下，无条件地赠予质权方或质权方指定的人。
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to making any other payment; or (2) unconditionally given to Pledgee or any other person designated by Pledgee to the extent permitted under applicable PRC laws.
3. 质押期限
Term of Pledge
3.1 本质权自本协议项下的质押股权出质在相应的工商行政管理机关登记之日起生效，质权有效期持续到所有合同义务和担保债务履行完毕为止。出质方和丙方应(一)自本协议签署之日起3个工作日内，将本协议的质权登记在丙方股东名册上，并(二)自本协议签署之日起30个工作日内向相应的工商行政管理机关申请登记本协议项下的质权。各方共同确认，为办理股权质押工商登记手续，各方及丙方其他股东应将本协议或者一份按照丙方所在地工商行政管理部门要求的形式签署的、真实反映本协议项下质权信息的股权质押合同(以下简称“工商登记质押合同”)提交给工商行政管理机关，工商登记质押合同中未约定事项，仍以本协议约定为准。出质方和丙方应当按照中国法律法规和有关工商行政管理机关的各项要求，提交所有必要的文件并办理所有必要手续，保证质权在递交申请后尽快获得登记。
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant administration for industty and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution of this Agreement The parties covenant that for the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of this Agreement. Pledgor and Party C shall submit all necessaiy documents and complete all necessaiy procedures, as required by the PRC laws and regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after filing.
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3.2 质押期限内，如出质方和/或丙方未履行合同义务或支付担保债务，质权方有权但无义务按本协议的规定行使质权。
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
4. 质权凭证的保管
Custody of Records for Equity Interest subject to Pledge
4.1 在本协议规定的质押期限内，出质方应将其在丙方的股权出资证明书及记载质权的股东名册交付质权方保管。出质方应在本协议签订之日起一周内将上述股权出资证明书及股东名册交付给质权方。质权方将在本协议规定的全部质押期间一直保管这些文件。
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee’s custody the capital contribution certificate for the Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have custody of such documents during the entire Term of Pledge set forth in this Agreement.
5. 出质方和丙方的陈述和保证
Representations and Warranties of Pledgor and Party C
出质方和丙方特此在本协议签署之日向质权方共同及分别陈述和保证如下：
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1 出质方是质押股权唯一的合法所有人。
Pledgor is the sole legal and beneficial owner of the Equity Interest.
5.2 质权方有权以本协议规定的方式处分并转让质押股权。
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
5.3 除本质权之外，出质方未在质押股权上设置任何其他质押权利或其他担保权益。
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
5.4 出质方和丙方已经取得第三方和政府部门的同意及批准(若需)以签署，交付和履行本协议。
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for execution, delivery and performance of this Agreement.
5.5 本协议的签署、交付和履行均不会：(i)导致违反任何有关的中国法律；(ii)与丙方章程或其他组织文件相抵触；(iii)导致违反其是一方或对其有约束力的任何合同或文件，或构成其是一方或对其有约束力的任何合同或文件项下的违约；(iv)导致违反有关向任何一方颁发的任何许可或批准的授予和(或)继续有效的任何条件；或(v)导致向任何一方颁发的任何许可或批准中止或被撤销或附加条件。
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions.
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6. 出质方和丙方的承诺
Covenants of Pledgor and Party C
6.1 在本协议存续期间，出质方和丙方共同和分别向质权方承诺：
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1除履行交易文件外，未经质权方事先书面同意，出质方不得转让质押股权或其任何部 分，不得在质押股权上设立或允许存在任何担保或其他债务负担；
Pledgor shall not transfer the Equity Interest, or place or permit the existence of any security interest or other encumbrance on the Equity Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents;
6.1.2出质方和丙方遵守并执行所有有关权利质押的法律、法规的规定，在收到有关主管机关就质权发出或制定的通知、指令或建议时，于五日内向质权方出示上述通知、指令或建议，同时遵守上述通知、指令或建议，或按照质权方的合理要求或经质权方同意就上述事宜提出反对意见和陈述；
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee’s reasonable request or upon consent of Pledgee;
6.1.3出质方和丙方将任何可能导致对质押股权或其任何部分的权利产生影响的事件或收到的通知，以及可能改变出质方在本协议中的任何保证、义务或对出质方履行其在本协议中 义务可能产生影响的任何事件或收到的通知及时通知质权方。
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee’s rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4 丙方应在其经营期限届满前三(3)个月内办理完成延长经营期限的登记手续，以使本协议的效力得以持续。
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration of such term to maintain the validity of this Agreement.
6.2 出质方同意，质权方按本协议条款取得的对质权享有的权利，不应受到出质方或出质方的继承人或出质方之委托人或任何其他人通过法律程序的中断或妨害。
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
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6.3 出质方向质权方保证，为保护或完善本协议对合同义务和担保债务的担保，出质方将诚实签署、并促使其他与质权有利害关系的当事人签署质权方所要求的所有的权利证书、契约和/或履行并促使其他有利害关系的当事人履行质权方所要求的行为，并为本协议赋予质权方之权利、授权的行使提供便利，与质权方或其指定的人(自然人/法人)签署所有的有关质押股权所有权的文件，并在合理期间内向质权方提供其认为需要的所有的有关质权的通知、命令及决定。
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons). Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by Pledgee.
6.4 出质方向质权方保证，出质方将遵守、履行本协议项下所有的保证、承诺、协议、陈述及条件。如出质方不履行或不完全履行其保证、承诺、协议、陈述及条件，出质方应赔偿质权方由此遭受的一切损失。
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall indemnify Pledgee for all losses resulting therefrom.
7. 违约事件
Event of Breach
7.1 下列事项均被视为违约事件：
The following circumstances shall be deemed Event of Default:
7.1.1出质方对其在交易文件及/或本协议项下的任何义务的违反；
any breach by Pledgor of any obligations under the Transaction Documents and/or this Agreement.
7.1.2丙方对其在交易文件及/或本协议项下的任何义务的违反。
any breach by Party C of any obligations under the Transaction Documents and/or this Agreement.
7.2 如知道或发现本第7.1条所述的任何事项或可能导致上述事项的事件已经发生，出质方和丙方应立即以书面形式通知质权方。
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
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7.3 除非第7.1条下的违约事件在质权方向出质方和/或丙方发出要求其修补此违约行为通知后的二十(20)天之内已经按质权方要求获得救济，质权方在其后的任何时间，可向出质方发出书面违约通知，要求依据第8条行使质权。
Unless an Event of Default set forth in Section 7.1 has been successfully resolved to Pledgee’s satisfaction within twenty (20) days after the Pledgee and /or Party C delivers a notice to the Pledgor requesting remedy for such Event of Default, Pledgee may issue a Notice of Default to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately honor the Pledge in accordance with the provisions of Article 8 of this Agreement.
8. 质权的行使
Exercise of Pledge
8.1 在质权方行使其质押权利时，质权方可以向出质方发出书面违约通知。
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
8.2 受限于第7.3条的规定，质权方可在按第8.1条发出违约通知之后的任何时间里对质权行使处分的权利。质权方决定行使处分质权的权利时，出质方即不再拥有任何与质押股权有关的权利和利益。
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.
8.3 质权方有权在根据第8.1条发出违约通知后，行使其根据中国法律、交易文件及本协议条款而享有的全部违约救济权利，包括（但不限于）以质押股权折价或以拍卖、变卖质押股权所得的价款以优先受偿。质权方对其合理行使该等权利和权力造成的任何损失不负责任。
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable PRC laws, the Transaction Documents and this Agreement, including but not limited to being compensated in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its due exercise of such rights and powers.
