SEC Company Response from Mercurity Fintech Holding Inc. (MFH) (CIK 0001527762) (CD) — Mar 4, 2015
Mercurity Fintech Holding Inc. (MFH) (CIK 0001527762)
Date: March 4, 2015 · CIK: 0001527762 · Accession: 0001104659-15-016644
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-201413
Referenced dates: February 13, 2015
Letter
Division of Corporation Finance Securities and Exchange Commission Wowo Limited Amendment No. 3 to Registration Statement on Form F-1 Filed March 4, 2015 File No. 333-201413
Dear Ms. Jacobs, Ms. Lindsey, Mr. Gilmore and Mr. Crispino:
We have reviewed the above-referenced registration statements and have the following comments. The page numbers in our comments refer to pages in Amendment No. 3.
Prospectus Cover Page
1. We noted that you have revised the offering structure such that it is now a best effort, minimum-maximum offering. Please revise the top of the cover page where you state that you are offering 6,000,000 American depositary shares representing 108,000,000 ordinary shares to also disclose the minimum amount of shares that must be sold for the offering to close. Similarly, revise the offering description on page 11 to disclose the minimum-maximum structure of the offering and the minimum number of shares that must be sold.
ALKHOBAR ·AMSTERDAM·ATLANTA ·BEIJING ·BOSTON ·BRUSSELS ·CHICAGO ·CLEVELAND ·COLUMBUS ·DALLAS
DUBAI· DÜSSELDORF·FRANKFURT ·HONG KONG ·HOUSTON ·IRVINE ·JEDDAH ·LONDON ·LOS ANGELES
MADRID ·MEXICO CITY ·MILAN ·MOSCOW ·MUNICH ·NEW YORK ·PARIS ·PITTSBURGH ·RIYADH ·SAN DIEGO
SAN FRANCISCO ·SAO PAULO ·SHANGHAI ·SILICON VALLEY ·SINGAPORE ·SYDNEY ·TAIPEI ·TOKYO ·WASHINGTON
The Company acknowledges the Staff’s comment and has revised its disclosure in Amendment 3 (on the cover page of the prospectus and page 11 of the prospectus) to reflect the minimum — maximum structure, including the minimum number of ADSs/ordinary shares being offered on a best efforts basis.
2. We note that you do not intend to place monies in an escrow account to maintain investor funds. As this is now a minimum-maximum offering, please tell us how you intend to comply with Rules 10b-9 and 15c2-4 of the Exchange Act without appointing an escrow agent. Further, please tell us what procedures are in place to ensure that funds will be promptly returned to investors.
The Company acknowledges the Staff’s comment and has updated its disclosure in Amendment 3 to clarify the offering. Although structured as a best efforts offering, the Company and the underwriter have agreed to certain closing mechanics that are intended to be similar to that of a firm commitment offering and ensure that investor funds are maintained in investors’ control through closing to make sure that trading on NASDAQ will commence immediately following closing or very shortly thereafter. Below please find a summary of the proposed closing mechanics which are intended to comply with Rules 10b-9 and 15c2-4 of the Exchange Act.
· Leading up to pricing and closing, investors in the offering will open or utilize existing trading accounts with either the managing underwriter or syndicate members (registered broker-dealers). Such trading accounts provide that the investor shall have sole control over the account and decisions made with respect thereto.
· Once the underwriter is confident that it has received investor interest in excess of the minimum offering amount, the underwriter and Company will seek acceleration of effectiveness of the Registration Statement.
· Following effectiveness of the Registration Statement and pricing, the underwriter will allocate the underwriting discount into the selling concession and management fee.
· In connection with the sale of securities, the total amount of securities to be sold in the offering are allocated (“ticketed”) by the underwriter and syndicate members among individual customers on the date immediately following pricing:
(i) With respect to the lead underwriter, order tickets are executed and confirmations are generated detailing offering price, securities purchased, and amounts due within three (3) days, settlement date and the final prospectus is delivered. In connection with accounts that do not maintain a cash balance that can be utilized for the purchase of securities in the Offering, each investor then wires the requisite purchase price out of such investor’s account (or funds the account in order to allow for the wire) to the underwriter’s clearing firm, National Financial Services LLC (a registered clearing firm and DTC member (the “Clearing Firm”)), during the next two (2) calendar days.