8.4 质权方行使质权获得的款项，应优先支付因处分质押股权而应缴的税费和向质权方履行合同义务及偿还担保债务。扣除上述款项后如有余款，质权方应将余款交还出质方或根据有关法律、法规对该款项享有权利的其他人或者向出质方所在地公证机关提存（由此所生之任何费用全部由出质方承担）；在中国法律允许的情况下，出质方应将上述款项无条件地赠予质权方或质权方指定的人。
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing of the Equity Interest and performing Contract Obligations and to pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who has rights to such balance under applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other person designated by Pledgee.
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8.5 质权方有权选择同时或先后行使其享有的任何违约救济，质权方在行使本协议项下的以质押股权折价或拍卖、变卖质押股权所得款项优先受偿的权利前，无须先行使其他违约救济。
Pledgee has the right to exercise any remedial measure available simultaneously or in any order. Pledgee may exercise the right to be compensated from the Equity Pledge in priority to the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this Agreement, without exercising any other remedy measure first.
8.6 质权方有权以书面方式指定其律师或其他代理人行使其质权，出质方或丙方对此均不得提出异议。
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise any objection to such exercise.
8.7 质权方依照本协议处分质权时，出质方和丙方应予以必要的协助，以使质权方实现其质权。
When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable Pledgee to enforce the Pledge in accordance with this Agreement.
9. 违约责任
Breach of Agreement
9.1 若出质方或丙方实质性违反本协议项下所作的任何一项约定，质权方有权终止本协议并要求违约方给予损害赔偿；本第9条不应妨碍质权方在本协议下的任何其他权利；
If Pledgor or Party C commits any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
9.2 若质权方违反本协议项下所作的任何一项约定，除非法律另有规定，出质方或丙方在任何情况均无任何权利终止或解除本协议。
If Pledgee commits any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless otherwise required by applicable laws.
10. 转让
Assignment
10.1除非经质权方事先同意，出质方无权赠予或转让其在本协议项下的权利义务。
Without Pledgee’s prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 本协议对出质方及其继任人和经许可的受让人均有约束力，并且对质权方及每一继任人和受让人有效。
This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its successors and assigns.
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10.3质权方可以在任何时候将其在交易文件中的所有或任何权利和义务转让给其指定的人，在这种情况下，受让人应享有和承担本协议项下质权方享有和承担的权利和义务，如同其作为原协议方应享有和承担的一样。质权方转让业务合作协议项下的权利和义务时，应质权方要求，出质方和/或丙方应就此转让签署有关协议和/或文件。
At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee’s request, Pledgor and/or Party C shall execute relevant agreements or other documents relating to such assignment.
10.4因转让所导致的质权方变更后，应质权方要求，出质方和/或丙方应与新的质权方签订一份内容与本协议一致的新质押协议，并在相应的工商行政管理机关进行登记。
In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
10.5出质方和丙方应严格遵守本协议和各方单独或共同签署的其他有关协议的规定，包括交易文件，履行交易文件项下的义务，并不进行任何足以影响协议的有效性和可强制执行性的作为/不作为。除非根据质权方的书面指示，出质方不得行使其对质押股权还留存的权利。
Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. 终止
Termination
11.1在出质方和丙方充分、完全地履行了所有的合同义务和清偿了所有的担保债务后，质权方应根据出质方的要求，在尽早合理可行的时间内，解除本协议下的质押股权的质押，并配合出质方办理注销在丙方的股东名册内所作的股权质押的登记以及办理在相关工商行政管理部门的质押注销登记。
Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge from the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 本协议第9、13、14条和本第11.2条的规定在本协议终止后继续有效。
The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. 手续费及其他费用
Handling Fees and Other Expenses
一切与本协议有关的费用及实际开支，其中包括但不限于法律费用、工本费、印花税以及任何其他税收、费用等全部由丙方承担。
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.
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13. 保密责任
Confidentiality
各方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息(惟并非由接受保密信息之一方擅自向公众披露)；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsel or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsel or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
14. 适用法律和争议的解决
Governing Law and Resolution of Disputes
14.1本协议的订立、效力、解释、履行、修改和终止以及争议的解决均适用中国法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.
14.2因解释和履行本协议而发生的任何争议，本协议各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
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14.3因解释和履行本协议而发生任何争议或任何争议正在进行仲裁时，除争议的事项外，本协议各 方仍应继续行使各自在本协议项下的其他权利并履行各自在本协议项下的其他义务。
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
15. 通知
Notices
15.1本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:
15.2 通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在发送或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of delivery or refusal at the address specified for notices.
15.3通知如果是以传真发出的，则以成功传送之日为有效送达日(应以自动生成的传送确认信息为证)。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).
15.4为通知的目的，各方地址如下：
For the purpose of notices, the addresses of the Parties are as follows:
甲方：海南共创共赢商贸有限公司
Party A: Hainan GCGY Commercial & Trading Co., Ltd.
地址：海南省澄迈县老城镇海南生态软件园孵化楼四层1001室
Address: Room 1001, 4th Floor, Incubation Building, Hainan Ecological Software Park, Laocheng Town, Chengmai County, Hainan, China
收件人：廖金起
Attn: LIAO Jinqi
电话： +86
Phone: +86
乙方： 廖金起
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Party B: LIAO Jinqi
地址：
Address:
电话： +86
Phone: +86
丙方： 海南中科共创新能源有限公司
Party C: Hainan ZKGC New Energy Co., Ltd.
地址： 海南省海口市龙华区金贸街道玉沙路国贸中心21楼A号房
Address: Room A, Building No.21, Guomao Center, Yusha Road, Jinmao Street, Longhua District, Haikou City, Hainan, China
收件人： 廖金起
Attn: LIAO Jinqi
电话： +86
Phone: +86
15.5 任何一方可按本条规定随时给其他各方发出通知来改变其接收通知的地址。
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16. 分割性
Severability
如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商，争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
17. 附件
Attachments
本协议所列附件，为本协议不可分割的组成部分。
The attachments set forth herein shall be an integral part of this Agreement.
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18. 生效
Effectiveness
18.1本协议自各方正式签署之日起生效。
This Agreement shall become effective upon execution by the Parties.
18.2本协议的任何修改、补充或变更，均须釆用书面形式，经各方签字或盖章并按规定办理政府登记(如需)后生效。
Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. 语言和副本
Language and Counterparts
本协议以中文和英文书就，一式陆份，质权方、出质方和丙方各持一份，剩余一份用于登记，各份具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in Chinese and English in six copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
本页其余部分刻意留为空白
The Remainder of this page is intentionally left blank
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有鉴于此，各方已使得经其授权的代表于文首所述日期签署了本股权质押协议并即生效，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first above written.
| 甲方：海南共创共赢商贸有限公司 | ||
| Party A: Hainan GCGY Commercial & Trading Co., Ltd. | ||
| 签字： | ||
| By: | /s/ LIAO Jinqi | |
| 姓名： | 廖金起 | |
| Name: | LIAO Jinqi | |
| 职位：法定代表人 | ||
| Title: | Legal Representative | |
| 乙方：廖金起 | ||
| Party B: LIAO Jinqi | ||
| 签字： | ||
| By: | /s/ LIAO Jinqi | |
| 丙方： 海南中科共创新能源有限公司 | ||
| Party C: Hainan ZKGC New Energy Co., Ltd. | ||
| 签字： | ||
| By: | /s/ LIAO Jinqi | |
| 姓名： | 廖金起 | |
| Name: | LIAO Jinqi | |
| 职位：法定代表人 | ||
| Title: | Legal Representative | |
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Exhibit 10.3
独家购买权协议
Exclusive Option Agreement
本独家购买权协议(下称“本协议”)由以下各方于2021年8月16日在中华人民共和国(下称“中国”)海口市签订：
This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties as of the 16 day of August, 2021 in Haikou, the People’s Republic of China (“China” or the “PRC”)：
甲方：海南共创共赢商贸有限公司，一家依照中国法律设立和存在的外商独资公司，地址为海南省澄迈县老城镇海南生态软件园孵化楼四层1001室；
Party A: Hainan GCGY Commercial & Trading Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC, with its address at Room 1001, 4th Floor, Incubation Building, Hainan Ecological Software Park, Laocheng Town, Chengmai County, Hainan, China;
乙方：廖金起，一位中国公民，身份证号码：440923197212034032；
Party B: LIAO Jinqi, a citizen of China with Chinese Identification No.: 440923197212034032;
丙方：海南中科共创新能源有限公司，一家依照中国法律设立和存在的有限责任公司，地址为海南省海口市龙华区金贸街道玉沙路国贸中心21楼A号房。
Party C: Hainan ZKGC New Energy Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room A, Building No.21, Guomao Center, Yusha Road, Jinmao Street, Longhua District, Haikou City, Hainan, China.