(ii) With respect to syndicate members, the managing underwriter will send the syndicate allocation instructions with the number of shares allocated to each
syndicate member, the selling concession, the trade date and the settlement date. The syndicate member then generates order tickets and confirmations to its customers detailing offering price, securities purchased, amounts due within three (3) days, settlement date and the final prospectus is delivered for the specific investors. Each investor then wires the requisite purchase price out of such investor’s account (or funds the account in order to allow for the wire) to the Clearing Firm.
(iii) In accordance with the existing Clearing Agreement between the underwriter and the Clearing Firm, all amounts received by the Clearing Firm will be maintained by the Clearing Firm in an independent account dedicated to the Company with the underwriter in charge of such account.
· Leading up to closing, the underwriter will confirm that the minimum offering amount has been raised and, if so, will arrange for closing and will pre-close with all transaction members.
· At closing, the underwriter will authorize the Clearing Firm to release funds out of the account and wire such funds directly to the Company. Upon receipt of such funds, the Company will instruct that its securities are released to the underwriter who will then credit the securities to the accounts of the various investors.
· As disclosed in the Registration Statement, in the event the minimum offering amount is not achieved (or NASDAQ approval is not received) within five (5) days from the date of effectiveness of the Registration Statement, the underwriter and the Company will not authorize closing and, in accordance with the Clearing Agreement, all amounts will be returned from the Clearing Firm to the individual investors and the offering will cease.
3. Disclose on the cover page the date the offering will end. Refer to Item 501(b) (8) (iii) of Regulation S-K.
The Company acknowledges the Staff’s comment and has revised its disclosure in Amendment 3 (on the cover page of the prospectus) to reflect the end date of the offering.
Risk Factors
“We might not be able to adequately protect our intellectual property rights,” page 29
4. We note your disclosure that you have received a cease and desist letter from a PRC law firm in connection with a claim by a third-party that your use of the Chinese characters “WoWo” has infringed upon their trademark. In this regard, we understand that Beijing WoWo Science & Technology Co., Ltd. (“WoWoSci-Tech”) prevailed in a trademark infringement lawsuit brought against you in the People’s Court of Haidian District, Beijing, China. We also understand that on January 13, 2015, the Beijing Administration for Industry and Commerce issued a “Forbidden
Command” to Sohu directing it to remove your mobile applications from its app store due to possible trademark infringement. Finally, we understand that other mobile applications stores, including DangLe, Wan Dou Jia and AppChina, have or are in the process of removing your mobile applications due to the claims of trademark infringement. Please address these allegations in your response letter and, as necessary, make appropriate revisions to your prospectus.
The Company respectfully advises the Staff that WoWo Science & Technology Co., Ltd. (“WoWo Sci-Tech”) did not prevail in any trademark or trade name infringement lawsuit brought against the Company neither in the People’s Court of Haidian District, Beijing, China, nor in any other courts to the knowledge of the Company. There was never any judgment issued against the Company in term of trademark infringement.
The Company respectfully advises the Staff that in 2012, it was the Company who was the plaintiff in a lawsuit brought against WoWo Sci-Tech in the People’s Court of Haidian District. The lawsuit claimed that WoWo Sci-Tech purposely used similar words of “WoWo” in its Company name in an act that constitutes unfair competition against the Company. In judgment number 23664 (2012), the People’s Court of Haidian District did not find WoWo Sci-Tech actions constituted unfair competition on the grounds that the two parties’ trade name apply to distinct classes of business operations. The court never ruled that the Company was infringing on WoWo Sci-Tech’s trademark or trade name in any way.
On the “Forbidden Command” that was sent to Sohu, subsequently, the local branch of Beijing Administration for Industry and Commerce (“BAIC”) arranged for the disputing parties to cross-examine the facts, and resulted in BAIC ordering Sohu to once again display the Company’s applications on its platform on February 6, 2015.
On the allegation that other mobile application stores are in the process of removing Company’s applications, the Company respectfully advises the court that this is not the case. The Company’s application is still being displayed on the respective application stores as of the date of this response letter. Please find links to several stores below where the Company’s applications can be seen as ready and available for download.