在本协议中，甲方、乙方、以下各称“一方”，合称“各方”。
In this Agreement, each of Party A, Party B and shall be referred to as a “Party” respectively, and they shall be collectively referred to as the “Parties”.
鉴于：
Whereas:
乙方是丙方的股东；在本协议签署日，乙方持有丙方100%的股权，代表丙方注册资本人民币1000万元。
Party B is the shareholder of Party C and as of the date hereof holds 100% of the equity interests in Party C, representing RMB 10 million in the registered capital of Party C.
现各方协商一致，达成如下协议：
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1. 股权买卖
Sale and Purchase of Equity Interest
1.1授予权利
Option Granted
乙方在此不可撤销地授予甲方在中国法律允许的前提下，按照甲方自行决定的行使步骤，并按照本协议第1.3条所述的价格，随时一次或多次从乙方购买或指定一人或多人(“被指定人”)从乙方购买其届时所持有的丙方的全部或部分股权的一项不可撤销的专有权(“股权购买权”)。除甲方和被指定人外，任何第三人均不得享有股权购买权或其他与乙股权有关的权利。丙方特此同意乙方向甲方授予股权购买权。本款及本协议所规定的“人”指个人、公司、合营企业、合伙、企业、信托或非公司组织。
Party B hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase the equity interests in Party C then held by Party B once or at multiple times in part or in whole at Party A’s sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the “Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.
1.2行使步骤
Steps for Exercise of Equity Interest Purchase Option
甲方行使其股权购买权以符合中国法律和法规的规定为前提。甲方行使股权购买权时，应向乙方发出书面通知(“股权购买通知”)，股权购买通知应载明以下事项：(a)甲方或被指定人关于行使股权购买权的决定；(b)甲方或被指定人拟从乙方购买的股权份额(“被购买股权”)；和(c)被 购买股权的购买日/转让日。
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying: (a) Party A’s or the Designee’s decision to exercise the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the “Optioned Interests”); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
1.3股权对价
Equity Interest Purchase Price
甲方行使股权购买权购买乙方在丙方持有的全部股权的对价(“基准对价”)应为中华人民共和国政府允许的最低价格。
The purchase price of all equity interests held by Party B, in Party C purchased by Party A by exercising the Equity Interest Purchase Option (the “Base Price”)shall be the lowest price the PRC government will permit.
1.4转让被购买股权
Transfer of Optioned Interests
甲方每次行使股权购买权时：
For each exercise of the Equity Interest Purchase Option:
1.4.1乙方、应责成丙方及时召开股东会会议，在该会议上，应通过批准乙方向甲方和/ 或被指定人转让被购买股权的决议；
Party B shall cause Party C to promptly convene a shareholders meeting, at which a resolution shall be adopted approving Party B’s transfer of the Optioned Interests to Party A and/or the Designee(s);
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1.4.2乙方应就其向甲方和/或被指定人转让被购买股权取得丙方其他股东同意该转让并放弃优先购买权的书面声明(如适用)。
Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the equity interest to Party A and/or the Designee(s) and waiving any right of first refusal related thereto (if applicable).
1.4.3乙方应与甲方和/或(在适用的情况下)被指定人按照本协议及股权购买通知的规定， 为每次转让签订股权转让合同；
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;
1.4.4有关方应签署所有其他所需合同、协议或文件，取得全部所需的政府批准和同意，并釆取所有所需行动，在不附带任何担保权益的情况下，将被购买股权的有效所有权转移给甲方和/或被指定人并使甲方和/或被指定人成为被购买股权的登记在册所有人。为本款及本协议的目的，“担保权益”包括担保、抵押、第三方权利或权益，任何购股权、收购权、优先购买权、抵销权、所有权扣留或其他担保安排等；但为了明确起见，不包括在本协议、乙方股权质押协议和乙方授权委托书项下产生的任何担保权益。本协议所规定的“乙方、丙方股权质押协议”指甲方、乙方和丙方于本协议签署之日签订的股权质押协议及对其的任何修改、修订或重述；本协议所规定的“乙方授权委托书”指乙方于本协议签署之日签署的授权甲方的授权委托书及对其的任何修改、修订或重述。
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, “security interests” shall include securities, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney. “Party B’s Equity Interest Pledge Agreement” as used in this Agreement shall refer to the Equity Interest Pledge Agreement executed by and among Party A, Party B, Party C on the date hereof and any modification, amendment and restatement thereto. “Party B’s Power of Attorney, as used in this Agreement shall refer to the Power of Attorney executed by Party B, on the date hereof granting Party A with power of attorney and any modification, amendment and restatement thereto.
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2. 承诺
Covenants
2.1有关丙方的承诺
Covenants regarding Party C
乙方(作为丙方的股东)和丙方在此承诺：
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1未经甲方的事先书面同意，不以任何形式补充、更改或修改丙方公司章程文件，增加或减少其注册资本，或以其他方式改变其注册资本结构；
Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2按照良好的财务和商业标准及惯例，保持其公司的存续，取得和维持丙方从事业务所需的全部政府许可、证照，审慎地及有效地经营其业务和处理事务；
They shall maintain Party C’s corporate existence in accordance with good financial and business standards, obtain and maintain all necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
2.1.3未经甲方的事先书面同意，不在本协议签署之日起的任何时间出售、转让、抵押或以其他方式处置丙方的任何资产、业务或收入的合法或受益权益，或允许在其上设置任何其他担保权益；
Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance thereon of any security interest;
2.1.4未经甲方的事先书面同意，不发生、继承、保证或容许存在任何债务，但（i）正常或日常业务过程中产生而不是通过借款方式产生的债务；和(ii)已向甲方披露和得到甲方书面同意的债务除外；
Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained;
2.1.5 一直在正常业务过程中经营所有业务，以保持丙方的资产价值，不进行任何足以影响其经营状况和资产价值的作为/不作为；
They shall always operate all of Party C’s businesses during the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may affect Party C’s operating status and asset value;
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2.1.6未经甲方的事先书面同意，不得让丙方签订任何重大合同，但在正常业务过程中签订的合同除外(就本段而言，如果一份合同的总金额超过人民币10万元，即被视为重大合同)；
Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except contracts in the ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB100,000 shall be deemed a major contract);
2.1.7未经甲方的事先书面同意，丙方不得向任何人提供贷款或信贷；
Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8应甲方要求，向其提供所有关于丙方的营运和财务状况的资料；
They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;
2.1.9如甲方提出要求，丙方应从甲方接受的保险公司处购买和持有有关其资产和业务的保险，该保险的金额和险种应与经营类似业务的公司一致；
If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10未经甲方的事先书面同意，丙方不得与任何人合并或联合，或对任何人进行收购或投资；
Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;
2.1.11将发生的或可能发生的与丙方资产、业务或收入有关的诉讼、仲裁或行政程序立即通知甲方；
They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C’s assets, business or revenue;
2.1.12为保持丙方对其全部资产的所有权，签署所有必要或适当的文件，采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩；
To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
2.1.13未经甲方事先书面同意，不得以任何形式派发股息予各股东，但一经甲方要求，丙方应立即将其所有可分配利润全部立即分配给其各股东；及
Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders; and
2.1.14根据甲方的要求，委任由其指定的任何人士出任丙方的董事。
At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15未经甲方书面同意，不得从事任何与甲方或甲方的关联公司相竞争的业务。
Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16除非中国法律强制要求，未经甲方书面同意，丙方不得解散或清算。
Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
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2.2乙方的承诺
Covenant of Party B,
乙方承诺：
Party B hereby covenants as follows:
2.2.1未经甲方的事先书面同意，不出售、转让、抵押或以其他方式处置其拥有的丙方的股权的合法或受益权益，或允许在其上设置任何其他担保权益，但根据乙方股权质押协议和乙方授权委托书设置的权益除外；
Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.2.2促使丙方股东会和/或董事不批准在未经甲方的事先书面同意的情况下，出售、转让、抵押或以其他方式处置任何乙方持有之丙方的股权的合法权益或受益权，或允许在其上设置任何其他担保权益，但批准根据乙方股权质押协议和乙方授权委托书设置的权益除外；
Party B shall cause the shareholders’ meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.2.3未经甲方的事先书面同意的情况下，对于丙方与任何人合并或联合，或对任何人进行收购或投资，乙方将促成丙方股东会或董事不予批准；
Party B shall cause the shareholders’ meeting or the director(s) of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person, without the prior written consent of Party A;
2.2.4将发生的或可能发生的任何关于其所拥有股权的诉讼、仲裁或行政程序立即通知甲方；
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;
2.2.5促使丙方股东会或董事表决赞成本协议规定的被购买股权的转让并应甲方之要求采取其他任何行动；
Party B shall cause the shareholders’ meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
2.2.6为保持其对股权的所有权，签署所有必要或适当的文件，采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩；
To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
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2.2.7应甲方的要求，委任由其指定的任何人士出任丙方的董事；
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
2.2.8放弃其对丙方其他股东向甲方转让股权所享有的优先购买权(如有的话)；
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A (if any); and
2.2.9如乙方从丙方获得任何利润、分红、股利、股息或清算所得，乙方应在遵从中 国法律的前提下将其及时赠予甲方或甲方指定的任何人；和
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party A to the extent permitted under applicable PRC laws.
2.2.10严格遵守本协议及乙方、丙方与甲方共同或分别签订的其他协议的各项规定，切实履行该等协议项下的各项义务，并不进行任何足以影响该等协议的有效性和可执行性的作为/不作为。如果乙方对于本协议项下或本协议各方签署的股权质押协议下或对甲方的授权 委托书中的股权，还留存有任何权利，除非甲方书面指示，否则乙方仍不得行使该权利。
Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B、C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party A.
3. 陈述和保证
Representations and Warranties
乙方和丙方特此在本协议签署之日和每一个转让日向甲方共同及分别陈述和保证如下：
Party B and C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the Optioned Interests, that:
3.1其具有签订和交付本协议和其为一方的、根据本协议为每一次转让被购买股权而签订的任何股权转让合同(各称为“转让合同”)，并履行其在本协议和任何转让合同项下的义务的权力和能力。乙方和丙方同意在甲方行使股权购买权时，他们将签署与本协议条款一致的转让合同。本协议和其是一方的各转让合同一旦签署后，构成或将对其构成合法、有效及具有约束力的义务并可按照其条款对其强制执行；
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning the Optioned Interests to be transferred thereunder (each, a “Transfer Contracts”), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
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3.2乙方和丙方已经取得第三方和政府部门的同意及批准(若需)以签署，交付和履行本协议；
Party B and C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution, delivery and performance of this Agreement.
3.3无论是本协议或任何转让合同的签署和交付还是其在本协议或任何转让合同项下的义务的履行均不会: (i)导致违反任何有关的中国法律；(ii)与丙方章程或其他组织文件相抵触；(iii)导致违反其是一方或对其有约束力的任何合同或文件，或构成其是一方或对其有约束力的任何合同或文件项下的违约；(iv)导致违反有关向任何一方颁发的任何许可或批准的授予和(或)继续有效的任何条件；或(v)导致向任何一方颁发的任何许可或批准中止或被撤销或附加条件；
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
3.4乙方对其在丙方拥有的股权拥有良好和可出售的所有权，除乙方股权质押协议和乙方授权委托书外，乙方在上述股权上没有设置任何担保权益；
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
3.5 丙方对所有资产拥有良好和可出售的所有权，丙方在上述资产没有设置任何担保权益；
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
3.6 丙方没有任何未偿还债务，除(i)在其正常的业务过程中发生的债务，及(ii)已向甲方披露及经甲方书面同意债务除外；
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained.
3.7 丙方遵守适用于资产的收购的所有法律和法规；和
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
3.8目前没有悬而未决的或构成威胁的与股权、丙方资产有关的或与丙方有关的诉讼、仲裁或行政程序。
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.
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4. 有效期
Effective Date
本协议自各方正式签署之日起生效，本协议在乙方持有的丙方全部股权均根据本协议的约定依法转让至甲方和/或其指定的其他人名下后终止。
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5. 适用法律与争议解决
Governing Law and Resolution of Disputes
5.1适用法律
Governing law
本协议的订立、效力、解释、履行、修改和终止以及争议解决均适用中国法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of PRC.
5.2争议的解决方法
Methods of Resolution of Disputes
因解释和履行本协议而发生的任何争议，本协议各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
6. 税款、费用
Taxes and Fees
每一方应承担根据中国法律因准备和签署本协议和各转让合同以及完成本协议和各转让合同拟定的交易 而由该方发生的或对其征收的任何和全部的转让和注册的税、花费和费用。
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.
7. 通知
Notices
7.1本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
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All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:
7.1.1通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在接收或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of receipt or refusal at the address specified for notices.
7.1.2通知如果是以传真发出的，则以成功传送之日为有效送达日(应以自动生成的传送确认信息为证)。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).
7.2为通知的目的，各方地址如下：
For the purpose of notices, the addresses of the Parties are as follows:
甲方：海南共创共赢商贸有限公司
Party A: Hainan GCGY Commercial & Trading Co., Ltd.
地址：海南省澄迈县老城镇海南生态软件园孵化楼四层1001室
Address: Room 1001, 4th Floor, Incubation Building, Hainan Ecological Software Park, Laocheng Town, Chengmai County, Hainan, China
收件人：廖金起
Attn: LIAO Jinqi
电话： +86
Phone: +86
乙方： 廖金起
Party B: LIAO Jinqi
地址：
Address:
电话： +86
Phone: +86
丙方： 海南中科共创新能源有限公司
Party C: Hainan ZKGC New Energy Co., Ltd.
地址： 海南省海口市龙华区金贸街道玉沙路国贸中心21楼A号房
Address: Room A, Building No.21, Guomao Center, Yusha Road, Jinmao Street, Longhua District, Haikou City, Hainan, China
收件人： 廖金起
Attn: LIAO Jinqi
电话： +86
Phone: +86
7.3任何一方可按本条规定随时给其他方发出通知来改变其接收通知的地址。
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
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8. 保密责任
Confidentiality
各方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息(惟并非由接受保密信息之一方擅自向公众披露)；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsel or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsel or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9. 进一步保证
Further Warranties
各方同意迅速签署为执行本协议的各项规定和目的而合理需要的或对其有利的文件，以及为执行本协议的各项规定和目的而采取合理需要的或对其有利的进一步行动。
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.
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10. 违约责任
Breach of Agreement
10.1若乙方或丙方实质性违反本协议项下所作的任何一项约定，甲方有权终止本协议并要求乙方及丙方或丙方给予损害赔偿；本第10条不应妨碍甲方在本协议下的任何其他权利；
If Party B or Party C commits any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and require Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
10.2若甲方违反本协议项下所作的任何一项约定，除非法律另有规定，乙方或丙方在任何情况均无任何权利终止或解除本协议。
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless otherwise required by applicable laws.