Sohu: http://app.sohu.com/search?words=%E7%AA%9D%E7%AA%9D%E5%9B%A2
Dang le: http://search.d.cn/list.html?keyword=%E7%AA%9D%E7%AA%9D%E5%9B%A2
App China: http://www.appchina.com/sou/%E7%AA%9D%E7%AA%9D%E5%9B%A2
The Company had been informed in the past by a few third party application stores that they have received letters of allegation from WoWo Sci-Tech. These third party mobile application stores have inquired the Company regarding such allegations. The Company provided proper explanations, and these third party application stores did not removed Company’s applications from their stores. In the event that such allegations continue to persist, the Company is prepared to provide further assurances to any application stores regarding the lack of validity in WoWo Sci-Tech’s allegations, particularly since two
parties’ trade names have been ruled to apply to distinct classes, as well as actively seeking to resolve our differences with WoWo Sci-Tech.
Based on the current status of the dispute and our estimation on potential further development in this matter, we do not believe our dispute with WoWo Sci-Tech would result in a material adverse effect to our business.
Capitalization, page 63
5. Your disclosure on page F-34 indicates that the preferred shares automatically convert upon a qualified IPO in which the aggregate proceeds are not less than $100 million. Since you will only raise a maximum of $60 million in this offering, please tell us how you determined it was probable that your preferred shares would convert to common shares for the purposes of the pro forma presentation. Refer to Article 11-01(a)(8) of Regulation S-X. Similar concerns apply to your pro forma presentations throughout the document, such as the pro forma disclosure on page 64 and your Consolidated Balance Sheet as of September 30, 2014 on page F-51.
The Company respectfully advises the Staff that all shareholders of the Company, pursuant to an unanimous written resolution dated February 13, 2015, and further amended on February 20, 2015, have resolved that, among others, an initial public offering of the Company’s ADSs that raises US$40 million shall be deemed a qualified IPO, pursuant to which all preferred shares shall be converted to ordinary shares at a conversion rate of 1 to 1. Please see pages 12 and 157 of Amendment 3 for additional disclosure in this regard.
6. Your disclosure on page 42 indicates that under certain circumstances, you may be required to obtain approval prior to the conversion of certain of your indebtedness to your CEO. Your disclosure on page 99 indicates that if your offering is successful and you sell 100% of your ADSs, your indebtedness to Mr. Xu would be converted into ordinary shares. Please address the following:
· Tell us how you considered the requirement to obtain regulatory approval prior to the conversion of certain of your indebtedness to your CEO in determining conversion was probable.
· Clarify if Mr. Xu will convert his shares if you sell less than 100% of your ADSs in this offering. If not, tell us how you determined it was probable that these shares would convert to common shares as presented in your 83.3% and 66.7% pro forma scenarios.
Refer to Article 11-01(a)(8) of Regulation S-X. Similar concerns apply to your pro forma presentations throughout the document, such as the pro forma disclosure on page 63 and your Consolidated Balance Sheet as of September 30, 2014 on page F-51.
The Company respectfully advises the Staff that all shareholders of the Company, pursuant to an unanimous written resolution dated February 13, 2015, and further amended on February 20, 2015, have approved and resolved that, among others, an initial public offering of the Company’s ADSs that raises US$40 million shall be deemed a qualified IPO and all indebtedness owed to the Company’s chairman and CEO, Mr. Xu, shall be converted to ordinary shares at the IPO price. As a result, the Company viewed the conversion of indebtedness owed to Mr. Xu to ordinary shares issues to him to be probable for which the disclosure of pro forma financial information would be material to the investors.
In terms of PRC regulatory approval, please see pages 41 and 42 of Amendment 3 for a more detailed description of the relevant PRC governmental control of currency conversion. Please also note that both the Company and Mr. Xu will apply for all relevant PRC regulatory approvals with each of the relevant governmental authorities described. Under general circumstances, this is a simple registration procedure. In case that any legal or administrative fines are imposed on the Company, Mr. Xu has also agreed to indemnify the Company for the full a
Show Raw Text
CORRESP
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filename1.htm
RESIDENT PARTNERS:
PEGGY P. Y. CHEUNG
PHILLIP GEORGIOU
ASHLEY HOWLETT
JOELLE S. L. LAU
ANITA P. F. LEUNG
CHIANG LING LI
GRAHAM LIM
BENJAMIN MCQUHAE
CHRISTOPHER SWIFT
MICHELLE TAYLOR
ROBERT THOMSON
JONES DAY
眾達國際法律事務所
SOLICITORS AND INTERNATIONAL LAWYERS
31ST FLOOR, EDINBURGH TOWER, THE LANDMARK
15 QUEEN’S ROAD CENTRAL, HONG KONG
香港皇后大道中十五號置地廣場公爵大廈三十一樓
TELEPHONE: (852) 2526-6895
FACSIMILE : (852) 2868-5871
REGISTERED FOREIGN LAWYERS:
MICHAEL ARRUDA (California, USA)
JUAN DU (NewYork, USA)
HAIFENG HUANG (New York, USA)
CHRISTINE KIM (New York, USA)
JULIAN LIN (California, USA)
MARIA PEDERSEN (New York and District of Columbia, USA)
NON-RESIDENT PARTNER:
SEBASTIEN EVRARD
March 4, 2015
Ms. Barbara C. Jacobs, Assistant Director
Ms. Rebekah Lindsey
Mr. Patrick Gilmore
Mr. Matthew Crispino
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
U.S.A.
Re:
Wowo Limited
Amendment No. 3 to Registration Statement on Form F-1
Filed March 4, 2015
File No. 333-201413
Dear Ms. Jacobs, Ms. Lindsey, Mr. Gilmore and Mr. Crispino:
We have reviewed the above-referenced registration statements and have the following comments. The page numbers in our comments refer to pages in Amendment No. 3.
Prospectus Cover Page
1. We noted that you have revised the offering structure such that it is now a best effort, minimum-maximum offering. Please revise the top of the cover page where you state that you are offering 6,000,000 American depositary shares representing 108,000,000 ordinary shares to also disclose the minimum amount of shares that must be sold for the offering to close. Similarly, revise the offering description on page 11 to disclose the minimum-maximum structure of the offering and the minimum number of shares that must be sold.
ALKHOBAR ·AMSTERDAM·ATLANTA ·BEIJING ·BOSTON ·BRUSSELS ·CHICAGO ·CLEVELAND ·COLUMBUS ·DALLAS
DUBAI· DÜSSELDORF·FRANKFURT ·HONG KONG ·HOUSTON ·IRVINE ·JEDDAH ·LONDON ·LOS ANGELES
MADRID ·MEXICO CITY ·MILAN ·MOSCOW ·MUNICH ·NEW YORK ·PARIS ·PITTSBURGH ·RIYADH ·SAN DIEGO
SAN FRANCISCO ·SAO PAULO ·SHANGHAI ·SILICON VALLEY ·SINGAPORE ·SYDNEY ·TAIPEI ·TOKYO ·WASHINGTON
The Company acknowledges the Staff’s comment and has revised its disclosure in Amendment 3 (on the cover page of the prospectus and page 11 of the prospectus) to reflect the minimum — maximum structure, including the minimum number of ADSs/ordinary shares being offered on a best efforts basis.
2. We note that you do not intend to place monies in an escrow account to maintain investor funds. As this is now a minimum-maximum offering, please tell us how you intend to comply with Rules 10b-9 and 15c2-4 of the Exchange Act without appointing an escrow agent. Further, please tell us what procedures are in place to ensure that funds will be promptly returned to investors.
The Company acknowledges the Staff’s comment and has updated its disclosure in Amendment 3 to clarify the offering. Although structured as a best efforts offering, the Company and the underwriter have agreed to certain closing mechanics that are intended to be similar to that of a firm commitment offering and ensure that investor funds are maintained in investors’ control through closing to make sure that trading on NASDAQ will commence immediately following closing or very shortly thereafter. Below please find a summary of the proposed closing mechanics which are intended to comply with Rules 10b-9 and 15c2-4 of the Exchange Act.
· Leading up to pricing and closing, investors in the offering will open or utilize existing trading accounts with either the managing underwriter or syndicate members (registered broker-dealers). Such trading accounts provide that the investor shall have sole control over the account and decisions made with respect thereto.
· Once the underwriter is confident that it has received investor interest in excess of the minimum offering amount, the underwriter and Company will seek acceleration of effectiveness of the Registration Statement.
· Following effectiveness of the Registration Statement and pricing, the underwriter will allocate the underwriting discount into the selling concession and management fee.