11. 其他
Miscellaneous
11.1修订、修改与补充
Amendment, change and supplement
对本协议作出修订、修改与补充，必须经每一方签署书面协议。
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2完整合同
Entire agreement
除了在本协议签署后所作出的书面修订、补充或修改以外，本协议构成本协议各方就本协议标的物所达成的完整合同，取代在此之前就本协议标的物所达成的所有口头或书面的协商、陈述和协议。
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3标题
Headings
本协议的标题仅为方便阅读而设，不应被用来解释、说明或在其他方面影响本协议各项规定的含义。
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.
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11.4语言
Language
本协议以中文和英文书就，一式伍份，各方各持一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in both Chinese and English language in five copies, each Party having one copy with equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5可分割性
Severability
如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商，争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish their purposes to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6继任者
Successors
本协议对各方各自的继任者和各方所允许的受让方应具有约束力并对其有利。
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such Parties.
11.7继续有效
Survival
11.7.1本协议期满或提前终止前因本协议而发生的或到期的任何义务在本协议期满或提前终止后继续有效。
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.
11.7.2本协议第5、8、10条和本第11.7条的规定在本协议终止后继续有效。
The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8弃权
Waivers
任何一方可以对本协议的条款和条件作出弃权，但必须经书面作出并经各方签字。一方在某种情况下就其他方的违约所作的弃权不应被视为该方在其他情况下就类似的违约已经对其他方作出弃权。
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.
本页其余部分刻意留为空白
The Remainder of this page is intentionally left blank
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有鉴于此，各方已使得经其授权的代表于文首所述日期签署了本独家购买权协议并即生效，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.
甲方：海南共创共赢商贸有限公司
Party A: Hainan GCGY Commercial & Trading Co., Ltd.
签字：
| By: | /s/ LIAO Jinqi |
姓名：廖金起
Name: LIAO Jinqi
职位：法定代表人
Title: Legal Representative
乙方：廖金起
Party B: LIAO Jinqi
签字：
| By: | /s/ LIAO Jinqi |
丙方： 海南中科共创新能源有限公司
Party C: Hainan ZKGC New Energy Co., Ltd.
签字：
| By: | /s/ LIAO Jinqi |
姓名：廖金起
Name: LIAO Jinqi
职位：法定代表人
Title: Legal Representative
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Exhibit 10.4
授权委托书
Power of Attorney
本人廖金起，中国公民，身份证号码为440923197212034032,在本授权委托书签署之日拥有海南中科共创新能源有限公司(“内资公司”)100%的股权。就本人在内资公司现时和将来持有的股权(“本人股权”)，本人特此不可撤销地授权海南共创共赢商贸有限公司(“独资公司”)在本授权委托书的有效期内行使如下权利：
I, Liao Jinqi, a Chinese citizen with Chinese Identification Card No.:440923197212034032, and a holder of 100% of the entire registered capital in Hainan ZKGC New Energy Co., Ltd.(“Domestic Company”) as of the date when the Power of Attorney is executed, hereby irrevocably authorize Hainan GCGY Commercial & Trading Co., Ltd. (“WFOE”) to exercise the following rights relating to all equity interests held by me now and in the future (“My Shareholding”)during the term of this Power of Attorney:
授权独资公司作为本人唯一的排他的代理人就有关本人股权的事宜全权代表本人行使包括但不限于如下的权利：1)参加内资公司的股东会；2)行使按照法律和内资公司章程规定本人所享有的全部股东权和股东表决权，包括但不限于出售或转让或质押或处置本人股权的全部或任何一部分；以及3)作为本人的授权代表指定和任命内资公司的法定代表人、董事、监事、总经理以及其他高级管理人员等。
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders’ meetings of Domestic Company; 2) exercise all the shareholder’s rights and shareholder’s voting rights I am entitled to under the laws of China and Domestic Company’s Articles of Association, including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors, the chief executive officer and other senior management members of Domestic Company.
独资公司将有权代表本人签署本人与独资公司、内资公司于2021年8月16日签署的独家购买权协议以及本人与独资公司、内资公司于2021年8月16日签署的股权质押协议(包括上述文件的修改、修订或重述，合称“交易文件”)中约定的需由本人签署的所有文件，如期履行交易文件，该权利的行使将不对本授权形成任何限制。
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Domestic Company on August 16, 2021 and the Equity Pledge Agreement entered into by and among I, WFOE and Domestic Company on August 16, 2021 (including any modification, amendment and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
独资公司就本人股权的一切行为均视为本人的行为，签署的一切文件均视为本人签署，本人会予以承认。
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All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
独资公司有转委托权，可以就上述事项的办理自行再委托其他人或单位而不必事先通知本人或获得本人的同意。如果中国法律有要求，WFOE应指派中国公民行使上述权利。
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
在本人为内资公司的股东期间，本授权委托书不可撤销并持续有效，自授权委托书签署之日起算。
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of Domestic Company.
本授权委托书期间，本人特此放弃已经通过本授权委托书授权给独资公司的与本人股权有关的所有权利，不再自行行使该等权利。
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE through this Power of Attorney, and shall not exercise such rights by myself.
本授权委托书以中文和英文书就，中英文版本如有冲突，应以中文版为准。
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
本页其余部分刻意留为空白
The Remainder of this page is intentionally left blank
2
| 股东 Shareholder | ||
| 签署： | ||
| By: | ||
| 日期： , 2021 | ||
| Date： , 2021 | ||
| 接受： | ||
| Accepted by: | ||
| 海南共创共赢商贸有限公司（盖章） | ||
| Hainan GCGY Commercial & Trading Co., Ltd. | ||
| 签字： | ||
| By: | ||
| 姓名： 廖金起 | ||
| Name: LIAO Jinqi | ||
| 职位： 法定代表人 | ||
| Title: Legal Representative | ||
| 承认： | ||
| Acknowledged by： | ||
| 海南中科共创新能源有限公司（盖章） | ||
| Hainan ZKGC New Energy Co., Ltd. | ||
| 签字： | ||
| By: | ||
| 姓名：廖金起 | ||
| Name: LIAO Jinqi | ||
| 职位： 法定代表人 | ||
| Title: Legal Representative | ||
3
Exhibit 10.5
Hainan ZKGC New Energy Co., Ltd.
Investment Cooperation Contract
of
Intelligent Charging Station
Signing date: 2020
Investment Cooperation Contract of Automobile Charging Station
Party A: Hainan ZKGC New Energy Co., Ltd.Legal representative: Liao Jinqi
Party B: Guangdong Shengshi Haotong Technology Co., Ltd.
Legal
representative: 
In response to the policies of the state and Hainan Province to promote the development of new energy charging piles, increase green travel, create healthy homes, and achieve the purposes of energy conservation, emission reduction and consumption reduction, and benefit the people’s livelihood, Party A and Party B are committed to promoting the popularization and development of new energy electric vehicle charging stations based on the principle of mutual benefit, and have reached the following agreement through friendly negotiation:
Article 1: Construction Address and Scale of Charging Station
1. Address of charging station: The parking lot of Food Plaza, No.94 Luobidong Road, Jiyang District, Sanya City, about 1,000 square meters.
2. Construction scale of Phase I charging station: one 1000kW transformer (box transformer) and eight DC 120kW double gun charging piles.
3. The total investment of the charging station is RMB 1,150,000 Yuan only.
Article 2: Cooperation Matters
1. Party B is responsible for the capital investment of charging station.
2. Party A is responsible for the construction application and approval of the charging station, the handling of government subsidies, the construction and installation of electronic equipment and facilities of the charging station, the online operation management of the charging station, the docking network charging platform, and the upgrading and technical maintenance of the charging station platform.
3. The third party (site) is responsible for providing on-site management and maintenance in the charging station to ensure the normal operation of the charging station.