· In connection with the sale of securities, the total amount of securities to be sold in the offering are allocated (“ticketed”) by the underwriter and syndicate members among individual customers on the date immediately following pricing:
(i) With respect to the lead underwriter, order tickets are executed and confirmations are generated detailing offering price, securities purchased, and amounts due within three (3) days, settlement date and the final prospectus is delivered. In connection with accounts that do not maintain a cash balance that can be utilized for the purchase of securities in the Offering, each investor then wires the requisite purchase price out of such investor’s account (or funds the account in order to allow for the wire) to the underwriter’s clearing firm, National Financial Services LLC (a registered clearing firm and DTC member (the “Clearing Firm”)), during the next two (2) calendar days.
(ii) With respect to syndicate members, the managing underwriter will send the syndicate allocation instructions with the number of shares allocated to each
2
syndicate member, the selling concession, the trade date and the settlement date. The syndicate member then generates order tickets and confirmations to its customers detailing offering price, securities purchased, amounts due within three (3) days, settlement date and the final prospectus is delivered for the specific investors. Each investor then wires the requisite purchase price out of such investor’s account (or funds the account in order to allow for the wire) to the Clearing Firm.
(iii) In accordance with the existing Clearing Agreement between the underwriter and the Clearing Firm, all amounts received by the Clearing Firm will be maintained by the Clearing Firm in an independent account dedicated to the Company with the underwriter in charge of such account.
· Leading up to closing, the underwriter will confirm that the minimum offering amount has been raised and, if so, will arrange for closing and will pre-close with all transaction members.
· At closing, the underwriter will authorize the Clearing Firm to release funds out of the account and wire such funds directly to the Company. Upon receipt of such funds, the Company will instruct that its securities are released to the underwriter who will then credit the securities to the accounts of the various investors.
· As disclosed in the Registration Statement, in the event the minimum offering amount is not achieved (or NASDAQ approval is not received) within five (5) days from the date of effectiveness of the Registration Statement, the underwriter and the Company will not authorize closing and, in accordance with the Clearing Agreement, all amounts will be returned from the Clearing Firm to the individual investors and the offering will cease.
3. Disclose on the cover page the date the offering will end. Refer to Item 501(b) (8) (iii) of Regulation S-K.
The Company acknowledges the Staff’s comment and has revised its disclosure in Amendment 3 (on the cover page of the prospectus) to reflect the end date of the offering.
Risk Factors
“We might not be able to adequately protect our intellectual property rights,” page 29
4. We note your disclosure that you have received a cease and desist letter from a PRC law firm in connection with a claim by a third-party that your use of the Chinese characters “WoWo” has infringed upon their trademark. In this regard, we understand that Beijing WoWo Science & Technology Co., Ltd. (“WoWoSci-Tech”) prevailed in a trademark infringement lawsuit brought against you in the People’s Court of Haidian District, Beijing, China. We also understand that on January 13, 2015, the Beijing Administration for Industry and Commerce issued a “Forbidden
3
Command” to Sohu directing it to remove your mobile applications from its app store due to possible trademark infringement. Finally, we understand that other mobile applications stores, including DangLe, Wan Dou Jia and AppChina, have or are in the process of removing your mobile applications due to the claims of trademark infringement. Please address these allegations in your response letter and, as necessary, make appropriate revisions to your prospectus.
The Company respectfully advises the Staff that WoWo Science & Technology Co., Ltd. (“WoWo Sci-Tech”) did not prevail in any trademark or trade name infringement lawsuit brought against the Company neither in the People’s Court of Haidian District, Beijing, China, nor in any other courts to the knowledge of the Company. There was never any judgment issued against the Company in term of trademark infringement.
The Company respectfully advises the Staff that in 2012, it was the Company who was the plaintiff in a lawsuit brought against WoWo Sci-Tech in the People’s Court of Haidian District. The lawsuit claimed that WoWo Sci-Tech purposely used similar words of “WoWo” in its Company name in an act that constitutes unfair competition against the Company. In judgment number 23664 (2012), the People’s Court of Haidian District did not find WoWo Sci-Tech actions constituted unfair competition on the grounds that the two parties’ trade name apply to distinct classes of business operations. The court never ruled that the Company was infringing on WoWo Sci-Tech’s trademark or trade name in any way.
On the “Forbidden Command” that was sent to Sohu, subsequently, the local branch of Beijing Administration for Industry and Commerce (“BAIC”) arranged for the disputing parties to cross-examine the facts, and resulted in BAIC ordering Sohu to once again display the Company’s applications on its platform on February 6, 2015.