Article 3: Mode of Capital Investment of Party B
1. Within 2 days from the date of signing this Agreement, Party B shall transfer half of the total investment funds, that is, RMB 575,000.00 Yuan, to the account designated by Party A, and the remaining investment funds shall be paid off within 2 days after being electrified with the charging pile.
2. The account designated by Party A is:
Account name: Hainan ZKGC New Energy Co., Ltd.
2
Bank of deposit: Haikou Jinmao Sub-branch of Industrial and Commercial Bank of China.
Bank account number: 2201020909200415292.
Article 4: Term of Cooperation
Party A and the third party (site) shall prevail, and the cooperation period between Party A and the third party (site) shall be 10 years, that is, from February 1, 2021 to January 31, 2031.
Article 5: Distribution of Profits
1. Net profit: The monthly total turnover is first deducted from electricity charges (subject to the paid-in amount of power supply bureau), then deducted from platform management fees by 20%, and the remaining 80% is net profit, that is, Party B and the third party (site) are divided into parts [total turnover-electricity charges-platform management fees by 20% (including taxes, APP platform management fees and site management fees) = net profit].
2. Of the 80% net profit, Party B accounts for 70% of the net profit and the third party (site) accounts for 30% of the net profit. Profits will be reconciled and settled from 1st to 15th of the following month, and profits of last month will be distributed before 30th.
3. Party A will directly transfer the monthly profit to the bank account designated by Party B. The bank account designated by Party B is:
Account name:
Bank of deposit:
Bank account number:
4. In case of subsidies from the national government, the subsidies shall be included in the profit re-sharing.
Article 6: Bearing of Expenses
1. If the expenses arising from government demolition and charging station transfer of the site are paid from the government compensation, if the government compensation is insufficient for the site transfer expenses, Party A and Party B shall bear them in proportion.
3
2. If the charging station needs to be relocated due to business reasons, the expenses incurred in the relocation shall be jointly borne by Party A and Party B and deducted from the profits.
3. Party A shall guarantee the charging pile free of charge for two years (except for man-made damage). After the warranty period expires, the expenses for the maintenance of charging equipment and electronic equipment (including charging piles, transformers, cables, etc.) in the charging station, the purchase of accessories, etc., and the expenses incurred in the normal operation of the charging station shall be borne by Party A and Party B in proportion.
5. During the two-year free warranty period of charging piles, the expenses incurred by man-made damage and maintenance of charging piles shall be borne by Party A and Party B in proportion.
Article 7: Clear Assets
1. The ownership of electronic equipment put into the charging station, including transformers, charging piles and cables, shall be owned by Party B.
2. After the expiration of the cooperation period between Party A and Party B, the charging equipment and electronic equipment (including charging piles, transformers, cables, etc.) in the charging station shall be owned by Party B.
3. During the cooperation period, the land use right shall be owned by the site.
Article 8: Rights and Obligations of Party A
1. Party A has the obligation to guide the planning, layout and investment of charging stations.
2. Party A has the right to keep the business secrets of the Company.
3. Party A has the obligation to disclose its operating income and transfer the profits to Party B’s account at the agreed time.
4. Party A has the obligation to do a good job in online management, operation, maintenance and coordination of charging stations.
Article 9: Rights and Obligations of Party B
1. Party B has the right to know the investment and operation of the charging station, and the operating cost, profit and share of the charging station.
4
2. Party B has the obligation to assist Party A in the operation and management of charging piles.
3. During the contract period, the third party (site) has the obligation to do a good job in the site management of the charging station site, coordinate and solve the disputes in the charging station site, and handle the relationship between the site and its surroundings.
Article 10: Force Majeure
If Party B fails to transfer investment funds on time or Party A fails to complete charging pile construction on time due to force majeure factors, such as government actions, earthquakes, typhoons, wars and other force majeure factors, Party A and Party B shall not bear the liability for breach of contract.
Article 11: Other Agreements
1. If Party B fails to transfer the investment funds to the account designated by Party A within the agreed time limit, resulting in the delay of the construction period of Party A’s charging station, it shall bear the liability for breach of contract.
2. Upon expiration of the cooperation period, both parties have the priority to renew the contract.
3. During the period of cooperation, if there are matters that need to be supplemented, Party A and Party B may sign a supplementary agreement, which has the same legal effect as this agreement.
Article 12: In case of any dispute between the two parties during the period of cooperation, they may settle it through negotiation. If negotiation fails, they may bring a lawsuit to the people’s court of the place where the contract is performed.
Article 13: This Agreement shall come into force as of the date of signing and shall be observed by both parties.
This agreement is made in duplicate, with each party holding one copy, which has the same legal effect.
5
| Party A: Hainan ZKGC New Energy Co., Ltd. | Party B: Guangdong Shengshi Haotong Technology Co., Ltd. | |
Representatives: Liao
Jinqi  |
Representatives:  | |
| Tel: 13825097233 | Tel: 13690398599 | |
 |
 | |
| March 18, 2021 | March 18, 2021 |
6
Exhibit 10.6
Charging Station Site Cooperation Contract
Party A: Hainan ZKGC New Energy Co., Ltd.
Party B: Wang Hulin, Zhu Ming
In order to response the policies of China and Hainan Province to promote the development of new energy charging piles, increase green travel, create a healthy home, achieve the purpose of saving energy, reducing emissions and consumption, and benefit people’s livelihood, and strive to promote the popularization and development of new energy electric vehicle charging stations, Party A and Party B have reached the following agreement through friendly negotiation based on the principle of mutual benefit, on the basis of voluntariness, equality and win-win, and in accordance with relevant national laws and regulations:
Article 1: Construction Address of Charging Station
Party B shall provide Party A with 10 parking spaces about 30 meters southeast of the parking lot of Xinxiangti Jiari Plaza in Old Town Development Zone, Chengmai County, Hainan Province to build charging stations.
Article 2: Cooperation Term and Scale
1. The cooperative use period of the charging station site is 15 years (the specific period shall be subject to the time of Party B’s land certificate, property right certificate and lease agreement, within the land use period of Party B), that is, from November 12, 2020 to November 11, 2035, and Party B shall copy the above documents as an annex to this Agreement.
2. One 630 kW transformer and five DC 120 kW double gun charging piles are installed in this charging station.
Article 3: Cooperation Matters
1. Party A is responsible for the installation management, maintenance and service of charging piles, cables and transformers.
2. Party A is responsible for docking the network charging platform and investigating market operation services.
3. Party B is responsible for providing the site for installing charging piles, transformers, cables, broadband networks and other electronic equipment. If the venue is equipped with automatic or manual charging gates, charging vehicles entering the site shall not be charged within two hours, and Party B may charge parking fees for vehicles exceeding two hours.
Article 3: Distribution of Profits
1. After deducting electricity charges from the total monthly turnover (subject to the paid-in amount of power supply bureau), 15% of taxes, APP operation platform fees and site management fees are deducted from the remaining turnover, and the remaining 85% is net profit [turnover-electricity charges-(15% of taxes, APP platform management fees and site management fees) = net profit].
1. Of the 85% net profit, the investment, operation and management of Party A accounts for 95% of the net profit, and the site provided by Party B accounts for 5% of the net profit. The dividend payment time is reconciliation and settlement at the end of each month, and payment is made before the 30th day of the following month.
2. Party A will directly transfer the monthly profit to the bank account designated by Party B. The bank account designated by Party B is:
Account name:
Bank of deposit:
Bank account number:
Article 4: Ownership of Charging Station Equipment
1. The ownership of charging piles, transformers and cables related equipment and facilities in the charging station belongs to Party A.
2. During the use period of the site, the right to use 10 parking spaces shall be owned by Party A.
3. If the contract is terminated due to government demolition, the compensation given by the government shall be owned by Party A.
Article 5: Rights and Obligations of Party A
1. Party A has the right to decide the planning, layout and investment of charging stations.
2. Party A has the right to keep the business secrets of the Company, and Party A has the right to carry out the business of the Company by itself.
2
3. Party A has the obligation to disclose its operating income and transfer the profits to Party B’s account at the agreed time.
Article 6: Rights and Obligations of Party B
1. Party B has the right to know the income and share of charging stations associated with Party B.
2. During the term of the contract, Party B has the obligation to keep Party A’s business model, business data, specific operation plan, profit sharing between both parties, etc.
3. During the use period of the charging station, Party B has the obligation to coordinate and solve other disputes such as land use right disputes and disputes with the owner.
4. Party B shall assist Party A in on-site management services of the charging station, and shall have the obligation to do a good job in fire protection, public security, hygiene and other related work of the charging station site, and shall have the obligation to ensure the smooth road of charging vehicles in the charging station and the normal charging of charging vehicles.
5. Party B shall not cooperate with other parties during the cooperation period between both parties. If Party B cooperates with other parties or unilaterally terminates the agreement during the cooperation period between both parties, it shall bear the liability for breach of contract, and shall compensate Party A for all the losses caused by it.
Article 7: Other Agreements
1. Party A and Party B shall not change or terminate the Contract in advance at will. If one party needs to change or terminate the Contract in advance, it shall notify the other party in writing more than two months in advance, and the agreement can only be changed or terminated after negotiation and consent of both parties. Otherwise, the breaching party will be investigated for breach of contract liability according to law.
2. Upon expiration of the cooperation period, Party A has the priority to renew the contract.
3. During the cooperation period, if there are matters that need to be supplemented, both parties may sign a supplementary agreement, which has the same legal effect as this agreement.
Article 8: In case of disputes between the two parties during the cooperation period, they can be settled through negotiation. If negotiation fails, they can bring a lawsuit to the local people’s court of Party A.
Article 9: This Agreement shall come into force as of the date of signing and shall be observed by both parties.
This agreement is made in triplicate, with Party A holding two copies and Party B holding one copy, which have the same legal effect.
3
| Party A: Hainan ZKGC New Energy Co., Ltd. | Party B: Wang Hulin, Zhu Ming Seal of unit: | |
| Signature of representative: Liao Jiqi | Signature of representative: | |
| Tel: 18320608889 | ID card number: | |
| Tel: | ||
| November 13, 2020 | ||
 |
November 13, 2020 | |
 |
4
Exhibit 10.7
编号：
No.:
劳动合同
Labor Contract
Employer (Party A)：Hainan ZKGC New Energy Co. Ltd
Employee (Party B)：LIAO Jinqi
Date: Aug. 11, 2020
1
Attention
I. Both Parties shall carefully read the Contract when signing the Contract. Once signed, the Contract shall have legal effect and must be strictly performed by Both Parties.
II. The Contract shall come into force after being signed and sealed by the Employer (Party A) and the Employee (Party B).
III. The blank columns in the Contract shall be filled in clearly after being determined by Both Parties through negotiation; Please mark “/” in the blank columns that do not need to be filled in.
IV. The Contract shall be filled in with pen. The handwriting must be clear, concise and accurate, and shall not be altered without authorization.
2
Employer (Party A)：Hainan ZKGC New Energy Co. Ltd
Employee (Party B)：LIAO Jinqi
In accordance with the Labor Law, Labor Contract Law and other relevant laws and regulations, Party A and Party B enter into the Contract in accordance with the principles of legality, fairness, equality, voluntariness, consensus and good faith.
I. Term of Labor Contract
Both Parties agree to determine the term of the Contract according to the method below:
From Aug/ 11 /2020 to Aug. / 10 / 2023.
II. Work Contents and Work Place
1. Party B is the executive director and general manager, responsible for the overall work of the company. Party B’s place of work is No. 12, xinxiangti holiday, old town, Chengmai County, Hainan Province.
2. Party B shall be dedicated, honest and trustworthy, keep Party A’s business secrets, abide by the labor rules and regulations formulated by Party A according to law, earnestly perform its post responsibilities and complete the work on time and with quality. If Party B violates labor discipline, Party A can deal with it according to labor rules and regulations.
III. Working Hours,Rest and Vacation
1. According to the characteristics of Party B’s job, Party A shall arrange Party B to implement standard working hours. The daily working hours shall not exceed 8 hours and the weekly working hours shall not exceed 40 hours. Due to work, the working hours can be extended after negotiation according to law. Generally, the working hours shall not exceed 1 hour per day, 3 hours per day for special reasons, and 36 hours per month. Party A shall not force or force Party B to work overtime.
2. If Party A arranges Party B to work overtime, it shall arrange compensatory leave or pay overtime wages according to law.
3. Party B is entitled to paid annual leave, statutory holidays, maternity leave, marriage and funeral leave.
IV. Labor Remuneration
1. Party A shall pay the salary every month, and pay the monthly salary of 5000 yuan in full before the 10th date of each month.
2. Party A shall reasonably adjust Party B’s salary. The individual income tax borne by Party B according to law on the salary obtained from Party A shall be withheld and remitted by Party A from its salary.
3
V. Social Insurance and Welfare Benefits
1. Party A and Party B shall participate in social insurance according to law. Party A shall handle relevant social insurance procedures for Party B and undertake corresponding social insurance obligations. The social insurance expenses payable by Party B shall be withheld and remitted by Party A from Party B’s salary.
2. Party A shall implement the provisions of the state on welfare by law.
3. Party B’s treatment for work-related injury or occupational disease shall be implemented in accordance with relevant national regulations. If Party B is ill or injured not due to work, the relevant treatment shall be implemented in accordance with the relevant provisions of the state and the relevant rules and regulations formulated by Party A by law.
VI. Training and Labor Protection
1. Party A shall provide Party B with necessary training for the job. Party B shall make effort to study, actively participate in the training organized by Party A and improve vocational skills.
2. Party A shall strictly implement the provisions of laws and regulations related to labor safety and health, implement the national provisions on the special protection of female employees and juvenile employees, establish a sound labor safety and health system, and carry out labor safety and health education and operation procedure training for Party B to reduce occupational hazards.
3. Party B shall strictly abide by the safety operation regulations and shall not operate against rules. Party B has the right to refuse to carry out Party A’s illegal command and forced risky operation.
VII. Change, Cancellation and Termination of Contract
1. The parties can change the labor contract according to law and by written.
2. The cancellation or termination of this contract by the parties shall be carried out in accordance with the provisions of laws and regulations.
3. If the parties cancel or terminate this contract, Party B shall cooperate with Party A to handle work handover procedures. If Party A should pay economic compensation to Party B by law, it shall be paid when the work handover is completed.
4. Party A shall provide Party B with a certificate of dissolution or termination of the labor contract at the time of dissolution or termination of the contract, and shall handle the transfer procedures of archives and social insurance relationship with Party B within 15 days.
4
VIII. Matters Agreed by the Parties
1. If Party B’s work involves Party A’s trade secrets and intellectual property rights, Party A may negotiate with Party B to agree on keeping trade secrets or competition restrictions according to law, and sign an agreement on keeping trade secrets or competition restrictions.
2. If Party A pays for professional and technical training for Party B and requires Party B to agree on the service period, it shall obtain the consent of Party B and sign an agreement to clarify the rights and obligations of both parties.
IX. Dispute Resolution
In case of any labor dispute arising from this contract, Party A and Party B may negotiate, mediate or arbitrate in accordance with the provisions of laws and regulations. If they are not satisfied with the arbitral award, they may bring a lawsuit to the court with jurisdiction according to law.
X. Miscellaneous
1. The contract may be renewed after its expiration.
2. The contact number and mailing address of Party B recorded in this contract shall be the contact information and address within the term of the labor contract. In case of any change of the information, Party B shall inform Party A immediately.