On the allegation that other mobile application stores are in the process of removing Company’s applications, the Company respectfully advises the court that this is not the case. The Company’s application is still being displayed on the respective application stores as of the date of this response letter. Please find links to several stores below where the Company’s applications can be seen as ready and available for download.
Sohu: http://app.sohu.com/search?words=%E7%AA%9D%E7%AA%9D%E5%9B%A2
Dang le: http://search.d.cn/list.html?keyword=%E7%AA%9D%E7%AA%9D%E5%9B%A2
App China: http://www.appchina.com/sou/%E7%AA%9D%E7%AA%9D%E5%9B%A2
The Company had been informed in the past by a few third party application stores that they have received letters of allegation from WoWo Sci-Tech. These third party mobile application stores have inquired the Company regarding such allegations. The Company provided proper explanations, and these third party application stores did not removed Company’s applications from their stores. In the event that such allegations continue to persist, the Company is prepared to provide further assurances to any application stores regarding the lack of validity in WoWo Sci-Tech’s allegations, particularly since two
4
parties’ trade names have been ruled to apply to distinct classes, as well as actively seeking to resolve our differences with WoWo Sci-Tech.
Based on the current status of the dispute and our estimation on potential further development in this matter, we do not believe our dispute with WoWo Sci-Tech would result in a material adverse effect to our business.
Capitalization, page 63
5. Your disclosure on page F-34 indicates that the preferred shares automatically convert upon a qualified IPO in which the aggregate proceeds are not less than $100 million. Since you will only raise a maximum of $60 million in this offering, please tell us how you determined it was probable that your preferred shares would convert to common shares for the purposes of the pro forma presentation. Refer to Article 11-01(a)(8) of Regulation S-X. Similar concerns apply to your pro forma presentations throughout the document, such as the pro forma disclosure on page 64 and your Consolidated Balance Sheet as of September 30, 2014 on page F-51.
The Company respectfully advises the Staff that all shareholders of the Company, pursuant to an unanimous written resolution dated February 13, 2015, and further amended on February 20, 2015, have resolved that, among others, an initial public offering of the Company’s ADSs that raises US$40 million shall be deemed a qualified IPO, pursuant to which all preferred shares shall be converted to ordinary shares at a conversion rate of 1 to 1. Please see pages 12 and 157 of Amendment 3 for additional disclosure in this regard.
6. Your disclosure on page 42 indicates that under certain circumstances, you may be required to obtain approval prior to the conversion of certain of your indebtedness to your CEO. Your disclosure on page 99 indicates that if your offering is successful and you sell 100% of your ADSs, your indebtedness to Mr. Xu would be converted into ordinary shares. Please address the following:
· Tell us how you considered the requirement to obtain regulatory approval prior to the conversion of certain of your indebtedness to your CEO in determining conversion was probable.
· Clarify if Mr. Xu will convert his shares if you sell less than 100% of your ADSs in this offering. If not, tell us how you determined it was probable that these shares would convert to common shares as presented in your 83.3% and 66.7% pro forma scenarios.
Refer to Article 11-01(a)(8) of Regulation S-X. Similar concerns apply to your pro forma presentations throughout the document, such as the pro forma disclosure on page 63 and your Consolidated Balance Sheet as of September 30, 2014 on page F-51.
5
The Company respectfully advises the Staff that all shareholders of the Company, pursuant to an unanimous written resolution dated February 13, 2015, and further amended on February 20, 2015, have approved and resolved that, among others, an initial public offering of the Company’s ADSs that raises US$40 million shall be deemed a qualified IPO and all indebtedness owed to the Company’s chairman and CEO, Mr. Xu, shall be converted to ordinary shares at the IPO price. As a result, the Company viewed the conversion of indebtedness owed to Mr. Xu to ordinary shares issues to him to be probable for which the disclosure of pro forma financial information would be material to the investors.
In terms of PRC regulatory approval, please see pages 41 and 42 of Amendment 3 for a more detailed description of the relevant PRC governmental control of currency conversion. Please also note that both the Company and Mr. Xu will apply for all relevant PRC regulatory approvals with each of the relevant governmental authorities described. Under general circumstances, this is a simple registration procedure. In case that any legal or administrative fines are imposed on the Company, Mr. Xu has also agreed to indemnify the Company for the full a