3. The parties confirm that both parties have read and understood the contents of this contract in detail and understood their respective rights and obligations. Matters not covered in this contract shall be implemented in accordance with relevant laws, regulations and policies.
4. Each party shall hold one copy of this contract, which shall take effect from the date of signature (seal) by both parties, and both parties shall strictly abide by it.
| Party A: (sealing) | Party B: (signing) | |
| Legal Representative: | ||
| (or authorized agent) | ||
| Date: | Date: |
5
Exhibit 10.8
编号：
No.:
劳动合同
Labor Contract
Employer (Party A)：Hainan ZKGC New Energy Co. Ltd
Employee (Party B)：LIU Chunai
Date: Jan. 13, 2021
1
Attention
I. Both Parties shall carefully read the Contract when signing the Contract. Once signed, the Contract shall have legal effect and must be strictly performed by Both Parties.
II. The Contract shall come into force after being signed and sealed by the Employer (Party A) and the Employee (Party B).
III. The blank columns in the Contract shall be filled in clearly after being determined by Both Parties through negotiation; Please mark “/” in the blank columns that do not need to be filled in.
IV. The Contract shall be filled in with pen. The handwriting must be clear, concise and accurate, and shall not be altered without authorization.
2
Employer (Party A)：Hainan ZKGC New Energy Co. Ltd
Employee (Party B)：LIU Chunai
In accordance with the Labor Law, Labor Contract Law and other relevant laws and regulations, Party A and Party B enter into the Contract in accordance with the principles of legality, fairness, equality, voluntariness, consensus and good faith.
I. Term of Labor Contract
Both Parties agree to determine the term of the Contract according to the method below:
From Jan/ 15 /2021 to Jan / 14 / 2023.
II. Work Contents and Work Place
1. Party B is the manager of Financial Department, responsible for the financial work of the company. Party B’s place of work is No. 12, xinxiangti holiday, old town, Chengmai County, Hainan Province.
2. Party B shall be dedicated, honest and trustworthy, keep Party A’s business secrets, abide by the labor rules and regulations formulated by Party A according to law, earnestly perform its post responsibilities and complete the work on time and with quality. If Party B violates labor discipline, Party A can deal with it according to labor rules and regulations.
III. Working Hours,Rest and Vacation
1. According to the characteristics of Party B’s job, Party A shall arrange Party B to implement standard working hours. The daily working hours shall not exceed 8 hours and the weekly working hours shall not exceed 40 hours. Due to work, the working hours can be extended after negotiation according to law. Generally, the working hours shall not exceed 1 hour per day, 3 hours per day for special reasons, and 36 hours per month. Party A shall not force or force Party B to work overtime.
2. If Party A arranges Party B to work overtime, it shall arrange compensatory leave or pay overtime wages according to law.
3. Party B is entitled to paid annual leave, statutory holidays, maternity leave, marriage and funeral leave.
3
IV. Labor Remuneration
1. Party A shall pay the salary every month, and pay the monthly salary of 3000 yuan in full before the 10th date of each month.
2. Party A shall reasonably adjust Party B’s salary. The individual income tax borne by Party B according to law on the salary obtained from Party A shall be withheld and remitted by Party A from its salary.
V. Social Insurance and Welfare Benefits
1. Party A and Party B shall participate in social insurance according to law. Party A shall handle relevant social insurance procedures for Party B and undertake corresponding social insurance obligations. The social insurance expenses payable by Party B shall be withheld and remitted by Party A from Party B’s salary.
2. Party A shall implement the provisions of the state on welfare by law.
3. Party B’s treatment for work-related injury or occupational disease shall be implemented in accordance with relevant national regulations. If Party B is ill or injured not due to work, the relevant treatment shall be implemented in accordance with the relevant provisions of the state and the relevant rules and regulations formulated by Party A by law.
VI. Training and Labor Protection
1. Party A shall provide Party B with necessary training for the job. Party B shall make effort to study, actively participate in the training organized by Party A and improve vocational skills.
2. Party A shall strictly implement the provisions of laws and regulations related to labor safety and health, implement the national provisions on the special protection of female employees and juvenile employees, establish a sound labor safety and health system, and carry out labor safety and health education and operation procedure training for Party B to reduce occupational hazards.
3. Party B shall strictly abide by the safety operation regulations and shall not operate against rules. Party B has the right to refuse to carry out Party A’s illegal command and forced risky operation.
VII. Change, Cancellation and Termination of Contract
1. The parties can change the labor contract according to law and by written.
2. The cancellation or termination of this contract by the parties shall be carried out in accordance with the provisions of laws and regulations.
3. If the parties cancel or terminate this contract, Party B shall cooperate with Party A to handle work handover procedures. If Party A should pay economic compensation to Party B by law, it shall be paid when the work handover is completed.
4. Party A shall provide Party B with a certificate of dissolution or termination of the labor contract at the time of dissolution or termination of the contract, and shall handle the transfer procedures of archives and social insurance relationship with Party B within 15 days.
4
VIII. Matters Agreed by the Parties
1. If Party B’s work involves Party A’s trade secrets and intellectual property rights, Party A may negotiate with Party B to agree on keeping trade secrets or competition restrictions according to law, and sign an agreement on keeping trade secrets or competition restrictions.
2. If Party A pays for professional and technical training for Party B and requires Party B to agree on the service period, it shall obtain the consent of Party B and sign an agreement to clarify the rights and obligations of both parties.
IX. Dispute Resolution
In case of any labor dispute arising from this contract, Party A and Party B may negotiate, mediate or arbitrate in accordance with the provisions of laws and regulations. If they are not satisfied with the arbitral award, they may bring a lawsuit to the court with jurisdiction according to law.
X. Miscellaneous
1. The contract may be renewed after its expiration.
2. The contact number and mailing address of Party B recorded in this contract shall be the contact information and address within the term of the labor contract. In case of any change of the information, Party B shall inform Party A immediately.
3. The parties confirm that both parties have read and understood the contents of this contract in detail and understood their respective rights and obligations. Matters not covered in this contract shall be implemented in accordance with relevant laws, regulations and policies.
4. Each party shall hold one copy of this contract, which shall take effect from the date of signature (seal) by both parties, and both parties shall strictly abide by it.
| Party A: (sealing) | Party B: (signing) |
| Legal Representative: | |
| (or authorized agent) | |
| Date: | Date: |
5
Exhibit 21.1
ZKGC New Energy Limited
Subsidiaries
| Subsidiary | Jurisdiction |
| ZKGC International Group Holding Limited | Hong Kong |
| Hainan GCGY Commercial & Trading Co., Ltd. | P.R. China |
Exhibit 23.3
ROBERT BRANTL, ESQ.
181 Dante Avenue
Tuckahoe, NY 10707
914-693-3026
January 24, 2022
ZKGC New Energy Limited
12 Xinxiangdi Jiari
Laocheng Town, Chengmai County
Hainan Province 571924
People’s Republic of China
Re: Registration Statement on Form F-1 (the “Registration Statement”)
Ladies and Gentlemen:
I hereby consent to the use of my name in the Prospectus forming a part of the Registration Statement under the caption “Legal Matters.” In giving my consent, I do not thereby admit that I am within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules or regulations of the Securities and Exchange Commission promulgated thereunder.
| Very truly yours, | |
| /s/ Robert Brantl | |
| Robert Brantl |
Exhibit 23.4
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Form F-1 Registration Statement of ZKGC New Energy Limited (the “Company”) of our report dated December 6, 2021 relating to the audit of the consolidated financial statements of the Company for the period from August 11, 2020 (inception) to May 31, 2021.
We also consent to the reference to the Firm under the heading “Experts” in such Registration Statement.
| /s/ Michael T. Studer CPA P.C. | |
| Michael T. Studer CPA P.C. | |
| Freeport, New York | |
| January 24, 2022 | |